Starting a hospice is not just a clinical mission — it is a business. And one of the highest-stakes early decisions a new hospice makes is how to structure its pharmacy benefit.
Under the Medicare Hospice Benefit, hospice organizations assume full financial responsibility for all medications related to a patient’s terminal diagnosis. There is no separate pharmacy reimbursement. Drug costs come out of the per diem rate — which means your formulary, your pricing model, and your PBM arrangement determine whether pharmacy spend supports your margin or erodes it.
For new and growing hospice organizations, getting pharmacy right from the start is significantly easier than fixing a bad arrangement later.
The Financial Stakes of the Pharmacy Decision
Established hospices often talk about PPD — per-patient-per-day drug cost — as their primary pharmacy benchmark. New organizations should understand this number before they admit their first patient.
The industry average PPD runs from $8 to $12, depending on patient acuity, geography, and diagnoses. Organizations with optimized formularies and strong PBM partnerships routinely achieve PPD in the $5 to $6 range. The difference between $10 PPD and $5.44 PPD across 50 patients over a year is more than $100,000 in pharmacy spend — money that either stays in the organization or goes to drug costs.
For a new hospice operating on thin initial margins while building census, that difference is not an abstraction. It is the difference between a viable first year and a financially precarious one.
What New Hospice Organizations Often Get Wrong
The most common pharmacy mistake for new hospices is defaulting to a retail pharmacy arrangement without a structured PBM relationship. Retail pharmacies are accessible and familiar, but they are not designed for hospice’s specific cost and formulary requirements.
Without a hospice-specialized PBM:
You Pay Retail Pricing
Retail pharmacy pricing is not optimized for the clinical reality of end-of-life care. Hospice drug spend is concentrated in a relatively small formulary — symptom management medications, pain management agents, respiratory medications — and the pricing for these drugs in a structured PBM arrangement is substantially different from what a retail account delivers.
You Have No Formulary Guidance
A hospice formulary is not just a list of covered drugs. It is a clinical and financial decision-making tool that shapes prescribing behavior, manages high-cost claims, and keeps PPD in range. Without structured formulary management, prescribing patterns drift, and PPD climbs.
You Have No Benchmark
New organizations often don’t know whether their PPD is good, bad, or indifferent — because there’s no reference point. A hospice PBM provides benchmarking against industry data and against your own historical trend.
You May Have Compliance Exposure
The Medicare Hospice Benefit has specific requirements for covered medications, formulary documentation, and billing. New organizations that build their pharmacy program around retail access rather than a structured PBM often discover compliance gaps only when an auditor arrives.
What a Hospice-Specialized PBM Provides from Day One
MaxHaven works with new and growing hospice organizations to build a pharmacy benefit structure that supports financial stability from the first patient.
A Formulary Designed for Hospice
MaxHaven’s formulary was developed by palliative care pharmacists around the actual clinical requirements of the Medicare Hospice Benefit. It covers what hospice patients need, manages high-cost outliers, and gives your clinical team a clear framework for prescribing decisions.
Transparent, Benchmarkable Pricing
MaxHaven operates on a no-spread-pricing model. You pay the actual cost of drugs plus a clear administrative fee. From your first month of operation, you have a PPD figure you can track, benchmark, and improve.
Medicare Hospice Benefit Compliance Support
Our team includes specialists in MHB billing, formulary structure, and documentation. For a new organization building compliance infrastructure, this expertise is immediately actionable.
PPD Benchmarking Before You Commit
MaxHaven will benchmark your projected patient mix against our PPD data before you sign anything. If your anticipated acuity suggests PPD above industry benchmarks, we will show you why and what formulary decisions would address it.
The Timing Advantage for New Organizations
Established hospices that want to switch PBMs face transition costs — re-contracting, formulary transitions, member communications, and sometimes friction with clinical staff accustomed to their current arrangement. New organizations don’t have any of that friction. They can build the right pharmacy structure from the start, without a transition cost.
That is a meaningful advantage, and it is worth using.
Growing Organizations: When to Revisit Your Pharmacy Arrangement
Organizations that started with a suboptimal pharmacy arrangement often revisit the decision when they hit a specific census threshold — typically 50 to 100 patients — where pharmacy spend becomes large enough to materially affect financial performance. At that point, the PPD math that seemed abstract at 10 patients becomes very concrete.
If you are a growing hospice that started with retail pharmacy access and is now seeing PPD climb as census grows, the time to revisit your pharmacy structure is now — not when you are larger, and the transition is more complicated.
MaxHaven will do a no-cost PPD analysis of your current pharmacy spend, compare it to what a structured MaxHaven arrangement would look like, and give you a clear picture of the financial impact. No obligation.
Ready to build your hospice pharmacy benefit on a solid financial foundation?
Get a Free PPD Benchmarking Analysis | Talk to a MaxHaven Specialist
MaxHaven RX is a hospice-specialized pharmacy benefit manager and part of the PPOK family of pharmacy brands. We serve hospice administrators, executive leaders, consortia, non-profits, hospital-based hospice programs, and new hospice organizations. Our average PPD: $5.44.
