CMS Cracks Down on Hospice Medicare Fraud

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Summary: The use of hospice benefits is increasing in the Medicare population, but with this increase also comes bad actors. CMS is threatening to kick out hundreds of facilities due to hospice fraud for kickbacks and more. Arizona, California, Nevada, and Texas are of particular concern, particularly for patients diagnosed with dementia, but the problem is nationwide. Now that CMS is providing more data for the first time, the issue is coming to light, along with actionable solutions. Estimated Read Time: 12 mins

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Table of Contents:

    1. Hospice Fraud Could Cause CMS to Close Around 400 Facilities
    2. Hospice Fraud and Abuse Prompts Unannounced Visits From CMS
    3. Medicare Hospice Fraud Reporting Available for the First Time
    4. Arizona, California, Nevada, and Texas Are of Particular Interest to CMS
    5. Medicare Care Choices Model (MCCM) Could Help the Future of Hospice
    6. The Hospice Carve-In Pilot Program
    7. Finding Solutions to Stifle Fraud and Improve Medicare Hospice Benefits
    8. Final Rules and Immediate Solutions for Hospice Fraud in 2024

Hospice care is a benefit available to Medicare beneficiaries when it is medically necessary. Unfortunately, hospice fraud is inspiring the federal healthcare system to create changes and implement new procedures when it comes to Medicare hospice care. Each year, more and more hospice fraud is uncovered, creating a concerning issue for everyone involved. This is why the Centers for Medicare & Medicaid Services (CMS) is working to combat the widespread issue.

Although utilizing hospice benefits provided by Medicare hasn’t been as rampant in the past, more and more beneficiaries are in need of hospice care, and this trend is projected to continue. Hospice Medicare fraud is costly for the federal government, while also causing issues for patients. As more and more enrollees utilize hospice care, a change needs to be implemented before Medicare is no longer able to provide the services.

Though this problem is far from new, CMS is already working on fixing the issue. Fraud and abuse have no place in the healthcare system as they shift the focus away from patient care. Below, discover how we got here and how CMS is fixing the problem.

Hospice Fraud Could Cause CMS to Close Around 400 Facilities

Ongoing hospice fraud is threatening the existence of hundreds of facilities and it’s complex as to whether or not this is a good or bad thing. On one hand, accessing such care is imperative for those with six months or less to live, but bad actors are making it unclear who patients can trust.

CMS is looking at almost 400 hospice facilities that will need to prove legitimacy if they wish to continue operating. Otherwise, they will no longer be able to treat Medicare-covered individuals. Hospice care produces nearly $22 billion per year to Medicare, making this a serious and expensive concern. Here’s what is at the heart of the ongoing investigation:

  • Facilities are often listed to help hospice patients, but don’t actually exist at the addresses they claim to be at.
  • “Churn and burn” fraud occurs when a facility reopens under another brand after Medicare mandates a shut down because of bad practices.

Being deactivated or revoked from Medicare altogether is a risk for those who fail to comply, but there is no set timeline for this happening. In the meantime, investigations continue to identify bad actors and possible solutions.

Hospice Fraud and Abuse Prompts Unannounced Visits From CMS

Ensuring facilities are legitimate is a difficult task, but CMS is ramping up its efforts. Over 7,000 facilities have already received unannounced visits from the federal agency in an attempt to uncover and prevent potential fraud. Additionally, the hospice survey process continues to evolve to better suit the needs of modern healthcare.

Hospice fraud and abuse can come in many different forms. This makes unannounced visits necessary as there are a number of ways facilities can bend the rules in addition to lying about an address or evading the consequences of a previous venture. For example:

  • Receiving kickbacks to misdiagnose clients or place referrals.
  • Forgoing proper care for patients.
  • Billing incorrectly and other accounting tricks, such as money laundering.
  • Rapidly growing new facilities without the proper infrastructure in place to do so.

There are several groups with proposed solutions for CMS to consider. This helpful approach should only increase in the future as now, Medicare hospice fraud is being reported more accurately than ever before.

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Medicare Hospice Fraud Reporting Available for the First Time

The goal of Executive Order 14036 is to encourage transparency and inspire competition in the marketplace. This is why the U.S. Department of Health and Human Services (HHS) is ramping up its efforts to provide more data that can help combat hospice fraud.

HHS data showcases who owns hospice and home health agencies participating in Medicare. The information is available to the public and in total, refers to over 17,000 facilities. Additionally, CMS is making its hospice survey protocol, including the 2023 revisions, available for the first time as well.

