Hospice care offers a compassionate alternative for individuals nearing the end of life, prioritizing comfort over invasive medical treatments. A recent study involving researchers from MIT reveals that hospice care not only enhances patient well-being but also leads to substantial savings for the U.S. Medicare system.
The study focuses on the rise of for-profit hospice providers, who benefit from Medicare reimbursements, and investigates the costs associated with caring for patients suffering from Alzheimer’s disease and related dementias (ADRD). Alarmingly, the findings indicate that patients opting for for-profit hospice services save Medicare approximately $29,000 in the first five years following an ADRD diagnosis.
“Hospice is saving Medicare a lot of money,” states Jonathan Gruber, an MIT economist and co-author of the research paper. “Those are significant figures.”
Over the past few decades, hospice care has expanded considerably. However, this growth has sparked concerns regarding the potential aggressive marketing strategies employed by for-profit hospice organizations. Instances of fraudulent activities have also been reported. Nevertheless, the study affirms that hospice care operates as intended: patients receive the necessary palliative care focused on comfort rather than aggressive medical interventions, all while incurring lower costs.
“What we found is that hospice essentially functions as advertised,” Gruber, who is the Ford Professor of Economics at MIT, elaborates. “It does not significantly extend overall lifespans and it results in cost savings.”
The research paper, titled “Dying or Lying? For-Profit Hospices and End of Life Care,” is published in the American Economic Review and features contributions from Gruber, David Howard at Emory University’s Rollins School of Public Health, Jetson Leder-Luis (PhD ’20) from Boston University, and Theodore Caputi, a doctoral student in MIT’s Department of Economics.
Understanding the Impact of Hospice Care
With its roots tracing back to the 1970s, hospice care in the U.S. allows patients to opt out of traditional medical care to receive nursing support in their homes or care facilities. This type of care centers on pain relief and enhancing quality of life for those expected to live six months or less. In the 1980s, the federal government began providing Medicare reimbursement for hospice care, leading to a significant transformation in how end-of-life care is delivered.
While the availability of nonprofit hospice providers has remained relatively constant, for-profit hospice organizations have surged by five times from 2000 to 2019. As a result, annual Medicare payments for hospice services reached about $20 billion, skyrocketing from just $2.5 billion in 1999. Notably, patients diagnosed with ADRD now constitute 38 percent of hospice populations.
Despite the alarming growth and complexity of hospice care, Gruber points out that the topic is still underexplored. To informed conclusions, researchers analyzed data from over 10 million patients from 1999 to 2019, comparing experiences of those enrolled in non-profit hospice care versus for-profit services or remaining in the broader healthcare system.
This rigorous approach allowed the team to assess the effects of increased access to hospice care. For example, the introduction of a new for-profit hospice facility in a community correlates with a notable increase in admissions to such services in subsequent years.
“We can utilize this methodology to determine whether patients would have otherwise opted for hospice or chosen a nonprofit option,” Gruber explains.
This analysis also reveals significant cost benefits. Evidence indicates that enrolling in hospice care leads to an 8.6 percentage point increase in the five-year post-diagnosis mortality rate for ADRD patients over the baseline of 66.6 percent. Choosing hospice often means foregoing aggressive life-extending medical interventions when individuals feel such options are no longer desirable.
Reassessing the Medicare Cap
By focusing on non-invasive care, it follows that hospice significantly reduces overall medical expenses. However, some policy experts express concern that for-profit providers might target patients who ultimately live beyond six months, increasing their revenue while straining the Medicare budget.
To address these concerns, Medicare implemented a cap on per-patient reimbursements, set at roughly $29,205 as of 2019. While many patients pass away shortly after entering hospice, some may live well past the six-month threshold, yet hospice providers cannot exceed that average reimbursement amount.
Nonetheless, the study suggests that this cap can be counterproductive. In 2018, a significant 15.5 percent of hospice patients were discharged alive due to the limitations imposed by the cap, leading to higher mortality rates among those patients. The paper cautions that “hospices facing cap pressure are more likely to discharge patients alive, which could adversely affect their health outcomes.”
Gruber emphasizes that, although the spending cap acts as a safeguard against fraud, it has unintended consequences that may push some patients out of the hospice system. “The cap might be throwing the baby out with the bathwater,” he argues, advocating for more precise tools to combat fraudulent activities without hindering patient access.
As long as individuals are well-informed about the nature of hospice care and its implications, this alternative appears to deliver valuable services while saving costs compared to traditional end-of-life treatment approaches.
“The ultimate goal in healthcare is to find solutions that enhance quality and cut costs,” Gruber remarks. “With hospice, surveys indicate high levels of patient satisfaction. It saves resources without causing harm, addressing a pressing issue of rising healthcare expenses in the United States.”
This research was partly funded by the National Institute on Aging at the National Institutes of Health.
Photo credit & article inspired by: Massachusetts Institute of Technology
