News Release

“Preying on the Dying”


In a new report by the Center for Economic and Policy Research, Preying on the Dying: Private Equity Gets Rich in Hospice Care, researchers provide evidence that in the last two decades, a growing number of private equity firms have exploited gaping holes in oversight and regulation of the hospice care industry.

The report finds that “loopholes built into the payment model used by [the Centers for Medicare & Medicaid (CMS)] provide incentives for for-profit hospice agencies to game the system, legally stealing money from Medicare while degrading the quality of patient care. These loopholes create incentives for financial actors such as private equity to target hospice providers for buyouts. Lax and fragmented oversight facilitates consolidation of hospice agencies into large chains in this fragmented industry… Compared to for-profit providers, private equity owners have even more incentives to game the system because they must service debt and deliver on their promise of outsized returns to their investors. Too often, gaming the system spills over into fraud––charging Medicare for services that were not provided or illegally enrolling ineligible patients.”

EILEEN APPELBAUM;, @EileenAppelbaum
    Appelbaum is a co-author on the report and co-director of CEPR.

Appelbaum told the Institute for Public Accuracy: “The privatization of the hospice industry started in around 2000. Private equity entered [the sector] a little later.” Now, “most nonprofits have been bought out––mostly by publicly traded organizations and some by private equity.” Unfortunately, though the Federal Trade Commission “automatically reviews acquisitions of over $110 million,” because most hospice deals “fall under that price threshold… there’s no review by antitrust agencies.” Appelbaum said that the “FTC needs to think about how to examine these smaller acquisitions. They need to look at what this does to competition.”

Ultimately, however, Appelbaum said that “CMS should be in charge of oversight. They are the ones who are ultimately responsible for enforcing the [rules] that already exist.” Right now, CMS pays a flat per diem reimbursement rate for hospice patients. In recent years, private equity-owned hospice firms have relied on enrolling more patients with dementia, who typically require less medical care and attention and tend to live for more than six months, compared to higher-cost patients with end-stage cancers or heart conditions. Privately owned hospices “cannot take patients being released from the hospital, because they’re very expensive to care for. They end up in [nonprofit] organizations who are overloaded with expensive patients.” Appelbaum urged CMS to “pay more for patients with higher acuity,” rather than a flat fee.

Appelbaum said she and her co-authors were “shocked” by the lack of regulation. “Our takeaway is that private equity can exploit this system. CMS is so deficient in how it regulates hospice.”