The decision for more transparency is part of a wider effort over the years to provide more public data in the health sector. Various healthcare-related business dealings and ownership data regarding Medicare Skilled Nursing Facilities were previously provided by CMS as was similar information on hospitals. is an important resource that beneficiaries can access to find out information about hospice facilities, such as their addresses, detailed information about its owners, the organization’s name, National Provider Identifier (NPI), CMS Certification Number (CCN), mergers, and more.

The goal is to provide quarterly updates and provide patients, researchers, and organizations more access to who is providing care. Ultimately, this can help mitigate the risk of hospice abuse. A pressing issue nationwide but is also affecting some regions more than others.

Arizona, California, Nevada, and Texas Are of Particular Interest to CMS

Hospice Medicare fraud cases affect everyone but not equally. Residents of Arizona, California, Nevada, and Texas are at a higher risk of running into issues with a variety of fraudulent concerns under the microscope of CMS:

  • With the exception of Nevada (#33), all of the other states CMS is highlighting, Arizona (#13), California (#1), and Texas (#3), fall within the top 15 populations aged 65 years and older by state.
  • Today, there are more than 6,000 hospice locations throughout the U.S., marking a notable increase from the 4,700 facilities in 2018. Furthermore, the states mentioned above are all experiencing rapid growth.

Some of this is because of the general population of each state, but nevertheless, these trends are disturbing. So much so, California put into effect new regulations and even a moratorium for new hospice licenses to fight fraud.

In Texas, exposing hospice fraud made headlines after the Merida Group misdiagnosing patients with Alzheimer’s and other forms of dementia to enroll them made the news. Going as far as to hire Medical Director Jesus Virlar-Cadena and provide chaplains for families, the higher-ups would go on to enjoy several kickbacks and luxury experiences as a result. Now, leadership is either dead, serving significant time in prison, and some are paying hefty fines.

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Problems Reach Beyond “Hotspots”

Deceiving families into false diagnoses and other forms of hospice fraud are major problems in the states CMS is paying extra attention to, but it’s a bit deeper than just a few regions. The HHS Office of the Inspector General (OIG) released its own report on the problem, which would lead to penalties, investigations, and more. Here’s what the OIG found:

  • Facilities are often unable or unwilling to provide adequate medication to patients. This can lead to suffering and pain for those enrolled.
  • Communication is an issue as many facilities aren’t informing families as much as they should.
  • Fraud is a growing issue and this is in part due to the current payment system which incentivizes facilities to enroll patients with fewer needs.

Exposing additional issues, the OIG further highlights issues with hospice fraud and abuse. Some notable examples did include healthcare workers from California, but also included:

  • A hospice owner in Mississippi trying to enroll patients not eligible for such care.
  • Improper billing practices from a chain in Minnesota.
  • Various incidents involving kickbacks, misinformation to recruit patients, etc.

Medicare Care Choices Model (MCCM) Could Help the Future of Hospice

The Affordable Care Act put many different healthcare initiatives into place, including the Medicare Care Choices Model (MCCM). Its purpose was to provide Medicare beneficiaries the opportunity to receive curative treatment while also using hospice benefits.

Even if you are a Medicare beneficiary, qualifying for hospice coverage means you need to receive a diagnosis that gives you a life expectancy of six months or less. Typically, you must forgo curative care if you do choose hospice, but MCCM is aiming to change this.

The model was in operation between 2016 and was set to end on December 31, 2020, but MCCM would end up receiving an extension until December 31, 2021. Data from this time period is being assessed presently as CMS continues to evolve its relationship with hospice benefits.

At the CMS Innovation Center, new ideas and experiments give way through the use of various models. Most last around 4 to 7 years, which is why the MCCM is so important. It fits perfectly into the typical time period and is now available to use for further implementation.

Completing the model is the first step of CMS taking its lessons and not only creating future models for further learning, but also assessing the next decade of care, improving along the way.

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The Hospice Carve-In Pilot Program

Original Medicare provides hospice coverage and has since 1983, but not much has changed to this underutilized health benefit throughout all these decades. Now that the MCCM is complete, and CMS is focusing on reducing hospice fraud and abuse, a new program is under way.

Nicknamed the “Hospice Carve-In Pilot Program,” private insurance carriers are becoming more involved. This allows more flexibility for costs and is expanding access for patients. Thousands have enrolled since its inception in 2021 and many believe this could be the future of hospice in America.

