Hospice Audit and Investigative Actions are Expected to Rise in 2024

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(November 20, 2023): Medicare, Medicaid, and most private insurance plans cover hospice care and related services. To be eligible for hospice care,[1] a patient must be certified as terminally ill and have a life expectancy of six months or less.  In recent years, the hospice industry has exponentially grown, and the number of Federal, State and Special Investigative Unit (SIU) audits and investigations have similarly increased. Private equity firms have entered the industry—now estimated at 16% of all hospice providers nationwide—and have capitalized on dementia patient long-term care, the proportion of entities from nonprofit to for-profit. [2] As the Baby Boomer generation continues aging into Medicare and Medicaid coverage, the relevance of hospice care will only increase. In Fiscal Year (FY) 2023, hospice payments increased by 3.8% (an estimated $825 million over FY 2022).[3] As the industry grows, payor plans have established more stringent screening protocols and implemented intensive auditing programs to help eliminate fraud and abuse. In this article, we will outline the current hospice audit landscape and examine recent updates to integrity programs dealing with hospice care.  We will also lay out a few recommendations for avoiding a hospice audit in 2024.

I.   Overview of the Administrative Hospice Audit Landscape:

As many of you have unfortunately learned, there are a number of Federal and State entities currently conducting audits and medical reviews of hospice claims. Depending on your participation status, your agency may be subjected to a hospice audit by a variety of program integrity contractors tasked with conducting medical reviews of Medicare and Medicaid hospice claims, State law enforcement agencies focusing on Medicaid claims, and Special Investigative Units (SIUs) responsible for auditing hospice claims submitted to private payors, Medicare Advantage and Medicaid Managed Care plans.  In this section, we will limit our discussion to hospice audit initiatives focused on traditional Medicare and Medicaid claims.

A. Comprehensive Error Rate Testing (CERT) Audits of Hospice Claims.

Pursuant to the Improper Payments Information Act of 2002,[5] CMS is required to estimate the improper Medicare fee-for-service payments made to health care providers each year. To accomplish this, CMS has adopted the Comprehensive Error Rate Testing (CERT) program to estimate the error rate.

The most recent CERT audit report[6] examining hospice claims was released in December 2022.  It looked at both hospital and non-hospital-based hospice services.  At that time, the projected improper payment amount for hospice claims submitted from July 1, 2020, to June 30, 2021, was $2.9 billion resulting in an improper payment rate of 12.0 percent. The primary reasons for denial identified by the review are set out in the chart below.

Primary Reasons for Denial of Hospice Claims

Root Cause Description Error Category Sample Claim Amount
Physician's certification / Recertification - Inadequate Insufficient Documentation 34
Documentation does not support medical necessity for the service or item billed Medical Necessity 31
Service insensity add on (SIA) services documentation - Missing Insufficient Documentation 18
Beneficiery election form - Inadequate Insufficient Documentation 11
Physician narrative as part of the certification / recertification supporting terminal illness - Inadequate Insufficient Documentation 10
Service intensity add-on (SIA) services documentation - Indadequate Insufficient Documentation 9
Face to face documentation - Inadequate Insufficient Documentation 7
Physician's certification / recertification - Missing Insufficient Documentation 7
Face to face documentation - Missing Insufficient Documentation 6
Physician's certification was signed and dated after the claim was submitted Other 6

Historically, the number of hospice agency providers selected for CERT audit each year has been relatively small. Nevertheless, the improper payment rate identified has been cited as a basis for hospice audits by other CMS program integrity contractors.

B. Supplemental Medical Review Contractor (SMRC) Audits of Hospice Claims.

Noridian Healthcare Solutions (Noridian) is the current Supplemental Medical Review Contractor (SMRC) selected by CMS to conduct nationwide medical reviews of certain Medicare and Medicaid claims that have been identified as problematic and / or subject to improper billing.  The specific types of claims to be audited by the SMRC are selected by CMS.  Notably, hospice claims are one of the areas being targeted by the SMRC in 2023 and continuing into 2024.

