Hospice Facts & Statistics

Updated November 2002

1. HOSPICE ORIGINS
   
   Hospices provide palliative care, as opposed to curative care. Hospice services include supportive medical, social, emotional, and spiritual services to the terminally ill, as well as support for the patient's family. The care is primarily provided in the patient's home to allow peace, comfort, and dignity. Hospice care relies on the combined knowledge and skill of an interdisciplinary team of professionals—physicians, nurses, medical social workers, therapists, counselors, and volunteers—who coordinate an individualized plan of care for each patient and family. Hospice reaffirms the right of every person and family to participate fully in the final stage of life.
   
   While the hospice concept dates to ancient times, the American hospice movement did not begin until the 1960s. The first hospice in the United States, The Connecticut Hospice, began providing services in March 1974.
   
   
2. TYPES OF HOSPICE
   
   The Medicare program identified 2,265 hospices as of January 2002. There are also an estimated 200 volunteer hospices in the United States. As of February 1998, 44 states licensed hospices.¹ In 1998, hospices served 579,801 Medicare patients throughout the United States.² Less is known about the hospices that do not participate in the Medicare or Medicaid programs, as the rules and regulations for licensure vary by state.
   
   
3. HOSPICE PARTICIPATION IN MEDICARE
   
   Congress enacted legislation in 1982 creating a Medicare hospice benefit (PL 97-248, §122). Hospice services may be provided to terminally ill Medicare beneficiaries with a life expectancy of six months or less "if the disease runs its normal course." Effective with the enactment of the Balanced Budget Act of 1997 (PL 105-33) the Medicare hospice benefit is divided into the following benefit periods:
   
   
   • an initial 90-day period;
   • a subsequent 90-day period;
   • an unlimited number of subsequent 60-day benefit periods as long as the patient continues to meet program eligibility requirements.
   
   The beneficiary must be recertified as terminally ill at the beginning of each benefit period. The following covered hospice services are provided as necessary to give palliative treatment for conditions related to the terminal illness: nursing care; services of a medical social worker, physician, counselor (including dietary, pastoral, and other), and home care aide and homemaker; short-term inpatient care (including both respite care and inpatient care for procedures necessary for pain control and acute and chronic system management); medical appliances and supplies, including drugs and biologicals; physical and occupational therapies; and speech-language pathology services. Bereavement service for the family is provided for up to 13 months following the patient's death.
   
   Medicare hospice participation has grown at a dramatic rate, largely as a result of a 1989 Congressional mandate (PL 101-239, §6005) that increased rates by 20%. From 1984 to January 2002, the total number of hospices participating in Medicare rose from 31 to 2,265—more than a 73-fold increase (see Table 1). Of these hospices, 1,003 are freestanding, 690 are home health agency-based, 552 are hospital-based, and 20 are skilled nursing facility-based. Table 2 shows the calendar year 1999 distribution of Medicare-certified hospices by state, as well as number of patients, total charges, and program payments.
   
   

4. REVENUE
   
   The nation's expenditures for health care are projected at $1,423.8 billion in 2001.³ Although little information is available specifically on the total national expenditure for hospice, detailed data are available on Medicare hospice expenditures and utilization. Some data also are available on hospice spending under the Medicaid program. In addition to Medicare and Medicaid, some hospice revenues come from private insurance companies. Community donations and grants also contribute to the revenue base, often to fund unreimbursed care and hospice services for patients with little or no insurance. Table 3 shows the breakdown of 1998 hospice expenditures by sources of payment.
   
   

1. Medicare Spending and Utilization
   
   The hospice Medicare benefit represents a small proportion of the total Medicare spending. In 2001, 1.4 percent of total benefit payments were estimated to have been spent on hospice care (see Table 4). The 2002 projections indicate that hospice care will continue to be a small proportion of the total Medicare spending. About 44% of the estimated $236 billion in Medicare spending in fiscal year 2001 and nearly 45% of the projected $247 billion spending in fiscal year 2002 goes to hospitals and about 17% of Medicare spending is for physician services in both years.
   
