Hospice Companies Increase Profits by Taking in People who aren’t Dying
Monday, December 30, 2013
A social movement for more compassionate end of life care is seeing its accomplishments tainted by health care companies seeking to make a profit off of sick, but not quite dying patients, according to an investigation by The Washington Post. Investigators reviewed more than 1 million patients’ records from California dated between 2002 through 2012, as well as various government reports, in reaching their conclusions.
For decades activists based at advocacy organizations and nonprofit health care institutions pushed for a fundamentally different approach to care for the dying called “hospice” that focuses on relieving pain and discomfort. Because hospice care contradicts the principle that health insurance will pay only for treatments that improve a patient’s health, until 1983 Medicare refused to cover hospice. When Medicare changed its rules, it did so in part on the theory that it might save money because palliative care is often cheaper than dramatic end of life treatment.
Although the hospice benefit has been around for thirty years, explosive growth in hospice care began around the turn of the century—just as for-profit corporations began to get into the business. Between 2000 and 2012, Medicare payments for hospice care increased fivefold, from $2.9 billion to $15.1 billion annually, even as the share of hospices run for a profit doubled from 30% to 60%, says the Post. Payments in 2013 are expected to exceed $17 billion.
It seems those for-profit hospice companies saw a lucrative opportunity in Medicare’s formula for hospice care. Once a patient has been certified by two doctors as having a life expectancy of six months or less, Medicare pays about $150 a day for routine palliative care, regardless of what care is actually delivered, meaning that healthier patients, who generally need less care and live longer, yield higher profits.
Given that financial incentive, it is not surprising that over the past decade the average stay in hospice has grown 60% longer, from 54 days in 2000 to 86 days in 2009. Between 2002 and 2012, California saw a 50% increase in the number of hospice patients who were discharged from hospice care alive, while profit per patient quintupled, from $353 to $1,975, and inflation-adjusted net profits soared more than tenfold, from $25 million to $265 million per year.
The trend toward longer hospice stays is likely costing Medicare billions of dollars a year. In 2011, nearly 60% of Medicare’s hospice spending of $13.8 billion went for patients who stayed longer than six months. Medicare makes about 85 to 90% of all payments to hospices.
Although hospice companies insist that these trends reflect changing demographics among the aged and dying, a key difference between non-profit and for-profit hospice facilities belies that claim. According to MedPAC, the Medicare watchdog group created by Congress, the average non-profit hospice patient has a stay of 69 days, while the average for-profit hospice patient stays 102 days—47.8% longer.
How are they doing it? Whistleblower lawsuits brought by former employees alleging Medicare fraud against four of the ten largest American hospice companies contend that they intentionally admitted non-terminal patients to hospice care as a way of boosting profits. Although the companies insist the whistleblowers are motivated by greed, the fact that the Justice Department has chosen to join several of the lawsuits greatly enhances the credibility of the allegations.
While the details of the allegations against the for-profit hospices vary, overall they paint a picture of an industry seeking to maximize profit by admitting non-terminal patients to hospice care.
AseraCare taught recruiters to “focus families” by emphasizing the urgency of making a decision and saying things like, “We only have 10 minutes left.” A training presentation advised recruiters that “effective communication is the transfer of emotion, not information.”
Odyssey Healthcare—which settled the case against it for $25 million—paid recruiters bonuses for meeting new patient goals.
Hospice Care of Kansas (HCK) regularly ran seasonal promotions like its “Summer Sizzle,” “Christmas Cash Blitz” and “Fall Frenzy” admission drives that paid employees up to $100 a head for referrals, according to the Justice Department. HCK also had its admitting nurses report to the marketing department, which put “pressure” on the nurses to admit patients regardless of eligibility, says Pat Perkins, a former HCK nursing supervisor.
