A Harvard-Led Study Found Hospice Medicare Spending Rose 5.9% After PE Acquisitions: What It Means for Independent Owners

A new Health Affairs study found Medicare spending per hospice stay rose after private equity acquisition, driven alongside longer stays and no increase in measured services. The findings are an association, not proof of wrongdoing or poor-quality care at any individual agency. This article explains the payment structure at the center of the debate, the reform options researchers proposed, and the records hospice owners can strengthen now. It also outlines why stay patterns and documentation may matter in buyer diligence.

11/11/20266 min read

A single daily payment icon weighed against different levels of patient care needs.

A study published in Health Affairs found Medicare spending per hospice stay rose after private equity acquisition, alongside longer stays and no increase in measured services. Here is what the findings do and do not establish, how researchers say payment design may affect incentives, and what hospice owners can do now to strengthen eligibility records and care planning.

Quick-Scan Summary

Who this is for

Hospice owners and operators, especially established agencies with $2 million to $10 million in revenue.
Home health owners who also operate a hospice service line or are considering a hospice acquisition.
Owners weighing succession or a sale and preparing for buyer diligence.

Key takeaways

The study found an association between private equity acquisition and higher Medicare spending per hospice stay. It does not prove wrongdoing or poor-quality care at any individual agency.
The comparison group was made up of other for-profit hospices. The research examined the effect associated with acquisition, not differences between nonprofit and for-profit ownership.
Eligibility documentation, care planning, and clear records of reassessment matter for every hospice, whatever its ownership.
Buyer diligence may include length-of-stay mix, diagnosis mix, live discharges, and visit intensity. Clear records can help explain those patterns and reduce uncertainty.

What the study examined

The study, reported by Newswise in a Harvard Medical School release and by Hospice News, compared 191 for-profit hospices acquired by private equity firms between 2018 and 2022 with 1,305 matched for-profit hospices not owned by private equity.

Researchers used Medicare fee-for-service claims and analyzed two years before and two years after each acquisition. Their difference-in-differences approach compared how outcomes changed at the acquired hospices with changes at the control hospices over the same period. Because the comparison group was also for-profit, the study focused on changes associated with private equity acquisition, not a contrast between nonprofit and for-profit providers.

The sources also report no increase in physician, nurse, or home health visits, and that patients received fewer social work visits. The findings therefore point to differences in stay patterns and patient mix, rather than more measured services, as part of the explanation for increased spending.

What the study does not show

The study is observational. Its design compares changes at acquired hospices with changes at similar control hospices. It does not prove that private equity acquisition caused every observed change, and it does not establish what happened at any particular agency.

Researchers did not conclude that every private equity owned hospice delivers inadequate care. Longer stays and live discharges do not, by themselves, demonstrate inappropriate admissions, poor-quality care, or patient selection at an individual hospice. Those patterns may have multiple explanations and need to be understood in clinical and operational context.

The comparison is also important: both groups were for-profit hospices. The researchers were assessing what changed after private equity acquisition within that group, not making a claim that for-profit ownership generally produces a particular result.

Why the payment structure is central to the debate

Medicare pays hospice providers a set daily fee regardless of how much care a patient needs on a given day. The Newswise release describes two major patient groups, people with dementia and people with cancer. A person with gradual dementia related decline who needs relatively few services can receive the same daily payment as a person with cancer who needs frequent visits and complex pain management. The cost of visits and services comes out of that daily fee.

That structure creates different financial pressures depending on the patient’s needs and services provided. It applies to hospice operators generally, not only to private equity owned agencies. The study’s findings bring attention to how the payment model may interact with admission patterns and length of stay.

Senior author Zirui Song said, “The more likely explanation for the longer stays and live discharges was a shift toward admitting patients who required less care.” He also said, “That makes sense from the point of view of a for-profit facility that looks to generate revenue under this payment system. The bigger question is whether that is the best payment model for meeting the needs of people who need hospice, or of ensuring that Medicare spending is sustainable.”

Those comments raise a question about incentives in the payment system. They are not a finding of misconduct at a specific hospice.

Payment reform options researchers proposed

The researchers outlined two broad possibilities. Each could affect hospice economics across the market, regardless of ownership.

