Dying for Dollars: The Corporatization of Hospice Care
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The following is an excerpt from Changing the Way We Die: Compassionate End-of-Life Care and the Hospice Movement by Fran Smith and Sheila Himmel. Copyright © 2014. Reprinted with permission of Cleis Press.
From a mission of mercy, hospice has evolved into a $14 billion industry, increasingly run by corporate chains, and nobody gets more credit, or blame, than the Reverend Hugh Westbrook. He invented the very idea of the corporate hospice, when he and a couple of partners opened the first for-profit program, in Dallas, in 1984—right after the Medicare law he was instrumental in crafting began to pay for hospice services. Over the next two decades, he grew the company into VITAS Innovative Hospice Care, the largest hospice chain in the United States—or anywhere, for that matter, because hospice chains do not exist abroad. In the process, Westbrook proved the unthinkable: A business can make a fortune caring for dying people.
Certainly he did. He had yachts, a Florida beachfront mansion, and a mountain home in North Carolina. He invested in a string of companies. He wrote big checks to Democratic candidates—his name would turn up on an infamous list of donors who received an invitation to sleep in the White House Lincoln Bedroom in exchange for a minimum $50,000 donation to President Clinton’s re-election campaign. And all that happened before he made the really big money, by cashing out to Roto-Rooter, a publicly traded company and a longtime VITAS investor.
Roto-Rooter already owned about 25 percent of VITAS when it acquired the rest of the company, in a $406 million deal in 2004. Westbrook walked away with about $200 million.
He signed the standard agreements not to compete, which kept him out of the hospice world for eight years. In that time, the industry changed more dramatically than even he could have imagined. A wave of mergers, acquisitions, and investments made hospice another Wall Street commodity to be traded, with one goal: maximizing returns. Roto-Rooter kept its hospice operations under the VITAS name but rebranded the corporate parent as Chemed Corp. The name had a ring of scientific authority and did not call to mind clogged drains.
Now under pressure to please shareholders with ever-larger revenues each quarter, VITAS embarked on a fast track to growth. It bought smaller hospices, opened new ones, and marketed more aggressively to doctors—for example, the free VITAS app, released in 2012, offered doctors the convenience of making referrals “without ever leaving your phone.” The company also began advertising directly to consumers, on radio and billboards. In 2012, VITAS had 11,000 employees in fifty-one programs across eighteen states. It served more than 75,000 patients and reported nearly $1 billion in revenues. As VITAS supersized, salaries bulked up too, at least in the corner offices of the corporate suite. Kevin J. McNamara, Chemed president and CEO, earned $6.4 million in salary, bonuses, stock awards, and other compensation in 2011. Timothy S. O’Toole, head of the VITAS subsidiary, had a $2.7 million package.
No wonder hospice beckoned investors. Almost every hospice program opened in the past decade has been for-profit. By 2011, 60 percent of Medicare-certified hospice providers were for-profit companies, up from 27 percent ten years earlier. Gentiva Health Services Inc., a publicly traded home health company, bought up small hospice chains in an aggressive move into the hospice market. (Yes, people in end-of-life-care, at for-profits and nonprofits alike, now toss around phrases like “the hospice market.” In investor circles, it’s “the hospice space.”) By 2012, Gentiva operated hospice programs in 165 locations across thirty states, with net revenues of $765 million.