Improper CMS Payments to Hospices Top $2.1 Billion in 2018

Medicare made an estimated $2.1 billion in improper fee-for-service payments to hospices during fiscal year 2018, with more than half occurring due to documentation errors, the Government Accountability Office (GAO) reported.

The GAO investigation focused solely on fee-for-service payments and did not examine Medicare’s managed care or outpatient prescription drug programs. Though the overall report relied on 2017 data, GAO included 2018 numbers for Medicare in an appendix.

GAO analyzed payment amounts and rates from Medicare and Medicaid for four selected services: hospice, home health, durable medical equipment, and laboratory.


“We selected these services based on their relatively high estimated amounts and rates of improper payments due to insufficient documentation, particularly in Medicare,” GAO indicated. “Specifically, these services accounted for $10.7 billion of $23.2 billion in Medicare improper payments due to insufficient documentation in fiscal year 2017.”

Poor documentation was the top contributing factor to improper hospice payments in 2017 as well as 2018. Documentation issues are more prevalent within Medicare than Medicaid, according to GAO. For hospice, the rate of insufficient documentation was 9 percent higher in Medicare programs than Medicaid.

This report comes at a time when regulators are narrowing their eyes towards hospice providers. CMS has stepped up its audit activity in the hospice sector in recent years. The agency in 2017 expanded its Targeted Probe and Educate (TPE program) to include hospices. And in 2016 the U.S. Department of Health and Human Services Office of the Inspector General added reviews of hospice compliance with CMS standards to its active work plan.


Among hospice providers, the most documentation common error was failure to include a physician narrative statement in documents certifying that the patient’s life expectancy was less than six months. Also, the certification documents often did not include the certification date span.

An effective physician narrative statement references clinical indicators of decline, relies on quantitative measures, provides evidence for observations about the patient’s condition, and documents the progression of any comorbidities that could impact that patient’s life expectancy, according to Debra Beaty, R.N., B.S.N., senior solution specialist for Optima Healthcare Solutions, speaking in a Home Health Care News webinar.

Medicare Administrative Contractors, who review the documentation on behalf of CMS, evaluate narratives using local coverage designations. Therefore, Beaty recommends, physicians should refer to these designations when crafting their narrative. Hospice providers can also consult CMS guidance for completing the necessary documents.

Overall in fiscal 2018 Medicare fee-for-service programs spent $389 billion, including $32 billion in improper payments. To address the issue, GAO made four recommendations:

  1. CMS should regularly assess whether its documentation processes in Medicare and Medicaid are effective at ensuring providers are complying with coverage requirements.
  2. Medicaid medical review should lead to corrective action to address these issues, as necessary.
  3. CMS should take steps to ensure that payment error rate measurement (PERM) reviews don’t compromise fraud investigations.
  4. CMS should ensure that states are notifying PERM contractors of ongoing fraud investigations.

Responding to GAO, the Department of Health and Human Services agreed with all but the second recommendation, saying that a larger sample size for these reviews would increase the administrative burden on states to administer Medicaid.