Adjust daily payment for clinical need. Payments could vary according to patient diagnoses or other measures of need, similar to some hospital payment methods. This may better reflect differing care needs. The authors also caution that risk adjustment could encourage more diagnostic coding to qualify for higher reimbursement, so design and oversight would matter.
Pay separately for specific services. Certain services could receive separate fees rather than coming entirely out of the daily rate. The authors note that this approach would need monitoring to guard against unnecessary services or improper billing.

Neither proposal is a confirmed policy change. Owners should not assume a payment reform or a change in reimbursement is coming. The proposals do, however, underline why reliable data on care needs, services, and costs matter to hospice operators.

What this means for independent owners

The most useful response is practical, not defensive. Eligibility records and care plans should clearly reflect the patient’s circumstances and the care the hospice is providing.

At admission, document the clinical basis for eligibility in a way that supports the assessment. At recertification, make the current record clear about the patient’s status, changes over time, and the clinical reasoning behind continued eligibility. Keep care plans and service records consistent with assessed needs, and document reassessment when a patient’s condition or needs change.

A composite example illustrates the point. Consider an independent hospice where a patient remains enrolled for an extended period and is later discharged alive. Neither fact alone indicates a problem. A clear record of the patient’s clinical trajectory, eligibility assessments, care plan, services, and discharge decision helps explain the case and supports consistent care.

These practices are relevant across ownership types. They also help an agency answer reasonable questions about stay patterns without treating a single metric as proof of a problem.

Buyer diligence and valuation implications

For owners considering a sale or succession, expect a buyer to want a clear picture of hospice operations. Relevant diligence may include length-of-stay distribution, diagnosis mix, live-discharge patterns, visit intensity, and the documentation supporting eligibility and care planning. These are preparation points, not accusations.

Clear, consistent records can help a buyer understand the agency’s operating results and identify what requires further review. Unexplained differences between the clinical record, reported services, and operating data can create uncertainty in underwriting. That uncertainty may affect transaction discussions, even when a headline metric alone says little about the quality of care.

For illustration only, an agency with $800,000 in normalized EBITDA valued at a 5.0 multiple would calculate to $4.0 million. At a 4.75 multiple, the calculation would be $3.8 million. These are arithmetic examples, not market quotes or predictions about how this study will affect any agency’s valuation. Strong documentation and a clearly explained stay mix can help a buyer assess risk, but no particular multiple or sale price is guaranteed.

What owners can do now

Review admission and recertification records for clear, current support of eligibility.
Compare care plans with visit and service records, and document the clinical reasoning for changes.
Track length-of-stay mix, diagnosis mix, live discharges, and visit intensity together rather than treating any one measure as a verdict.
Prepare a concise explanation of unusual patterns for internal review and, if relevant, buyer diligence.
For home health owners, note that this study examined hospice claims and does not establish findings about home health services.

So what should you do now?

Audit a sample of hospice admission and recertification records for clarity and consistency.
Review stay and discharge patterns alongside clinical documentation and service records.
Identify questions a buyer may raise and prepare evidence based explanations.
If you are considering a sale or succession, organize operating data before beginning transaction discussions.

Plain-Language Glossary

Difference-in-differences: A research method that compares how results changed in one group with how they changed in a similar comparison group.
Control group: The comparison group used to help assess whether observed changes differ from what happened elsewhere.
Per diem: A payment made for each day of care.
Risk adjustment: A way of varying payment or comparison measures to account for differences in patient needs or health conditions.
Live discharge: A hospice discharge in which the patient is alive at the time they leave hospice care.
Length of stay: The time a patient remains enrolled in hospice.
EBITDA: Earnings before interest, taxes, depreciation, and amortization.
Normalized EBITDA: Earnings adjusted to represent the ongoing operations of a business.
Multiple: A factor applied to EBITDA in an illustrative valuation calculation.

Explore a sale or partnership with Senate Healthcare

Senate Healthcare LLC is the buyer and strategic partner pursuing home health or hospice agency acquisitions. We are not a broker or advisor. If you are considering a sale, succession, or partnership, we welcome a confidential conversation about your goals, your agency’s readiness, and ways to reduce transaction uncertainty. Your agency does not need to be perfectly positioned today to explore a potential transaction with us.

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