Changing the model

In 2017, Professor Paul Palmer of the (then) CASS Business School observed that “there is considerable evidence that the current business model for hospices needs a radical rethink.” With the benefit of hindsight, this was a prescient insight. 

Over the past two years, the sector has seen widespread service reductions and closures. Without the large levels of government funding provided during the pandemic—arguably close to what is now needed for a sustainable long-term model—the present crisis would almost certainly have emerged sooner. 

It is understandable that charities instinctively look to income generation as the solution to financial pressures. But this is an expenditure-led crisis, driven by sustained cost inflation, largely wage increases of over 20% in the last couple of years. Indeed, hospices are continuing to raise more money year on year. But, unsurprisingly, not at the rate needed to cover the increased expenditure. 

Government to the rescue? 

Calls for more Government funding remain compelling. The case is strong, not only in principle—why should end-of-life care be funded differently from other healthcare services?—but also pragmatically. Hospice care can relieve pressure on the NHS by making more effective use of existing system capacity. There is also evidence of the value for money it provides. 

There is, moreover, a fundamental ethical question: can we envisage a future in which assisted dying is fully state-funded, while hospice care continues to rely predominantly on voluntary public support?

There have been positive words. At the Hospice UK Conference, Stephen Kinnock said 'We are putting this issue of palliative and end-of-life care right at the heart of the 10 year plan, shifting from hospital to the community and making sure this sector gets the respect it deserves'. 

And the announcement of a Modern Service Framework for palliative and end of life care has been welcomed. But the sector has heard such words before, such as when the Palliative Care Funding Review reported in 2011, without seeing fundamental change. So, there is cautious optimism, but also justified scepticism.

So how has the model changed? 

Even if policy reform materialises, further service reductions appear likely in the short to medium term. 

This brings us back to Paul Palmer’s original challenge: how, in practice, have hospices adapted their business models? The answer is: in several important ways.

Diversification

Hospices have made significant efforts to diversify income, particularly through commercial activities Some of these aim to monetise the core skills and mission of the sector. Others in less obvious ways, but still based on hospice expertise. But not all will succeed, as experience has shown. 

Encouragingly, there has also been a shift away from some of the cultural perspectives about fundraising. This is not only a realisation of the need to be more pro-active, but also that some of the paternalistic and 'necessary evil' attitudes of some have changed. 

This was evident in presentations from Dorothy House, North London Hospice, and Keech Hospice at the Hospice UK Conference in the 'Why the time for hospices to invest in their income generation is now' session, and reinforced in the 'Leading Organisational Culture for Successful Fundraising plenary.'

Innovation  

There remains considerable scope for further innovation. Digital crowd fundraising campaigns such as those run by Dorothy House and St Oswald's can raise six figures sums. Both hospices have made these a regular feature of their fundraising portfolio. And products like My Thank You still offer great opportunities. 

Hospice UK's national legacy campaign is another positive. But individual hospices must significantly strengthen their local legacy strategies to benefit from the forecast growth in legacy giving— especially given the loss of market share hospices have seen in recent years.  

Changing the Cost Base

But as I said above, this is an expenditure led crisis. So reform on the delivery side of the model has been unavoidable. 

Calls for charity mergers to save money are easy to make and we have seen a number in the sector in recent years (often takeovers in reality!) 

However, those with direct experience know that mergers rarely deliver short-term savings. In many cases, costs rise and service delivery suffers during the period of operational and cultural integration. In one or two instances, merger-related disruption has arguably contributed to subsequent service reductions.

The benefits come in the longer run. The journey Cancer Research UK has been on in the last twenty years shows this. And examples within the hospice sector from Dougie Mac and Keech Hospice Keech and, going further back, Shooting Star Children's Hospice also provide positive evidence.

Collaboration

And collaboration does not have to mean merger. Increased collaboration in other ways has also been a feature of recent years. St Michael’s in Hastings and St Wilfrid’s in Eastbourne now share seven joint posts, including three at Director level.

We also now have over 40 hospices working within the Local Hospice Lottery framework, benefiting from the shared infrastructure, specialist expertise, and economies of scale of a hospice owned company. 

Collaborative working has also strengthened commissioning outcomes. The most striking example is, of course, the group of hospices serving North West London who have secured over £5 million extra funding for end of life care through coordinated engagement with commissioners and stakeholders. 

In the words of the ICB Finance Director, 'This is the kind of work we want to support; it provides an equitable service across our boroughs and is demonstrable value for money.' Comparable, if smaller-scale, successes can be seen in areas such as Kent and West Yorkshire.

Digital and AI

Investment in digital infrastructure—to modernise systems, improve efficiency, and enhance service delivery—has become another defining theme, though Hospice UK research indicates that there is still a long way to go.

Bespoke hospice digital products such as GRACE which Dorothy House and others are about to implement, have the potential to deliver substantial productivity gains while further improving quality of care.

Turnarounds

But obviously the majority of hospice expenditure goes on service delivery. So, threats to the business model increasingly require leaders to decide not only what to do differently—but what to stop doing altogether. We now have 2 in 5 hospices planning or having made cuts.

These decisions are profoundly difficult. As turnaround expert Simon Hopkins says, no one came into this sector to cut services. But the ability to manage organisational restructuring has become a core leadership capability for a hospice CEO, requiring emotional intelligence as much as financial acumen.

The Stockdale Paradox

And yet, despite the pressures, the resilience and commitment of hospice leaders and teams remain striking. 

In the final session of my Virtual Hospice CEO Group last December, I asked participants what they would remember most about 2025. While no one suggested it had been easy, the overwhelming tone was positive—focused on achievements and plans for the future

This response immediately brought to mind the Stockdale Paradox, described by  Jim Collins in his seminal work ‘Good to Great’;   

'You must never confuse faith that you will prevail in the end—which you can never afford to lose—with the discipline to confront the most brutal facts of your current reality, whatever they might be.'

So, perhaps the most valuable aspect of the Hospice Business Model remains the passion and commitment of the people involved.