By Charles R. Babcock
PHILADELPHIA---Donna Nelis, a hospice sales agent for Vitas Healthcare Corp. of Miami, considers Dr. Raymond Urbanski one of her success stories. When Nelis first called on the young internist in the heavily Italian neighborhoods of South Philadelphia two years ago, Urbanski knew nothing about hospice services for the terminally ill. Now the doctor routinely refers most of his dying patients to Vitas Healthcare.
Each new patient is typically worth about $100 a day in Medicare payments to Vitas, which has more than $200 million a year in sales and is the nation's largest chain of for-profit hospices. Each patient also means money for Nelis, one of nearly 100 Vitas agents earning commissions by recruiting the doomed.
The payment of such finder fees is an indicator of how hospice care, begun in the mid 1970's as a compassionate volunteer movement to comfort the dying, has evolved into a big, competitive industry. Declared a federal entitlement by Congress 15 years ago, hospice care now serves 450,000 patients, grosses $2.5 billion a year and is Medicare's fastest-growing benefit.
Easing death's sting is still the avowed ambition of hospice operators. But an aging U.S. population and the financial pressures of modern health care have brought the marketing tactics of corporate America into the cancer ward and cardiology unit.
"Things have changed so much in hospice since I started 10 1/2 years ago," said Geraldyne Habermehl, manager of Hospice of the Sunrise Shore in Alpena, Michigan. "It was pure hospice then. Now it's dog-eat-dog, dirty, competitive fighting. It was a service thing before. Now it's a money deal."
The "money deal"--which has resulted in a doubling of Medicare payments for hospice care in the past four years--has lured increasing numbers of for-profit operations to a field that once was universally non-profit. Now about 20 percent of hospices are for profit. The transformation of hospice care has led to such tactics as paying a sales commission for each terminal patient recruited, which bothers even some of those hospice operators who do it.
"On the one hand, you want to be zealous in getting the message out. On the other hand, you don't want to be a salesman. It's unseemly to sell death," said Barry Smith, head of VistaCare, a Phoenix company that pays sales commissions.
Other recent developments in the hospice industry also have drawn increased attention from federal regulators, including evidence that some providers may be exploiting the terminally ill and taxpayers alike.
Recent allegations of abuse suggest a "kind of innocence lost" for hospice, said George F. Grob, a Deputy Inspector General at the [U.S.] Department of Health and Human Services. Now, Grob added, the industry is grappling with the fact that it has "grown from a voluntary, philanthropic program to one where business and other motives were coming into play."
To be eligible for hospice care under federal Medicare rules, a patient must be certified by a doctor as having six months or less to live if the terminal disease follows its normal course. In return for giving up further curative treatment, the patient receives pain medication and periodic visits by hospice nurses, home health aides and spiritual counselors. Most patients are treated in their homes, though increasing numbers are cared for in nursing homes.
For the terminally ill, hospice care provides a federally subsidized opportunity to die at home rather than in a hospital. For those who remain in nursing homes, the hospice provider is supposed to supply extra care in the final weeks and months of life.
As part of the new scrutiny of hospice providers, federal auditors reviewed more than 2,000 hospice patients who lived longer than the anticipated six months and concluded that nearly two-thirds--including many at six Vitas locations--were not terminally ill when they were enrolled. In one case, a patient died after four years and nine months of hospice care, a protracted stay that cost Medicare more than $160,000 according to the Inspector General of the [U.S.] Department of Health and Human Services.
The same review criticized Vitas's practice--since abandoned, according to company officials--of paying commissions based on how long a patient remained in hospice care. "This marketing tactic encouraged the recruitment of long-term patients, many of whom our review found ineligible for hospice benefits." concluded the audit, published in November .
This Spring, the [U.S.] Inspector General issued a "special fraud alert," warning that some hospices are suspected of paying kickbacks to nursing homes in order "to influence the referral of patients." In October, a federal grand jury returned the first hospice fraud indictment by charging a Chicago man with bilking the federal government by collecting more than $10 million in Medicare reimbursements while providing less than $2 million in hospice services to patients. Joseph ----------, who has pleaded not guilty, allegedly paid nursing homes $10 a day for each patient signed up for hospice benefits with the assistance of compliant doctors who certified them as terminally ill without an examination.
Officials at the National Hospice Organization, the industry's main [lobbying] trade group, said such incidents are rare exceptions in a booming industry going through growing pains. They cited a recent HHS inspector general's assessment that the Medicare hospice benefit is "working as intended," notwithstanding some fraud and abuse concerns.
