The amount of money Medicare spent on hospice care increased more than 53 percent between 2005 and 2009 to $12 billion, according to a government report.
Hospice care is provided at the end of a person's life and focuses on providing comfort, not a cure. Medicare covers certain hospice care costs provided a person has a terminal illness, six months or less to live and receives care in an approved facility.
The rise in spending is largely due to a big increase in the number of people who use hospice services. In 2009, more than 1 million people received hospice care, a 25 percent increase over 2005. People can receive this type of care at home, in a long-term care facility, in hospitals or in facilities that specialize in hospice care.
In addition to a boom in the number of people who receive it, the number of facilities that provide end-of-life care services also increased.
"Hospice care, like a lot of medical interventions, is a victim of its own success," said Robert Field, professor of health management and policy at the Drexel School of Public Health in Philadelphia. "It's used more and more because it's worked out for many people."
According to the Department of Health and Human Services, more than half of hospices in 2009 were for-profit. These same hospices received more money from Medicare than non-profit and government-owned hospices, even though there are far fewer of them.
Although the government paid more money to profit-making providers, Medicare pays the same rate to all hospices.
"Reimbursement is all the same -- it's the same dollar amount per day," said Don Schumacher, president and CEO of the National Hospice and Palliative Care Organization, a non-profit organization that represents hospice and palliative care programs and professionals nationwide. Information on Medicare's web site shows the current rate is $146.63 for daily routine home care.
Field explained the main reason for-profits made so much more money is because of that per diem payment system.
"Medicare pays in a way that incentivizes overuse," he said. "Providers get a certain rate per day, and the longer patients stay in, the more they make.
The incentive is to enter patients into hospice before they really need it and to keep them there beyond the time they may no longer need it -- they may no longer be on the verge of dying in many cases."
A recent study published in the Journal of the American Medical Association found that for-profit hospices had more patients with illnesses linked to fewer medical needs and longer lengths of stay, resulting in higher payments.
"The recent increase in the for-profit hospice sector raises critical questions about potential financial incentives in hospice reimbursement," wrote the study authors, led by Dr. Melissa Wachterman, a palliative care physician at Beth Israel Deaconess Medical Center in Boston.
Critics of for-profit hospices say the current reimbursement structure could lead facilities to hand pick certain patients who cost less medically but require longer stays, maximizing profits.
Recently, two of the biggest for-profit providers -- Gentiva and Vitas -- were accused by the federal government of Medicare fraud. Back in June, Gentiva agreed to pay $12.5 million for allegedly billing Medicare for services it didn't provide.
But Schumacher says there's no proof of such patient selectiveness.
"There's no documented evidence of 'cherry picking' that I've seen," he said. "Some programs have a targeted marketing strategy, but there's nothing wrong with that under federal guidelines as long as they are taking care of any terminally ill patients requesting services."
Medpac, the government's Medicare Payment Advisory Commission, made a couple of recommendations to Congress in March on ways to cut costs and reduce fraud.
Medicare should increase payments for services at the beginning and the end of care to discourage stays beyond the time needed. Medpac also recommended investigating whether relationships exist between hospices and long-term care facilities and taking a closer look at enrollment processes at hospices with patterns of long periods of service and marketing practices.
But experts warn that cost-controlling measures shouldn't be excessive, since hospice still saves the government money.
"For every patient admitted to hospice, it saves approximately $2,250 compared to patients with similar illnesses not admitted to hospice care," said Schumacher.
"The fact that the government is spending more on hospice care might be a good thing," said Field. "That could be money we're not spending on long-term care or hospital care."