Acquisitions of Hospice Agencies by Private Equity Firms and Publicly Traded Corporations

Abstract

This case series examines the increase in acquisitions of hospice agencies by private equity firms and publicly traded corporations from 2011 to 2019.

Over the past 3 decades, the hospice industry has transitioned from a mostly not-for-profit sector to one where nearly two-thirds of all agencies operate on a for-profit basis.¹ A substantial driver of this trend has been the growth of large for-profit hospice chains, many of which are part of publicly traded corporations (PTCs).² In general, for-profit hospice agencies have been associated with higher rates of live discharge, lower levels of skilled staffing, and provision of a narrower range of clinical services than nonprofit agencies.^1,3,4 An understudied and less visible factor is the more recent entry of private equity (PE) investment into the sector. Facilitated by relatively easy market entry and the prospect of stable Medicare payments, PE firms and PTCs have made strategic hospice investments in recent years, raising quality concerns among some policymakers and patient advocates.⁵ In this study, we measure the prevalence of hospice agency acquisitions by PE firms and PTCs over the period from 2011 to 2019.

Methods

We identified freestanding hospice agency transactions by PE firms and PTCs using the Irving Levin Associates Health Care Mergers and Acquisitions data set. We then merged these transactions with hospice Provider of Services files, matching on hospice agency name and address. Using Centers for Medicare & Medicaid Services Certification Numbers from the Provider of Services file, we merged this information with Medicare Cost Reports, the post–acute care and hospice public use file, and the Hospice Compare data sets to obtain the number of Medicare fee-for-service enrollees for each acquired hospice agency.

Changes over time in the number of beneficiaries who received care from PE and PTC hospices were compared using the Cochran-Armitage test for trend. A 2-sided P < .05 was considered statistically significant. This study was exempted from review and informed consent by the institutional review board of Weill Cornell Medical College University because the data were deidentified and publicly available.

Results

We identified 87 PE and 36 PTC transactions from 2011 through 2019. Of the 3162 hospice agencies operating in the United States in 2011, 106 agencies were owned by PE firms and 93 by PTCs (Figure 1). By 2019, there were 5615 hospice agencies, which included an additional 303 and 151 agency acquisitions by PE firms and PTCs, respectively, over the 9-year period. Among all PE transactions, 294 of 409 (72%) of acquired agencies were previously nonprofit, and among PTC transactions, 141 of 244 (58%) were previously nonprofit.

Figure 1. Prevalence of Hospice Agencies Acquired by Private Equity Firms and Publicly Traded Corporations in 2011 and 2019.

The number of transactions by year are as follows: 9 in 2011, 8 in 2012, 16 in 2013, 15 in 2014, 15 in 2015, 11 in 2016, 13 in 2017, 12 in 2018, and 20 in 2019.

In 2012, of the 959 583 Medicare beneficiaries in hospices, 11% received care from either PE-owned or PTC-owned hospices. By 2019, 16% of the 1.46 million Medicare hospice enrollees received care from either PE-owned or PTC-owned hospices; this included 112 995 beneficiaries in PE-owned hospices (328% increase from 2012, P < .01) and 125 746 beneficiaries in PTC-owned agencies (57% increase from 2012, P < .01) (Figure 2).

Figure 2. Percent of Medicare Fee-for-Service Beneficiaries Who Received Care From Hospice Agencies Owned by Private Equity Firms and Publicly Traded Corporations, 2012-2019.

Data Sources: 2012-2013 Medicare Cost Report; 2013-2017 long-term care public use file; 2018-2019 Hospice Compare.

Discussion

The rate of acquisitions and the percent of Medicare beneficiaries who received care from PE-owned and PTC-owned hospices has grown substantially over the last decade. The majority of transactions we identified were purchases of nonprofit agencies and part of a broader shift of the sector toward for-profit ownership. The growing role of PE-owned and investor-owned entities has raised concerns in other health care sectors (eg, nursing homes).⁶ Unlike for-profit companies that may have longer-term business plans (such as PTC agency chains or other large multiagency chains), PE owners might have little experience in hospice care, and may focus on selling acquisitions within a short time horizon, typically in 3 to 5 years.⁶ Furthermore, PE firms typically assume large levels of debt to make acquisitions and the acquired agencies are responsible for the loan payments. The short time horizons for returns on investment paired with large amounts of debt may lead to reductions in resources such as staffing, as has been seen in PE acquisitions of nursing homes, which could negatively affect the quality of end-of-life care.⁶

An important limitation of this study is that PE and PTC transactions were identified through public announcements, which likely underestimates the number of transactions. Further research is needed to understand the effects of PE and PTC acquisitions on the quality and cost of end-of-life care. An important step will be to achieve greater transparency in hospice ownership for public reporting (eg, in Hospice Compare) and efforts to monitor the quality of care for hospice patients.