Individual hospice operators singled out by federal auditors also took issue with the criticism. For example, Hugh Westbrook, the Vitas chief executive and a founder of the hospice movement, disagreed that large numbers of his patients were not qualified for hospice benefits; more than $50 million in disputed federal payments to Vitas hangs in the balance. Westbrook said physicians who certify Vitas admissions are not paid commissions and ensure that only eligible, terminal patients are enrolled.
Hospice leaders contend that physicians should not be second-guessed if their prognoses of patient longevity prove erroneous.
The average length of stay for hospice patients has dropped slightly in recent years, according to federal statistics, leading hospice operators to complain that patients have not been able to take full advantage of their services.
"There are two stories here," said Mary Labyak, executive director of Hospice of the Florida Suncoast in St. Petersburg. "One is the miracle of hospice, how a group of volunteers set out 20 years ago to change how people die. ... The other story is where is this all going? Are there really people taking advantage of what is the business of hospice? One's a miracle. One's a tragedy."
Other Ailments Join Cancer
Christine Kirkland is another example of how the hospice business has changed. The 70-year-old Vitas patient has a heart condition that hospitalized her six times last year, before she signed up for hospice care in mid-December. In the early days of hospice, most patients had cancer. Now growing numbers have other maladies, which, experts say, often make life expectancy harder to forecast.
"I have my good days and my bad days," Kirkland told a visitor to her home in North Miami. She praised the Vitas home health aide, Dorothy -------, who comes to help draw her bath, and the nurse who helps ensure she has no "hard pain."
Kirkland is among 4,500 patients at Vitas facilities--four times more than at any other hospice operator.
Twenty years ago Vitas founder Westbrook, whose total salary package now approaches $600,000 a year, had one patient. The former Methodist minister started a small hospice in Miami with a friend who was a nurse. Westbrook successfully lobbied the Florida legislature for passage of a law legalizing hospice care in the state.
But it was Congress's agreement to make hospice care a federal entitlement that really launched the national industry. Westbrook and others organized a grass-roots campaign in the early 1980's. The cause was helped, he recalled, by a federal study predicting that a hospice benefit would save $100 million in Medicare costs within three years by getting patients out of more expensive hospitals. The new entitlement launched on a trial basis, was signed into law by President Ronald Reagan and took effect in late 1983.
Soon thereafter, Westbrook changed his nonprofit hospice to a profit-making business--having realized, he said, that it "had to be large" to succeed."
The Medicare benefit for hospice was made permanent in 1986, and was added as a Medicaid option for impoverished nursing home residents the same year. Early on, hospices weren't reimbursed for services provided to patients who lived longer than seven months. Congress amended that in 19990, making the benefit open-ended and, according to federal auditors, triggering a sharp increase in he number of hospice patients who lived longer than six months.
The first signs of abuse in the industry were detected in the early 1990's in Puerto Rico, where auditors concluded that 70 percent of the hospice patients they investigated were not terminally ill. Even patients with routine arthritis were being signed up according to [U.S. Dept. Of] HHS documents. In late 1995, HHS warned that some patients were being recruited for hospice care without being informed they had to forfeit other Medicare benefits, including payments for treatments such as chemotherapy. Other hospices reportedly were skimping on required services or were discharging patients who needed more extensive treatment than the hospice was willing to provide.
Audits of 12 large hospice operations--half of them owned by Vitas--followed, part of a federal anti-fraud initiative called Operation Restore Trust. Westbrook said he was offended that hospice care was singled out. "It implied a hunt for fraud," he said, "and I don't believe that really exists in hospice on any kind of scale that would warrant that view."
As Westbrook was building his hospice chain, he became a prominent Democratic donor and fundraiser. In 1991-92, he raised more than $400,000 for the party from family members and business associates, according to news reports. In 1994, he played host to President Clinton at a fund-raiser in his MIAMI home. He has been an overnight guest at the White House. And in 1996, the president and first lady Hillary Rodham Clinton held a White House dinner for him and the donors of a nonprofit voter registration group that Westbrook chaired, which raised $3 million.
Westbrook tried to parlay his political contacts into help for the hospice industry, according to a White House memo obtained by The Washington Post. In December 1995, when the Senate considered trimming the growth of the Medicare reimbursement rate for hospice care, Westbrook called Harold Ickes, Clinton's deputy chief of staff then. Ickes then wrote a three-paragraph memo to health care aide Chris Jennings, noting that Westbrook "is very close to the president and this administration." Ickes underlined the word "very."
