New study shows costs of hospice care is less for most end-of-life patients

Quality care and cost savings coincide

Hospice managers have long suspected that their care both improves quality and saves payers money. Now there's a major research study of Medicare end-of-life patients that demonstrates that hospice care saves money for most end-of-life patients.

Managers can use the study's findings to demonstrate the value of their services to health system executives and referral sources, including physicians.

The study found that hospice use reduced Medicare program expenses during a patient's last year of life by an average of $2,309 per person enrolled in hospice care.(Reference 1) Hospice use also saved Medicare a maximum cost savings of about $7,000 per hospice patient when the hospice care was provided for about two months.1

"For the last 25 years or so, people have been interested in the question of 'Does hospice reduce health insurance costs to Medicare?'" says Donald H. Taylor Jr., PhD, an assistant professor of public policy studies at Duke University and an assistant professor of community and family medicine and nursing at Duke Medical Center in Durham, NC. Taylor is the lead author of the new Duke study that provides a hearty "yes" to the cost-savings question.

"It seems like a straightforward question to answer, but the tricky part is that people who tend to use hospice are different than those who don't use hospice," Taylor says. "Our study tries to statistically account for the difference between the two groups."

The Duke study is one of the most important to date on the topic of hospice costs because it compares apples to apples among Medicare beneficiaries, says Jon Radulovic, spokesman for the National Hospice & Palliative Care Organization (NHPCO). "The methodology used in this study was very thorough," Radulovic says. "What's interesting is the finding that by increasing hospice stay even by a couple of days, you can increase that savings by another couple of hundred dollars."

The study, which was conducted from 1995 to 2003, identified people who were very similar to hospice users in their demographics and past health care experiences, but had the one difference of not having used hospice care in their last year of life, Taylor explains. Researchers subsequently determined the daily costs of each group. Much of hospice's cost savings could be attributed to one primary difference between the two groups: "People who are using hospice are not as likely to die in the hospital as people who don't use hospice," Taylor says.

Hospital care is very expensive

Recent government scrutiny and media attention have focused on the hospice patients who have very long lengths of stay (LOS) and the hospices that have a disproportionate number of such patients. For example, a recent article in The New York Times, highlighted a handful of for-profit hospices that have exceeded the Medicare cap on per patient expenditures because they have a large number of patients who have long lengths of stay.2

But across the nation, the longer-stay patients are less common than the patients who are referred to hospice too late to receive the full benefits and best quality of care, Taylor notes.

The 25th percentile of hospice LOS is five days, meaning that one out of four hospice patients receive hospice care for five days or less, Taylor explains.

If these same patients were to double their lengths of stay, it would save Medicare money, and this is the area in which cost savings efforts should be focused, Taylor says.

As the study notes, the longer LOS would save Medicare money because it is a patient's last week and days in hospital care that is the most expensive health expenditure. Thus, when a hospice patient is referred to hospice care at home two weeks before his or her death, it saves Medicare the difference between what would have been spent in hospital care versus what is spent in hospice care. This amount increases the longer a patient is in hospice care for all but the minority of patients with very long LOS.1

Additionally, most people who work in hospice care or who have had loved ones who received hospice care would say that hospice care enhances the quality of care, Taylor says. "And our study shows hospice would save Medicare money," he adds. "There is almost no other example I can think of showing something that improves quality of life and saves money."

Goal is quality — not lowest cost

While the Duke study is welcome news to an industry that is undergoing federal scrutiny and regulatory changes, it also might reinforce the idea that hospice care should reduce health care costs, says Porter Storey, MD, executive vice president of the American Academy of Hospice and Palliative Medicine.

"The thing we have to watch about studies is [the reality] that no care is always cheaper than good care," Storey says. "The goal here is not to have the lowest cost."

It's an interesting and fair question to ask whether hospice care should be expected to save money for the Medicare program, Taylor says. "We don't ask whether coronary bypass surgery saves Medicare money," he adds. "It's interesting that the hospice program is subjected to that question of whether it saves Medicare money when no other part of medicine is."

While the Duke study's findings are very positive for the hospice industry, it's unlikely the one study will settle all questions about hospice's value in the Medicare program. Stephen Connor, PhD, vice president for research and international development at the National Hospice and Palliative Care Organization (NHPCO), says, "The thing about hospice cost research is I'm not sure we'll ever be able to have what is referred to as a definitive study, because we can't randomize patients to hospice."

"The study is as good as how well you match subjects," Connor says. "This study has done a better job than any previous study in doing that, and it's the best we have at this point."

