When Medicare introduced a hospice benefit in 1983, hospice care was the purview of small nonprofits and charities. Over the past four decades, however, that benefit’s per diem reimbursement scheme, coupled with lax oversight and low overhead costs, has transformed hospice into an attractive venture for companies looking for a reliable income stream. Roughly three quarters of U.S. hospices are now owned by for-profit entities. In recent years, the field has experienced another transformation, as hospice ownership has shifted from small for-profit operations to publicly traded companies and private equity firms, while ownership structures have become more complex across the entire healthcare industry. As a result, more hospices are now part of large chains, which may include other types of care providers, such as nursing homes, or span multiple states. A growing body of research has linked this financialization and consolidation to higher prices and poorer quality care.
One commonly recommended treatment for these ailments is a dose of revitalized antitrust law—more regulatory scrutiny of smaller acquisitions, and more enforcement activity in general. Yet, as I argue in this brief post, while antitrust is necessary, it has an under-discussed side effect: normalizing the language of the market as the default mode for discussions about healthcare reform. Even if a radical reframing of healthcare as a public good is infeasible in our current political circumstances, it does not follow that we must accept corporate involvement in care delivery as inevitable. Hospice demonstrates what is lost when healthcare is described as a mere economic exchange, and the Medicare hospice benefit—despite its current loopholes—suggests a possibility for disentangling care delivery from financial incentives.
PRIVATE EQUITY INVESTMENT IN HOSPICE
Medicare made hospice good business. In 1983, the first year of the hospice benefit, there were 40 Medicare-certified hospices, only 4 of which were for-profit. There are now almost 6,000 Medicare-certified hospices, of which roughly 4,400 are under for-profit ownership, caring for over 1.7 million Medicare enrollees. This growth can partly be explained by the hospice benefit’s distinctive structure: Medicare does not pay for individual services under the hospice benefit but rather pays a per diem (daily) rate, regardless of the services actually provided. In theory, a per diem rate gives hospice providers the necessary flexibility to provide holistic, individualized care to each patient. As in the nursing home industry, however, especially mercurial for-profit entities learned that insufficient regulatory oversight of hospice providers afforded them broad leeway to cut spending on patient care without losing Medicare reimbursement.
Compared with nonprofit hospices, for-profit hospices offer fewer services, employ staff with less training, and are more likely to enroll patients with less intensive care needs. Some for-profit hospices use their business relationships with nursing homes and other care providers to recruit stable patients who may not even qualify for hospice. Meanwhile, high-need patients who do qualify for hospice may find themselves disenrolled. Using 2017 data, the Government Accountability Office found that although for-profit and nonprofit hospices had similar average scores across quality measures, for-profits vastly outnumbered nonprofits among the worst performing hospices: Of the 329 hospices at or below the 10th percentile in a composite quality measure, which collectively cared for tens of thousands of patients, 261 were for-profit. Subsequent research has found that the quality gap between for-profit and nonprofit hospices is growing, driven in part by the increase in publicly traded company and private equity ownership.
While there is ample evidence that many kinds of for-profit entities exploit regulatory loopholes and market failures across the healthcare sector, private equity firms have attracted particular attention from scholars and policymakers. In part, this is because the private equity business model—which involves using loans to purchase companies and restructuring or making strategic asset sales to increase their profitability with the aim of selling them within three to seven years—makes it particularly prone to being driven by short-term profits at the expense of care.
Private equity has also facilitated significant consolidation in the industry, while avoiding antitrust scrutiny, by purchasing a sizable “platform” company first and then “adding on” or “rolling up” smaller companies in separate transactions. By 2012, half of Medicare hospice enrollees received care from a hospice chain. A study of private equity acquisitions of hospices between 2015 and 2022 identified 124 transactions involving 47 private equity firms. Over 96 percent of the hospices involved in these transactions were already under for-profit ownership, and many were already large operations. As a result of this model, private equity firms lack strong incentives to limit price increases, improve the quality of the goods or services they provide, or gain industry-specific expertise.
ANTITRUST & ANTI-COMMODIFICATION
The problem of private equity investment in healthcare, and the consolidation of the healthcare sector more broadly, are in some ways tailor-made for antitrust. Evidence is mounting that lack of competition has significantly contributed to higher prices and poorer outcomes for consumers, as well as higher costs across the board.
What antitrust cannot do alone, however, is fully account for the ways in which healthcare resists commodification. There is no need to adopt a particular philosophical viewpoint to acknowledge that the patient-as-consumer paradigm has failed to produce a cogent theory of value. The actual provision of care—the act of healing or attempting to heal—is broadly understood to be something more than a purely economic transaction. That idea is implicit in the argument that financial incentives for private equity and other for-profit actors are misaligned with the traditional goals of medicine. Yet policy plans tend to gesture at the vague notion of “something more” before discussing care in terms of what various economic actors are willing to pay for it. We lack a shared vocabulary for describing the noneconomic value of healthcare in a way that can be practically integrated into policy.
Hospice, perhaps more than other types of healthcare, lays bare the tension between medicine and the market. The value of a “good quality of life,” and what that entails, are highly personal determinations. Palliative care—of which hospice is a specialized form—is designed to assist seriously ill patients and their families as they make those determinations. Its animating principle, drawn from the work of Dame Cicely Saunders, is that a patient’s experience of pain has multiple dimensions—psychological, social, emotional, and spiritual as well as physical—all of which can and should be addressed holistically by a multidisciplinary care team. When hospice is commodified, this principle is flattened into a standardized list of discrete services that can each be given a monetary value: pain medication, durable medical equipment, skilled nursing visits, access to a chaplain. The aspects of hospice that cannot be standardized or given a monetary value are not legible to the market.
Accordingly, these aspects are often invisible in conversations about healthcare reform, even when those conversations purport to focus on hospice. This is understandable. In this era of consolidation and financialization, the most urgent issues in healthcare involve cost and competition. The most relevant conception of hospice is, accordingly, hospice-as-commodity. And the most relevant tool for monitoring how corporate entities deal with hospice as a commodity is antitrust law. But policymakers and reformers who take “most relevant” to mean “only” risk implementing reforms that prevent the most exploitative profit-seeking practices but, in doing so, further entrench the idea that deep-rooted corporate involvement in care delivery is an inevitable, irreversible development. Given the central aims of antitrust—to assess and regulate the dynamics of a particular market—it simply does not consider whether the market should exist in the first place.
Ironically, the per diem rate that made Medicare’s hospice benefit so appealing to for-profit companies also harbored as-yet-unrealized potential for decommodification. Unlike risk-adjusted capitated payments or value-based payment models, the flat per diem rate does not link reimbursement to care outcomes or utilization. It insulates the day-to-day provision of care from market valuation, creating a space for providers and patients to engage with hospice in its uncommodified form. But without adequate oversight or enforcement, this space became a vacuum that unscrupulous profit-seekers were all too happy to fill. Hospice reformers and observers concerned about private equity investment tend to diagnose this as a standard market failure problem. What this framing misses is that the benefit was designed (whether deliberately or not) not to maintain a healthy market for hospice, but to disentangle hospice from market logic. To achieve this, however, we need to do more than merely stabilize the hospice industry through greater competition—we need to create and safeguard spaces where care remains uncommodified.
