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February 2, 2011
JAMA Study Finds For-Profit Hospice Organizations "Cherry-Pick" Lower Cost Patients, Leaving Higher Cost Patients to Nonprofit Hospice; Medicare Payment Structure Incentivizes The Strategy
Capitalist systems are amoral (some might argue immoral) so the results of a recent JAMA study (described and linked to below) should not be surprising. The study results helps us think about what should be the proper role of nonprofits in society. Capitalism presupposes the necessity that in order for some to be rich, others must be poor. Capitalism requires the poor and the poor will always be with us. Nonprofits ought to militate against this particular amoral or immoral aspect of capitalism. This is not to condemn capitalism in toto. If, indeed, it provides more utility for more people than any other economic model than, of course, it is not entirely immoral. But to determine beforehand that some people must, of necessity, be poor so most people have what they need is the quandry of capitalism. Nonprofits help solve the quandry and, as I argued yesterday, should be tax exempt and supported in other ways only to the extent they do so.
A study in the current Journal of American Medical Association helps demonstrate the broader point, while also demonstrating the need to make changes to the medicare payment structure. The study concludes that for-profit hospice organizations typically select lower cost patients, leaving higher cost patients to the nonprofit sector. Nevertheless, both for-profits and nonprofits are reimbursed using identical per diem rates. Here is the study abstract:
Context: Medicare's per diem payment structure may create financial incentives to select patients who require less resource-intensive care and have longer hospice stays. For-profit and nonprofit hospices may respond differently to financial incentives.
Objective: To compare patient diagnosis and location of care between for-profit and nonprofit hospices and examine whether number of visits per day and length of stay vary by diagnosis and profit status.
Design, Setting, and Patients: Cross-sectional study using data from the 2007 National Home and Hospice Care Survey. Nationally representative sample of 4705 patients discharged from hospice.
Main Outcome Measures: Diagnosis and location of care (home, nursing home, hospital, residential hospice, or other) by hospice profit status. Hospice length of stay and number of visits per day by various hospice personnel.
Results: For-profit hospices (1087 discharges from 145 agencies), compared with nonprofit hospices (3618 discharges from 524 agencies), had a lower proportion of patients with cancer (34.1%; 95% CI, 29.9%-38.6%, vs 48.4%; 95% CI, 45.0%-51.8%) and a higher proportion of patients with dementia (17.2%; 95% CI, 14.1%-20.8%, vs 8.4%; 95% CI, 6.6%-10.6%) and other noncancer diagnoses (48.7%; 95% CI, 43.2%-54.1%, vs 43.2%; 95% CI, 40.0%-46.5%; adjusted P < .001). After adjustment for demographic, clinical, and agency characteristics, there was no significant difference in location of care by profit status. For-profit hospices compared with nonprofit hospices had a significantly longer length of stay (median, 20 days; interquartile range [IQR], 6-88, vs 16 days; IQR, 5-52 days; adjusted P = .01) and were more likely to have patients with stays longer than 365 days (6.9%; 95% CI, 5.0%-9.4%, vs 2.8%; 95% CI, 2.0%-4.0%) and less likely to have patients with stays of less than 7 days (28.1%; 95% CI, 23.9%-32.7%, vs 34.3%; 95% CI, 31.3%-37.3%; P = .005). Compared with cancer patients, those with dementia or other diagnoses had fewer visits per day from nurses (0.50 visits; IQR, 0.32-0.87, vs 0.37 visits; IQR, 0.20-0.78, and 0.41 visits; IQR, 0.26-0.79, respectively; adjusted P = .002) and social workers (0.15 visits; IQR, 0.07-0.31, vs 0.11 visits; IQR, 0.04-0.27, and 0.14 visits; IQR, 0.07-0.31, respectively; adjusted P < .001).
Conclusion: Compared with nonprofit hospice agencies, for-profit hospice agencies had a higher percentage of patients with diagnoses associated with lower-skilled needs and longer lengths of stay.
A Los Angeles Times article had this to say of the study:
They found that for-profit services had a lower proportion of patients with cancer than nonprofit providers, and a higher proportion of patients with dementia (which are, generally, less expensive to treat). For-profits had more patients living in nursing homes (also less expensive to treat.)
The team also found that the average length of stay for patients in for-profit hospice was 20 days, while the average length of stay in a nonprofit hospice was 16 days. Because costs are highest at the onset of enrollment and near death, longer stays in hospice are more profitable for providers.
Between 2000 and 2007 the number of for-profit hospice agencies more than doubled, from 725 to 1,660, while the number of nonprofit operators stayed about the same. For-profits have "significantly higher" profit margins than nonprofits, reported the researchers. Indeed, nonprofits, true to their name, operate at a loss.
The team did not assess the relationship between profit status and quality of care, but did suggest that policy makers should consider the study's results when planning how Medicare hospice reimbursements will work in the future.
"Patient selection of this nature leaves nonprofit hospice agencies disproportionately caring for the most costly patients," the team wrote. "As a result, those hospices serving the neediest patients may face difficult financial obstacles to providing appropriate care in this fixed per-diem payment system."
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