05 November 2022 |

Hospice Care Startup Guaranteed Launches from Stealth

By workweek

Tech-enabled hospice startup Guaranteed is the latest startup to launch from stealth after raising a $6.5 million seed round. The company has raised $9.25 million in total and is prepared to transform the hospice space with tech-enabled services.

Hospice care has become more attractive lately. The aging population means more individuals will require hospice care, and more Americans than ever are choosing to pass in the comfort of their homes. Unsurprisingly, private equity and for-profit companies have flocked to the lucrative hospice industry, raising concerns about profit-driven motives and poor patient care.

In this article, I’ll highlight Guaranteed, discuss why hospice care is so attractive for PE and other for-profit companies, and discuss how all the above affect physicians and patients.

The Deets

Jessica McGlory founded Guaranteed to ensure loved ones in hospice care die in a dignified and respectful way. The inspiration came from her father’s harrowing experience with hospice care—care that wasn’t patient-centered, leaving her father in pain.

The only thing that’s guaranteed for all of us is that one day we will die, but the thing that isn’t guaranteed is that when you die it’s comfortable, pain-free and filled with dignity. We [Gauranteed] wanted to create that.Jessica McGlory

Guaranteed’s incorporation of tech-enabled services differentiates the startup from traditional hospice models. The startup’s care teams include home hospice aids, nurses, dietitians, social workers, and chaplains. Patients will have 24/7 access to care teams via messaging and video.

While Guaranteed is driven by a touching mission, the company also recognizes the next “big” area in the healthcare industry. According to a 2022 report by the CDC, around 1.6 million patients were under hospice care in 2018, and 95% of these patients were 65 and older (read: Medicare!). The population is only getting older, meaning more and more Americans will require hospice care. As such, the hospice industry is projected to grow at an annual rate of 7% to 8%, making it the second-fastest growing healthcare sector.

Guaranteed is Medicare- and Medicaid-certified, meaning Medicare and Medicaid will reimburse for Guaranteed’s hospice services. Medicare and Medicaid are the big payers that reimburse hospice companies. Reimbursement is per diem, no matter the intensity or quantity of services provided. Even when no services are provided, hospice companies are still reimbursed.

Why is Hospice Care So Attractive?

Private equity and for-profit companies have infiltrated the hospice space, for better or worse. Why?

First, the hospice business is always needed since people are always dying, and more people will die as the population ages. As people prepare to pass, they’ll want to do so in the comfort of their homes. In 2017, the home surpassed the hospital as the place of death for Americans for the first time in decades. This home-death trend will only continue.

Second, Medicare and Medicaid hospice payments are lucrative, and the government provides little regulatory oversight on hospice companies.

A lot of money and little oversight? Very attractive.

As I discussed above, Medicare and Medicaid pay hospice companies a per diem rate for care, no matter how little or intense the care is. Below is a table of Medicare hospice payment rates for 2023.

Hospice care is, therefore, a numbers game for the for-profit companies in the industry. Companies can manipulate who they accept for hospice care and how many services they provide to maximize profit. That is, they can choose to accept low-acuity patients, have low-level training of providers caring for patients, and initiate hospice care for low-acuity patients early to keep them in care longer.

Despite PE-backed and for-profit hospice companies making good money, the value of hospice care they provide does not mirror their high profits. Studies have shown the following of for-profit hospice companies compared to nonprofit hospice companies:

To hammer the point home, one study of 355 hospices found that 90% of the companies with the highest hospital rates and lowest spending on direct patient care, including home visits, were for-profit.

Dash’s Dissection

Backed by a strong mission, Guaranteed can avoid the perverse tactics that PE-backed and for-profit hospice companies have endorsed to turn a profit.

However, I’m weary that the quantity and quality of care Guaranteed plans to provide aren’t optimal for the current hospice reimbursement models. Again, hospice reimbursement models aren’t optimized to incentivize high-value end-of-life care. A per diem rate incentivizes hospice companies to manipulate the number and intensity of services they provide. The formula is a high number of low-acuity hospice patients, a low number of services, and low intensity of services.

How will Guaranteed remain competitive with incumbent PE-backed and for-profit hospice companies who are “gaming” the system? Guaranteed is new, and there isn’t that much information about their revenue model, so I’m making assumptions here. But, a tech-enabled company with a large and diverse care team, to which patients have 24/7 access, sounds costly compared to their per-diem reimbursement. I imagine Guaranteed could provide tiers of services and charge their own per diem or capitated rates in addition to Medicare/Medicaid rates. The capitated rates would likely encourage high-value care.

However, if Guaranteed’s 24/7 messaging and video calls service is considered “continuous 24-hour home care,” their per-diem rate from Medicare/Medicaid would be seven times higher than the normal reimbursement rate. In this case, cash would be funneling in while Guaranteed provides high-value end-of-life care.

With all the above mentioned, some regulation changes would be optimal for Guaranteed to thrive in the hospice industry are the following:

  • Government implementation of the same compliance tools that nursing facilities follow but for hospices, too (the government currently investigating PE-backed hospice companies).
  • Reimbursement restructuring to make reimbursement more variable patient-to-patient.
  • Filtering and penalization of low-quality hospices companies.

In summary, Guaranteed is the newest startup to focus on transforming hospice care to ensure patients die a dignified death. Guaranteed’s all-encompassing care team and tech-enabled services separate them from competitors. However, barriers to fulfilling Guaranteed’s mission include the current hospice reimbursement structure, which disincentivizes caring for high-acuity patients and providing many high-intensity hospice services. But, such “barriers” may be a different story with different revenue models that promote high-value care or if their 24/7 virtual care services are considered “24/7 home care” in terms of reimbursement. Either way, I’m excited to see how Guaranteed transforms the antiquated hospice space.

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