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Hospice Reduces Spending For Patients And Medicare

Hospice Reduces Spending for Patients and Medicare

Did you know that even though Medicare’s hospice benefit pays 100% for a range of home services, Medicare saves money when patients elect hospice in a timely fashion? Hospitals advance some of their financial objectives, too. This isn’t to say the goal of hospice care is financial. Hospice seeks to maximize quality of life during a crucial time. However, caring for family members with advanced illness proves costly, so finances often factor into health care planning.

Hospice Does Not Shorten Life

It’s worth noting upfront that hospice does not shorten life. When patients qualify for hospice, enrolling in a timely fashion is shown to extend life by days to months compared to people who choose other paths.1-4 Hospice reduces spending despite having patients who live longer.

What Hospice Covers

Traditional Medicare’s hospice benefit pays 100% for covered services. This means families have no deductible to meet, no co-pays, and no cost sharing of any kind. Hospice covers a range of home services:

  • Home nursing and therapy
  • Personal care from aides
  • Medications related to the hospice diagnosis (especially pain control meds)
  • Supplies related to the hospice diagnosis
  • Equipment related to the hospice diagnosis (especially at-home hospital beds, bedside commodes, and other accommodations)
  • Bereavement services for the family

How Does Hospice Reduce Spending for Medicare?

Even though patients in hospice tend to live longer, they spend less time in the ER and hospital. This is because they receive most of the nursing they need at home. Not only is this more comfortable for patients, it’s a less costly way to deliver intermittent nursing services. Hospice agencies tend to be on-call for patients 24/7, so families don’t need to rush to the emergency room every time there is a change in condition. Instead, they call the hospice agency, and the hospice agency sends a nurse to the home.

How Much Money Does Hospice Save?

People who enroll in hospice cost an average of $8,697 less per person,5 and the savings could be greater. The figure is based on the research of Ziad Obermeyer, MD and colleagues, which was recently published in the Journal of the American Medical Association. They studied the billing records of 86,851 Medicare beneficiaries with serious cancers. The nearly $9000 in savings is accumulated over the lifetime from diagnosis of a serious cancer forward.

Dr. Obermeyer’s study found that people average 11 days in hospice. Experts recommend three to six months in hospice. Obermeyer’s data showed spending five to eight weeks in hospice optimized savings. The research largely supports an earlier study from Duke University finding that savings to Medicare triple when hospice enrollment spans 58 to 180 days.6

As impressive as this is, it actually understates the overall savings achieved by hospice. These studies only focus on Medicare spending. The hospice benefit also reduces what the family would have spent out of pocket for home supplies and equipment, co-pays, and deductibles.

How Does Hospice Help Hospitals Financially?

Medicare incentivizes hospitals to reduce 30-day readmissions. Hospitals with higher rates of hospice utilization have better performance on 30-day readmission rates.7,8 Additionally, greater the average “length of stay” in hospice, the lower the rehospitalization rates. Hospitals perform better financially when they help families choose hospice at the optimal time.


In summary, hospice reduces healthcare spending for families and Medicare, while improving profitability for hospitals. Hospice achieves this despite the fact that patients who choose hospice live longer. This is only a side benefit. Hospice is not about saving money. The primary aim of hospice is to maximize quality of life during a very important time of life.



  1. Hamano J, Yamaguchi T, Maeda I, et al. Multicenter cohort study on the survival time of cancer patients dying at home or in a hospital: Does place matter? Cancer. 2016 May; 122 (9): 1453-60.
  2. Saito A, Landrum M, Neville B, et al. Hospice care and survival among elderly patients with lung cancer. J Palliat Med. 2011; 14 (8): 929-939.
  3. Keyser E, Reed B, Lowery W, et al. Hospice enrollment for terminally ill patients with gynecologic malignancies: impact on outcomes and interventions. Gynecol Oncol. 2010: 118 (3): 274-7.
  4. Connor S, Pyenson B, Fitch K, et al. Comparing hospice and nonhospice patient survival among patients who die within a three-year window. J Pain Symptom Manage. 2007 Mar; 33(3): 238-46.
  5. Obermeyer Z, Makar M, Abujaber S, et al. Association between Medicare hospice benefit and health care utilization and costs for patients with poor-prognosis cancer. JAMA. 2014; 312 (18): 1888-1896.
  1. Hamano J, Yamaguchi T, Maeda I, et al. Multicenter cohort study on the survival time of cancer patients dying at home or in a hospital: Does place matter? Cancer. 2016 May; 122 (9): 1453-60.
  2. Lah S, Wilson E, Brown SM. The association between hospice utilization and performance on publicly reported outcome measures. In A14. Advance Care Planning and Palliative Care: Patients to Policy 2016. (pp. A1015-A1015). American Thoracic Society.
  3. Clough JD, Strawbridge LM, LeBlanc TW, et al. Association of practice-level hospital use with end-of-life outcomes, readmission, and weekend hospitalization among Medicare beneficiaries with cancer. Journal of Oncology Practice. 2016 Aug 16;12(10):e933-43.