Hospice leaders have kept their eyes on four key numbers as 2022 progressed: clinical capacity, length of stay, labor costs and utilization. A fifth, the rising number of new hospices in certain states, has emerged as a priority in recent weeks.
These metrics are key to understanding what hospices experienced this year. Though most aggregated, industry-wide data will not be released this year, common themes have emerged in statements from individual providers that offer insights.
The workforce shortage had an influence on each one of these indicators, making it perhaps the most significant, though unfortunate, hospice trend of 2022.
When it came to providers’ ability to admit new patients, the link to the labor shortage could not have been more clear. Hospices simply did not have enough staff to meet demand, which drove some of them out of business.
Executives from almost every publicly traded hospice company raised this issue in earnings calls and presentations throughout the year. In addition to the generally lean national labor pool, the Omicron variant of COVID-19 diminished capacity early in the year.
During the summer months, companies also reported that clinicians were using paid time off at higher rates.
At Amedisys Inc., (NASDAQ: AMED) reduced capacity slowed hospice admissions growth during the third quarter. Labor headwinds bit into the company’s ability to take on patients, resulting in only a 1% increase in same-store admissions during Q3, coupled with a 1% decline in its average daily census.
“As staffing got tighter on our clinical side, it started to impact hospice,” former Amedisys CEO Chris Gerard said in a Q3 earnings call. “It was something that we were monitoring, but it kind of came up late in the summer that we have markets that we really were unable to take patients, or we were slow rolling admissions because of staffing capacity and having to draw up some contractors as well.”
Amedisys’ board removed Gerard as CEO early in Q4, with Chairman Paul Kusserow returning as the company’s top executive.
Enhabit Inc.’s (NYSE: EHAB) hospice segment saw a 6.4% decline in revenue in Q3, down to $49.4 million from $52.8 million during the prior year’s period. The company’s consolidated net service revenue dropped 3% from Q3 2021 to $265.7 million.
Contributing to these declines were constraints on clinical capacity stemming from the labor shortage, as well as some instances of lower reimbursement for its home health services due to the shift of more patients towards Medicare Advantage, executives said in an earnings call.
However, Enhabit is among a number of companies that reported glimmers of an upward trend in the early days of Q4. Others included Amedisys and Chemed Corp. (NYSE: CHEM) VITAS Healthcare.
“So 2023 is going to be an exciting year where we’re able to care for more patients; we’re able to care for more families; we’re able to support the communities more than we ever have,” VITAS CEO Nick Westfall told Hospice News. “And we’re going to do that because we have more team members that are able to do that. I’m probably more excited than I’ve been in a few years.”
Leaders of other companies have voiced similar optimism, but other providers may take a different view.
Some leaders foresee several more years of workforce scarcity as stakeholders work to expand clinical education in hospice and palliative care. Clinicians will also need time to build up experience in the field.
”The shortage isn’t going away. I mean, people were telling us about it a decade ago, but I don’t think the sky was falling yet. So nobody really did enough to get the pipeline full of people,” Susan Ponder-Stansel, CEO of Florida-based Alivia Care, told Hospice News. “Now, I think it’s going to be a few years of real scarcity in our bedside people, and interestingly enough a lot of us are also experiencing really severe shortages in our information technology, or business office people.”
Length of stay
Hospices reported drops in their average length of stay during 2022. While the causes are multifaceted, labor issues played a big role here as well. In some cases, admissions were delayed due to capacity restraints.
Hospices are also still feeling the impact of the ongoing pandemic, which contributed to a spate of later referrals and accelerated mortality.
Average lengths of stay among the publicly traded firms tumbled at a faster rate in Q3 2022 (3%) than they did in the third quarter of 2021 (2%), according to research by Scott Fidel, an analyst for Stephens. The Pennant Group (NASDAQ: PNTG) experienced the largest decline with a 15.9% drop year-over-year.
Length of stay is a crucial metric when it comes to both the quality of care and providers’ financial performance.
The No. 1 complaint that families report on Consumer Assessment of Healthcare Provers & Systems (CAHPS) surveys is that they wish their loved one had entered hospice sooner, according to the U.S. Centers for Medicare & Medicaid Services (CMS).
From a business perspective, BerryDunn researchers found a direct correlation between length of stay and a hospice’s likelihood of profitability, according to the firm’s National Healthcare at Home Best Practices and Future Insights Study.
Among hospices with an average length of patient stay between 41 and 60 days, around 82% yielded higher daily revenue, BerryDunn found. Those whose average stay was 40 days or less achieved a 29% positive profit ratio, while those with 81 days or more had 0% or negative profit ratios.
One consideration to bear in mind is the speed with which hospices can respond to referrals.
“Something that we watch is, once a referral is made, how quickly and effectively can you get someone who’s qualified into the program. That’s an important metric,” Ponder-Stansel said. “Our acute care partners and others would like patients to be able to get to the right level of care as soon as possible.“
Regulators also have their eyes on lengths of stay.
Longer lengths of stay often appear as red flags for CMS and the U.S. Department of Health & Human Services Office of the Inspector General (OIG).
