Fraudulent operators in the hospice space have misspent millions of Medicare dollars in recent years. This problem has become so severe that it has become one of the defining issues facing the hospice industry, with providers and other industry stakeholders expressing concern about significant impacts to future payment, access, sustainability and utilization. 

This is the first of a two-part Hospice News series that examines the financial and operational pressures weighing on the minds of hospice providers amid instances of fraud, waste and abuse occurring in the industry.

Fraudulent hospice billing practices are slowing growth among legitimate providers and impairing their ability to enhance quality care delivery, said Patrick Harrison, senior director of regulatory and compliance at the National Alliance for Care at Home. The outlook for hospice providers will become increasingly challenging if the unscrupulous billing activity continues, with negative impacts for a swelling aging population with end-of-life care needs, Harrison stated.

“The outlook appears concerning for the future if the federal government continues to pay substantial amounts to providers that fail to deliver quality care,” Harrison told Hospice News in an email. “This not only undermines efforts to incentivize and improve care for beneficiaries with terminal or serious illnesses, but [it] also puts additional financial strain on the Medicare program.”

Fraudulent activity adds pressure that challenges regulators and policymakers’ efforts to justify increased payments necessary to improve equitable care access, Harrison added.

But while there is no doubt that hospice fraud is occurring — with the government identifying certain states as hotspots — a lack of clarity exists around the full extent of hospice fraud. The first step in successfully combating the problem might be a more thorough approach to data collection and analysis, as well as research into whether particular business structures are more likely than others to be associated with fraudulent practices.

Scope of fraud is uncertain

The U.S. Centers for Medicare & Medicaid Services (CMS) has increasingly ramped up efforts to curb fraud, waste and abuse in the hospice space. Ensuring sustainable access to hospice care for future patient populations is among the agency’s key considerations in this initiative, according to CMS.

“CMS is committed to being a responsible steward of public funds and to promoting the sustainability of its programs for future generations,” a CMS spokesperson told Hospice News in an email. “CMS has revisited and revitalized our hospice program integrity strategy, focusing on identifying bad actors and addressing fraudulent activity to minimize impacts to beneficiaries in the Medicare program.”

Limited data are available on the verified amounts of annual fraudulent hospice spending, but recent reports have illuminated where suspected malfeasance may be occurring.

Audits and investigations conducted during the Fiscal Year 2023 by the U.S. Department of Health & Human Services (HHS) Office of the Inspector General (OIG) are estimated to have yielded $3.44 billion in recovered misspent Medicare, Medicaid and other health and human services funds, the agency reported. However, this total is not necessarily tied to instances of fraud, waste or abuse in the hospice space in particular.

The regulatory watchdog agency’s hospice-related enforcement actions thus far in 2024 have included roughly $143.81 million in alleged fraudulent activity. The suspected hospice fraud amount reported in 2023 came to an estimated $198.1 million.

A large portion of these actions are suspected False Claims Act (FCA) cases and those involving the closely related anti-kickback statute. FCA cases often hinge on questions around patient eligibility for hospice care based on a six-month terminal prognosis. However, these cases result from errors, such as in clinical documentation or claims, as well as deliberate malfeasance.

“In our reports (audits and evaluations), we can only — based on our methodologies — determine overpayments, but cannot substantiate fraud,” an HHS-OIG spokesperson told Hospice News in an email. “While legal culpability is substantiated through much of our [Office of Investigations (OI)] work through guilty verdicts or pleas, many of the settlements involving [Office of Counsel (OCIG)] do not determine a defendant’s liability; though defendants agree to pay settlement amounts, claims made during the case remain allegations.”

Narrowing down the annual year-over-year estimates of suspected Medicare hospice fraud costs involves a complex process.

Determining whether suspected fraud cases were resolved through either restitution or settlement agreements takes a detailed examination of Medicare hospice billing claims analyzed against licensing information and provider data. It also requires tracking funds that have been recouped by CMS. These are just some of the steps involved.

