Study Shows Private Equity-Owned Hospices Report Highest Profits, Lowest Spending on Patient Care

A new study published in Health Affairs finds that private equity-owned hospices report the highest profit margins while spending the least on direct patient care compared with other ownership models. The study was led by Alexander Soltoff, a PhD student in the Department of Health Policy and Management at the Rollins School of Public Health, and colleagues. The study comes as private equity ownership across the U.S. health care system is rapidly increasing. 

What They Found 

Using 2022 Medicare cost reports, the researchers compared financial outcomes across four hospice ownership models: private equity-owned, publicly traded company–owned, other for-profit, and not-for-profit. Key findings include:

• Private equity-owned hospices reported the highest profit margins (7.6%) and the lowest spending on direct patient care, which includes costs like nursing salaries, health aide services, medications, and medical equipment.
• Private equity-owned hospices also reported significantly higher revenues and expenses related to nursing facility room and board as compared to other owners,  suggesting these agencies place a greater focus on enrolling patients who reside in nursing facilities.
• Private equity-owned hospices spent approximately 25% less on non-salary administrative services relative to other ownership models, likely because of efficiencies from operating as part of larger corporate chains.
• Not-for-profit ownership was associated with the greatest spending on direct patient care—around 20% more spending per patient relative to for-profit ownership categories. These differences were largely driven by greater spending on nursing salaries. This implies not-for-profits may tend to employ more nurses per patient relative to for-profit models.

The study suggests that private equity-owned hospices may follow distinct operational strategies, emphasizing nursing facility-based care and administrative efficiency while limiting investments in direct patient care. 

Why it Matters

Reduced spending on patient care may have implications for hospice quality and could shift costs to other parts of the health care system. Previous research has linked higher investment in nursing and patient services to fewer hospitalizations and emergency department visits at the end of life.

“We find that that consumers report the highest quality in not-for-profit hospices, which simultaneously spend the most on direct patient care, including nursing staff. The data is clear that investment in direct patient care can lead to better end-of-life care,” said Soltoff.

The research also indicates potential opportunities for Medicare to better align reimbursement with the costs of care delivery. One such opportunity is lowering hospice payments for patients co-located in nursing facilities, which may help promote Medicare savings and better support high-quality hospice care.