The pace of consolidation in healthcare is well documented, with hospital systems in particular being prime merger or acquisition targets as pressure mounts from reduced Medicare reimbursements, but another side of healthcare could be next – hospice providers.

Facing similar pressures from the ACA like all providers, the hospice industry is also facing cuts from sequestration, which could hasten mergers or acquisitions for smaller organizations or further exacerbate financial woes of struggling organizations, according to Jon Radulovic, vice president of communications for the National Hospice and Palliative Care Organization, an advocacy group near Washington, D.C.

In California, the nation’s second oldest hospice provider, Hospice by the Bay, is considering an affiliation with Sutter Health, citing the stability that such an alignment could afford the nonprofit. Sacramento-based Sutter already operates a sizable hospice operation throughout Northern California, known as Sutter Care at Home.

Hospice by the Bay’s consideration of aligning with Sutter follows last year’s bankruptcy of San Diego Hospice, which was eventually purchased by Scripps Health at a federal bankruptcy auction for $16.55 million. Hospice by the Bay, which operates in San Francisco and in four counties to the north of the city, apparently wants to preempt any such situation, although its finances are stable.

“Things can change quickly,” CEO Kitty Whitaker told the Marin Independent Journal. The nonprofit had total revenues of about $36.9 million on a budget of about $31.5 million in expenses, according to its 2012-2013 annual report.

Like most hospices, private or nonprofit, the vast majority of its revenue is from Medicare reimbursements, at 89 percent.

Radulovic, of the National Hospice and Palliative Care Organization, said that while each situation varies for hospices around the country, there has been an uptick in acquisitions and that would likely accelerate in the coming months, though perhaps not to same extent as other providers like hospitals or independent physician associations.

“I think what you’re finding in the past couple of years, there’s been a lot more regulatory demand and a lot more requirements for running a Medicare-certified hospice,” he said. “Most of the funding comes from Medicare, so it has gotten a lot harder, and so lot of organizations are looking to see what benefits there are for consolidation or merging. We are seeing that. Not on an epidemic proportion, but we probably figure you will see more.”

With an increasingly aging population across the U.S., the demand for hospice and palliative care will likely increase, he added.

“There are over 5,000 hospice organizations in the U.S., and a lot of that growth has been in the last decade,” he said. More than 1.5 million people are treated in hospice care each year.

Hospice providers are contending with the same quality measures that CMS is applying through the ACA as all other providers, which comes in the way of a 2 percent cut in reimbursements. Sequestration cuts to hospice reimbursement likewise were 2 percent.

Radulovic said that while much of the hospice industry isn’t opposed to Obamacare, collectively the cuts can take a toll, especially since hospice providers tend not to have additional revenue streams like a big health system or multi-specialty practice. Most hospice organizations have profit margins of around 4 to 6 percent, he said.

“Given the additional data and recent rules, I can see why organizations might look and say ‘Is there a way we might partner so we aren’t seeing the resources going to administrative and instead to care,’” he said.

For-profit or nonprofit structure plays less of a role than the size of the organization and its ability to navigate the changes, Radulovic said. He also noted that it’s not just happening in California, with a host of acquisitions occurring nationwide. Specific figures are not available.

Hospice by the Bay itself notes the increasing demand in its annual report, reporting a 6 percent increase of patients cared for, while zero patients are turned away because of inability to pay.