Recently proposed amendments to the False Claims Act (FCA) could spell choppy regulatory waters for the hospice industry. Senators introduced a bill that would, among other provisions, shift the burden of evidence and potentially make it easier for whistleblowers to call out hospices on fraud and harder for providers to defend themselves, according to Bryan Nowicki, hospice attorney for Husch Blackwell. 

Senators Dick Durbin (Dem. Ill.), Charles Grassley (Rep.-Iowa), Patrick Leahy (Dem-Vt.), John Kennedy (Rep.-La.) and Roger Wicker (Rep.-Miss.) introduced a bill that, if enacted, would amend FCA procedures regarding fraudulent hospice claims to Medicare that violate the program’s rules and regulations. The legislators proposed changes to the law’s parameters for determining materiality. “Materiality,” has several definitions depending on who you ask, but the defining factor is that a misstatement or misrepresentation could have influenced Medicare’s decision to pay or deny the claim.

The U.S. Senate Committee on the Judiciary is considering the bill, which also contains language that the materiality of an FCA claim can be established by a preponderance of the evidence, which means that the court believes that more than 50% of the claim is true.

The proposed changes could alter the way false claims are enforced to the detriment of hospice providers, according to Nowicki, raising the level burden for disproving materiality.

“To show immateriality, which is what the provider would want to show, that compliance with the regulation is immaterial. The provider needs to show that by clear and convincing evidence — that’s a heightened burden of proof,” said Nowicki in a Husch Blackwell podcast. “What the legislation is doing is making it easier for whistleblowers to show materiality, [and] making it more difficult for providers to show immateriality.”

FCA cases are among the most common legal concerns for hospice providers as the industry faces increasing regulatory scrutiny. These cases most commonly center around questions of a patient’s eligibility for hospice care based on a six-month terminal prognosis.

Whistleblowers can file qui tam complaints in concert with the government that call out potentially fraudulent hospice claims, in which providers submit Medicare claims for patients who were not eligible or didn’t receive these services. Called “relators” by the courts, they stand to receive a portion of any funds recovered by the government through a lawsuit, averaging a range of 15% to 25%.

“This really does affect our industry pretty tremendously if it goes through, for hospices in particular, because so much of the False Claims Act activity is being made in the hospice arena,” said Husch Blackwell Hospice Attorney and Partner Meg Pekarske. “Hospices, in addition to all of their audit activity, are subject to a lot of False Claims Act and whistleblower activity. This is bad for providers. This act can lead to extremely negative consequences for upstanding hospices.”

The amendments would give the government the ability to “come back with objections based upon proportionality and undue burden,” according to Nowicki, possibly shifting costs onto the provider to prove immateriality against these claims.

A report earlier this year from Bass, Barry, and Sims showed a leading cause of fraud involving hospices billing Medicare for services for which patients were not eligible. This resulted in several multi-million dollar settlements in 2020 as amounts run the gamut from $1 million to $5.25 million.

Responding to an FCA investigation could be crippling to hospice finances even without actual litigation, according to Nowicki. Fighting off investigations and having to prove immateriality could result in heavy financial and operational burdens to providers that can span months of documentation and thousands in expenses, with hospices feeling the effects before even stepping into a court.

“The False Claims Act is a pretty wide net. The people who enforce the False Claims Act, they capture a lot of innocents within that net, hospices included, and that is very difficult to extricate themselves from,” said Nowicki. “This new legislation has made that net a bit wider by tweaking with that law.”