   

With the growth in Medicare-certified hospices, there are concomitant increases in Medicare's total reimbursement to hospices. Table 5 shows the FY 2001 distribution of hospice utilization by type of hospice. Freestanding hospices served a majority of the hospice recipients. In contrast, skilled nursing facility-based hospices served the fewest number of hospice clients. In 2001, over 40 million aged and disabled persons were enrolled in the Medicare program. For the federal fiscal year ended September 30, 2001, 579,801 enrollees received hospice services, which is nearly ten times the number of hospice recipients in 1989 (see Table 6).

Medicare hospice expenditures climbed from $205.4 million in 1989 to more than $3.6 billion in FY 2001 (see Table 6). Although the number of hospice users increased to 579,801 in FY 2001, the average stay declined slightly from 50.1 days in FY97 to only 49.9 days in FY 2001.

The need for Medicare-certified hospices will continue to rise due to an aging population, the increasing interest and concern about end-of-life care, and rising health care costs. More importantly, both medical professionals and the general public are choosing hospice care over other forms of health care delivery because of its holistic, patient-family, in-home-centered philosophy.

The Medicare fiscal intermediary calculates each hospice's cap amount by multiplying the adjusted cap amount by the number of Medicare beneficiaries who elected to receive hospice care from that hospice during the cap period, a 12-month period ending September 30 of each year. Each hospice must refund Medicare payments in excess of this aggregated cap amount.

Medicare payments for hospice services are made on a prospective basis under four levels of care and adjusted by an area wage index. This local adjustment is necessary to permit payment of higher rates in areas with high wage levels, and proportionately lower rates in areas with wage levels below the national average. Industry representatives, including the Hospice Association of America, participated in a negotiated rulemaking process with the Health Care Financing Administration to derive a new wage index. This new wage index, which for a period consisted of a blend of the old and the new area wage index, is now based on hospital wage data.

The Medicare hospice rates also vary according to the level of care furnished to the beneficiary. The FY 2003 published payment rates, which are adjusted by the hospital market basket index, are as follows. Section 321 of the Benefits Improvement and Protection Act of 2000 (BIPA) included a provision which amended Section 1814(i)(1)(C)(ii)(IV) mandating a five percent increase in the hospice rates for FY 2001. This increase continues as part of the hospice base rate. The current rates, effective October 1, 2002, are listed below:


• Routine Home Care Day—$114.20. This category is for individuals receiving hospice care at home. The rate does not vary by volume or intensity of services.
• Continuous Home Care Day—$666.52 for 24 hours or $27.77 per hour. Individuals in this category must need skilled services for a period of at least eight hours within a 24-hour period beginning at midnight, but only for brief periods of crisis and only as necessary to maintain the terminally ill individual at home.
• Inpatient Respite Care Day—$118.13. Care may be provided for no more than five days at a time in an inpatient facility.
• General Inpatient Care Day—$508.01. Care may be provided in a Medicare-certified hospital, skilled nursing facility, or inpatient unit of a hospice.

Table 7 shows the distribution of Medicare hospice expenditures and utilization by the type of care. Table 8 provides the average Medicare reimbursement per unit of care for the four categories of hospice care and hospice-related physician services.

Medicare payments to hospices are subject to an overall aggregate "cap amount." The cap amount is adjusted annually for inflation or deflation. For the fiscal year ending October 31, 2001, the cap amount is $17,390.89.


2. Medicaid Spending for Hospice
   
   As is true for Medicare, hospice services represent a relatively small part of total Medicaid payments. Table 9 shows that of the more than $153 billion in Medicaid vendor payments, 40.1 percent went for hospital and skilled nursing facility services. Hospice is an optional Medicaid service, currently available in 46 states (see Table 10). In FY99, hospice services comprised only 0.2% of total Medicaid payments.
   
   

Medicaid hospice expenditures totaled $345 million in FY99, an increase of 6.2% from the $325 million spent in FY98 (see Table 11).

