“It doesn’t seem right,” said Stubbs, who had Appling’s power of attorney to make medical decisions. “What incentive did the doctor have to put my aunt on hospice? How much was she being paid?”
Harden Healthcare, the hospice’s current owner, said medical directors received no incentive pay. Appling’s doctor, Donna Ewy, could not be reached for comment.
Hospice care, once chiefly a charitable cause, has become a growth industry, with $14 billion in revenue, 1,800 for-profit providers and a base of Medicare-covered patients that doubled to 1.1 million from 2000 to 2009.
Compensation based on enrollment numbers, pay to nursing-home doctors who double as hospice medical directors, and gifts to the nursing facilities have helped fuel the boom, according to a study of 1,000 pages of court documents and interviews with more than 45 hospice employees, patients and family members.
KKR buys in
“They wanted us to admit, admit, admit,” said Joyce White, a former marketer for Vitas Healthcare, a Chemed unit that is the nation’s largest hospice chain. “All of us competed against each other to make our numbers.”
Publicly traded companies like Chemed and Gentiva Health Services have created hospice chains through serial takeovers. Hospice buyouts and investments by private-equity firms have also led to boosted enrollments.
Funding from Kohlberg Kravis Roberts enabled closely-held Harden’s acquisition of Hospice Care of Kansas’s parent last year. The seller: private-equity investor Apax Partners.
“There was always pressure to get the patient census up, any way we could, to sell the company,” said Rae Ann Angelo, a Wichita salesperson for the Kansas hospice between 2003 and 2009. “You can’t sell unless you show big growth.”
KRG Capital Partners is another private-equity concern active in the hospice trade. KRG sold Dallas-based Trinity Hospice for $75 million in 2006. The company was liquidated by the buyer, nursing-home operator Sunrise Senior Living, two years later, after $67 million in write-offs and government allegations of ineligible patient enrollments before the takeover.
“After KRG came in, it was clear their philosophy was, ‘Put everyone on hospice; don’t ask questions and build!’ ” said Catherine Covington, who worked as a Trinity compliance officer from 2000 to 2004. “They were there to make a buck.”
KRG members on Trinity’s board ordered “immediate disciplinary action” when they learned of compliance violations, which led to terminations, according to Topper Ray, KRG spokesman.