A slew of fraudulent hospices in California are dodging consequences by shuffling patients around between provider numbers.

That’s according to multiple sources who spoke with Hospice News, expressing their concerns about patterns of fraud continuing even as government regulators crack down on the sector.

Since 2021, numerous media and government reports have emerged of unethical or illegal practices among hundreds of newly licensed hospices, particularly among new companies popping up in California, Texas, Nevada and Arizona. Despite the best efforts of regulators and law enforcement, hospice leaders are concerned that many bad actors are slipping through the cracks.

“As more regulation comes in, it really doesn’t matter. You can give me a regulation right now and in three seconds, I can give you a way to work around it,” a hospice owner told Hospice News on condition of anonymity. “Because I know my industry, I can find a work-around for any regulation … Our systems are filled with loopholes.”

Industry associations also are aware of this issue, according to Logan Hoover, vice president of health policy and government relations at the National Hospice and Palliative Care Organization (NHPCO).

“It is deeply concerning that we continue to see sophisticated fraud attempts in multiple states, targeting beneficiaries and defrauding taxpayers. These deceitful actions reveal that serious vulnerabilities still exist in our system,” Hoover told Hospice News in an email.

One principal tactic among these hospices is maintaining multiple provider numbers, hospice leaders told Hospice News on background. This enables perpetrators of fraud to move patients between the various hospices they own. Another common practice is transferring patients who have reached the payment cap to avoid recoupment.

“I always get agencies that ask me to swap patients with them,” a hospice CEO said. “They say, ‘Maybe we can swap some patients out this way and you can eat into your cap, because my patients don’t have cap space.’”

The U.S. Centers for Medicare & Medicaid Services (CMS) has introduced a series of new regulations to combat fraud during the past two years. In addition to new rules, the agency has been conducting unannounced onsite visits. As of August 2023, CMS personnel had appeared at 7,000 locations, with plans to visit every hospice site in the country, according to a blog post by two CMS officials.

CMS has also implemented a “period of enhanced oversight” for new hospices in California, Nevada, Arizona and Texas — states that have emerged as hotbeds for hospice fraud. The enhanced oversight period applies to hospices in those four states that were newly enrolled in the Medicare program as of July 13, 2023, as well as those that are submitting or undergoing a change in ownership. A key component of the enhanced oversight includes a medical review of claims before a Medicare Administrative Contractor (MAC) will pay them.

Other agencies such as the FBI and the U.S. Department of Health and Human Services (HHS) Office of the Inspector General have likewise stepped up investigative efforts.

Despite these actions, more work is necessary, according to Mollie Gurian, vice president of home-based and HCBS policy at LeadingAge.

“Good hospice care, because of its holistic, patient- and family-centered compassionate approach to the dying, is a godsend,” Gurian told Hospice News in an email. “When bad actors are able to continue practicing without being held accountable for their fraudulent behavior, patients and their families get hurt, and ethical providers oftentimes face roadblocks to delivering needed care. LeadingAge continues to advocate with both Congress and CMS for solutions, and we urge them to act with expediency.”

However, the wheels of justice turn slow, and often before regulators and law enforcement catch wind of potential malfeasance, the fraudsters have shut down the provider number under scrutiny and transferred patients to another one, according to the sources who spoke with Hospice News.

“They all have the same answer: By the time an [Additional Document Request (ADR)] comes through, which is like that enhanced scrutiny, all of these patients will be transferred over to another hospice,” a hospice executive told Hospice News. “That first company is gone. Those patients are on a second company, and they’re already starting their third, if not [their] fourth. They are already waiting for the next jump.”

These companies are also essentially “selling” patients to evade the payment cap and regulatory scrutiny, sources told Hospice News. Hospice owners will move patients between their organizations in exchange for payment, often reaching tens of thousands of dollars per individual.

In some cases, these organizations are enrolling patients without their knowledge or consent, according to Sheila Clark, president and CEO of the California Hospice and Palliative Care Association (CHAPCA).

“Scammer hospices enroll patients without informed consent. They provide no care or poor care and do not provide the necessary services,” Clark told Hospice News in an email. “Scammer hospices are harvesting enrollment numbers. It is not until care is denied [patients] find out their identity was stolen and they cannot get the care they need. Scammer hospices get paid and that gets posted to the lifetime hospice spend for the beneficiary.”

The sources who came forward to Hospice News witnessed these activities in Los Angeles County, California.

Thus far, California is the only state to take action on the issue, including a moratorium on hospice licensing. While these efforts may be curtailing some fraud, problems persist. A ProPublica investigation published in January found that new hospices in California are still receiving Medicare certification amid the increased regulatory scrutiny around program integrity. 

Medicare claims data shows that 102 newly enrolled hospices entered California in 2023. Arizona also saw a rise of 25 new hospices during the last year, with Texas and Nevada seeing 72 and 25 new providers, respectively.

In one instance, 15 new hospices received Medicare certification, all operating from the same two-story building in Los Angeles, ProPublica reported.

In another: One location in Phoenix was approved for three new hospice licenses in 2023, all at the same location as dozens of other new providers in the past two years, according to ProPublica.

Industry leaders are issuing increasingly urgent calls for regulators and enforcement agencies to move even more strongly and swiftly to curtail such problematic trends.

“For the past few years, we have dedicated ourselves to solving this problem, and continue to provide CMS and key congressional stakeholders with recommended legislative and regulatory changes to strengthen hospice program integrity,” NHPCO’s Hoover told Hospice News. “This issue highlights significant failures in the licensure and certification process, and we call on authorities to take immediate and stronger action.”

Fraudulent agencies are also increasingly brazen, with some openly boasting of their ability to game the system and encouraging other providers to do the same, according to sources who spoke with Hospice News. The bad actors also have little fear of the potential consequences.

“Their mentality is, ‘Hey, if I can scam $8 million to $9 million, and I have to sit in jail for a year or two years, I’d get out, get back home and millions of dollars are waiting for me,’” a hospice executive said.