3. Managed Care and Hospice
   
   Increasingly, health care services in the United States are financed through managed care organizations. A managed care contract generally specifies a negotiated fee, often called a capitated payment, for the care of patients. A fully capitated plan specifies a lump sum payment per enrollee to cover all care provided through the plan. Choice of provider and access to specialty care vary under managed care arrangements, but there tend to be incentives for consumers to use certain providers who are part of the managed care organization's network. In contrast, traditional health insurance, commonly known as fee-for-service, pays providers of care based on the number of services delivered, with few limitations on which providers could be paid.
   
   In a MedPAC study released in May 2000, it was determined that Medicare's managed care plan, Medicare+Choice, had 25% of beneficiaries from 1994-1998 choose hospice, as opposed to 15% of those enrolled in the traditional Medicare benefit at the time of death.⁴
   
   Managed care is most prevalent in the employer-based health insurance market. In 2002, 95 percent of insured workers received health benefits through a managed care plan.⁵ Managed care enrollment has increased among Medicaid beneficiaries particularly in states that have federal waivers to convert their Medicaid program to a managed care program. As of June 30, 2001, 56.8% of Medicaid beneficiaries were enrolled in managed care.⁶ Medicare managed care enrollment has increased at a slower pace. As of August 1, 2002, about 14% of Medicare beneficiaries were enrolled in Medicare+Choice.⁷
   
   When a Medicare-eligible patient who is an enrollee of a Medicare participating managed care organization (MCO) elects hospice care, the hospice services must be provided through a Medicare-approved hospice, and the individual must meet the eligibility requirements specified by Medicare. The patient does not need a referral from the MCO and is not required to disenroll from the MCO. Medicare pays the hospice for hospice services and the MCO for attending physician services and services not related to the patient's terminal illness. In addition, MCOs are required to inform enrollees about the availability of hospice care if: a) a Medicare-certified hospice is located in the MCO's service area; or b) it is common practice to refer patients to hospice programs outside such service area.
   
   The increasingly competitive health care market has created incentives for hospices to enter managed care provider networks. Although hospices have considerable experience managing payments under the Medicare prospective reimbursement system's per-patient cap, little is known about the extent to which hospices have entered into managed care arrangements or what impact these arrangements have on hospice clients.
   
   
6. HOSPICE RECIPIENTS
   
   As shown in Table 12, most patients receiving hospice care are elderly—more than 79% are age 65 or older. Hospice patients are nearly as likely to be male as female. Nearly half of all hospice patients are married.
   
   

7. CLIENT DIAGNOSES
   
   In a report issued in May 2002 by the Medicare Payment Advisory Commission (MedPAC), administrative records and the Medicare Current Beneficiary Survey were analyzed by Direct Research, LLC, showing new hospice patients by diagnosis in 1992 and 2000 (see Figure 1). The balance between hospice patients with a cancer diagnosis and those with a non-cancer diagnosis has shifted dramatically from 1992-2000.
   
   

Figure 1: New Hospice Patients by Diagnosis 1992 & 2000

Source: Medicare Payment Advisory Commission, "Report to the Congress: Medicare Beneficiaries' Access to Hospice," May 2002.

8. VALUE AND COST-EFFECTIVENESS OF HOSPICE
   
   In comparison to hospital and skilled nursing facilities' costs, hospice is a cost-effective service. Table 13 provides a comparison of the average cost for a Medicare patient to stay one day in a hospital, a skilled nursing facility, and a hospice. Hospice charges per day are substantially lower than the hospital and skilled nursing facility charges per day.
   
   

Various studies on the cost-effectiveness of hospice, both federally and privately sponsored, also provide strong evidence that hospice is a less costly approach to care for the terminally ill than the traditional approach. A 1988 study conducted by Abt Associates for HCFA concluded that in the first three years of the hospice benefit, Medicare saved $1.26 for every $1.00 spent on hospice care.⁸ The study found that much of the savings from hospice care relative to conventional care accrue in the last month of life, which is due, in large part, to the substitution of home care days for inpatient days during this period.

