Hospices have grown increasingly frustrated by fraudulent operators in the space and how their activities affect legitimate operators’ financial health.

This is the second of a two-part Hospice News series that explores how fraud, waste and abuse in the hospice space could create headwinds for the industry at large. Fraudsters misspend millions of Medicare dollars annually, though the actual hospice-specific amounts are difficult to determine, regulators previously told Hospice News.

Industry stakeholders have questioned whether the malfeasance will stymie the U.S. Centers for Medicare & Medicaid Services’ (CMS) ability to justify future reimbursement rate increases, which many hospice providers already consider insufficient to support the full range of their interdisciplinary services in today’s economic climate.

Mis-accounting for patients in the federal health care budget could lead to an inaccurate assessment of hospice utilization and care needs, potentially resulting in lower reimbursement or in stricter payment policies down the line, said Patrick Harrison, senior director of regulatory and compliance at the National Alliance for Care at Home (the Alliance). 

“When federal dollars go to fraudulent actors, it disrupts the financial landscape, limiting efforts to provide sufficient funding and resources to legitimate hospice providers,” Harrison told Hospice News in an email. “These pressures would challenge regulators and policymakers’ efforts to justify increased payments necessary to improve equitable care access — slowing progress and impairing providers’ ability to enhance care quality and continue serving traditionally underserved communities.”

Fraud’s future costs

Bad operators are reaping the benefits of providing poor and negligent care to patients while creating an unstable payment environment for legitimate providers, according to Sheila Clark, president and CEO of the California Hospice and Palliative Care Association (CHAPCA).

For instance, patients being enrolled who are not eligible for hospice may eventually be prohibited from electing these services in the future. Essentially this means that a host of Medicare beneficiaries could be unreimbursable due to fraud, leaving other hospices to pick up the bill if they take on those patients, Clark explained.

“Those beneficiaries will need hospice at some point, even though they were enrolled fraudulently,” Clark told Hospice News. “At some point a provider is going to have to pick up those patients’ care, and that’s a hard financial impact on sustainability.”

Regulators are spending valuable time and resources on addressing the fraud issues, a trend that could have negative outcomes if the challenges heighten and persist, said Paul Ledford, president and CEO of the Florida Hospice & Palliative Care Association.

Though the program integrity oversight is warranted and often results in payment recoupment activity — among other legal consequences — the costs of these regulatory efforts may be lasting, Ledford stated.

“There is a very high level of payment recoupments overturned on appeal – in favor of the hospice, but that process wastes an incredible amount of time and money and distracts the hospice program from the mission of serving their communities,” Ledford said.

Regulators during the past four years have increased efforts to curb fraud, waste and abuse in the space. Analyzing the annual fraudulent hospice dollars being spent involves a complicated process of tracking suspected instances against provider data and recouped funds, among a host of other considerations, according to the CMS.

CMS has “revitalized” its hospice program integrity strategy, which is in part aimed at minimizing the impacts of fraud amid a growing population in need of support, an agency spokesperson recently wrote in an email to Hospice News. Fraudsters complicate the ability to sustain access to quality health care options, the agency indicated.

“When criminals commit fraud and falsely bill Medicare, people’s medical records may become inaccurate and they can suffer delayed or even be denied care,” a CMS spokesperson previously told Hospice News. “In the end, Medicare fraud costs taxpayers billions of dollars every year. Each dollar lost to fraud takes away resources intended for people with Medicare.”

Calls for benefit reform

More hospices are coming under regulators’ microscope of increased auditing activity aimed at detecting malfeasance and improper spending. Several hospices have reported undergoing multiple audits simultaneously within a six-month period in 2023, according to research from LeadingAge, the Alliance and the National Partnership for Healthcare and Hospice Innovation (NPHI).

Common red flags that bring auditors to a hospice’s doorstep include questions around patient eligibility, longer lengths of stay and high live discharge rates. Though these factors can help regulators to detect fraudulent spending, legitimate providers have increasingly seen a host of operational and financial challenges as they prepare for and respond to a swath of audits, said Larry Atkins, chief policy officer at NPHI.

The current structure of the Medicare Hospice Benefit may need an overhaul to instill stronger safeguards against illegal profiteering billing practices, according to Atkins. Without change hospices could be facing a mixed bag of potential payment hurdles on the horizon.

“The design of the hospice benefit itself has opened up an opportunity for people to come in with a pretty low entry cost,” Atkins told Hospice News. “It’s attractive to and being exploited by both people who want to make a big turnaround in a short period of time as well as people who are really looking to scam the government, and that latter activity is criminal. Without reform, I worry that what is going on is inviting a cut in the payment rate, which would be disastrous for some providers and could put them out of business.”

Regulators need a more standardized approach to both detect and recoup misspent funds while also considering the hidden fraud pathways in current payment structures, Atkins stated. While current efforts have helped highlight areas of improved oversight, gaps remain in which regulators could use more aggressive tactics trying to recover fraudulent dollars, he added.

“This behavior invites a restructuring of the benefit to try and make sure that you can’t get paid for having somebody enrolled, but you do get paid for providing services,” Atkins said. “[It’s] shifting the money in the system away from those who are not providing services to those who are. That could generate a fair amount of money in savings to better build out the benefit if we could shift resources around a better outcome.”

Changes to Medicare payment structures designed to hinder illegal billing practices could inadvertently challenge providers’ efforts to deliver quality care, particularly in the face of rising labor costs, staffing resource constraints and fewer financial resources necessary to invest in their services, Harrison stated.

“While safeguarding the integrity of the Medicare trust fund and hospice benefit is critical, it is important that these efforts don’t undermine providers committed to high standards of care in their efforts to care for their communities,” he said.