Hospice Trends

Can hospice houses be financially viable?

Lack of third-party payers a stumbling block

By Larry Beresford

What is the enduring appeal of "hospice house" residential facilities for America’s hospice industry?

Recent traffic on end-of-life professional listservs, presentations at the National Hospice and Palliative Care Organization conference in September, and new projects under way in communities from coast to coast attest to hospice houses’ continued attraction for hospices seeking ways to establish and operate houses of their own.

Freed from many of the code requirements and regulations of long-term care facilities or acute inpatient units, these hospice houses often create a much more comfortable, serene, homelike atmosphere for terminally ill hospice patients who cannot be managed in their own homes. Sometimes, the residence and its landscaped grounds just seem to say "home" to all who see its panoramic vistas, outdoor patios, stained-glass windows, and antique furniture. Other amenities can include individualized food service for residents and their visitors and liberal pet and child visitation policies.

But with a few exceptions, the room-and-board costs of residential hospice care currently are not reimbursed by third-party payers. As a result, someone else needs to cover the operating expenses. That could be the patient or family paying a hefty daily room-and-board rate out of pocket; the larger community through a capital campaign, endowment fund, or other donations; or the hospice itself, subsidizing operations out of other income streams.

Residential hospice care has an important place in the end-of-life care continuum for patients who don’t need the intensity of acute hospice general inpatient care and who don’t want to be in a long-term care facility but who can’t remain safely in their homes. Many live alone and can no longer manage on their own, or they don’t have a home, or their family caregivers are worn out — or just in need of respite.

Proponents say these residences allow the hospice to serve a population of patients who otherwise would never even get referred because they lack family caregivers or a viable home environment. The residence also may be an outlet for actively dying, hospitalized patients who are too sick to go home.

Hospice houses make attractive fund-raising projects, in part because they assert a concrete, physical presence that home-based care does not. The hospice house, artfully designed and landscaped, can even be a visual symbol and embodiment of the hospice’s philosophy and its presence in the community. Some facilities have child care, public meeting rooms, or other amenities that drive home the point.

Residents of hospice houses typically qualify for the routine home care reimbursement rate under the hospice benefit, which covers medications, equipment, nursing, and other professional hospice services just as if they were living in their own homes. Room-and-board expenses generally are not included in that rate and are billed privately at a separate daily rate subject to a means-tested sliding scale.

The use of volunteers to staff the facility may help keep costs down, but the hospice has quality and safety obligations and should not try to scrimp on the support and supervision needed by residents of its hospice house.

The capital campaign is just the tip of the iceberg in terms of the challenges of launching a successful hospice house project, notes Mary Michal, a health care attorney at law firm Reinhart Boerner Van Deuren in Madison, WI. Michal, who has considerable hospice experience, has developed a checklist of 11 tips for hospices considering a hospice house. Among other suggestions, she recommends that hospices make sure their donor base and their clinical infrastructure, including a medical director, are solidly in place and that they are maximizing operating efficiencies in their home-based programs before embarking on facility-based care.

Jay Mahoney, a hospice consultant with the Summit Business Group in Penfield, NY, says his firm usually does not recommend that client agencies pursue strictly residential-level hospice house projects, although many are interested in exploring them. Third-party reimbursement for residential hospice care from a few Medicaid demonstration projects or private health plans is sporadic at best, he explains. "So how does it get paid for? It gets paid privately" by the patients and their families, he says. "There are people who can afford to pay for residential care, and there are hospices that are making it on such payments."

On the other hand, Mahoney says, the hospice wouldn’t want to limit access only to those able to pay the full charge. "By and large, if you are truly charging your actual operating costs, not that many people could afford it. My impression is that covering operating costs from operational revenues can be pretty difficult, although not impossible."

This reimbursement reality points most hospices toward fundraising as an alternative funding strategy. Fundraising for a residential facility can sometimes open new doors to sources that never donated to the hospice before. On the other hand, Mahoney says, if a hospice can raise enough money to open and operate a hospice house, that raises the question of whether that money might have been better spent on other patient needs.

