November 15, 2017; Hospice of Cincinnati (via Cincinnati.com)
Last week, Cincinnati-based Chemed and the US Department of Justice reached a settlement of $75 million in a long-running False Claims Act (FCA) suit against the for-profit hospice care provider. Chemed has a practice of admitting patients that are not terminally ill; such patients require less care, thus reducing their operating costs and expanding their profit margin. Of course, the practice also exploits taxpayers by making poor use of an expensive and largely publicly funded resource.
While this settlement represents the largest amount recovered under FCA, it is just one of many violations of the False Claims Act cited against hospice centers in recent years—few of which are directed at nonprofit providers. Readers may remember that on June 16th, the Department of Justice announced it had reached a $53.6 million settlement with Genesis Healthcare Inc., resolving six federal lawsuits and investigations alleging that companies and facilities acquired by Genesis violated the False Claims Act. As Ruth McCambridge wrote at the time, “The issues the DOJ had with the corporation were numerous but followed a simple formula: substandard and sometimes unnecessary services at overinflated prices.”
As NPQ readers know, because for-profit corporations have to answer to shareholders and maintain a razor-keen focus on the bottom-line, fraudulent or inflated billing is more likely to occur. On the other hand, nonprofit hospice centers can, and do, run organizations with meager profit margins and focus their efforts on providing care. Analogous situations have also been identified in several other industries in which nonprofit and for-profit counterparts coexist, such as nursing homes.
Should the hospice field (and perhaps the nursing home field as well) be reserved for nonprofit providers? Data from NPQ’s coverage of this issue over the years suggests this is the case. As NPQ readers may remember, the hospice industry was originally dominated by nonprofits. But, the increasing number of Americans using hospice services caused such a “boom” in the industry that corporations and investors quickly recognized they wanted a piece of the pie. Since the early part of this century, the number of for-profit hospice centers has more than doubled, while the number of nonprofit centers has remained stagnant. As of 2015, only a third of this is made up of nonprofit providers.
This shift is one of the reasons why the hospice industry is plagued by billing fraud and incompetent care. According to the Washington Post’s investigation into hospice centers, covered in detail in Melinda Crosby’s newswire, “The Ugly Face of Profiteering in Hospice Care—For-Profit Effects on the Field,” this focus on profit as opposed to patient care has led to fewer nursing visits in for-profit hospice centers; further, for-profit centers are “less likely to provide more intense levels of care for patients undergoing a crisis in their symptoms.”
Reflecting this data, the Journal of the American Medical Association found that the patient populations were markedly different between for-profit and nonprofit hospice centers. Nonprofit hospice centers had a higher percentage of patients that were expensive to treat and had short stays (around 50 days on average) whereas for-profit centers had patients that were less expensive to treat and had an average double that of their nonprofit counterparts. For-profit hospice centers appear to be milking the system, taking on “less sick” patients and treating them for a longer period of time. Since Medicare pays for about 85 percent of hospice care via a per diem rate, longer stays mean more money for the hospice center.