(May 12, 2022): Hospice agencies are again the focus of both state and federal investigators and prosecutors around the country. The number of hospice audits and investigations at both the state and federal levels have risen in 2022. This isn’t surprising given the ever-expanding level of beneficiary participation and cost of Medicare’s hospice benefit program. From 2010 to 2019, the percentage of Medicare decedents increased from 44% to 52% in 2019. The number of hospice providers has also dramatically increased by 38% during this period. In 2019, 4,840 hospice providers furnished care and Medicare payments totaled $20.9 billion. This article examines the various hospice audits, investigations, prosecutions, and initiatives that have taken place so far in 2022.
I. State Hospice Audit and Criminal Enforcement Efforts:
As with Medicare, Medicaid fraud, waste and abuse are major governmental concerns. In recent years, Medicaid Fraud Control Units (MFCUs) and various state audit organizations have expanded their enforcement efforts. State auditors and investigators are working closely with federal task forces investigating Medicare and Medicaid hospice fraud schemes around the country. While state authorities remain primarily responsible for combating fraud in the Medicaid program, federal and state efforts at fighting Medicaid fraud have become closely coordinated. The Department of Health and Human Services (HHS), Centers for Medicare and Medicaid Services (CMS) and the Office of Inspector General (OIG) are actively providing audit support, technical assistance, and investigative coordination to the states’ fraud-fighting efforts. For example, in February 2022, the California Department of Justice’s Division of Medi-Cal Fraud and Elder Abuse (DMFEA) arrested 14 individuals associated with two hospice agencies for allegedly stealing more than $4.2 million from the Medicare and Medi-Cal programs. State prosecutors have alleged that these hospices:
- Enrolled patients into hospice who were not terminally ill; or
- Enrolled patients into hospice care, without the patients’ knowledge; or
- Enrolled patients into hospice care despite the fact that the patients didn’t have an understanding of what hospice entails.
Depending on the individual’s specific conduct, prosecutors have charged the defendants in this case with a variety of violations, ranging from conspiracy to commit insurance fraud to money laundering and identity theft.
As state hospice audit and efforts expand, some states have identified significant problems. For example, California’s state audit group recently advised the state’s governor and legislators that "weak controls" have created an opportunity for hospice agencies to commit large-scale fraud and abuse, at the expense of both the Medicare and Medi-Cal programs. Fraud indicators identified by California State Auditors when reviewing hospice agencies in Los Angeles County include, but are not limited to the following:
- Unwarranted rapid increase in hospice agencies. There has been a rapid increase in the number of hospice agencies with no clear correlation to increased need. More specifically, auditors found that there has been a 1500% increase in the number of hospices in Los Angeles County between 2010 and 2021. During this same time period, there has only been an increase in the aged population of approximately 40%.
- Excessive geographic clustering of hospices. State Auditors further found that “dozens of separately licensed agencies” have sometimes been identified as located in the same building. For example, State Auditors found that 112 licensed hospice agencies were listed as located at a single building address in Van Nuys. Many of these agencies were not listed in the building directors or had simple “paper signs” for the hospice taped to their door. One hospice agency was included on a door with 13 different suite numbers.
- Excessive lengths of stay. State Auditors found that individual patient lengths of stay were unusually long. This was cited as a possible indication that an agency is admitting patients who do not need hospice care or is admitting them sooner than they require.
- High number of discharges from hospice. State Auditors found that an “abnormally” high number of still-living patients were being discharged from Los Angeles County hospices. State Auditors further noted that nationally, live discharges from hospice are infrequent (estimated at 6%). Nevertheless, the rate of live discharges from hospice in Los Angeles County ranged from 31% (in Burbank) to 51% (in Van Nuys). The auditors suggested that these high rates of live discharge could be an indication that patients admitted for hospice did not meet admission criteria and may not have been terminally ill.
- Identity theft. State Auditors expressed their concerns that some hospice agencies may be using the stolen identities of medical personnel. When assessing this concern, State Auditors found that a number of medical professionals reported that hospice agencies were using their personal information without their permission. Additionally, when State Auditors reviewed wage data, in a number of cases they found that the individuals did not receive wages from the hospice agency for which they allegedly worked. Regulators were therefore concerned that the hospice agencies may be illegally using the individual’s personal information and licensure number to engage in fraudulent billing practices.
