Medicare Compliance & Reimbursement

Could newly revealed data mean hospices will lose favor with regulators, lawmakers?

A surprising new study could spell bad news for hospice providers.

"Patients who choose hospice care cost the federal Medicare system more than patients who use only traditional medical care," says a study conducted by RAND Corp.

Medicare expenses were 4 percent higher in the last year of life for beneficiaries who elected the hospice benefit compared to patients who received traditional fee-for-service medical care, says the study of 250,000 beneficiaries who died from 1996 to 1999.

Medicare did save money on cancer patients when they elected hospice -- about 1 percent over regular medical services, notes the study, which was published in the Feb. 16 Annals of Internal Medicine. And Medicare spent 17 percent less for patients with aggressive cancers who chose hospice.

But non-cancer patients who chose hospice cost the program 11 percent more than regular beneficiaries, notes the study.

"I'm surprised," says attorney Connie Raffa with Arent Fox Kintner Plotkin & Kahn in New York City. "I personally find it difficult to believe that hospice care is not more cost effective than curative care."

And much of the hospice industry has long held the same view.

The study's findings are "contrary to traditional views that hospice care is less costly to provide," RAND says in a press release summarizing the results.

The broad statement that hospice care is more expensive than regular care could negatively impact the hard-won victories of the industry, experts worry. "Sensationalized headlines" on the findings "could serve as a barrier to care," warns Jon Radulovic, spokesperson for the National Hospice and Palliative Care Organization.

For example, a physician who hears a snippet about the findings could dismiss hospice care as an option, thinking it costs too much, Radulovic says.

And the study could have an even more pronounced effect on lawmakers and regulators. The RAND study was conducted in cooperation with the Medicare Payment Advisory Commission.

The fact that two publicly traded, for-profit hospice companies, Odyssey HealthCare Inc. and VistaCare Inc., have been racking up record earnings and a third, VITAS Healthcare Corp., is expected to go public soon probably won't help the industry's reputation either, observers remark.

"It has not gone unnoticed by MedPAC that some of the higher profile for-profit companies have reported significant operational profits from their hospice business," notes consultant John Mahoney with Penfield, NJ-based Summit Business Group. "Those kind of profits could influence MedPAC's thinking if it is called upon to make recommendations regarding hospice and hospice rates."

Study Data Misleading, Association Says

While the study offers some valuable information, it has drawn some misleading conclusions overall, Radulovic says. Some forthcoming studies will present their own data showing hospice care is generally more cost effective than traditional Medicare for end-of-life care, he says.

One of the problems with the RAND study is that it examined only about 5 percent of the Medicare population, and it made some patient sample choices that could skew the data, Radulovic tells MLR. Medicare managed care patients were excluded. And the study "adjusted" for 10 factors when choosing subjects, including their "propensity to use hospice," according to the study abstract.

Some of those adjustment factors were "subjective" and could throw the cost findings into question, Radulovic suggests.

"Trying to control for the inherent selection bias that will exist in any such study" is extremely difficult, Mahoney contends.

And in figuring up costs, the study failed to take into account some key components of hospice care, Radulovic protests. For example, the year of bereavement counseling offered to family members and caregivers is an important benefit ignored by the study, he claims. In fact, a number of hospice services may not decrease Medicare costs, but they can decrease the family's costs.

Editor's Note: RAND's summary of the study is at www.rand.org/news/press.04/02.16.html.