While the program was set to end in 2024, it continues to impress CMS so far. So much so, there are now talks of expanding the Hospice Carve-In Pilot Program through 2030.

Traditionally, Medicare pays hospice facilities every day a beneficiary is there, however, this includes days in which no care is necessary. The policy was in place because when it first came out, hospice patients typically had cancer and would die in a few months.

But there are many different reasons to need hospice care today. This means, frankly, people are living longer while in hospice and it’s more expensive to maintain. The hope is that are reforming the way Medicare pays facilities and addressing patients that require longer stays, CMS will mitigate costs and fraud.

Finding Solutions to Stifle Fraud and Improve Medicare Hospice Benefits

CMS finding a single solution to help limit hospice fraud is unlikely, but there are several initiatives showing promise. Adopting some or all of these reforms could provide a viable plan for moving forward that helps limit costs, discourage fraud and abuse, ultimately protecting patients and their families.

Hospice care used to be a nonprofit driven industry, but this isn’t the case today. All of this comes as studies show nonprofits often provide better care for patients. However, for-profit entities purchase nonprofits and create large hospice chains with hundreds of facilities.

Furthermore, there are loopholes for-profit entities to use to generate more money at the expense of patients. While legal, it’s clearly a moral issue and a costly practice for Medicare. The loopholes can incentivize private equity firms to buyout hospice facilities, a practice which took centerstage in 2020 and 2021. Compounding the issue, private firms have investors and are looking for even more loopholes to maximize returns.

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This is where fraud thrives because the need to improve returns can become unsustainable or simply more difficult through proper methods. Practices such as hiring inadequately qualified staff, providing less care, and enrolling patients not eligible for hospice care are common.

For these reasons, CMS conducting more fact checking efforts is a positive step forward. The current environment is simply too hospitable for entities to take advantage of, leading to hospice fraud and abuse. However, possible solutions are available:

  • Better enforcement of Medicare guidelines currently in place. This includes conducting more due diligence before accepting hospice facilities into Medicare.
  • More involvement from both the Federal Trade Commission (FTC) and the U.S. Department of Labor (DOL) is necessary to review mergers.
  • Closing the loopholes bad actors are using will help save money and provide better care to patients.
  • The feasibility of using the public sector may be difficult but it’s an important option to consider when and where it makes sense.
  • Nonprofits provide better care, can often manage costs more efficiently, and are less likely to discharge a patient before they pass. Encouraging these entities will help Medicare and patients.

Final Rules and Immediate Solutions for Hospice Fraud in 2024

Some of the suggestions and processes CMS and other entities are looking into won’t be around for a few years. But in 2024, even more change is coming. Final Rules are already in place and will continue to help CMS. There are new ones, however, that will specifically affect hospice facilities in a more immediate fashion.

Remember, CMS is already ramping up its inspections and looking to take more of a hardline against Medicare hospice fraud and abuse by pulling licenses of facilities that aren’t legitimate.

For example, providers and suppliers must submit enrollment forms, primarily Form CMS-855 (OMB Control No. 0938-0685), to the Medicare Administrative Contractor (MAC) they are assigned to. This process allows MACs to screen operations and helps limit Medicare hospice fraud and abuse. Physicians who have Medicare beneficiaries also need to either opt-out or enroll in Medicare before receiving payment from the federal government.

New Final Rules coming to FY 2024 are also going to improve the wages for hospice workers. This varies by location and how busy each facility is. CMS is basing the increase on FY 2022 data, keeping with previous methods of calculating pay rates, using the latest available information. Hospice facilities are also receiving 4%-point reductions for the market basket update instead of 2% if CMS reporting requirements aren’t met.

Each year, CMS also creates a cap on the amount of money hospice facilities can receive. This helps keep costs down and avoid fraudulent charges. For FY 2024, CMS is setting the cap at $33,396.55.

Though CMS implementing these rules and recommitting to enforce previous guidelines can’t change the past, it’s inspiring for the future. Nobody should have to worry about someone taking advantage of them when they are dying. CMS’s dedication to stopping hospice fraud is good for the program, taxpayers, and families across the United States.

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  2. For the First Time, HHS Is Making Ownership Data for All Medicare-Certified Hospice and Home Health Agencies Publicly Available, CMS. Accessed November 2023.
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  6. Owner of Texas Chain of Hospice Companies Sentenced for $150 Million Health Care Fraud and Money Laundering Scheme, DOJ. Accessed November 2023.
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  9. Completed Models Contribute to Health System Transformation, CMS. Accessed November 2023.
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