Medicare fee-for-service hospice programs made an estimated $1.3 billion in improper payments during the 2023 report period, which included billing claims submitted from July 1, 2021 through June 30, 2022, according to data that CMS shared with Hospice News. These payments were defined as all services with a provider type of hospice, including hospital-based hospice and non-hospital-based hospice, the agency stated.

The amounts do not serve as fraud rate estimates or measures of fraud, CMS stated, as improper payments can be related to a range of billing claim errors such as documentation and technical issues, among others. In fact, most improper payments involve a situation when a state, contractor or provider misses an administrative step, a CMS spokesperson stipulated in an email.

“It is possible that some of the $1.3 billion might be fraud, but CMS would not know this unless a court or other adjudicative body determines facts and guilt or liability for fraud,” a spokesperson from the agency said. “To determine the recovery information for the OIG enforcement actions … would require specific provider information such as the National Provider Identifier, transaction number, etc. A separate research effort would be required for each enforcement action.”

Year-over-year hospice fraud rate estimate information “does not exist and/or is not readily available,” according to CMS. Additional research on the data would require requests to be processed by the Freedom of Information Act (FOIA) Office, the agency added.

Signals of improper spending

Program integrity concerns have fueled greater examination around the potential risk factors of fraudulent hospice spending, including trends related to providers’ tax status.

This focus is part of a broader trend in health care, as certain types of owners — notably private equity entities — have come under scrutiny from lawmakers. The high-profile bankruptcy of private equity-backed hospital company Steward Healthcare has led to contentious hearings on Capitol Hill, with a Senate committee voting to hold Steward’s CEO in contempt. This week, federal lawmakers announced a revised version of the Stop Wall Street Looting Act.

“Private equity takeovers are legal looting that make a handful of Wall Street executives very rich while costing thousands of people their jobs, putting valuable companies out of ­business, and in the case of health care, is literally a matter of life and death,” said Democratic Senator Elizabeth Warren of Massachusetts. “Our bill is designed to close loopholes and end incentives for private equity pillaging — and it will make sure what happened at Steward never happens again.”

The Biden Administration also has taken aim at private equity and real estate investment in the nursing home sector. This has elicited pushback from nursing home provider associations and other industry stakeholders. CMS has finalized rules mandating greater transparency related to nursing home ownership.

CMS also increased program integrity oversight efforts in response to the rapid growth in the number of potentially fraudulent hospices in Arizona, California, Nevada and Texas. Among these efforts was instilling a “36-month” rule. The rule prohibits the transfer of the provider agreement and Medicare billing privileges of a newly enrolling hospice for 36 months, mirroring existing rules for home health agencies.

More than three-quarters (77%) of all hospice providers nationwide were for-profit in 2022, with the remaining group made up of nonprofit and government-owned organizations, the Medicare Payment Advisory Commission (MedPAC) reported.

Much of the rising volume of for-profit hospice providers between 2021 and 2022 was concentrated in California and Texas, according to the MedPAC report. These are two of the four fraud hotbed states catching the eyes of regulatory watchdog groups. Red flags for fraudulent activity include a surge in the number of hospices without a corresponding increase in eligible patients.

But despite this heightened concern and regulatory activity, instances of fraud, waste and abuse in hospice are not directly tied to for-profit and private equity operators, said researcher Lauren Hunt. Hunt is a nurse practitioner and health services researcher. She also serves as associate professor at the University of California, San Francisco’s (UCSF) Institute for Health Policy Studies Mount Sinai Health System.

Other factors hinting at malfeasance include indicators of poor or negligent care practices, which quality reports can help uncover, Hunt explained. More research is needed to determine the future impacts of today’s fraudulent spending practices in hospice, she stated.

“We definitely need to invest more research dollars into understanding what the impacts are of different financial players and how that affects outcomes,” Hunt told Hospice News. “The huge increase in private equity acquisitions in hospice is concerning, because the profit motives are very high for past turnaround on investors in a short period of time. We don’t have a good understanding of private equity spending versus other types of ownership.”

*Stay tuned for the second article in this series, which will examine the mounting concerns among hospice providers and industry stakeholders related to fraud and the future of end-of-life care delivery.