Vitas also paid bonuses based on the number of patients enrolled and encouraged recruiters to admit as many patients as possible, whether they were eligible for hospice care or not, according to the lawsuit. A former manager says the company philosophy of “sign everybody up” put pressure on medical staff to admit patients regardless of eligibility, and Joyce White, a former marketer, claims “they wanted us to admit, admit, admit. All of us competed against each other to make our numbers. You lived or died by your numbers.” White also alleges that Vitas paid salespeople bonuses based on patients’ length of stay.
Angels of Hope hospice in LaGrange, Ga., trained salespeople to cruise neighborhoods looking for possible hospice patients, according to audio recordings cited in the complaint. “How do you solicit patients?” the recordings allegedly ask. “You see somebody sitting on the front porch in a wheelchair and you hit the brakes.”
Delta Hospice of California, which had one of the highest discharge rates of living patients in the state last year (63%) routinely admits non-terminal patients to hospice because “if they come in very sick and die right away, it’s difficult to run a business that way,” according to former marketing manager Rachel Mason. Having worked at non-profit hospices prior to joining Delta, she says she left Delta because “I wasn’t willing to sign on people who weren’t appropriate for hospice.…It wasn’t a good fit.”
After private equity firm KRG Capital Partners LLC bought Dallas-based Trinity Hospice, says Catherine Covington, who worked as a Trinity compliance officer from 2000 to 2004, “it was clear their philosophy was, ‘Put everyone on hospice, don’t ask questions and build! They were there to make a buck.”
VistaCare Hospice, a unit of Atlanta-based Gentiva, paid enrollment bonuses to doctors, admissions directors and branch managers, alleges Misty Wall, a former social worker for the company and now a professor at Boise State University, who has filed a whistleblower lawsuit against VistaCare.
Spokespersons for the accused companies generally deny these allegations.
MedPAC, which has been recommending reforms to the hospice payment system for about five years, sounded a note of urgency in its latest report on the issue, which was released in June.
“Given the magnitude of hospice spending devoted to long-stay patients, who are more profitable under the current payment system than other patients, it is important that an initial step toward payment reform be taken as soon as possible,” MedPAC wrote.
For decades activists based at advocacy organizations and nonprofit health care institutions pushed for a fundamentally different approach to care for the dying called “hospice” that focuses on relieving pain and discomfort. Because hospice care contradicts the principle that health insurance will pay only for treatments that improve a patient’s health, until 1983 Medicare refused to cover hospice. When Medicare changed its rules, it did so in part on the theory that it might save money because palliative care is often cheaper than dramatic end of life treatment.
Although the hospice benefit has been around for thirty years, explosive growth in hospice care began around the turn of the century—just as for-profit corporations began to get into the business. Between 2000 and 2012, Medicare payments for hospice care increased fivefold, from $2.9 billion to $15.1 billion annually, even as the share of hospices run for a profit doubled from 30% to 60%, says the Post. Payments in 2013 are expected to exceed $17 billion.
It seems those for-profit hospice companies saw a lucrative opportunity in Medicare’s formula for hospice care. Once a patient has been certified by two doctors as having a life expectancy of six months or less, Medicare pays about $150 a day for routine palliative care, regardless of what care is actually delivered, meaning that healthier patients, who generally need less care and live longer, yield higher profits.
Given that financial incentive, it is not surprising that over the past decade the average stay in hospice has grown 60% longer, from 54 days in 2000 to 86 days in 2009. Between 2002 and 2012, California saw a 50% increase in the number of hospice patients who were discharged from hospice care alive, while profit per patient quintupled, from $353 to $1,975, and inflation-adjusted net profits soared more than tenfold, from $25 million to $265 million per year.
The trend toward longer hospice stays is likely costing Medicare billions of dollars a year. In 2011, nearly 60% of Medicare’s hospice spending of $13.8 billion went for patients who stayed longer than six months. Medicare makes about 85 to 90% of all payments to hospices.
