Regulators Prioritize False Claims Enforcement for Hospices, Investors

Hospice organizations and private equity investors are under increasing legal and regulatory scrutiny related to medical necessity complaints under the False Claims Act.

“Hospice providers are on the government’s radar and have increasingly become the subject of government enforcement actions and investigations,” John Kelly, member, Bass, Barry, and Sims, told Hospice News. “Hospice agencies should be alert because we can expect continued regulatory and enforcement oversight in this area in 2019.”

A report from Bass, Barry, and Sims indicated that a leading cause of fraud involves hospices billing Medicare for services for which patients were not eligible. This resulted in several multi-million dollar settlements during 2018, with amounts ranging from $1.24 million to $8.5 million.

Advertisement

“Settlements involving allegations about medical necessity of hospice services continued to dominate enforcement actions this last year,” Kelly explained. “Hospice organizations should be particularly mindful of the patients they are accepting and ensure that the appropriate documentation is retained.”

According to the US Centers for Medicare and Medicaid Services (CMS) Medicare’s hospice benefit is available for patients who elect palliative treatment for a terminal illness and have a life expectancy of six months or less if their disease runs its normal course.

As private equity investment rises in the hospice sector, those companies should also be aware of potential liability risks.

“I believe private equity firms that invest in any health care space, including hospice, could potentially be at risk of False Claims Act litigation,” Jeff Gibson, member of the Nashville-based law firm Bass, Barry, and Sims, told Hospice News.

Gibson’s comments follow a 2018 complaint filed by the Justice Department against the compounding pharmacy Patient Care America alleging illegal kickbacks to marketing firms. In an unusual move, the private equity company Riordan, Lewis, & Haden, Inc., was also named as a defendant.

Along with regulators and prosecutors, private equity firms are also paying closer attention to matters of legal and regulatory compliance, as well as ethical business practices, when making investment and acquisition decisions.

“Investors have to do a lot of due diligence, devoting quite a bit of time and resources to making sure they are playing by the rules, even when the matter is not illegal but simply immoral,” said Chris Booker, a partner with Frist-Cressey Ventures, L.L.C. “A company may be seeing growth and look like an exciting opportunity, but investors need to know: Are they playing by the rules?”

The best way for hospices and private equity firms to guard against fraud complaints is to ensure they have a robust program to monitor their compliance with law and regulation and to take action when deficiencies are found.

“If private equity firms become aware of compliance issues within the health care companies they own, they should not sit idly by, but instead should consider proactive steps to address the issues,” Gibson explained.

Companies featured in this article: