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Each week, Health Affairs' Rob Lott brings you in-depth conversations with leading researchers and influencers shaping the big ideas in health policy and the health care industry.
A Health Podyssey goes beyond the pages of the health policy journal Health Affairs to tell stories behind the research and share policy implications. Learn how academics and economists frame their research questions and journey to the intersection of health, health care, and policy. Health policy nerds rejoice! This podcast is for you.
Hello, and welcome to a health podocy. I'm your host, Rob Lott. The social sciences are commonly described as the systematic study of human interactions and social structures. But I'll admit to what might be the height of nerdiness and share that sometimes my colleagues and I here at Health Affairs, we jokingly attempt to develop perhaps even better alternative definitions. For example, you could call the social sciences the study of what makes people and organizations tick.
Rob Lott:You could call it the study of everything, everywhere, all at once. And my favorite, you could call it figuratively, the study of ripples in a pond, which is to say the study of consequences intended and unintended spreading outward over great periods of time. Take, for example, congress's 1982 decision to have Medicare begin paying for hospice services. More than forty years later, we're still seeing the impact, good, bad, and complicated, of that policy and numerous other policy changes laid on top of it. The consequences for people, for communities, and for health care writ large have been significant, and they continue to evolve and change for decades on.
Rob Lott:They also make great fodder for researchers interested in pond ripples to continue assessing their impact, past, present, and future. In my eyes, that's the social sciences, and it's the subject of today's health policy. I'm here with Alexander Soltoff, a PhD student in health services research and health policy at Emory University in Atlanta. He and his coauthors have a new study in the October issue of Health Affairs. Its title is also one of its main findings.
Rob Lott:Quote, private equity owned hospices report highest profits, lowest patient care spending compared with other ownership models. I cannot wait to learn more about those findings and think with him about their implications. Alexander Soltauf, welcome to A Health Odyssey.
Alexander Soltoff:Thank you so much, Rob. It is my pleasure to be here today.
Rob Lott:Great. Well, let's just dive in. Let's start perhaps with the stone in the pond. A bit of history. Medicare, as I mentioned, created the hospice benefit in 1982.
Rob Lott:What did the provider landscape look like at that point in time? And how did it change over the course of, let's say, the 80s and 90s, maybe the early 2000s?
Alexander Soltoff:Yeah, so we can start before 1982. So the Western hospice movement came to The US from The UK in the 1960s. Hospices as organizations started popping up in The US in the 1970s, such that by 1982, there were a few 100 hospices operating in The US. Almost all of them, I think basically all of them, were not for profits. Most of them were associated with hospitals.
Alexander Soltoff:Some were associated with places like visiting nursing associations. And pretty much all of them relied largely on volunteers. And then in 1982, you mentioned Congress passes the, I think it's the Tax Equity and Fiscal Responsibility Act, but that establishes the Medicare Hospice Benefit as a demonstration project. It becomes permanent, I think in 1985 or 1986. And once the government starts paying for hospice services, you see growth in the number of hospices that are operating around the country.
Alexander Soltoff:In the 80s and 90s, we see an increase to around 1,500 hospices that are operating in The US. At that point, most of them are still not for profits. You start to see larger chains starting to creep into the hospice landscape at that point. And by the early two thousands is when you really start to see growth in for profit hospices. And starting in February, you start to see really exponential growth in the number of for profit hospices that are operating in The US.
Rob Lott:Okay. And what do we know about the relationship between hospice ownership? You talked about starting as a sort of largely nonprofit and then growth in the sort of for profit space. What do we know about the relationship between that status and the quality of care that they deliver and the experience of people in those hospices?
Alexander Soltoff:Yeah, it's a great question. This is kind of one of my favorite things to think about is quality of hospice care. It's kind of going to be what my entire dissertation is about. So I think before answering that question, it's important to think about how we define quality in the hospice space. And the way I think about hospice quality, and I'd say the way other researchers and even Medicare itself think about hospice quality is there's these three buckets of hospice outcomes that are synonymous with quality.
Alexander Soltoff:The first, I would say, is health care utilization outcomes. So those are things like are a lot of hospices patients ending up in places like the emergency department in ICUs? That tends to indicate poor quality of care. And what research shows is that relative to not for profits, for profit hospices have higher rates of hospitalization, ICU stays, ED visits for their patients. The second bucket of hospice quality outcomes I'd say are process quality outcomes or outcomes having to do with the actual delivery of hospice services.