Although hospice companies insist that these trends reflect changing demographics among the aged and dying, a key difference between non-profit and for-profit hospice facilities belies that claim. According to MedPAC, the Medicare watchdog group created by Congress, the average non-profit hospice patient has a stay of 69 days, while the average for-profit hospice patient stays 102 days—47.8% longer.
How are they doing it? Whistleblower lawsuits brought by former employees alleging Medicare fraud against four of the ten largest American hospice companies contend that they intentionally admitted non-terminal patients to hospice care as a way of boosting profits. Although the companies insist the whistleblowers are motivated by greed, the fact that the Justice Department has chosen to join several of the lawsuits greatly enhances the credibility of the allegations.
While the details of the allegations against the for-profit hospices vary, overall they paint a picture of an industry seeking to maximize profit by admitting non-terminal patients to hospice care.
AseraCare taught recruiters to “focus families” by emphasizing the urgency of making a decision and saying things like, “We only have 10 minutes left.” A training presentation advised recruiters that “effective communication is the transfer of emotion, not information.”
Odyssey Healthcare—which settled the case against it for $25 million—paid recruiters bonuses for meeting new patient goals.
Hospice Care of Kansas (HCK) regularly ran seasonal promotions like its “Summer Sizzle,” “Christmas Cash Blitz” and “Fall Frenzy” admission drives that paid employees up to $100 a head for referrals, according to the Justice Department. HCK also had its admitting nurses report to the marketing department, which put “pressure” on the nurses to admit patients regardless of eligibility, says Pat Perkins, a former HCK nursing supervisor.
Vitas also paid bonuses based on the number of patients enrolled and encouraged recruiters to admit as many patients as possible, whether they were eligible for hospice care or not, according to the lawsuit. A former manager says the company philosophy of “sign everybody up” put pressure on medical staff to admit patients regardless of eligibility, and Joyce White, a former marketer, claims “they wanted us to admit, admit, admit. All of us competed against each other to make our numbers. You lived or died by your numbers.” White also alleges that Vitas paid salespeople bonuses based on patients’ length of stay.
Angels of Hope hospice in LaGrange, Ga., trained salespeople to cruise neighborhoods looking for possible hospice patients, according to audio recordings cited in the complaint. “How do you solicit patients?” the recordings allegedly ask. “You see somebody sitting on the front porch in a wheelchair and you hit the brakes.”
Delta Hospice of California, which had one of the highest discharge rates of living patients in the state last year (63%) routinely admits non-terminal patients to hospice because “if they come in very sick and die right away, it’s difficult to run a business that way,” according to former marketing manager Rachel Mason. Having worked at non-profit hospices prior to joining Delta, she says she left Delta because “I wasn’t willing to sign on people who weren’t appropriate for hospice.…It wasn’t a good fit.”
After private equity firm KRG Capital Partners LLC bought Dallas-based Trinity Hospice, says Catherine Covington, who worked as a Trinity compliance officer from 2000 to 2004, “it was clear their philosophy was, ‘Put everyone on hospice, don’t ask questions and build! They were there to make a buck.”
VistaCare Hospice, a unit of Atlanta-based Gentiva, paid enrollment bonuses to doctors, admissions directors and branch managers, alleges Misty Wall, a former social worker for the company and now a professor at Boise State University, who has filed a whistleblower lawsuit against VistaCare.
Spokespersons for the accused companies generally deny these allegations.
MedPAC, which has been recommending reforms to the hospice payment system for about five years, sounded a note of urgency in its latest report on the issue, which was released in June.
“Given the magnitude of hospice spending devoted to long-stay patients, who are more profitable under the current payment system than other patients, it is important that an initial step toward payment reform be taken as soon as possible,” MedPAC wrote.
-Matt Bewig
To Learn More:
Hospice Firms Draining Billions from Medicare (by Peter Whoriskey and Dan Keating, Washington Post)
Aunt Midge Not Dying in Hospice Reveals $14B Market (by Peter Waldman, Bloomberg)
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