II. Federal Hospice Audit and Criminal Enforcement Efforts:
- Hospice beneficiary eligibility. The OIG’s Office of Audit Services has performed several recent audits examining whether hospice beneficiaries qualify to receive hospice care. As part of this most recent audit, the OIG intends to perform a nationwide review of hospice beneficiaries that were not an inpatient in a hospital and did not have an emergency room visit prior to their admission to hospice. In prior hospice audits examining beneficiary eligibility and medical necessity, the OIG has pulled random samples of claims and sent the associated medical records to an Independent Medical Review Contractor (IMRC) to determine whether the hospice services billed met Medicare’s coverage, medical necessity and coding requirements.
- Joint work with state agencies. To strengthen state Medicaid program integrity efforts, the OIG is working closely with state auditors, regulators and prosecutors to address improper payments in fee-for-service programs such as hospice, home health and durable medical equipment.
- Medicare payments made outside of the hospice benefit. As you will recall, when a hospice patient agrees to be admitted to hospice, he or she waives all rights to Medicare payments for any services that are related to the treatment of the terminal condition for which hospice care was elected. Medicare will continue to pay for covered services that are unrelated to a patient’s terminal illness. Unfortunately, the OIG has repeatedly found that services which should have been covered under the per diem payments made to the responsible hospice has been paid outside of the hospice benefit. The OIG intends to try and identify specific categories of services that are especially vulnerable to this problem.
Federal hospice fraud enforcement efforts have expanded in 2022. Earlier this year, In March 2022, federal prosecutors charged the owner of two hospice agencies, a physician involved in the certification of medical necessity, and a marketer working for the hospices, with multiple counts of health care fraud. The owner of the California-based hospices (who remains at large in the Philippines) and the marketer have also been charged with violations of the Anti-Kickback Statute. The government alleges that the physician provided fraudulent certifications for a number of patients, some of whom he never saw. The physician’s conduct has been linked to approximately $5.1 million in fraudulent claims. The government further claims that the hospices at issue billed Medicare and Medi-Cal for hospice services rendered to patients who were not terminally ill and / or submitted bills for hospice services that were not provided.
Notably, federal auditors and investigators are not limiting their review of hospice agencies to only the services billed to Medicare and Medicaid. In yet another California hospice case, the owner of a North Hollywood hospice has pleaded guilty in March 2022 to three counts of theft of government property in connection with his alleged theft of COVID-19 funds. The government contends that the defendant applied for COVID-19 funding out of the “Coronavirus Aid, Relief, and Economic Security (CARES) Act Provider Relief Fund.” As part of his plea, the defendant admitted that he submitted, or caused to be submitted, five fraudulent Economic Injury Disaster Loan (EIDL) applications to the Small Business Administration (SBA) on behalf of his hospice (which was never operational during the pandemic) and four other entities that he controlled. The defendant received more than $89,000 under the CARES Act and was loaned approximately $428,000 under the EIDL program. He was not entitled to any of these funds. The defendant currently faces up to 10 years in prison for each of the three counts of theft of government property.
III. Civil Fraud Cases Brought Against Hospice Agencies:
Even though COVID-19 significantly slowed the workload of many outpatient health care providers in 2021, civil matters and cases against hospice agencies have continued throughout the pandemic. As you will recall, the False Claims Act is the primary civil enforcement tool relied on by the government to recover losses attributed to health care fraud against federal health benefits programs. Under the False Claims Act, any person who: (A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; or (B) knowingly makes, uses, or causes to be made or used a false record or statement material to a false or fraudulent claim, or (C) conspires to violate the False Claims Act, may be liable to pay significant civil monetary penalties and treble damages to the government.