Alexander Soltoff:So that is basically asking, do nurses show up? Do they show up consistently? Do they show up near death? Are patients being discharged alive? It's perfectly fine if patients are being discharged alive, but seeing a very high proportion of hospices patients being discharged alive is usually a cue that something strange might be going on.
Alexander Soltoff:And there, not a lot of information on how hospices differ with regard to whether or not they show up consistently. There is some research that shows that for profits are less likely to provide visits in the last two days of someone's life, which is a common metric that's associated with hospice quality. Research Sorry shows
Rob Lott:to interrupt. By visits No, a nurse or a care provider visiting the patient toward those last few days of life. Is that right?
Alexander Soltoff:Yeah, yeah. So it's asking whether or not a nurse, a registered nurse, visits with a patient usually in their home in the last two days of life. There's a study that came out that said for profits were less likely to provide visits in that really key time point. And that's the reason we look at last two days of life is that that tends to be when needs for both the patient and their families are the highest. And then you see with regard to those process outcomes that for profit hospices tend to have higher rates of live discharge relative to not for profits.
Alexander Soltoff:And then the final bucket of outcomes, and I would say the most important bucket of outcomes, are patient experience outcomes. I think really the entire goal of hospice is to ensure that patients and their families feel comforted, that patients are able to experience the completion of life with dignity. Essentially, patients like the care that they receive. So to measure that, basically in order to get fully paid, eligible hospices have to survey their caregivers using a patient experience survey, something called the Consumer Assessment of Healthcare Performance and Systems, CAPS. And there you see that compared to for profits, not for profits tend to perform better across domains of the CAPS hospice survey.
Alexander Soltoff:So domains include things like your willingness to recommend a hospice, overall rating, how well symptoms were addressed, whether or not you feel that the team communicated well, whether or not caregivers were trained well, stuff like that. So across all those domains, not for profits tend to perform better than for profits. And then I can break up for profits a little bit. Not all for profits, I'd say, are the same. There's heterogeneity in that group that I'm sure we'll talk about.
Alexander Soltoff:But one thing that we found just last year actually, we published a paper that showed both not for profits and then this kind of amorphous other for profit category of ownership perform better on across caps domains relative to hospices owned by private equity firms, as well as those owned by publicly traded companies.
Rob Lott:Great. Well, that's a great segue for my next question, which is specifically private equity. I know over the last ten, fifteen years or so, private equity has become a much bigger player in healthcare generally, in hospice in particular. And I'm wondering, looking at that reality, let's say before conducting the study we're talking about today, how would you have explained the appeal of hospice as a target for private equity? Why are they so eager to invest in private in hospice?
Alexander Soltoff:It's a great question. There's a couple pieces there. I would say that the first is over the last fifteen, twenty years, ten, fifteen, twenty years, I think that private equity firms and other institutional investors have gotten smart to the fact that there's this increased demand for hospice services. So that's because US population is getting older, so there's just more people who are looking for end of life care services because there's more people that are reaching the end of life. And then I think that relative to thirty years ago, over the past ten, twenty years, there's been increased cultural awareness of and cultural acceptance of palliative care and hospice care as medical subspecialties.
Alexander Soltoff:So there's increased demand from consumers in that perspective. The second thing that makes hospice appealing is that you don't really need a traditional brick and mortar healthcare facility to start a hospice. I don't know how familiar our listenership here is with what hospice actually looks like on the ground, but most hospice isn't delivered in an inpatient facility. Mostly what it looks like is a nurse or a home health aide entering a patient's home, doing a thirty minute visit in which they try to address all of the patient's pain and symptom management needs. A social worker might also come by to try to address any patient, the patient and family emotional needs.
Alexander Soltoff:But really very little of hospice is provided inpatient. I think like 1% of all patient days are provided in an inpatient facility. What that means is that you don't need hospital beds, you don't need expensive medical equipment to start a hospice agency or a hospice facility. Think most hospices basically just operate out of your standard office space. So there isn't a lot of capital required to start a hospice.
Alexander Soltoff:And then the way that payment works is not it's not fee for service. Hospices essentially get a flat rate, and I'm simplifying a little bit here, but they get a flat rate of 200 per patient per day to take care of their patient roster, of their patient census. And that should cover everything. It should cover staffing. It goes to cover rent.