The rate increase was cut, although less severely than had been proposed in the Senate. Jennings said in an interview that he never took any action on Westbrook's behalf. Ickes did not return repeated phone calls. Westbrook said the call to Ickes was "in the ordinary course of business."
The [U.S. Dept. Of] HHS audit published in November mentioned a "large national chain," which company officials confirmed as Vitas, where 60 percent to 85 percent of long-term patient cases reviewed in various locations were ineligible for hospice benefits. The audit also noted that the chain paid $1 million a year in sales commissions and that several sales agents earned $80,000 to $100,000.
Westbrook and other Vitas officials said the company has ceased paying commissions based on patient longevity, although they declined to discuss how commissions are now calculated, on grounds that the information is proprietary.
Urbanski, the Philadelphia internist, said he was unaware that Nelis, the Vitas sales representative, earned commissions on patients he referred for hospice care. But, he added, as long as family members call back saying they received good care, I'll keep using them."
Small Operators at Risk
Darla Schueth views change in the hospice business from a somewhat different perspective than Westbrook, with his 4,500 patients a day and operations in nine states. As executive director of Hospice Care of D.C., Schueth is struggling to stay in business as her patient census has ebbed in recent years by more than half, to about 40. Even as hospice care grows in the United States, competition for patients and the federal money they bring in, "is driving small hospices out of business," she said.
Likewise, Ken Nicholls and Pat Kelley of the Montgomery Hospice Society, said they have seen their average patient load dwindle to about 50 a day. The Montgomery hospice, begun by volunteers in a church basement in 1981, is building an in-patient facility to complement at home service. But competition continues to increase; the Maryland licensing board has approved four new hospices for Montgomery County, three of them for-profit.
Westbrook believes economies of scale are necessary to make hospice care viable. "You can't cover costs if you have under 75 to 80 patients a day," he said. "Most hospices are under 50. A lot of them are being subsidized by philanthropic dollars."
Vistacare's Smith agreed. The hospice field, he said, has been "largely filled with moms and pops, good hearted, wonderful people who lack' the capital or information systems" needed--and who are vulnerable to competition from bigger operations.
Andrew Parker of American Hospice Management said the for-profits will lead a necessary consolidation in the industry. A brochure from Parker's company states: "Hospice represents an excellent opportunity for providers in many areas of the country to enhance revenue, expand service profiles, and conserve resources." The key to making money in hospice is "volume, volume, volume," Parker says.
"The whole environment of health care has changed; dollars are being squeezed," said David English, president of Hospice of Northern Virginia, the largest in greater Washington, with more than 350 patients. "Each institution is trying to maximize its revenue, hold onto the patient a little bit longer."
That means competition among hospitals, physicians, nursing homes and hospices for the cash the desperately ill can bring in. In some complicated cases, including those requiring in-patient care, the federal hospice reimbursement rate is more than $400 a day.
For non-profit hospices, the competition requires greater attention to marketing. "Vitas was kicking our butts": a few years ago, said Cheryl Bonnet, chief financial officer of San Diego Hospice. "They were smart, and we were resting on our laurels." Her hospice, she added, has worked hard to increase its "market share" of dying patients.
The hospice industry still faces substantial cultural barriers given the reluctance of many terminally ill patients, their families and their physicians to acknowledge the imminence of death by enrolling in hospice care. The extraordinary emotions that attend life's last passage also mean that hospices are subject to intense scrutiny of the care they give the dying.
Carole Alvarez of Grand Rapids, Michigan, for example, said she felt anger and guilt upon learning, too late, that Hospice of Michigan--the nation's largest nonprofit operator--could have provided round-the-clock nursing service at home to her late husband, Jose, who had wanted to die there rather than in an institution. "I just broke down and started crying, asking why I didn't explore it more. I trusted them so much," Alvarez said in an interview.
Barbara Lewis, a spokeswoman for Hospice of Michigan, said the company erred in not making the service available. The [U.S. Dept. Of] HHS Inspector General is investigating several complaints against the company, according to documents.
"I'd like to say I sit here thinking every minute about how to improve care to our patients," said English of the Hospice of Northern Virginia. "But the truth is I'm not. I have to manage to keep us viable," he added. "We have been able to run it like a business and still have the compassion. It's a tough balancing act."