Noridian is now conducting post-payment reviews of Medicare Part A hospice claims billed during the period January 1, 2021, through December 31, 2021. Should your agency receive an Additional Documentation Request (ADR) seeking copies of the supporting documentation for specific hospice claims now being reviewed, we recommend that you contact your health lawyer for assistance.  It isn’t merely a matter of producing copies of the medical records associated with a particular episode of care.  Many times, additional documentation (from outside the period under audit) is needed to support the medical necessity of the care.  Should you have a bad showing in connection with the SMRC review, it is highly likely that your agency’s hospice claims will receive a subsequent post-payment audit request from the Unified Program Integrity Program (UPIC) assigned to your region.  Moreover, your Hospice Medicare Administrative Contractor (MAC) may place your claims on prepayment review or even initiate a more severe administrative action (such as revocation or suspension).

C. Unified Program Integrity Contractor (UPIC) Audits of Hospice Claims.

Although administrative in nature, a UPIC hospice audit is serious business and can result in civil and criminal referrals to law enforcement.[7] Unlike their predecessors,[8] UPICs are authorized to audit both Medicare and Medicaid hospice claims.  Perhaps most importantly, the goal of the UPIC program is to identify and report evidence of fraud to law enforcement authorities.  As CMS expressly states in its Medicare Program Integrity Manual, Section 4.2:

"The primary goal of the UPIC is to identify cases of suspected fraud, waste and abuse, develop them thoroughly and in a timely manner, and take immediate action to ensure that Medicare Trust Fund monies are not inappropriately paid. Payment suspension and denial of payments and the recoupment of overpayments are examples of the actions that may be taken in cases of suspected fraud. Once such actions are taken, cases where there is potential fraud are referred to LE [Law Enforcement] for consideration and initiation of criminal or civil prosecution, civil monetary penalties (CMP), or administrative sanction actions[9]

Post-COVID, UPIC audit and administrative enforcement activity has steadily increased.  Possible administrative actions that a UPIC might take (or recommend to CMS that it be taken) with respect to your hospice agency include:

  • Unannounced site visits.
  • Prepayment review.
  • Postpayment audit.
  • Revocation of a hospice agency’s billing privileges.
  • Suspension of payments.
  • Referral to law enforcement for criminal investigation and prosecution.

If your agency is facing a UPIC hospice audit, we strongly recommend that you contact an experienced healthcare attorney before you turn over the medical records and claims materials requested.  Your attorney can usually contact the UPIC and obtain an extension of time for you to assemble the records at issue and review them for completeness.

If documents are missing, try and locate a copy of the information that is needed in your records.  For instance, is a complete copy of the referring physician’s notes in the files?  Are supporting hospital records in the file? If any information appears to be incorrect, take care when making a correction. NEVER backdate a document. To the extent that amendments, corrections or delayed entries must be made in a hospice record, it is essential that you comply with the requirements set out in Chapter 3, Section 3.3.2.5 of the Medicare Program Integrity Manual.

II.  Criminal and Civil Prosecutions of Hospice Related Violations:

This has been a rough year for hospice agencies.  A wide variety of criminal prosecutions have been brought by Department of Justice (DOJ) prosecutors against hospice managers and staff and this focus on hospice fraud is expected to continue in 2024.  Earlier this year, Deputy Assistant Attorney General Lisa H. Miller delivered remarks at the American Bar Association’s 33rd Annual National Institute on Health Care Fraud.  As she noted in her speech:

“. . . the Health Care Fraud Unit and its partners are prioritizing the investigation and prosecution of schemes that affect vulnerable populations, including, but by no means limited to, sober homes fraud, illegal prescribing of controlled substances,and hospice fraud.” (Emphasis added).

