The past year has seen a slew of regulatory developments aimed at improving quality and combatting fraud in the hospice industry.

The drive by regulators and members of Congress to strengthen oversight is fueled by two main factors. The first was two July 2019 reports on hospice quality from the Office of the Inspector General (OIG) in the U.S. Department of Health and Human Services (HHS). These spurred passage of the Helping Our Senior Population in Comfort Environments (HOSPICE) Act, which mandated the establishment of a hospice Special Focus Program (SFP), among other actions.

The second driving force was the emergence of fraudulent actors in the space in relatively large numbers, particularly concentrated in California, Nevada, Arizona and Texas.

Investigations have shown that potentially hundreds of newly licensed hospices have bilked Medicare of millions of dollars during the past several years, all while providing egregiously poor care or none at all. Some of these providers engaged in referral kickback schemes, enrolled patients who were not eligible for hospice and lied to them about being terminally ill.

In some instances, multiple hospices have been operating out of the same address without a corresponding increase in the population of eligible patients. Some individuals also hold management positions at several of these hospices simultaneously.

The Hospice Special Focus Program

Finalized in the U.S. Centers for Medicare & Medicaid Services’ (CMS) 2024 home health rule, the SFP is set for 2025 implementation.

Though the hospice community generally has voiced support for the program, many contend that the agency’s methodology for identifying hospices for the SFP is deeply flawed. Stakeholders, including hospice providers and members of Congress, have called on CMS to postpone the program and revise that algorithm.

The program will have the authority to impose enforcement remedies against hospices with poor performance based on its algorithm. Hospices flagged by the SFP also will be surveyed every six months rather than the current three-year cycle and could face monetary penalties or expulsion from the Medicare program. CMS will also make public the names of hospices selected for the SFP.

The program, set to begin Jan. 1, 2025, could potentially lead patients away from quality providers and into the arms of bad actors in the space, according to Dr. Steven Landers, newly appointed CEO of the National Alliance for Care at Home.

“We think that [the CMS] methodology [for the SFP] is likely flawed. It is likely to harm beneficiaries if it’s released, because it’s going to steer people away potentially from quality providers,” Landers said in a press briefing. “It might make them even fearful about hospice care, which is the last thing we want to see happen. At the same time, [CMS’] implementation misses likely lots of truly poor performing hospices that should be called out and addressed.”

The 36-month rule

Some hospice owners have been selling their businesses soon after securing a license. This has prompted federal agencies to pursue new regulations to address the problem. Chief among these is the so-called 36-month rule.

This “license flipping” activity is prominent among bad actors who have been implicated in fraud, though until now it hasn’t been technically illegal.

CMS starting in 2024 forbids any change in majority ownership during the 36 months after initial Medicare certification, including acquisitions, stock transactions or mergers. This would mirror an existing regulation for home health providers.

CMS indicated four exceptions for the 36-month requirement:

1. The hospice submitted two consecutive years of full cost reports since initial enrollment or the last CIMO, whichever is later;
2. The hospice’s parent company is undergoing an internal corporate restructuring, such as a merger or consolidation;
3. The owner of an existing hospice are changing the hospice’s existing business structure (for example, from a corporation to a partnership (general or limited), and the owners remain the same;
4. An individual owner of a hospice dies.

A related clause in the rule would deactivate the Medicare certification of providers that do not bill Medicare after six months of providing services.

Enhanced oversight

Also, this year, CMS expanded its enhanced oversight for new hospices in fraud-ridden states, including California, Nevada, Arizona and Texas.

CMS announced a “provisional period of enhanced oversight” for new hospices in those states. A key component of the enhanced oversight includes a medical review of claims before a Medicare Administrative Contractor (MAC) will pay them.

“To combat fraud, waste and abuse under the hospice benefit, CMS will expand prepayment medical review this September in Arizona, California, Nevada and Texas,” the agency indicated in a statement. “To help reduce burden on compliant providers, initial review volumes will be low and adjusted based on results. If you’re noncompliant, we may implement extended review or take additional administrative actions.”

The newly expanded oversight program will cover any new hospice or those pursuing a change of ownership. These companies may also undergo other forms of payment and medical reviews. Potential penalties for noncompliance could range from claims denials to expulsion from the Medicare program.

Individual hospices will receive notice from CMS that they will be receiving this additional oversight, which can last from 30 days to as long as a year. Hospices that do not respond to requests from CMS may also see claims denied or their Medicare certification revoked.

Increasing audit activity

In the midst of these changing regulations, hospices have also seen stepped up auditing activity by Medicare Administrative Contractors (MACs) and other entities employed by CMS.

More than half of hospice providers reported having multiple types of audits within a six-month span in a survey earlier this year.

A range of audit types are happening with rising frequency, including MACs, Targeted Probe and Education (TPE), Supplemental Medical Review Contractors (SMRC), Unified Program Integrity Contractors (UPIC) and Recovery Audit Contractors (RAC). A main purpose of most audit types is to identify hospice providers with frequent errors on their billing claims or other activity that CMS considers to be unusual.

Hospices have increasingly come under a regulatory microscope around General Inpatient Care (GIP) in particular during the past few years, particularly when it comes to stays longer than five days.

In addition to CMS contractors, the U.S. Department of Health & Human Services Office of the Inspector General(OIG) launched a national audit of GIP utilization. The impetus for the audit was primarily related to billing errors.

An OIG study of hospice billing claims submitted during 2012 found that 31% of the GIP claims that providers submitted to CMS were inappropriately billed — to the tune of an estimated $268 million that year alone.

Calls for reform

This year also saw calls for major reform in the hospice space.

Rep. Earl Blumenauer (D-Oregon) has introduced the Hospice Care Accountability, Reform, and Enforcement (Hospice CARE) Act in the U.S. House of Representatives, which, if enacted, could revolutionize the Medicare Hospice Benefit.

Blumenauer announced that his office was working on the bill at the Hospice News Elevate conference in Washington D.C. The bill includes an overhaul of the per-diem payment system, along with a slew of other regulatory updates and changes to the benefit.

“This is an opportunity to do something in this Congress that is concrete, specific, that will save money and improve the quality of care for some of our most vulnerable people …” Blumenauer told Hospice News at Elevate. “This is an essential part of being able to humanize the health care system to improve patient outcomes.”

The bill would also implement a temporary, national moratorium on the enrollment of new hospices into Medicare, to help stem the tide of fraudulent activities among recently established providers concentrated primarily in California, Arizona, Texas and Nevada.

Among the key changes would be a reduction in hospice daily rates and the addition of a per-visit payment for clinical services to ensure that hospices are delivering appropriate care to patients.

The bill would also institute a payment add-on to support delivery of higher-acuity care palliative services that are difficult for hospice to support within the current payment structure. In the current draft of the legislation, this would include dialysis, chemotherapy, radiation and blood transfusions. It also proposed changes to the ways hospices provide respite care, including the allowable lengths of stay within that level of care.