Hospice Census: Where’s It At?

A common question I am fielding has to do with the current “no growth” pattern of hospice census; in some cases, decline is more operative of the pattern.  Briefly, there are a number of factors at play, some recurring themes and some driven by more aggressive CMS intervention.

• The biggest culprit in the current no-growth situation is the economy.  I’ve written about this issue before but it clearly bears repeating.  In a down economy, paying patients are more scarce than in a healthy(ier) economy.  Assuming as has been the case, provider growth or supply hasn’t declined substantially (if at all) during the recession to current level of stagnation; the same number of providers are chasing a lesser number of “paying” patients.  The reality is such that each provider seeks patients that can pay and ranks or grades patient value by payer source; some patients are worth more than others.  As hospice is primarily a “down stream” referral, generally coming from an acute environment, the base of referrals starts with the supply of paying patients within the hospital.  For most if not all hospitals, patients with good private insurance are the most prized.  Medicare comes next and Medicaid next and everything else well below.  For hospice, the bulk of referrals are Medicare followed by Medicaid and private insurance to a far lesser degree.  When the supply of patients with private insurance declines due to economic malaise for a prolonged period (as current with high unemployment) and the level of elective procedures dies rapidly, all other paying patients become more prized by the hospital; their value increases.  As the value of these other patients rises and isn’t replaced quickly with private insureds, the realization of keeping Medicare and Medicaid patients within the system and the hospital as an economic necessity (paying the bills) trumps the value of referring down stream.  In short, the demand from a supply of private insureds for beds and services isn’t great enough today to push these other patients out of the acute system.  Economically speaking, if I am a hospital, I will maximize whatever revenue source is available to me such that doing so is better than nothing as no immediate alternative or replacement is available.
• While overall census hasn’t grown much over the last few years (if at all), CMS’ concern regarding the composition of hospice census has.  The primary focal point is around nursing home patients on hospice and their proclivity as a sub-group to account for longer lengths of stay.  Not surprising, as the sources for non-nursing home patients have remained stagnant or declined, hospice activity in nursing homes has steadily increased.  What CMS is concerned about today is the growth of the longest stays, principally where these stays occur and what diagnoses correlate to these stays.  A notable aside and one that cannot be ignored is the type of hospice ownership that seems to drive the majority of long-length stays.  The facts below combined with an OIG workplan emphasis that is focused on reviewing the business relationships between hospices and skilled nursing facilities correlates directly to a softer environment for census gains derived via nursing homes.  If the term Hawthorne Effect (behavior modification that occurs as a result of being watched or monitored) comes to mind, I’ve made my point.
• The longest stays occur on average, in nursing homes and assisted living environments.
• The average length of stay in-service for a for-profit hospice is 30 days longer or 33% longer compared to a non-profit hospice.
• The bulk of industry growth in terms of organizations providing hospice has been for-profit, free-standing hospices.  The rest of the industry growth has remained essentially flat.
• For-profit margins of free-standing hospices average 10 to 11% compared to non-profit margins of 3%.
• A recent OIG report on hospice care provided in nursing homes found that 82% of the cases reviewed did not meet Medicare coverage requirements.
• In the grand universe of all health care options, hospice care remains a decided niche’.  For non-health care people, its tough to wrap your head around a care approach that by its nature, offers no “curative” option.  For all too many individual patients and their families, this option is too often viewed as “giving up”.
• Marketing has caused some erosion but marketing on behalf of non-hospice providers.  Cancer remains the primary cause of a hospice referral yet for every hospice advertisement I encounter, I encounter a literal ten to one (if not more) advertisements for hospital-based cancer treatment programs or distinct hospitals (think Cancer Treatment Centers of America).  While I know the overall survival numbers, costs, logistics, etc. as well as any one, the general patient and their family does not.  The treatment approaches are phenomenally positive and reassuring regarding themes of “hope”, “cure”, etc., even for the most desperate of diagnoses.  The hospice message is frankly trumped quickly as to the unitiated, it is still about death.  The result: Referrals that should have come sooner perhaps are not coming at all or coming closer to the final days.

Taken the above into account and CMS data regarding a projected growth in outlays for FY 2012 of 2.8% (Medicare), an amount that is almost entirely rate driven, expect continued stagnation on the census side.  Until the economy improves and more certainty is forward on the future of health care reform, growth in terms of new volume is not soon to arrive.