Additional research on hospice supports the premise that cost savings associated with hospice care are frequently unrealized because terminally ill Medicare patients often delay entering hospice care until they are within just a few weeks or days of dying, suggesting more savings and more appropriate treatment could be achieved through earlier enrollment. Using the 1996 Medicare claims data, the General Accounting Office (GAO) found the median length of stay for hospice patients was only 19 days.⁹ Moreover, only 19% of the dying utilize hospice care.¹⁰ The difficulty of predicting death may account for part of the delay along with the reticence of caregivers, patients, and families to accept a terminal prognosis. Education about hospice and its benefits may help broaden its use and improve end-of-life care.

Cost-effectiveness is not the sole rationale for hospice care. More compelling is the fact that hospice is a humane and compassionate way to deliver health care and supportive services. Based largely on interviews with family members, a study of the end-of-life experience of 3,357 older decedents and seriously ill patients who died reported that 40% were in severe pain prior to their death and 25% experienced moderate to great anxiety or depression before they died.¹¹ The researchers reported very few of the patients received hospice care prior to death and suggested that encouraging hospice might alleviate some of the distress that patients typically face at the end of life. Hospice care allows terminally ill patients and their families to remain together in the comfort and dignity of home—preserving one of our country's most important social values, keeping families together. In addition, hospice care allows family members to take an active role in providing or supplementing the care given by formal caregiver(s).

Tables 14-17 are from a study sponsored by the Office of the Assistant Secretary for Planning and Evaluation (ASPE), U.S. Department of Health and Human Services. This study is part of a larger project exploring the use of hospice benefits and services provided through the Medicare program and through private insurance. The MEDSTAT Group's contribution to the larger study is an examination of hospice benefits in commercial plans and the use of hospice benefits by persons commercially insured. In particular, this report focuses on hospice benefits in plans offered by large employers in the U.S. and the utilization of hospice benefits by the employees of these large companies, their dependents, and in some cases early retirees. MEDSTAT's proprietary MarketScan® database is used for all of the analyses in this study. MarketScan includes about 70 employers and 200 insurance carriers/claims administrators. It is a database that represents the health care experience of about four million privately insured individuals annually.

Three complementary approaches to the study of commercially-insured hospice care were taken in this study: An analysis of hospice benefits offered by large employers through examination of their Summary Plan Description (SPDs) booklets; discussions with selected large employers about their hospice benefits; and a quantitative analysis of hospice use and expenditures of persons commercially insured.

Of the 52 SPDs selected for analysis, hospice was identified as a covered benefit in 46. Table 14 depicts the distribution of plans according to whether they offered a hospice benefit, by plan type: Indemnity, Point of Service (POS) or Preferred Provider Organization (PPO). A very high proportion of each plan type (84.4 percent to 100 percent) offered the benefit.

The remaining results in this section are based on the 46 SPDs that offered an explicitly specified hospice benefit. They represent 19 large employers. The data were collected in the early winter of 1998, but since plans do not typically update SPDs annually, the SPDs available ranged from 1986 to 1996.

The percentages in Table 15 represent the proportion of plan types with certain hospice benefit-related criteria. As this table shows, the vast majority of plans provided a definition of hospice and required precertification of being terminally ill by a physician. All SPDs providing a description of the hospice benefit identified the terminally ill as its target group. But only half of the plans provided an operational definition of the term "terminally ill". In all cases where a definition was provided, "terminally ill" was defined as 6 months or less to live. The majority of plans do not impose a lifetime day or dollar limit. However, of the 10.9 percent that stipulate a day limit, 80 percent have a 180-day limit and 20 percent (representing 1 plan) have a 270-day limit. Dollar limits are somewhat more common and exist in 37 percent of plans. Dollar limits range from $5,000 to $10,000; 70 percent of plans with a dollar limit set the limit at $5,000.

The data in Table 16 indicate that the indemnity and POS plans offer the widest variety of hospice services. For both of these plan types, a variety of venues for the provision of hospice care seems to prevail—in the hospital, in a hospice facility, and at home. A smaller proportion of plans will reimburse for hospice services provided in an extended care or skilled nursing facility. Counseling, both for the terminally ill individual and for family members, is also a benefit that is specified in the majority of indemnity and POS SPDs. Other services such as respite care, homemaker, home health aide, equipment, etc. are less likely to be indicated. The low percentage of PPOs offering hospice services other than in-home hospice care is perplexing.

