Legal Experts: Hospices Need ‘Bulletproof’ Compliance in Fraud Watch

Regulatory oversight in the hospice space has been intensifying due to program integrity issues. Legitimate providers are seeking greater clarity about the direction of the next wave of enforcement actions, with some legal experts indicating referral and ownership structures may come under more scrutiny.

The fraudulent actions of a few bad operators has brought significant challenges for legitimate hospice providers, according to Steven Aaron, partner at Rimon Law. Hospices are spending a lot of money, time and resources to demonstrate compliance in today’s regulatory climate, he said.

Compliance has become a moving target as regulators work to keep pace with fraudsters’ evolving tactics to avoid detection, Aaron stated. Regulators need stronger avenues of enforcement and oversight to better address fraud, he said.

“Hospices can’t stop the bad actors out in the world,” Aaron told Hospice News. “It’s become a complicated problem, but a necessary evil to make sure you can withstand any investigation. You have to separate out the kinds of fraud. In criminal cases, there’s an intent element, people who are truly committing health care fraud to get payment. In the civil [case] arena, hospices are low-hanging fruit versus any other type of medical practice, because part of the evidence [is whether] the patient is eligible. It’s not black and white. It’s hard to root that out.”

Fraud hunt zeroing in on referrals

Amid the recent regulatory moves was the U.S. Centers for Medicare & Medicaid Services’ (CMS) national moratorium halting new hospice and home health enrollment in Medicare. The moratorium took effect in May and will last for six months. Designed to stop fraudsters from entering the hospice space, the temporary pause came with concerns that CMS was using a “sledgehammer approach,” according to some providers and industry stakeholders.

Meanwhile, increased auditing practices have resulted in payment suspections among hundreds of new hospice and home health providers. Legitimate providers may be getting caught in the fraud dragnet, with the financial impacts bringing some hospices to question their sustainability or go out of business.

Regulators’ enforcement activity is not anticipated to abate anytime soon, said Jon Rawlson, founder and president at Armory Hill Advocates LLC. This year has brought a shift of more targeted scrutiny in certain “high-risk areas”, according to Rawlson.

Medicare auditors have increasingly narrowed focus on suspicious hospice utilization and billing patterns, he stated. However, a growing and “aggressive overlap of data mining” now exists among auditors in terms of the types of information being scrutinized, Rawlson said.

Referral patterns have increasingly become a zone of fraud watch, according to Rawlson. Hospices need to have processes in place that help catch “persistent regulatory blind spots” related to the ethical, legal and regulatory parameters of their referral relationships, he stated. Missing the mark on referral management compliance could come with detrimental impacts, particularly for smaller hospices.

“CMS has blurred vision right now, because they are so driven to stamp out and root out all the fraud and abuse in the system,” Rawlson told Hospice News. “What can they improve in their compliance program to help make them more bulletproof? One thing that comes up more often is referral relationships. Where are you getting referrals, and do you audit your referral relationships? It’s a really critical question that every provider has to look at [in] this target-rich environment that I don’t think is going to end.”

Kickback schemes are “hallmark” of hospice fraud and often involve aggressive patient recruitment in exchange for payment, said Dylan Aste, counsel, at the law firm Pillsbury Winthrop Shaw Pittman LLP.

The next iteration of fraud is already happening, according to Aste. Recent enforcement cases suggest “sophisticated and organized” plots by scammers who are often leveraging data to maximize referrals and minimize regulatory detection, he told Hospice News in an email.

Uneven government oversight has allowed these models to operate for longer periods of time in the past, but now enforcement is increasingly driven by data analytics and referral and billing pattern recognition, Aste said. CMS has increasingly “worked in parallel” with state agencies and the FBI, U.S. Departments of Justice (DOJ) and Health and Human Services Office of Inspector General (HHS-OIG), he said.

The DOJ’s recently formed Anti-Fraud Strike Force is among the signals of where regulators’ efforts may be heading, according to Aste. The task force has rolled out increased enforcement in California, resulting in the suspension of hundreds of hospice licenses among allegedly fraudulent operators. These actions are an early example of a more integrated regulatory approach taking root, he stated.

Even high-quality hospice providers should anticipate increased regulatory scrutiny, with potentially more aggressive and coordinated enforcement actions on the horizon, Aste indicated.

“Expect real-world pressure testing, such as undercover operations to see if providers will accept kickbacks or entities will pay kickbacks for a referral,” Aste said. “Also, expect public-facing and visible enforcement actions meant to send a deterrent signal — dawn raids and search warrant executions by federal agents in blue jackets. If your data tells the wrong story, you’re already on the radar. Regulators are no longer only asking, ‘Is there a complaint?’ They are asking, ‘Does the data make sense?’”

Adapting to the next regulatory wave

Hospices need careful consideration around their ownership structures, according to Paul Werner, lawyer and member of the firm Buttaci Leardi & Werner LLC. Internal audit analyses performed by third parties can help identify potential grey areas, according to Werner.

Legitimate providers may be unknowingly inviting “unsavory optics” around how their businesses are structured, he said.

“The business of health care is such an uncontrolled beast, there are always people coming into the market related to one another in some way,” Werner told Hospice News. “These connections are both apparent and indirect between facilities and operators. It’s a trust-but-verify pitfall situation for hospice providers. It comes down to exercising good common sense. We can expect that the light is going to get brighter, not dimmer in these more aggressive fraudulent activities over time. Your marketing, outreach and referral tactics have to be buttoned up behind the scenes.”

Hospice is always going to be a highly regulated industry, and providers need to have adaptive approaches to compliance, said Scarlett Singleton Nokes, partner at Sheppard, Mullin, Richter & Hampton LLP.

Potential areas facing greater regulatory scrutiny include patient eligibility and hospice ownership structure, Singleton Nokes said.

Hospices with high patient recertification and discharge rates may catch the government’s watchful eye, she indicated. Fraudsters have avoided regulatory attention in part through attempts to hide the nature of referral and ownership relationships.

“I’m seeing a lot more hospices, skilled nursing facilities and home health providers with a lot more scrutiny of their ownership structure,” Singleton Nokes told Hospice News. “If new ownership changes with some frequency, coming in buying multiple providers all at once … it can bring on heightened government scrutiny. There’s a sense that [regulators] are pretty dogged in priorities to root out bad actors. It’s very possible now that there’s going to be government action and more investigation to follow. It’s a more challenging spot to be in.”