Length of stay will be a factor in the OIG’s planned national audit of hospice eligibility in 2023.
“I would be looking at the issue of lengths of stay because it’s creating a bit of a lightning rod. We’re at a bit of a tipping point relative to lengths of stay. Some voices think that there’s abuse coming because of lengths of stay,” National Association for Home Health & Hospice (NAHC) President Bill Dombi told Hospice News. “Among the other camp, others believe that the imposition of end-of-life prognosis necessitates a lot of flexibility on lengths of stay and that the length of stay issues indicate unmet needs coming from the existing benefit structure.”
Hospices of all stripes indicated that wages were rising among their staff. This, coupled with bonus programs, led to exacerbated labor costs during 2022.
The national average hourly rate for hospice aides and CNAs rose 9.09% in 2022, compared to a 4.52% increase in 2021, according to the 2022-2023 Hospice Salary & Benefits Report, published by Hospital & Healthcare Compensation Service (HCS) in cooperation with NAHC.
Nurses saw average national salary increases of 5.95% in 2022. Social workers saw an average 4.07% hourly wage hike, and medical directors saw the lowest rate of increase at 0.6%, the report indicated.
Many organizations also implemented bonus programs to attract job seekers and reduce turnover. While some report gains in hiring and retention, the costs are likely unsustainable in the long term.
Bonuses range on average between $2,038 for aides to $9,056 for top executives. The average bonus for RNs hovered around $6,330, according to the HCS-NAHC report.
“It’s killing me financially, between direct labor costs like retention efforts, raises, and incentive pay in sign-on and retention bonuses,” Kathleen Benton, president and CEO of the nonprofit Hospice Savannah, previously told Hospice News. “Indirectly, it’s anything from human resources ensuring great employee benefits to their input in recruitment. We’re doing all we can to make sure that our people feel very well taken care of, and that requires time and effort.”
Recruitment and retention costs now represent 30% of Hospice Savannah’s budget, Benton said.
The most recent available utilization data are from 2020, but the hospice community should be watching for updated numbers.
Hospice utilization fell in 2020 for the first time in years, to 47.8% among Medicare decedents from 51.6% in 2019, the Medicare Payment Advisory Commission (MedPAC) reported.
These data reflect disruptions during the height of the pandemic. Due to COVID, the number of deaths rose more rapidly than enrollment, leading to a decline in utilization rates that were “not unexpected” in light of the pandemic, according to MedPAC.
But COVID likely was not the sole contributing factor.
When the Medicare Hospice Benefit became a permanent program in 1982, its parameters were designed specifically for cancer patients. Now, patients are enrolling in hospice with a wider range of diagnoses, some of which have a much less predictable trajectory than most cancers — including dementia-related illnesses are clear examples.
Risk-based payment models may also play a role, according to Ponder-Stansel.
“It’s a combination of many things. The benefit hasn’t been modernized in many years, and it does create some barriers for certain types of patients, particularly of a more diverse population,” Ponder-Stansel told Hospice News. “Another of the things that we’re really seeing is that — as more of the value-based care is happening — many patients are being cared for in what we call a substitute competition model, where hospice is not really a good thing in the eyes of those that are at risk for the total cost of care. So utilization is something I’m looking at very carefully.”
The fifth element: a proliferation of new hospices
An issue that has come to the forefront in recent weeks was the number of newly licensed hospices that have been cropping up in at least a few states. Some of these organizations have been associated with potentially unethical or illegal practices.
Cases in California were among the first to garner attention. Hundreds of newly licensed providers have cropped up in the state, as well as in Arizona, Nevada and Texas.
“In 2022 a concerning data point is the incredible increase of for-profit entrants that have been certified in California, Arizona, Nevada, and Texas,” National Hospice and Palliative Care Organization (NHPCO) COO and interim CEO Ben Marcantonio told Hospice News. “If that growth is needed, and they’re valid providers, then yes, they should provide. But if they’re not, that needs to be addressed by the surveyors and the accrediting bodies. This can really affect both the perception of what hospice is and has been and to what degree competition is healthy and when it isn’t. That’s probably one of the most significant data points in 2022.”
Arizona had 239 new Medicare-certified hospices appear between 2018 and 2022, representing 52% of all providers in the state. In that time frame, Nevada saw 56 newly certified hospices, and 369 emerged in Texas.
A coalition of hospice industry organizations recently urged CMS to examine the issue and to consider actions like targeted moratoria on licenses. Signatories on the joint letter included LeadingAge, NAHC, NHPCO, and the National Partnership for Healthcare and Hospice Innovation (NPHI).
California has since stepped up hospice regulation and enforcement, with several new laws and a licensing moratorium, as well as litigation, investigations and arrests.
Poor, uncoordinated hospice oversight had contributed to widespread fraud and other violations, according to a report from the state’s Department of Justice (CDOJ).
“The state’s weak controls have created the opportunity for large-scale fraud and abuse,” CDOJ indicated in its report. “We identified numerous indicators of such fraud and abuse by hospice agencies, which typically offer palliative end-of-life care to individuals with medical diagnoses of fewer than six months to live.”