Table 17 shows the number of persons accessing the benefit in 1995.


9. HOSPICE STAFF
   
   Hospices employ physicians, nurses, home care aides, social workers, chaplains, therapists, and counselors who work together as an interdisciplinary team to coordinate an individualized plan of care for each patient and family. Little information is available on the total number of "formal" hospice caregivers. Neither the Bureau of Labor Statistics nor the major organizations that collect information on health care providers gather detailed information on the entire hospice industry. However, CMS collects information on Medicare-certified hospice staff (see Table 18).
   
   

Hospice organizations also rely heavily on volunteers. Table 18 shows that on average Medicare-certified hospices nationally have about 80% of the number of volunteers as employees. A closer look at each caregiver type shows that there are generally more employees than volunteers, except for the homemaker and "other" categories.

It is also important to note that many terminally ill patients receive informal care. Informal caregivers represent family members, friends, or other unpaid helpers who are not trained as hospice volunteers. All Medicare hospice volunteers must participate in intensive volunteer training programs.


1. Hospice Staff Productivity
   
   A 2002 survey conducted by the Hospital & Healthcare Compensation Service (HCS), in cooperation with the Hospice Association of America (HAA), collected information from 258 hospices on productivity (measured as the number of visits per 8-hour day). Hospice staff ranged from 3.44 visits per day on average for masters’ prepared social workers to 5.25 visits per day on average for physical therapists (Table 19). Registered nurses provided 4.48 visits per day on average; licensed practical nurses provided 4.97 visits per day. Social work visits are generally more time intensive, which may account for the differences by discipline.
   
   

2. Hospice Employee Compensation
   
   The 2002 survey mentioned above, conducted by HCS, collected information on the salary and benefits provided to employees in 70 job categories, including both administration and nonsupervisory positions. Summary results for administrators are provided in Table 20. Table 21 provides summary data on the hourly and per visit compensation rates for hospice caregivers.¹²
   
   

1. National Hospice and Palliative Care Organization licensure survey (September 2000).
2. Centers for Medicare & Medicaid Services, Office of the Actuary, Center for Health Plans and Providers (October 2002).
3. Heffler, S., S. Smith, G. Won, M. Clemens, et al. “Health Spending Projections For 2001-2011: The Latest Outlook” Health Affairs, vol. 21, no.2 (March/April 2002).
4. Hogan, C., J. Lynn, J. Gabel, J. Lunney, A. O'Mara, A. Wilkinson. "Medicare Beneficiaries' Costs and Use of Care in the Last Year of Life." MedPAC, May 2000, No. 00-1.
5. Gabel J., L. Levitt, J. Pickreign, et al. "Job-Based Health Benefits in 2002: The Latest Outlook," Health Affairs, vol. 21, no. 5 (September/October 2002).
6. Centers for Medicare & Medicaid Services, “National Summary of Medicaid Managed Care Programs and Enrollment – June 30, 2001,” www.cms.gov (October 2002).
7. Centers for Medicare & Medicaid Services online, www.cms.gov (August 1, 2002).
8. Kidder, D., “The Effects of Hospice Coverage on Medicare Expenditures” Health Services Research, vol. 117, 1992, pp. 599-606.
9. MEDICARE: More Beneficiaries Use Hospice but for Fewer Days of Care. GAO/HEHS-00-182. United States Government Accounting Office (GAO) (September 2000).
10. Ibid.
11. Lynn, J., J. Teno, R. Phillips, A. Wu, N. Desbiens, et al. “Perceptions by Family Members of the Dying Experience of Older and Seriously Ill Patients” Annals of Internal Medicine, vol. 126, no. 2 (January 15, 1997), pp. 97-106.
12. To order a copy of the 2002-2003 Hospice Salary & Benefits Report, contact HAA's Publications Department, 228 Seventh Street, SE, Washington, DC 20003-4306; 202/546-4759.

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