Metrics Matter: New Methods for Measuring Hospice Utilization Reveal the Best Way to Grow Your Business

Filed under Articles
Originally published in Market Research Letter: January/February 2013

Which would be the best way to grow a hospice business – finding new sources of patients or getting patients earlier in the disease process? We answer that question and discuss new methods of measuring hospice utilization in this month’s Metrics Matter.

Traditionally, the hospice industry has measured utilization of the hospice Medicare benefit as the percentage of patients who died on hospice compared to total deaths:

Hospice Utilization = # Patient Deaths on Medicare Hospice Benefit/Total Deaths

Historically, this metric has run in the 35% to 40% range, depending on geography.

Healthcare Market Resources has initiated a new hospice utilization metric – the number of Medicare hospice patients served divided by Medicare eligible patients:

Hospice Utilization = # Medicare Hospice Patients Served/Total Medicare Hospice Eligible Population

This methodology is different from the industry’s approach in that it accounts for live discharges. Our research at the state level showed a very strong correlation – 80% to 95% – between these two measures. It is essential to remember that the key with this statistic is relative performance and how much of the potential is realized.

Hospice utilization can also be measured in terms of days on service. This method brings into account not only the number of hospice patients served, but also how long they are served (i.e., average length of stay). In mature markets, providers may find identifying new sources of patients is difficult. “Death bed” admissions are a universal issue and an opportunity in almost every situation. This new hospice metric appears to be an excellent tool to gauge market potential. These benchmarks may need to be revised, however, if the J-shaped curve becomes part of the new Medicare hospice reimbursement system and the number of days over 90 and 180 days-on-service declines.

Metrics Matter

Based on our analysis of 2011 Medicare claims data, we can conclude the following:

  1. The entire country averaged 1.79 hospice days per Medicare enrollee in 2011. This was a 2.10% increase compared to 1.76 days in 2010 and a 51.3% increase compared to 1.01 days in 2005.
  2. The distribution among state quartiles for the number of hospice days per Medicare enrollee is 2.59 days, 1.90 days, 1.48 days, and 1.01 days, respectively. This distribution is fairly even, since the averages of the 1st and 4th quartiles, as well as the 2nd and 3rd quartiles, closely approximate the overall average.
  3. Our method of measuring hospice utilization has been based on the number of Medicare hospice patients served per Medicare eligible. This approach reflects live discharges that can be a factor in certain markets – unlike the industry’s method that is based on hospice deaths as a percentage of total deaths. In the past, we have calculated the correlation between these two methods to be in the 80% to 95% range in any given year.
  4. We also performed a correlation calculation for the Medicare hospice days per Medicare eligible versus the Medicare patients served per Medicare eligible and found an 89% correlation for 2005 data. This is a very strong indicator of the similarity of the two metrics.
  5. Moreover, four out of the top five states are the same using both of these methods. Alabama and Mississippi traditionally have been hotbeds of hyper-competitiveness and cap abuse. Although they have seen their patients served utilization drop by at least 10% from historic highs, these two states are still leaders from a hospice days-on-service perspective. It appears that old habits die hard.
  6. Using both methods, 10 of the 13 states in the bottom quartile are identical – primarily a combination of seven Certificate of Need states and three barely populated upper Midwest states. This is consistent with our previous work that shows as hospice utilization increases, the percentage of non-cancer diagnoses increases. These types of patients have less certain prognoses and, therefore, longer lengths of stay.
  7. The most revealing fact of our analysis is that the Medicare hospice patients served utilization grew by 28.7% from 2005 thru 2011, while the days on service jumped by 51.3% over the same period on a nationwide basis. Based on these results, it appears that growing your business by getting patients earlier in the disease process is easier than finding new sources of patients.

Click here or call 215-657-7373 if you have questions about this metric and to learn more about the many ways Healthcare Market Resources’ data can help you track industry trends and successfully grow your business.