Last month, after securing criminal convictions against both the Owner and the Administrator of a Texas-based chain of hospice and home health agencies, the government partially intervened in the underlying False Claims Act whistleblower suit, naming the Owner and the Administrator of the chain as defendants named in the government’s Complaint in Partial Intervention. It is important to keep in mind that the False Claims Act explicitly contemplates the United States choosing to pursue civil and criminal remedies based on the same facts. Moreover, when bringing a case under the False Claims Act:
“... a final judgment rendered in favor of the United States in any criminal proceeding charging fraud or false statements ... shall estop the defendant from denying the essential elements of the offense in any action which involves the same transaction as in the criminal proceeding ...” 
In other words, the government does not have to re-litigate the issue of liability. In the Complaint in Partial Intervention that has been filed, the government has asked the district court to enter judgment against the defendants and award penalties and damages under the False Claims Act. The government’s approach in this case illustrates the fact that even after a criminal conviction has been achieved, depending on the facts and the charges in the underlying criminal case, federal prosecutors will not hesitate to also seek additional penalties and damages under the False Claims Act.
IV. Reducing the Level of Risk in Your Hospice Agency:
As reflected above, hospice agencies (and the individuals associated with them) are under law enforcement’s microscope. To reduce your hospice agency’s level of regulatory risk, it is essential that you ensure that medical necessity, documentation, coding and billing practices fully comply with applicable statutory and regulatory requirements. It is equally important for you to carefully examine your marketing and business practices. In the event of an investigation, one of the first assessments conducted by the federal agents will be to determine how referrals to the hospice are generated. In other words, “Who does the hospice get referrals from?” Similarly, law enforcement will be examining the hospice’s other business relationships and will reviewing where the hospice sends Medicare and Medicaid referrals for services that fall outside of the hospice benefit.
Is your hospice agency being audited or investigated? If not, now is the time to get ahead of any problems that may be present and initiate corrective action to address any deficiencies that have been noted. To the extent that a hospice audit has been initiated, we recommend that you engage experienced legal counsel to represent you. Liles Parker attorneys have extensive experience and expertise representing hospice agencies around the country in audits and investigations. Many of our health law attorneys are Certified Professional Coders (CDCs) and / or Certified Medical Reimbursement Specialists (CMRSs). Questions? Give us a call for a free consultation.
Robert W. Liles, Esq. is Managing Partner at the health law firm, Liles Parker PLLC. With offices in Washington, DC, Houston, TX, and Baton Rouge, LA, our attorneys represent hospice agencies and other health care providers around the country in connection with claims audits and investigations. Should you have any questions, please call us for a free consultation. Robert can be reached at: 1 (800) 475-1906.
-  Medpac, Hospice Services Payment System, Revised November 2021.
-  Public letter from the Acting California State Auditor to the Governor of California, et al. (March 29, 2022).
-  42 C.F.R. §418.24(d).
-  For a more detailed discussion of the False Claims Act, please see our article titled "False Claims Act Matters and Cases – An Overview."
-  See U.S. ex rel. Jane Doe and Jane Roe v. Rodney Ysa Mesquias and Henry Wayne McInnis. (S.D Tex. Civil No. 2:15-cv-208)(Filed May 8, 2015). This case was originally filed in May 2015 by two whistleblowers (both of whom were former employees) against a large Texas-based chain of hospice and home health agencies. The civil whistleblower Complaint triggered a criminal investigation and the qui tam case remained under seal while the criminal case was pending. Over the next few years, a number of individuals associated with the hospice chain were criminally prosecuted and convicted. In December 2020, the Owner of the hospice chain was sentenced to 20 years in prison. The Administrator of the hospice chain was sentenced to 15 years in prison in February 2020. The government filed a Complaint in Partial Intervention in April 2022.
-  See 31 U.S.C. §§ 3731(e).
-  Since both the criminal and civil cases are premised on the same facts and transactions, damages under the False Claims Act can be calculated based on the amount of restitution ordered in the criminal case under 18 U.S.C. § 3664. See United States v. ex rel. Bachman v. Healthcare Liaison Professionals, Inc., 395 F.Supp.3d 785, 789-790 (N.D. Tex. 2019)(discussing the use of criminal restitution to determine False Claims Act damages).
-  See United States v. ex rel. Bachman v. Healthcare Liaison Professionals, Inc., 395 F.Supp.3d 785, 789-790 (N.D. Tex. 2019) (discussing the use of criminal restitution to determine FCA damages).