The study has caught the attention of the government, and its timing led to notice at the fall meeting of the Medicare Payment Advisory Commission (MedPAC), where one MedPAC member mentioned its findings.

"MedPAC has some interest in how hospice is financed," Taylor notes. "The two groups of most interest from a policy perspective are people who use hospice three to four days before death, and there's a concern whether they reap all of the benefits of hospice care. The second group is of people who use hospice for more than 180 days, which is about 5% to 6% of Medicare beneficiaries."

It's this second group that has drawn more attention from MedPAC, Taylor says.

MedPAC worries most about long LOS

MedPAC is worried that these long lengths of stay represent something fraudulent to hospice, Taylor says.

"It appears to us that most of those cases of longer LOS occur when the clinical condition of the patient changes," Taylor says. "Death is not the simplest thing to predict, and we think more attention should be paid to the shorter LOS."

The Duke study found that for the entire last year of life, people who received hospice care cost Medicare $32,727, nearly the same as the $32,837 cost for people who did not receive hospice care in their last year of life.1 Also, hospice cancer patients who were in hospice care for 233 days or longer and noncancer patients who were in hospice care for 154 days or longer actually cost the Medicare program more than normal hospital-based and other medical care.

Policy-makers should focus on decreasing the numbers of people who enter hospice care too late to reap the full quality of life and Medicare cost-savings benefits, Taylor suggests. This could happen with a simple policy change that allows end-of-life patients who wish to continue to receive curative medical care to also receive hospice care, he says. "Most people who are coming to hospice late or for such short periods is because of restrictions on curative treatment for hospice," Connor says. "What happens commonly is people want to continue some disease-modifying therapy with the goal of remission or cure even up to the point of near death."

End-of-life patients who don't receive hospice care until the last few days of their lives are missing out on some of the significant benefits that hospice can offer them, Storey says. "I have had many patients who finally became comfortable when they received hospice care, and they were furious with me because they had been miserable for so long," Storey says. "They'd ask, 'Why didn't I receive that kind of care sooner?'"

The Medicare program makes an unnatural division between end-of-life patients who choose to continue curative treatments and those who choose to enter hospice care and discontinue all such treatment, Storey says. "Everyone else in countries around the world looks at our system as a real aberration because it puts a financial barrier between hospice care and hospital care," Storey says. "In Great Britain, Australia, and Canada, you can get a CT scan and be referred to a specialist while on hospice care."

Some hospices have gone out of business because they couldn't afford the short-term and intense palliative treatment needed by end-of-life patients who continued to receive medical interventions for their cancer until they were very sick, Storey notes.

By the time such patients are referred to hospice care, they cannot swallow and must receive infusions and additional staff to help them become comfortable, he adds.

If these same patients had been referred earlier, while they still received medical interventions, then the overall hospice cost would have been lower, and it would have been easier and less expensive for the hospice to make them comfortable, Storey says.

Patients who are referred to hospices sooner are those who have accepted that their disease cannot be cured, and so they're ready to stop curative treatment and receive the symptom relief and other services that hospice can offer to end of life patients. "Most patients who come on to hospice care are getting much more intensive care in what matters to them most: pain, shortness of breath, the family pulling their hair out," Storey says. "But they have to face the reality that they have something that can't be cured."


1. Taylor DH, Ostermann J, Van Houtven CH, et al. What length of hospice use maximizes reduction in medical expenditures near death in the US Medicare program? Soc Sci & Med 2007; 65:1,466-1,478.

2. Sack K. In hospice care, longer lives mean money lost. The New York Times. Nov. 27, 2007:p. 1.

Need More Information?

  • Stephen Connor, PhD, Vice President for Research and International Development, National Hospice and Palliative Care Organization, 1700 Diagonal Road, Suite 625, Alexandria, VA 22314. Telephone: (703) 837-1500. Web:
  • Jon Radulovic, Spokesman, National Hospice and Palliative Care Organization, 1700 Diagonal Road, Suite 625, Alexandria, VA 22314. Telephone: (703) 837-1500. Web:
  • Porter Storey, MD, Executive Vice President, American Academy of Hospice and Palliative Medicine, 4700 W. Lake Ave., Glenview, IL 60025-1485. Telephone: (847) 375-4712. E-mail:
  • Donald H. Taylor Jr., PhD, Assistant Professor of Public Policy Studies, Duke University, Center for Health Policy; Assistant Professor of Community and Family Medicine and Nursing, Duke Medical Center, 112 Rubenstein Hall, Durham, NC 27708. Telephone: (919) 613-9357. E-mail: