Overall, we estimate NH hospice enrollment reduces the last month of total government expenditures by 6 percent. This effect, however, is not uniform across NH residents. Short-stay NH hospice enrollment results in uniformly large savings (22 percent overall), but for long-stay NH residents, the hospice effect is mixed. We observe a hospice cost saving effect among cancer long-stay NH residents (of 9 percent), cost neutrality among dementia long-stay NH residents, and additional expenditures (of almost 14 percent) for long-stay NH residents with diagnoses other than cancer or dementia. However, even among this last group of NH residents, factors such as cognitive impairment, gender and/or age have a strong influence on whether hospice has a positive or negative effect on end-of-life expenditures. Another important study finding is the modest but statistically significant increases in Medicaid expenditures among short-stay NH cohorts, resulting in a financial disincentive for state Medicaid programs to promote hospice enrollment (at least for short-stay dual-eligible residents). Finally, the sometimes large differences between the unadjusted and adjusted results makes evident the importance in hospice cost studies of using methodologies that correct for selection bias.
The heterogeneity in our hospice effect estimates can be partly understood as a reflection of the difference in utilization patterns, particularly of Medicare benefits, among different cohorts and their subgroups. Long-stay NH residents have a greater need for long term care supportive services and a lower use of Medicare inpatient and SNF care. In addition, the longer observation of their trajectory to death by the NH staff may help explain their longer hospice LOS (27 days median hospice LOS versus 13 days median hospice LOS for short-stay NH residents). As a result, Medicare savings for inpatient and SNF care may not be large enough to offset the added cost of the hospice benefit. Short-stay NH residents, on the other hand, tend to be admitted to the NH to receive skilled care following an inpatient episode, and while for many their prognosis is uncertain, others are transferred to NHs within days or weeks before death (Miller, Teno, and Mor 2004
). Due to the high acuity of these short-stay residents, their use of Medicare inpatient and SNF care is greater than among long-stay residents (see Table A in electronic Appendix A
), resulting in a greater opportunity for cost savings upon hospice enrollment, despite their shorter hospice LOS.
Unlike another study that included NH residents as part of their study (Campbell et al. 2004
), we did not observe a large (30 percent) increase in expenditures for hospice residents having a diagnosis of dementia, and we also did not observe large increases in expenditures for those 85 years of age or older. Instead, our findings show severe cognitive impairment and gender have much larger effects on expenditures than does age or a documented diagnosis of dementia. This difference in results could be due to our study population (NH residents), our greater ability to control for case mix, the sophistication of the statistical techniques used to adjust for selection bias, and/or to the difference in the time period studied (last year of life versus last month of life).
The partial substitution of Medicaid for Medicare expenditures associated with hospice enrollment among short-stay NH residents results in part from Medicare's payment policies. In particular, Medicare SNF residents cannot simultaneously access Medicare hospice (unless SNF care is unrelated to the terminal condition). Thus, when SNF dual-eligible residents elect hospice, NH payment becomes the responsibility of Medicaid, rather than Medicare. (Of note, similarly, when private-pay Medicare SNF residents elect hospice, NH payment becomes the responsibility of the patient/family, rather than of Medicare [Miller, Teno, and Mor 2004
].) This shift in payment source also affects NH facilities as Medicaid per diem payment rates are typically substantially lower than the SNF per diem rates, creating a financial disincentive for both NHs and Medicaid programs to promote hospice enrollment among short-stay NH residents. However, given the overall large savings resulting from hospice enrollment among short-stay NH residents (Table A in electronic Appendix A
), it may be of interest to all parties involved (Medicare, Medicaid, NHs, and Medicare beneficiaries) to relax or modify the hospice/SNF exclusion policy barrier so to increase hospice enrollment. For example, implementation of some type of additional time-limited Medicare payment to state Medicaid programs (with some portion going to NHs) to supplement the Medicaid NH per diem rate when dual-eligible SNF residents elect hospice could serve to subsidize the additional Medicaid NH expenses incurred when caring for these high acuity residents as well as result in increased hospice access for SNF residents. While study results show such a subsidy program to be viable and desirable for beneficiaries, nursing homes, and the government, further study across more states is needed to validate whether these findings can be generalized, and thus to determine whether a subsidy program would in fact be feasible nationally.
The observed results for the cancer cohorts confirm the cost saving effect of hospice for cancer found in several studies (Mor and Kidder 1985
; Kidder 1992
; Campbell et al. 2004
), but the results also show cancer cohorts to have the largest evidence of selection bias. This evidence of selection bias, emphasizes the importance for hospice cost studies to use both data sources that allow for comprehensive adjustment for confounding and more sophisticated statistical techniques to help control for selection.
Our study has certain limitations. Despite the use of good statistical methods and comprehensive patient assessment data to control for case mix and selection bias, there is always a possibility that some important factor remains unobserved. Additional studies that allow for better control of unobserved factors such as the use of a natural experiment, instrumental variables or clinical trial would be helpful to validate our findings. Also, while our data covers all Florida NH dying residents during our observation period, the results may not generalize to other states. Additionally, this study focused on expenditures in the last month of life as 53 percent of long-stay and 74 percent of short-stay NH residents enrolled in hospice in the last 30 days of life, and as expenditures by both hospice and nonhospice enrollees are largest in the last month of life (Yang, Norton, and Stearns 2003
; Miller et al. 2004
). However, given our study's focus, the financial effects of hospice for months beyond the last month of life cannot be determined from the results presented here.
This study extends the findings of other hospice cost studies and emphasizes the importance of conducting separate analyses for subpopulations that are known to differ substantially in their expenditure patterns. Still, hospice costs studies, while important, cover only one aspect of the potential benefits associated with hospice. A complete cost-effectiveness evaluation of the hospice benefit needs to include the potential patient/family benefits associated with hospice care such as higher-quality symptom management, continuity and comprehensiveness of care, and bereavement and spiritual comfort provided to the patient and family. These benefits may well justify the observed added monetary costs associated with hospice care for some beneficiaries.