Lately I’ve been running across intermittent publications/blog posts, etc. regarding a general decline in hospice census. At the end of this post, I’ve attached a couple of links for anyone who wishes to see some examples of what I’ve been reading. Naturally, being the curious consultant and health policy junkie that I am, I started to do a bit of digging. What I found was rather interesting and perhaps, indicative of another trend that may soon emerge.
In my prior career as a health system CEO, I first became seriously interested in hospice in the mid-eighties. The impetus for this was my VP of Religion and Pastoral Care who happened to train with Dr. Elizabeth Kubler-Ross and was (still is actually) a highly respected expert in the field of spirituality, bio-ethics and end-of-life care. Over the years, he often engaged me in debate regarding the high cost of institutional care at the end of life. He also pointed out how inefficient and somewhat demeaning it was for individuals to die in an institutional environment. In our system at the time, we experienced hundreds of deaths annually, the majority in SNFs. With the enormity and complexity of all the SNF regulations, it was extremely difficult to provide lower cost, more creative and thus, more humane end-of-life care in a nursing home. To further complicate matters, like most SNFs at the time (and even still today), our beds were generally configured as semi-private; hardly ideal to accommodate visitors, guests, and privacy.
To resolve the above issue, we started a hospice in the early nineties. We took a different tack however, developing a place of residence and a site for inpatient care initially. As our focus was principally geriatric, we saw the greatest market need as an alternative site to hospitals or SNFs; a hospice site that would provide a lower cost of care, a private room and incorporate all of the latest knowledge in palliative care. We knew at the time that the majority of our patients died in SNFs and hospitals simply because there was no real alternative and given the age of the patient and the lack of willing or able caregivers to accommodate death at home, home hospice was not the solution. To make a long story short, we quickly expanded to a second location and incorporated a home program within our hospice division. Oddly enough, at the time, we became the first free-standing, inpatient and residential hospice in Wisconsin and the sole “geriatric only” hospice in the State and the in the nation. Also at the time, there was one inpatient hospital unit and one free-standing residence. When I left my position as CEO to form my consulting partnership, there were five additional inpatient/residential hospice options and nearly a dozen home hospice options (some related to the inpatient/residential options).
To the point of this post and my observation: Hospice census is getting soft for a number of reasons but the primary driver of the decline that I can verify is too much supply for what is truly, an undeveloped demand. The primary payer for hospice care is Medicare and as I have written in numerous other posts, Medpac and CMS both have targeted hospice as an industry in need of reform. Their scrutiny is born out of a steady increase in the benefit utilization, rapidly increasing lengths of stay, and an increase in the number of hospices that have SNF contracts. To Medpac and CMS, this means potential abuse and to me it means too much supply chasing too little “real” demand. This is particularly true in a down economy where potential demand ( the universe of all terminally ill individuals at any one point) is somewhat disconnected with the health system due to unemployment related job losses and lack of insurance and other providers compete for a scarcer share of patient days.
The difficulty of gauging the true demand for hospice in the U.S. is that the health system presently in place, somewhat restricts the growth of legitimate patient referrals. Combine this with a traditional cultural and religious predilection which values life and technical advancements focused on the restoration of life and hospice becomes relegated to a choice paired with futility. Physicians, the gatekeepers of hospice referrals, are fundamentally incented to do everything (financially, legally, etc.) other than to make the referral. Patients and their families, ignorant about hospice, often know nothing about the benefits available under Medicare, the care that is delivered in a hospice setting, or that a referral to hospice can occur (and should) significantly in advance of imminent death. Without sufficient information about hospice, save the stereotypes, patients and their families must rely on a health system that actually competes against making referrals. While I know this sounds rather harsh, the reality is that most hospitals and physicians are pushed by economic factors, especially of late, to maximize treatment, to maximize tests, and to maximize patient contact that correlates to higher reimbursement, even if the same will in all probability, not change the ultimate outcome: death. A phenomenal source of data on this very subject is available from the Dartmouth Atlas (http://dartmouthatlas.org/).
While I cannot universally verify a trend of softer census, I can verify that census issues are occurring in a variety of hospices, particularly in larger urban and fully developed suburban areas. From the limited research I did conduct, this issue is not new and in fact, has likely been going on for some time. Where census trends are up or a bit more stable is typically in rural areas, fast growing areas or as a result of new or expanded nursing home and assisted living contracts (the latter a somewhat new but growing phenomenon). Areas that have been hit the hardest in the economic downturn are logically, areas with the greatest number of hospices struggling to capture census. Areas that are truly over-bedded in terms of SNFs and hospital capacity are the areas where the “soft census” trend is evident back to late 2008 and early 2009. Not too surprising, these over-bedded areas will not recover any time soon, if at all.
A new trend that is likely to emerge in the immediate future is consolidation or renewed merger/acquisition activity. Industries that have reached a growth plateau or stage of maturation provide marginally higher opportunities for businesses within the industry to consolidate, especially if the overall, longer-term growth prospects remain solid. I like to think of this phase or stage as a period of digestion. Hospice has grown markedly in the last decade, so rapidly in certain areas that the market area is or was saturated and the recent downturn in the economy served to illuminate, how saturated the market really was. In the period or time when the economy was advancing, a hospice could survive on the margins; the leakage that hospitals, physicians and other providers were willing to forego as other business or patient encounter opportunities were perceived as more valuable. As the economy tightened and reversed, the queue of “other more valuable” business evaporated and all remaining revenue generating patients became valuable again, closing the gaps that once leaked patients deemed “played-out”. This cohort of marginal patients (marginal only from the perspective of revenue opportunities) was a few years ago, the life-blood of a number of hospices in an over-developed market. As all providers are now willing to utilize even the most marginal patient encounters today, marketing or census development activities alone will not generate sufficient new referrals (they simply don’t exist) and the remaining strategy is to merge or be acquired.
I would not be surprised to see a steady growth pattern of hospices affiliating with other hospices, either via merger or outright acquisition. The general prospects for the industry are solid but the intermediate future with likely Medicare payment reform, greater OIG scrutiny and new referral and relationship regulations means that marginal hospice providers probably can’t survive sans an affiliation of some sort. Additionally, while the market will grow slightly year over year, I believe hospice has reached a point of maturity as a service or product line. It is truly a niche’ product, one not fully embraced by physicians or for that matter, the general market of patients and their families. As long as the economic incentives remain heaviest on “cures” and the cultural trend continues to embrace life-elongation at all cost, hospice will remain a secondary option for care, offered too late in the end-journey to a population, woefully uneducated and unaware of how valuable a care option it truly is.
The following are a few links to articles I read, prompting this post.
http://www.kaiserhealthnews.org/Columns/2010/February/021810Gleckman.aspx
http://growthhouse.typepad.com/larry_beresford/2010/03/are-hospice-enrollments-declining.html
http://palliativemedicine.blogspot.com/2010/02/can-hospice-and-palliative-care-escape.html
I thought the article hit the nail right on the head. I current work at a not for profit hospice and we are struggling to capture referrals. Our situation is a bit different in that referrals are at budget, but ALOS and median length of stay are down. We are getting the referrals and the patients are dying much quicker.