Rising demand and demographic tailwinds are propelling rapid growth in the hospice and palliative care markets.
But continued labor market pressures remain a risk point. A big concern is whether there will be enough hospice and hospice providers to meet demand, according to Brian Tanquilut, healthcare services equity analyst at investment bank Jeffries LLC.
“These markets are growing partly because of demographic trends and partly because of the growing acceptance of hospice and hospice care,” Tanquilut told Hospice News. “As we see accelerating growth, staffing capacity is the primary concern. It’s about deploying the right level and type of staff to optimize these small labor pools.
The state of the hospice and palliative care markets
In 2021, palliative care was a $23 billion industry that accounted for about 20% of the overall U.S. healthcare market, according to a report that Bank of America (BofA) Global Research shared with Hospice News. The palliative care market will grow at an annual rate of 7% to 8%, making it the second fastest growing healthcare segment nationwide, second only to personal care, according to findings from the report.
The palliative care industry is expected to grow to $64.7 billion by 2030, up from $34.5 billion this year, according to a report from Research and Markets.
Like palliative care, the domestic palliative care market is also expected to boom in the coming years. Palliative care is among the next markets to experience substantial growth, according to a study by BofA.
US palliative care market to reach $78.50 billion by 2023, up from $49.42 billion in 2018, according to a recent Market.us report.
Forces pushing markets forward
Globally, the palliative medicine market is propelled by an increasing demand for these services as the number of patients living with chronic and severe disease increases, according to PharmaWeb.
Similar trends exist on the palliative care side of the equation as the number of seniors swells nationwide. Adults 65 and older are expected to make up nearly a quarter (23%) of the total U.S. population by 2060, according to Data from the Population Reference Bureau (PRB). About 95 million people will fall into that age group by then, nearly double the 52 million seniors nationally in 2018, the PRB said.
New payment models are also driving the adoption of palliative care, according to BofA researchers. This includes a gradual move towards value-based reimbursement and a drive to reduce residential care and associated costs.
The Center for Medicare & Medicaid Innovation is currently testing palliative care coverage through Medicare Advantage with the Value-Based Insurance Design (VBID) program. Often called the Medicare Advantage hospice carve-in, the program is nearing the end of its second year.
It remains to be seen whether Medicare Advantage will become a permanent part of hospice reimbursement after the four-year demonstration. However, the hospice component of VBID has helped inform payers about the value proposition of hospice, according to Tanquilut.
Hospices have other value-based payment methods, especially for upstream services such as palliative care. These opportunities include partnerships with responsible care organizations and providers participating in the Medicare Shared Savings Program.
“We’re watching closely what’s happening with value-based pilots in hospices,” Tanquilut said. “I think if Medicare Advantage plans pay for palliative care, that will help future growth. While there are question marks over what kind of tariffs they will pay, this will be an added benefit for palliative care providers and a trend to watch as a key factor contributing to the evolution of the industry over the next five to 10 years. ”
Value-Based Reimbursement Boosts Palliative Care Market.
The US Centers for Medicare & Medicaid Services (CMS) allows Medicare Advantage plans to cover palliative care as an additional benefit. Although traditional health insurance currently reimburses the services of licensed palliative care physicians and independent practitioners through fee-for-service programs, these do not sufficiently cover the full spectrum of interdisciplinary care.
Value-based payers are increasingly recognizing that hospice and palliative care can lead to lower healthcare costs, Tanquilut said. Medicare Advantage plans are increasingly recognizing that these services can help improve patient experiences and reduce healthcare costs, he added.
“Payers are increasingly accepting the idea that hospice and palliative care are cost-effective tools that help improve patient outcomes, better manage populations with chronic conditions, and reduce hospitalizations,” said Tanquilut at Hospice News. “Payers see the value of palliative care, and they want to increase its use because it benefits them and patients. I think that’s one of the main drivers there.
Staffing issues are holding back the growth of hospice and palliative care
Labor pressures represent the biggest hurdle in the road for the palliative care and palliative care markets. Demand for Critical Illness and End-of-Life Care Expected to Increase Soon exceed the offer of clinicians to provide it.
“The biggest impediment to growth right now is labor shortages and high employee turnover,” BofA representatives told Hospice News in an email.
Recruiting and retaining sufficient volumes of clinicians is critical to growth, according to Tanquilut.
But preparing for what lies ahead will not just be a numbers game in terms of recruiting staff. Finding the right referral sources and building those relationships will also be key to sustaining and driving the growth of palliative care, Tanquilut said.
“Finding the right referral sources and the right referral relationships is important,” Tanquilut said. “Nurturing those relationships with palliative care referral sources is important because you can build your staffing capacity, but it won’t matter if you don’t get the incoming referrals. It is important that providers make efforts to establish these relationships so that they have access to patients.