Hospices Have Become Big Business for Private Equity Firms


Hospice care, once provided primarily by non-profit organizations, has seen a marked change over the past decade, with more than two-thirds of hospices across the country now operating as for-profit organizations. The opportunity to make a quick profit while caring for people in their final days is attracting a new generation of hospice owners: private equity firms.

This rapid growth has left many hospice veterans worried that the original vision of hospice may be fading as the capital investment demands of these companies for return on investment and the debt burden they impose on hospices are detrimental to patients and families.


“Many of these deals are for quick profits,” says Dr. Joan Teno, an associate professor at Brown University’s School of Public Health, whose work focuses on end-of-life patient care. “I am very concerned that you are harming not only a dying patient, but also a family whose memory will be of a loved one who suffers because he did not receive proper care.”

According to a 2021 analysis, the number of hospice agencies owned by private equity firms has skyrocketed from 106 out of 3,162 hospices in 2011 to 409 out of 5,615 hospices operating in 2019. During this time, 72% of hospices purchased by private equity firms were non-profit organizations. And these trends have only accelerated in 2022.

Hospice is an easy business to start, with much of the care provided in the home and using cheaper healthcare workers. This allowed small hospices to spring up, many of which were opened with the intention of selling them within a few years. Private equity firms, backed by wealthy investors, could then grab a handful of small hospices, put together a chain, and profit from economies of scale in administrative and supply costs before selling off an even larger chain or another private equity firm.


Private hospice companies counter that their model supports growth through investment, which benefits the people in their care.

“Private equity sees a huge opportunity to take over small businesses that lack complexity, that lack room for growth, lack capital investment, and private equity says, “We can go in there, put these things together, get standardization, get visibility.” and be able to create a better footprint, better access and more opportunities,” said Steve Larkin, CEO of Charter Healthcare, a hospice chain owned by private equity firm Pharos Capital Group.

But he acknowledged that not all those entering the hospice market have the best of intentions.


“It’s a little scary,” he said. “There are people who have nothing to do with healthcare” who want to invest in a hospice.

Growing Position of Private Equity in the Hospice Industry

Over the past decade, private equity firms have rapidly acquired end-of-life companies.


Industry boom

As the US population is rapidly aging, the hospice industry has boomed. Medicare — the federal insurance program for people aged 65 and over that pays for the vast majority of end-of-life care — spent $22.4 billion on hospices in 2020, according to the Medicare Payments Advisory Commission report to Congress. This is more than 12.9 billion dollars ten years earlier. The number of hospices billing Medicare during this time has grown from less than 3,500 to more than 5,000, according to the report.

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But with limited oversight and generous pay, the industry is at high risk of exploitation. Agencies are paid a daily rate for each patient – about $200 this year – which encourages commercial hospices to limit costs in order to increase their profits. For-profit hospices tend to employ fewer staff than non-profit hospices and expect to see more patients.


Many hospice nurses and social workers are booked into 30-minute appointment slots throughout the day, unable to spend more time with patients if needed. Commercial hospices employ more licensed practical nurses than registered nurses, who are more qualified and rely more on nursing assistants to further cut costs. One study found that for-profit hospice patients visit physicians or nurse practitioners one-third less often than non-profit hospice patients. The US Government Accountability Office found in an analysis of federal data from 2014-2017 that for-profit hospice patients were less likely than non-profit hospice patients to have attended a hospice in the last three days of their lives.

“The main way to improve the bottom line is to reduce the number of visits,” Teno said.

In 2019, for-profit Medicare hospices had a ROI of 19%, compared to 6% for non-profit hospices, according to the Medicare Payments Advisory Panel.

Commercial hospices also enroll a different set of patients, preferring those who can stay in the hospice longer. Most of the expenses are for the first and last week of the hospice stay. Patients admitted to the hospice must undergo several examinations in order to develop a care plan and prescribe medications. In recent days, as the body begins to shut down, patients often need additional services or medications to feel comfortable.