Several recent cases brought by the government against hospices and individuals accused of hospice fraud are outlined below:

A. Criminal Prosecutions.

California. The Administrator of a Southern California hospice was sentenced to 30 months in prison for his role in a multi-million-dollar hospice fraud scheme. As part of his guilty plea, the defendant admitted that while acting as Administrator he and others paid illegal kickbacks to patient recruiters for the referral of hospice beneficiaries to the hospice agency. Further, when clinical staff at the hospice determined that beneficiary referrals did not qualify to receive hospice services, he overruled those determinations and nonetheless caused the beneficiaries to be put on hospice service.

Texas. The Operations Manager of a chain of hospice and home health agencies throughout the Rio Grande Valley was sentenced to 27 months in prison and ordered to pay $4,700,000 in restitution for his role in a conspiracy to falsely convince thousands of patients with long-term incurable diseases they had less than six months to live in order to enroll the patients in hospice programs for which they were otherwise unqualified, thereby increasing revenue to the company. At a trial of his co-defendants, witnesses testified that the vast majority of hospice and home health patients at the group of agencies did not qualify for services.  The government alleged that: (1) physicians were bribed with illegal kickbacks, under the pretense of medical directorships, (2) physicians falsely certified unqualified patients for services, and (3) employees were instructed to falsify medical records, making non-terminal patients appear to be terminally ill and declining. 

As these cases reflect, DOJ prosecutors are actively pursuing individual found to be involved in the commission of fraud.  In recent years, the personal liability of all health care workers, including those working as managers, supervisors, coders, billers has greatly increased. You cannot expect to avoid personal liability by hiding behind your hospice’s settlement with DOJ and / or the OIG.

B. Civil False Claims Act Allegations.

Utah. Earlier this year, the DOJ alleged that from October 2018 through September 2021, a Utah hospice billed for services that were not medically necessary, because the patients’ records lacked documentation of a terminal illness to qualify for services. While the hospice denied the allegations, it agreed to pay a little more than $1 million to resolve the False Claims Act allegations alleged by the government.

III.  Recent Hospice Enforcement Initiatives:

In response to increasing rates of abuse Federal and State enforcement efforts are once again intensifying. As of May 2023, CMS reported site visits of over 7,000 hospices, noting that nearly 400 of these sites warranted further administrative action post-visit. [11]Media findings and CMS investigations are finding more and more that hospices nationwide defraud patients and the government in the following common ways:

  • Certifying patients for hospice care who are not terminally ill.
  • Participating in Identity theft of patients and physicians not affiliated with the hospice(s) in question.
  • Billing for services not provided to patients.
  • “Churn and Burn” schemes, in which a hospice is opened and fraudulently bills until receiving an audit notification, at which time it shuts down and retains the reimbursements previously obtained and begins the process again with a new Medicare billing number.[12]

In response to these schemes, CMS published a summary of enforcement effort updates[13] in August, outlining the integrity programs updated in recent final rules and press releases. The following are the most important for hospice providers to remain aware of:

A. Enhanced Oversight in “Problem” States.

CMS has implemented a period of enhanced oversight in California, Texas, Arizona, and Nevada. This is due to these states’ histories of fraudulent hospice agencies and the quickly growing number of hospices within the past few years.[14]According to the related fact sheet, any hospices considered new[15] began the provisional period July 23, 2023, on a rolling basis that will last anywhere from one month to a year. Continued review may occur after that period.

Additionally, CMS allows and encourages review of patients’ first 90 days of hospice care claims. This is a pilot program not limited to the problem states, though it initially began in those states.

B. Proposed Regulatory Changes.

In its proposed rule for Calendar Year 2024 (CMS–1780–P), CMS laid out several regulatory adjustments to enrollment provisions targeting hospice care. “We believe these provisions would help protect hospice beneficiaries by more closely scrutinizing hospice owners and ensuring that they do not pose program integrity risks.”[16] These provisions include:

  • Subjecting hospice providers to the highest level of enrollment application screening, including obtaining fingerprints of all 5% or greater owners of said hospice agency;
  • Expanding Home Health Agency majority ownership change provisions (42 CFR §424.550(b)) to include hospice changes in majority ownership; and
  • Adjusting the definition of “Managing Employee” as seen in 42 CFR §424.502 to include the administrator and medical director of any hospice agency.