Alexander Soltoff:It goes to cover medications. But there, if getting $200 per patient per day, and then you're able to cut costs or or become efficient in such a way that you're spending less than $200 per patient per day, then you have this stable income coming in in a way to generate profit. So if hospice owners can find a way to cut costs and create efficiencies, you can generate a fairly high profit margin. And that's something that's been well known. So the Medicare Payment Advisory Commission, for example, they've been publishing about that for a while, that the profit margins can be quite large.
Alexander Soltoff:So my guess is that in the last ten or fifteen years, somebody in the private equity world was like, you know, we see here that that high profit that there can be high profit margins in the hospice space, so maybe we should start investing in it since it could be financially lucrative.
Rob Lott:Got it. Okay. Well, that sets the stage for your paper, which my understanding is you used 2022 Medicare cost data to compare those sort of four ownership, hospice ownership models. You mentioned them earlier, private equity on one end, nonprofit on the other, and then sort of these other for profit models. One is publicly traded companies and then the other is for profit models.
Rob Lott:And you looked at where they spent their money, if I'm correct. What are some of the top line findings?
Alexander Soltoff:Yeah. We looked at where they spent their money and how they received their money. I think where they spent their money might be a little bit more interesting. I'll circle back to that. But regarding the top line findings, so what we found both before adjusting for various confounders and also after adjusting for various confounders is like three, four big findings.
Alexander Soltoff:The first is that private equity owned hospices tend to spend a lot more money on nursing facility room and board relative to the other ownership categories. The second is that private equity owned hospices tend to spend significantly less on a line item called non salary administrative expenses. And that's a broad category, but it includes expenses like legal, fiscal, data processing, malpractice services. So they spend less on those non salary administrative costs relative to all other ownership categories. Then we find that relative to the three categories of for profit ownership, so private equity owned, publicly traded company owned in this other for profit category, not for profit spend significantly more on direct patient care services.
Alexander Soltoff:And that's largely driven by spending more on nursing salaries, which make up a little less than half of all direct patient care costs. And finally, we find that private equity owned hospices report the highest profit margins and the highest incomes. And I will say that all of our data, we exaggerated findings in our sensitivity analysis that limited our sample to hospices that had sustained ownership for at least three years. So when you get rid of the new hospices and hospices that recently changed hands, you see more pronounced findings.
Rob Lott:Got it. Well, I wanna, look under the hood at some of those findings with you in, just a minute. But first, let's take a quick break. And we're back. I'm here talking with Alex Soltoff about private equity owned hospices and the findings of their article in the October issue of Health Affairs.
Rob Lott:You talked a little bit about the clear difference nonprofit hospices spending more on patient care. And then you talked about sort of past findings about nonprofit hospices sort of quality outcomes being higher. Did you look at quality in this study or sort of how do you look at those two findings, the increased spending on patient care and the increased, you know, improved patient experience? How do you see those two in the same light? Is there a, what do we know about the correlation or perhaps causation between those two things?
Alexander Soltoff:So that's a great question. I want to be careful with using causal language here. But what we found in this study is that not for profit hospices spend around 20% more on direct patient care services relative to for profit hospices. I talked about those three categories. And then we found in a paper that we published last year that over the same exact study period, essentially, in 2021 and 2022, we find that consumers of hospices that are not for profit are rating their experience significantly better in not for profit hospices relative to private equity owned, publicly traded company owned, and other for profit hospices.
Alexander Soltoff:And when you dig into that, we're saying that on average, consumers in not for profit hospices are saying that they have timelier care, that they're more willing to recommend, that they have better symptom management. And to me, it would make sense that as you invest more in direct patient care, that would lead to kind of an improved patient experience. And as you have more robust staffing, for example, that would lead to improved cap scores, basically.
Rob Lott:Can you say a little more about what your findings imply about private equity sort of typical strategy when it comes to bringing a hospice agency on board? How are they approaching their decision making compared to other types of hospices?
Alexander Soltoff:That is a great, great question. And again, I think the simple answer here is that I don't really know. So I'm in the middle of my dissertation right now. One thing that I really want to do as part of my dissertation is actually go out and talk to stakeholders at private equity firms and ask them to explain their rationale behind why they make the financial decisions that they do and what that says about the greater ways that private equity owned hospices operate and how that might be different relative to not for profit and other forms of for profit hospice. However, we can make some hypotheses here.