“So the optimal point is somewhere in between,” said Robert Tyler Brown, an assistant professor of medical sciences at Weill Cornell Medical College.

This makes dementia patients particularly profitable. It is more difficult for doctors to predict whether a patient with Alzheimer’s disease or another form of dementia will live less than six months, which is an eligibility criterion for enrollment. For-profit hospices enroll these patients anyway, and profit the longer those patients live, Teno said. They tend to register fewer cancer patients, whose prognosis is generally more predictable, but they usually die earlier.

“It’s a very simple business model,” Teno said. “Go to nursing homes and nursing homes and it’s all in one place.”

Non-profit and commercial organizations

Rev. Ken Dugger worked as a chaplain in Denver for 13 years in both commercial and non-profit hospices.

In one commercial hospice, “words on the street [that] we were a dementia hospice because we had so many dementia patients,” Dagger said.

He said about a third of hospice patients die every week, so agencies have to do a lot of marketing to replace them. This leads some hospices to make promises to families — such as daily nurse visits — that they cannot deliver.

“Some people see dollars and say, “Wow! It’s a great chance to make some money here,” and they don’t understand that hospice is not easy,” Dagger said.

For-profit agencies counter that their non-profit counterparts have cornered the cancer patient market and that they are expanding access by serving patients with other diagnoses.

But if patients get too expensive, requiring expensive care or medications, hospice providers can write them out and take them to a hospital emergency room to get services that agencies don’t want to pay for themselves, said Christy Whitney, former CEO of HopeWest. non-profit hospice serving five of Colorado’s western counties.

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A 2019 report by consulting firm Milliman found that 31% of patients at nonprofits had cancer and 15% had dementia. In commercial hospices, 22% of patients had cancer and 22% had dementia, according to a report funded by the National Hospice Innovation Partnership, a non-profit hospice trade group.

Patients in nonprofits were more likely to visit nurses, social workers, and therapists. The report says that commercial hospices stay longer, discharge more patients before they die, and are almost seven times more profitable.

Other studies have shown that commercial hospices have higher rates of complaints and deficiencies, provide fewer social benefits, and have higher rates of emergency department and other hospital usage.

Brown said the financial pressure on private equity-backed hospices is worse than other commercial hospices, in part because of how hospice acquisitions are funded. The private equity firm typically contributes only 10% to 30% of the acquisition cost and borrows the rest. The acquired hospice must not only generate a profit to satisfy its private equity owners, but also bear the cost of the loan.

Private equity firms typically expect to recoup their investment in hospices in three to seven years.

In 2017, Webster Equity Partners bought Bristol Hospice, with 45 locations in 13 states, for $70 million. The firm reportedly received $1 billion in offers to buy the hospice chain last year.

Because hospices are inspected every three years, some are bought and sold without state or federal inspection, and sometimes regulators don’t even know about the sale.

And quality control is poor. Hospices have a financial interest in reporting quality scores to the Centers for Medicare and Medicaid Services, but there is no penalty for poor performance related to these scores.

Cordt Kassner, CEO of Colorado-based consulting firm National Hospice Analytics, said 17% of hospices in Colorado are now privately owned, up from the 13% he found nationally. When he looked at the scores reported by Medicare, he found that private equity firms scored lower than average on self-reported quality.

“The difference is small,” Kassner said. “Because national estimates are also small and there aren’t many differences, we account for any difference, even if it’s a percentage point smaller.”

Many non-profit organizations believe that private investment-backed hospices and other commercial hospices are damaging the industry’s reputation.

“They are paid the same as we are, but they accept other patients. spoke to KHN before she retired in June. “They have developed a kind of shady business that really has very little to do with the business I run. But they are called by the same name.

Larkin, Charter’s CEO, lamented the lack of progress in quality metrics as the hospice industry grows. But he said it’s not limited to private foundations or even commercial hospice providers.

“There are bad companies everywhere,” Larkin said. “There are wrong people, there are people with bad intentions, there are companies that are not focused on the right things.”


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