Hospices also believe that a residence can close a significant gap in the end-of-life care continuum. It may give the agency greater visibility with referral sources and could generate positive impressions that could result in the referral of other patients. There is some anecdotal evidence to suggest such benefits, Mahoney says, while hospices might generate additional revenues from their physicians making daily rounds in the facility. There also may be economies of scale and reduced travel costs from having patients concentrated in a single location.

However, Mahoney observes, the most viable option for funding residential hospice care appears to be incorporating residential hospice beds within a freestanding inpatient facility where at least half of the patients are maintained at a general inpatient level of care, providing a more predictable source of revenue. "That’s what my clients have tended toward," he says.

Michal confirms this conventional wisdom that some proportion of general inpatient-level care is needed for a hospice house to break even. She also urges hospices planning residences to seek legal advice to make sure they fully understand the anti-kickback issues and the implications of providing free care in a hospice house without a carefully constructed sliding scale.

Benefits of residential projects

Ruben Liebhaber is a project development manager in Lexington, MA, who specializes in hospice residential and inpatient projects. He also is a volunteer at Tippett House, a hospice residence in Needham, MA. "I have witnessed firsthand how important an option residential care can be," he says. "There are many situations where family members can’t supply the care or the home environment is just too erratic." Hospice houses make it possible for these patients to get the care they need while taking a burden off their families. In many cases, the only other alternative would be a nursing home.

Liebhaber tells his clients to expect room-and-board costs in a hospice house to run roughly $120 per day, depending on a variety of factors including beds, occupancy rates, and actual operating expenses. He suggests that a target census of 14 to 16 beds, evenly split between residential and general inpatient levels of care in a facility properly designed to accommodate both, could break even — at least on paper.

While the majority of terminally ill hospice patients can be served at home, a program with a census of 100 or more may already have a critical mass of patients who could benefit from the residential alternative, depending on what the obligatory needs assessment reveals.

"I have visited 18 hospice residences, and they are, without exception, places where terminally ill patients would be well-served," Liebhaber notes. He points to increased openness to the concept of residential hospice care options among Medicaid plans and private payers and the potential for competition among hospices to further push the trend.

"This will be market-driven. I expect that within five to 10 years there will be a shift in the viability of hospice houses and a groundswell of interest and support," he says.

An example of the lure of the hospice house concept is found in the work of Duluth, MN, physician Joel Carter, MD. Carter has a fellowship in end-of-life medicine from the Bush Foundation of Minnesota, which he is using to study the feasibility of developing a freestanding hospice house for the Duluth area. After visiting other hospice residences and surveying their operators, he has concluded that this project will require substantial community support, although not more than Duluth can afford.

When Carter asked managers at one of the sites he visited what they would do differently based on their experience, they answered that they would endow the building before opening for business.

Carter’s business plan, still being developed, likely will recommend that an independent nonprofit organization operate the facility in service of both of Duluth’s competing health system hospices. He hopes to incorporate medical student training through the local medical college and to complete bricks-and-mortar work within three to five years.

"There are many ideas of what residential hospice means and the value our culture puts on home," Carter says to explain the origins for his project. Some people don’t have homes to die in or can’t cope, or else their family caregiving breaks down. A hospice house could serve their end-of-life needs while making death and dying more of a community event, he says.

"A couple of the hospice houses I visited were in beautiful wooded areas. Their directors told me a very curious thing. When a resident is dying, there are increased sightings of wild animals on the grounds."

[Editor’s note: For more information on hospice houses, contact project development manager Ruben Liebhaber at info@hospiceresidence.com or visit his web site at www.hospiceresidence.com. Contact consultant Jay Mahoney of the Summit Business Group at jmahoney@sbg-llc.com. Contact hospice attorney Mary Michal for legal advice or a copy of her hospice house checklist at mmichal@reinhartlaw.com. "Hospice Trends" columnist Larry Beresford is an Oakland, CA-based health care journalist who specializes in hospice and end-of-life care. He can be reached at (510) 536-3048 or at larryberesford@hotmail.com.]