Regulators Have Eyes Fixed on Hospice Fraud Cases

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

A report from Bass, Barry, and Sims shows 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 2020, with amounts ranging from $1 million to $5.25 million.

“For several years, courts have wrestled with the question of whether subjective clinical decisions about the types and amounts of treatment patients may need can be false for purposes of establishing FCA liability,” the firm’s report indicated. “Health care providers have long argued that they cannot.”


FCA cases often hinge on the question of whether live discharges from hospice care were the result of deliberate fraud or occurred because of the inherent difficulty of predicting a patient’s life expectancy.

The U.S. Department of Human Services Office of the Inspector General and the U.S. Department of Justice in recent years have increasingly scrutinized hospice providers for compliance with anti-fraud measures. Documentation errors and omissions, live discharges and lengths of stay beyond six months are the main red flags that could bring regulators to a hospice’s doorstep. 

These issues have resulted in an increasing number of CMS audits, OIG investigations and litigation. A 2019 Optima Health survey found that fewer than 50% of hospice providers felt prepared to respond to such scrutiny, which so far has shown no sign of slowing down.


In January, the U.S. Department of Treasury reported that enforcement efforts had recovered more than $3 billion in the past fiscal year from False Claims Act cases. About 2.6 billion of those dollars stemmed from lawsuits involving the health care industry, including hospice organizations.

A number of FCA claims resulted in settlements reaching into the millions, with cases against hospice providers growing among them. Florida-based Hope Hospice, a subsidiary of Hope Healthcare, settled an FCA case for $3.2 million. The Justice Department alleged that the organization knowingly certified patients for end-of-life care who were not truly eligible.

In one significant case, the Eleventh Circuit Court of Appeals partially affirmed a decision in favor of Arkansas-based hospice provider AseraCare. The appellate court agreed with the Northern District of Alabama that a mere difference of physician’s opinions on a terminal patient’s prognosis does not indicate falsity under the FCA.

The court gave prosecutors more time to seek out additional evidence, but AseraCare agreed to $1million settlement to bring the litigation to an end, while maintaining that the company did not engage in a fraudulent practices. Not long after the case was closed, hospice and home health giant Amedisys (NASDAQ: AMED) acquired AseraCare for $235 million. 

“AseraCare produced its own expert who testified that a physician could have reasonably concluded that the patients at issue were terminally ill and needed hospice care,” the Bass, Berry & Sims report said. “The district court granted summary judgment, adopting an “objective falsity” test for the FCA’s falsity element and concluding, as in AseraCare, that a difference of expert opinions was insufficient for the relators to survive summary judgment.”

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