Alexander Soltoff:We see that private equity owned hospices spend significantly more on nursing facility room and board relative to all other ownership categories, like 250% more than not for profits and about a 100 and and about 50% more than private publicly traded company owned hospices and other for profit hospices. And the only thing that would explain that number, the way that that number gets calculated, is that private equity owned hospices place a relatively greater focus on enrolling patients who reside in nursing facilities. So they're seeing a greater proportion of patients who are residing in nursing facilities, and that makes some intuitive sense. It's kind of well known that patients in nursing facilities tend to be relatively stable, and if you're visiting patients who co reside in nursing facilities, then you can knock out multiple visits. You can visit multiple patients with minimal travel time and minimal travel costs.
Alexander Soltoff:The other thing that our results point to about how private equity firms invest money or how they operate is that most private equity owned, I think pretty much all private equity owned hospices are associated with some sort of parent organization or chain. And when you see that they are spending significantly less on non salary administrative expenses. So I wish that the cost report kind of itemized that bucket a little bit more. Lawyers versus Yeah. I don't
Rob Lott:Yeah. Janitorial services and that kind
Alexander Soltoff:Lawyers versus janitorial versus data processing versus malpractice versus legal. But all that is wrapped up in this non salary administrative expense. And what we can intuit is that if private equity owned hospitals are part of these larger chains, then perhaps they're more efficient doing these administrative tasks just due to efficiencies of scale, where if you have a centralized HR department, your costs are going be a lot cheaper per patient than if you are like a mom and pop hospice trying to do HR on your own.
Rob Lott:For our listeners reading your paper or hearing about us today and thinking about where do we go from here, what's the next step when it comes to policy in your mind? If your paper were to inspire a concrete specific policy change or improvement in this space, where do you think that would go?
Alexander Soltoff:Yeah, I have two answers for you, Rob. Great. One. Better first one in what we write in the paper is that we see that private equity owned hospices tend to care for a relatively large number of patients who are residing in nursing facilities, and simultaneously they're also reporting the highest profit margins and the most income per patient. And I just mentioned it, but that aligns with this known logic that enrolling patients who are relatively stable, who live in nursing facilities, is a method to generate profits.
Alexander Soltoff:The way that the current payment model works is that you get that flat, and I get this to oversimplify it a little bit, but you get a flat $200 per patient per day for every patient on your roster, regardless of what their care needs are, what their diagnosis is, and where they reside. So our results suggest they provide some early evidence that perhaps tweaking the per diem to lower payment on days when patients on a census are co residing in nursing facilities could be a way to generate some savings. If you're generating so much profit from visiting patients in nursing facilities, maybe the payment is too high. And then outside of our results, I think in the process of writing this paper, one policy thing that I was thinking about is the importance for greater transparency and reporting on staffing. So in a lot of ways, the best and most consistent data that we have on the staffing mix and staffing levels in US offices comes from cost reports.
Alexander Soltoff:And as I just discussed a little bit, there's limitations there where you don't actually get a raw number of how many nurses are working in hospice, how many home health aides are working in hospice, how many social workers, how many chaplains are working in these places. And that's really important because I mentioned, actually I'm not sure if I mentioned this before, but I think that staffing is really a key, key, key driver of hospice quality. That in order to ensure that patients are getting consistent visits and visits in the last days of life, and that patients are having a positive experience of care, staffing should be somewhat robust. And right now there isn't really a great way to evaluate staffing within a hospice. I know last year, I think part of the not last year, maybe a couple of years ago, the Biden administration mandated staffing minimums at nursing homes.
Alexander Soltoff:And right now nursing home organizations are required to port out pretty specific staffing numbers. And I'd like to see something like that for hospice, especially because right now we kind of have to rely on this salary proxy to get at who and how many people are working within hospice agencies. So in writing this paper, I kind of thought more about that as a potential policy change and getting more robust data on staffing within hospice agencies, because I really do think that staffing on some level is a key, key, key driver of hospice quality.
Rob Lott:Well, a great agenda for perhaps future policy change and certainly future research. Alex Soltov, thanks so much for taking the time to chat with us today. Had a great time.
Alexander Soltoff:Thanks so much, Rob. This was fun.
Rob Lott:To our listeners, if you enjoyed this episode, please leave a review, recommend it to a friend, and of course, tune in next week. Thanks, everyone. Thanks for listening. If you enjoyed today's episode, I hope you'll tell a friend about a health policy.