C. Hospice Payment Rate and Quality Reporting.

In late July 2023, CMS released its fact sheet regarding updates to Medicare hospice payments and FY 2024’s aggregate cap amount. This rule also codified the Hospice Quality Reporting Program (“HQRP”). As discussed below, this rule also approved updates to the hospice special focus program as required in the Consolidations Appropriations Act of 2021 (CAA).

“The FY 2024 hospice payment update is 3.1% (an estimated increase of $780 million in payments from FY 2023). This results from the 3.3% inpatient hospital market basket percentage increase reduced by a 0.2 percentage point productivity adjustment.”[17]

In other words, hospice spending is still expected to increase in the coming fiscal year. However, Section 1814(i)(5)(A)(i) of the CAA was also amended to adjust the payment reduction for failing to meet hospice quality reporting requirements. Failing to meet said requirements will result in a payment reduction of 4%, and failing to report the quality data would decrease payment by 0.9%. Additionally, the HQRP has been updated in this final rule to work with the special focus program as discussed below.

D. Hospice Special Focus Program.

Included in the proposed regulation changes for 2024—and approved in the July Final Rule—is the implementation of a special focus program (SFP) to increase oversight for poorly performing hospices. A Technical Expert Panel (TEP) in CY 2022 identified the best indicators of poor performance in hospices to determine which agencies required additional oversight.[18]Based on those findings, CMS is proposing the following methodology for the hospice SFP:

  • Use TEP recommended data sources to gather and analyze hospice data to identify poorly performing agencies.
  • Rank hospices using an aggregate scoring method to target the top 10% highest performing hospices for participation in the SFP.
  • Make this information all publicly available on the CMS website, and update and reevaluate annually.
  • While participating in the SFP, each hospice should be surveyed “not less than once every six months” over an 18-month time period.
  • Hospices must have no Condition-Level Deficiencies [CLD], or have returned to substantial compliance with all requirements, during the 18-month timeframe to complete the SFP successfully.”[19] Failure to do any of the aforementioned results in consideration for termination from the Medicare program.

IV.   Reducing Your Risk of a Hospice Audit:

The heightened scrutiny of the government bearing down upon hospice care providers may seem daunting. However, there are steps available to ensure your agency does not fall under investigation. The following are crucial considerations for any hospice provider to consider:

  • Maintain documentation. When it comes to audits and surveys, having a comprehensive account of all the agency’s administrative action, medical necessity documentation, billing, coding, and patient records can help remove suspicion from a practice.
  • Compliance is key. In a similar vein, performing self-evaluations of compliance with all relevant statutory and regulatory requirements is a necessity. This may entail hiring a qualified compliance officer or outside consultant to guarantee all aspects of the hospice care remain compliant as things change year by year.
  • Review referrals and other business relationships. Though not discussed at length in this article, one of the first things examined in an investigation will be their relationships with the hospice agency. You want to maintain compliant relationships that will not reflect negatively on the practice. Legal counsel with experience and qualifications in anti-kickback and Stark law will likely be most helpful in this regard.

If your hospice agency is not currently under investigation, now is the time to address any deficiencies you may find. If an audit has begun, we recommend that you engage experienced legal counsel to represent you.

ashley Morgan-seniorCounsel150x150-lilesparker

Need help?  Give us a call.  A number of our health lawyers are also Certified Professional Coders (CPCs) and / or Certified Medical Reimbursement Specialists (CMRSs).  Our attorneys have extensive experience representing hospice agencies in connection with UPIC and other program integrity audits.  Additionally, several of our attorneys have held significant positions as Federal prosecutors with the U.S. Department of Justice.  To the extent that a civil or criminal investigation has been initiated by the government, our attorneys will diligently work to attempt to obtain a favorable outcome in your case. For a free consultation, please give us a call: 1 (800) 475-1906.