PE-Acquired Hospices: Medicare Paid $993 More Per Encounter, Health Affairs Study Finds
A Health Affairs study of 191 for-profit hospices acquired by private equity firms between 2018 and 2022 found higher Medicare spending per hospice encounter after acquisition than at 1,305 matched for-profit hospices without PE ownership. The study used 100% of fee-for-service Medicare claims and compared the two years before and after each acquisition. Medicare paid $993 more per encounter, a 5.9% increase from a $16,922 baseline. Average length of stay rose 6.3 days relative to controls, and patients were more likely to be discharged alive. Total visits did not change significantly, and social work visits fell. The dementia share of patients rose from 22.6% to 23.8%. The authors suggest, as a hypothesis, that selecting patients who need less care under Medicare’s non-risk-adjusted daily rate may help explain the results.
PE-backed and PE-targeted hospice and home-based care platforms face growing regulatory and payer scrutiny. This study shows which operating metrics, such as length of stay and patient mix, can move after a deal and draw attention.
Use it for: Stress-testing a hospice or home-based care deal model by separating revenue growth that comes from operations from growth that comes from longer stays and a different patient mix.
Watch out for: Both groups were for-profit, so the study does not compare PE with nonprofit ownership. It covers 2018-2022 hospice acquisitions, and the patient-selection explanation is a hypothesis, not a tested mechanism.
Try this: Pull a target’s last eight quarters of length-of-stay distribution, share of stays under one week and over six months, and dementia share, then run the revenue with and without that drift through the valuation calculator.
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