Private equity hospice acquisitions push Medicare spending higher
Private equity ownership of for-profit hospices was associated with longer stays, more live discharges, and higher Medicare spending, a pattern that points to how the hospice benefit can be shaped by payment incentives. After acquisition, Medicare paid $993 more per hospice encounter, a 5.9% increase from a baseline of $16,922, compared with similar for-profit hospices that were not bought by private equity firms. Average length of stay rose 6.3 days relative to the comparison group, while total visits and time spent on visits per week did not change significantly.
The study, published Nov. 2 in Health Affairs, examined 191 hospices newly acquired by private equity firms between 2018 and 2022 and compared them with 1,305 matched control hospices that were for-profit but not private equity owned. Investigators used 100% of fee-for-service Medicare claims and tracked changes in the two years before and the two years after each acquisition. The design matters because it captures whether the ownership change itself coincided with a measurable shift in how hospice care was used and paid for, rather than simply describing a cross-sectional difference between organizations.
A longer hospice stay is not automatically a clinical failure, but in a fixed daily payment system it can become a financial signal. Medicare pays hospices a daily rate that is not risk-adjusted, and the cost of visits comes out of that rate. Patients with dementia, who often decline gradually and require relatively few services, can generate the same daily payment as patients with cancer who need more frequent visits and more complex symptom control. In that setting, a business model that rewards revenue stability may favor patients whose needs are easier to manage within the reimbursement structure.
Patient mix shifted toward less intensive care
The clearest change after acquisition was in who entered hospice. The share of patients with dementia at acquired hospices rose from 22.6% to 23.8%, while the share at control hospices did not change. After acquisition, a smaller share of patients had stays shorter than a week, and more patients stayed longer than six months. Patients were also more likely to be discharged alive.
Those patterns fit a shift toward admissions that are less resource-intensive. Senior author Zirui Song, M.D., Ph.D., a professor of health care policy at Harvard Medical School and a general internist at Massachusetts General Hospital, said the more likely explanation for the longer stays and live discharges was a shift toward admitting patients who required less care. The study found no increase in physician, nurse, or home health visits that would explain the longer stays by way of more intensive treatment keeping patients alive longer.
The absence of extra visits is important. If a hospice were simply extending life through more frequent clinical attention, one would expect visit volume or time spent with patients to rise. Instead, the data point toward a different mechanism: a change in case mix, with more patients whose decline is slower and whose service needs are lighter. In practical terms, the payment structure appears to reward length of enrollment more than intensity of supportive care.
Medicare’s hospice model creates incentives around length of stay
Hospice benefit rules require a physician to certify that a patient’s life expectancy is six months or less if the terminal illness runs its normal course, and hospices must obtain a new certification for each benefit period. That framework is designed to reserve hospice for patients near the end of life, yet the payment model can create a mismatch between the clinical goal and the financial incentive. Short stays compress care into a limited window, while prolonged enrollments distribute the daily rate across many more days.
MedPAC has already described how hospices furnish more services at the beginning and end of an episode and fewer in the middle, making long stays more profitable than short ones. The economics are not subtle. In 2024, average lifetime length of stay was 169 days among decedents admitted to hospice for neurological conditions and 51 days among decedents with cancer. For-profit hospices averaged 120-day stays in 2024, compared with 71 days at nonprofit hospices. In 2023, for-profit hospices had an aggregate fee-for-service Medicare margin of 13.7%, while nonprofit hospices posted a margin of negative 1.3%.
That financial contrast helps explain why ownership structure matters. Private equity firms typically finance acquisitions with investor capital and loans, then require the acquired company to carry the debt and the interest burden. Investors also expect a relatively fast return. In that setting, longer hospice stays and a more favorable patient mix can improve revenue without requiring a corresponding increase in staffing or visit volume.
Private equity’s hospice footprint is expanding
Medicare hospice spending reached $28.3 billion in 2024, when more than 1.8 million beneficiaries, including more than half of Medicare decedents, received hospice care from about 6,700 providers. Over two decades, U.S. hospice ownership has shifted from mostly nonprofit to nearly three-quarters for-profit, and private equity has become the fastest-growing ownership category.
The clinical concern extends beyond spending. A 2024 study in JAMA found that hospices owned by private equity firms or publicly traded companies scored 2.86 percentage points lower than not-for-profit hospices and 1.68 points lower than other for-profit hospices on a composite measure of caregiver satisfaction. Earlier work from Song has linked private equity ownership in hospitals and physician practices to higher Medicare spending, fewer physicians, and more adverse health outcomes, including death, likely related to staffing cuts.
The hospice findings fit that broader body of evidence, even if hospice care has its own reimbursement logic. Fewer social work visits were observed after acquisition, which may matter in hospice because social workers are central to caregiver support, advance care planning, and symptom-related coordination. The study did not show a rise in the core clinical services that might have justified the longer stays, so the operational change appears to have been more about patient selection and service mix than about deeper bedside investment.
A 2025 commentary by Jared Rhoads, M.S., M.P.H., founder of the Center for Modern Health and a senior lecturer in health policy at The Dartmouth Institute for Health Policy and Clinical Practice, described the evidence on private equity in health care as mixed, occasionally contradictory, and still emerging. That caution still applies, especially because many studies have limitations such as small samples and short observation windows. Even so, this hospice analysis relied on a large claims base and a before-after comparison that makes the spending and length-of-stay changes difficult to dismiss.
Payment reform is now the central policy question
The investigators wrote that changes to Medicare’s hospice payment system may be warranted. One option would be to alter incentives that currently make long stays more financially attractive than short ones, especially when the patient mix changes after ownership shifts. Another would be to revisit how the program accounts for differences in illness trajectory, since dementia and cancer create very different patterns of service use under the same daily rate.
The core issue is not whether hospice should be profitable. It is whether a payment structure that rewards prolonged enrollment without adjusting for service intensity can distort admission patterns and raise Medicare spending while leaving visit volume essentially unchanged. This study leaves that policy dilemma squarely in view, along with a narrower question for future monitoring: whether the same ownership pattern continues to favor lower-acuity admissions as private equity expands its reach across hospice care.