Paying the Price at the End of Life

A Consideration of Factors That Affect the Profitability of Hospice

Published in: Journal of Palliative Medicine, v. 11, no. 7, Sep. 2008, p. 1002-1008

Posted on RAND.org on September 01, 2008

by Sean Michael O'Neill, Susan L. Ettner, Karl Lorenz

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OBJECTIVE: To evaluate factors that affect the financial performance of hospice. METHODS: Using the California Office of Statewide Health Planning and Development 2003 survey, the authors evaluated the organizational attributes, clinical care, and financial performance of 185 operational hospices. As outcomes, the authors evaluated revenues, costs, and profits per patient and per patient-day, the intensity and skill mix of care, and the provision of charitable and special palliative services. They evaluated regression-adjusted differences by profit status controlling for other organizational features and aggregate patient characteristics. RESULTS: Hospices reported median revenue of $6865 per patient and $138 per patient-day (for-profit-not-for profit [FP-NFP] difference -$20, p = 0.045), median cost of $6737 per patient, and $135 per patient-day (FP-NFP difference -$55, p = 0.002), and median pretax profit of $334 per patient and $6 per patient-day (FP-NFP difference $34, p = 0.026). Patients received a median of 29.9 total visits by all providers per patient (FP-NFP difference 8.8 visits, p = 0.010), but there was no difference in total visits per patient-day. A median of 50.8% of all nursing visits were registered nurse (RN) visits (FP-NFP difference -14.1%, p < 0.001). Few hospices provided charity care, and only 4% of hospices reported expenditures on chemotherapy and only 9% on radiation therapy. CONCLUSIONS: Overall hospice profitability is low. Length of stay is strongly associated with financial performance, and greater FP profitability is related to lower costs. FP hospices also provide less RN care as a proportion of nursing care. Few hospices provide charitable care or special costly services. The relationship of service patterns to patient quality needs to be examined.

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