Sabina Ohri Department of Economics University of California, Irvine

1. Differences between Non-Profits and For-Profits in the Hospice Industry:Patient Selection and Quality Sabina Ohri Department of Economics University of California, Irvine

2. Background • Hospice: provider of palliative care for the terminally ill and bereavement counseling to families • Considerable growth in hospice industry, mostly by for-profits • Medicare spending increased to $5.9 billion in 2003, a fivefold increase from 1992 • Large increase in demand for hospice services

3. How Hospices Enroll Patients Physician Referral Hospital Long Term Care Facility Cancer Case Mix Non-Cancer Length of Stay

4. Medicare Benefit and Financial Incentives • Revenue: Medicare per diem reimbursement rate • U-shaped cost function • Incentives: 1. To enroll patients with longer lengths of stay 2. To reduce costs- depends on inputs in the production of care

5. Testable Hypotheses Do the incentives of the Medicare reimbursement rate create differential behavior across ownership type? 1. Patient selection through referral networks 2. Quality

6. Data 1. All freestanding California hospices from 2002 to 2004 from the California Office for Statewide Health Planning and Development (OSHPD) • Detailed information on patient referral sources, disease categories, length of stay, staffing ratios, patient demographics, and other facility information 2. Quality citations from the California Department of Health Services across five dimensions of quality

7. Patient Selection Models (OLS) Test for patient selection across ownership form: 1. Referral sources 2. Patient case mix 3. Patient length of stay • Control for: size (total patient days), inpatient facility, chain, rural, age, year • Include county fixed effects to take advantage of within market variation

8. Regression Results (OLS): Patient Selection

9. Quality Models (OLS and NB) Test for quality differences across ownership form: 1. Staff Ratios 2. Quality Deficiencies • Control for: size (total patient days), inpatient facility, chain, rural, age, year, patient case-mix • Include county fixed effects to take advantage of within market variation

10. Regression Results (OLS): Staff Visits

11. Regression Results (NB): Quality Deficiencies

12. Summary of Findings • Evidence of differential patient selection • The results also indicate that after controlling for patient mix, for-profits substitute away from high skilled nursing. • First to study quality outcomes in hospices and offers some evidence of lower levels of quality in for-profit facilities.

13. Discussion • California hospice market: • 10% of hospice patients in the US (90,000 patients annually) • 9% of Medicare hospice expenditures. • Drawback: Aggregated facility measures makes studying correlations between different types of patient characteristics difficult. • Policy Implications: 1. Adopt case-mix or length of stay adjustments to the Medicare reimbursement rate 2. Improve quality inspections