Industry eyes hospice with renewed interest

Saturday, June 30, 2007

Providers of home medical equipment have long looked to managed care companies as a way to decrease their dependency on Medicare, but a small group of providers has quietly taken refuge in another payer: hospice agencies.
Most providers shy away from working with hospice agencies, because it means accepting, on average, about one-third of Medicare's reimbursement. Providers who have found ways to make it work, however, report significant growth in the market, especially in the last few years.
"When we started doing hospice 12 years ago, no one was going after it," said Cary Nail, president of Independent Medical Services in Cullman, Ala. "We've gone from five contracts in 12 years to about 15 in the last year."
Hospice makes up about 50% of Independent Medical's payer mix, with Medicare and managed care sharing the rest.
Even though hospice comprises only 5% of Care Medical Equipment's payer mix, the Portland, Ore.-based provider also reports growth in the market.
"We'll probably pick up two to three new hospice contracts this year," said Tom Coogan, president of the company. "It's kind of exciting--you have to diversify your business."
Providers make hospice work by spending less money on labor. At Independent Medical, hospice requires one administrative employee to take care of calls and billing, and one-and-a-half delivery/service technicians, Nail said.
Allcare Medical, another provider who sees growth in the hospice market, reports that the average days sales outstanding (DSO) is anywhere from 60 to 80 days for hospice vs. 90 days or more for Medicare.
"We seek out (hospice business)," said Richard Lerner, president of the Old Bridge, N.J.-based company. "There's a quicker turnaround, and it diversifies us from Medicare and managed care."
But not all providers are sold on hospice. Due to advancements in health care, patients often don't use hospice until the last minute, preventing providers from establishing long-term relationships with patients, some say.
While he acknowledged that cancer patients often use hospice care for a shorter time, other patients, such as those with CHF or COPD, use it for months, Nail said.