Agencies Around the Country are Facing Expanded Administrative Medicare Hospice Audits and Investigations

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Medicare Hospice Claims are Being Audited Around the Country - Liles Parker

(November 5, 2024): It’s been a frustrating year for many Medicare hospice providers around the country. Throughout 2024, hospice agencies have been under the focused scrutiny of both program integrity[1] and administrative claims processing[2] contractors working for the Department of Health and Human Services (HHS), Centers for Medicare and Medicaid Services (CMS). Unfortunately, the government’s interest in reviewing Medicare hospice claims hasn’t been restricted to merely administrative audits. Federal and state law enforcement agencies have actively investigated allegations of impropriety levied at hospice agencies, their employees, and referral sources. Importantly, Medicare hospice audits and the accompanying legal risks are expected to continue throughout 2025. In this article, we examine the various claims audit and regulatory risks currently faced by hospice agencies participating in Medicare, Medicaid, and other Federal health benefits programs.

I. Medicare Hospice Audit Programs Currently in Place:

For many years, hospice agencies have been under the microscope of CMS and its program integrity contractors. Several of the most recent audit initiatives arose out of the 2021 Consolidated Appropriations Act,[3] including Medicare’s hospice Special Focus Program (SFP). Hospices are also subject to review under ongoing Medicare hospice audit initiatives. These programs include, but are not limited to, the Hospice Provisional Period of Enhanced Oversight (PPEO), Targeted Probe and Educate (TPE), and Comprehensive Error Rate Testing (CERT). Finally, Unified Program Integrity Contractors (UPICs) continue to perform program integrity audits of hospice claims. Each of these initiatives are discussed below.

Hospice Special Focus Program (SFP) Audits

Special Focus Program (SFP) audits have been designed to monitor hospices identified as “poor performers” based on selected quality indicators. Hospices selected for review under the SFP audit program are given additional oversight that is intended to enable performance improvement. Notably, the process for determining what constitutes poor hospice performance was not published in the Federal Register[4] until November 2023 and was not effective until January 1, 2024. In addition to covering the SFP program criteria, several other significant hospice program changes (unrelated to the SFP program) are also outlined in this Final Rule. These hospice program changes include, but are not limited to:

  • Under the Final Rule, the 36-month rule on change of ownership (typically applied to home health changes of ownership) is now being applied to hospice agencies.
  • The Final Rule states that hospice administrators and medical directors must now be disclosed as managing employees.
  • The Final Rule categorizes hospices as “high risk” providers for Medicare screening purposes. This places hospices in a heightened screening category and requires fingerprinting for individuals with 5% or greater ownership in the hospice.
  • The Medicare deactivation[5] period applicable to hospice agencies that can be imposed if the hospice has not billed Medicare for an extended period has been shortened. Under the Final Rule, hospices that do not bill Medicare for 6 months can now have their Medicare billing privileges deactivated. Before this change, the period of non-billing that could trigger deactivation was 12 months.

Risk Significance of SFP Audit Results. CMS selects poor-performing hospices for review and SFP audit based on the hospice’s (1) hospice survey results over the last three consecutive years, (2) Hospice Care Index (HCI) overall score based on Medicare claims data, and (3) the four Consumer Assessment of Healthcare Providers and Systems (CAHPS®) Hospice Survey Index measures most aligned with caregiver experience.[6] Hospice agencies that are unable to resolve the deficiencies that led to their review may be terminated from participation in the Medicare program. CMS also has the option of imposing one or more alternative enforcement remedies, in addition to placing the provider on a termination track.[7]

Hospice Provisional Period of Enhanced Oversight (PPEO) Audits

In July 2023, CMS announced[8] that the agency had received numerous reports of hospice fraud, waste, and abuse over the previous 12 months. During this period, CMS also noted that the number of enrolled hospices had greatly increased in Arizona, California, Nevada, and Texas, thereby raising serious concerns about market oversaturation. In response to these concerns, CMS started placing newly enrolling[9] hospice agencies in these states under a program of “enhanced oversight”. Since this program was initiated, hospices changing ownership have also been subjected to enhanced oversight. The primary reasons for denying hospice claims under the PPEO audit program include the following:

  • Documentation submitted does not support a prognosis of six months or less. (55% of total denials).
  • Physician narrative statement not present or not valid. (18% of total denials).
  • The hospice election statement does not meet statutory/regulatory requirements. (9% of total denials).
  • No certification for dates billed. (9% of total denials).
  • Hospice continuous care hours reduction. (9% of total denials).[10]

Risk Significance of PPEO Audit Results.From a practical standpoint, this enhanced oversight typically means that newly enrolled hospice agencies in Arizona, California, Nevada, and Texas should anticipate being on prepayment review for at least a year. It also will slow down payments and will significantly increase the administrative burden on new hospices. A poor showing while on prepayment review may result in the revocation of a hospice’s enrollment in the Medicare program.

Hospice Targeted Probe and Educate (TPE) Audits.

While it may seem like yesterday that TPE audits[11] first began, the program has now been active for more than a decade.[12] Historically, the initiative first arose out of the 2014-2015 Medicare Administrative Contractor (MAC) Probe and Educate medical review strategy which focused on hospital inpatient status cases.[13] These initial efforts produced favorable outcomes for educating providers and reduced improper payments. Initially expanded to include home health claims, the program was further expanded in 2017 to all Medicare Administrative Contractors (MACs). During COVID, the audit initiative was temporarily suspended and resumed in 2021. Not all hospice claims are subjected to TPE audit. As CGS Administrators, the HHH MAC for Jurisdiction 15 has noted, hospice providers are selected (1) based on aberrancies in billing data,OR (2) the provider was already on targeted review (such as prepayment review) and transitioned over to the TPE audit initiative based on error rate results, OROR (3) the provider’s error rate has triggered a TPE audit.[14] Deficiencies noted in TPE audits have included:

  • Eligibility for hospice services is not properly documented.
  • Missing face-to-face documentation.
  • Missing or incomplete certifications and/or recertifications.

Risk Significance of TPE Audit Results. TPE audits are serious business. If your hospice is subjected to a TPE audit and fails to achieve an acceptable level of performance, the MAC will refer the matter to CMS for additional possible action. At the very least, your hospice may be placed on 100% prepayment review. It is also likely that a referral to the appropriate UPIC will be made and a postpayment audit of your claims will be conducted. Even more serious adverse actions may be taken, including having your hospice placed on suspension. This effectively cuts off your Medicare payments until the suspension action can be resolved. Alternatively, CMS may revoke your hospice’s billing privileges.

Comprehensive Error Rate Testing (CERT) Audits of Hospice Claims

Under the Improper Payments Information Act of 2002,[15] CMS is required to estimate the improper Medicare fee-for-service payments made to healthcare 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 (encompassing 2023) covering hospice claims looked at both hospital and non-hospital-based hospice services. The projected improper payment amount for hospice services during the 2023 report period was $1.3 billion, resulting in an improper payment rate of 5.4%. Notably, this was down from an improper payment rate of 12.0% during the 2022 report period. The primary hospice claims errors resulting in improper payment have included:

  • Inadequate physician’s certification/recertification.
  • Inadequate beneficiary election form.
  • Physician certification was signed and dated after the claim was submitted.
  • Inadequate face-to-face documentation.
  • Missing face-to-face documentation.[16]

Risk Significance of CERT Audit Results. The number of hospice providers selected for CERT audits is relatively small. Nevertheless, if the audit identifies a significant claims error rate, follow-up administrative audits by other CMS contractors are a distinct possibility.

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

Noridian Healthcare Solutions (Noridian) currently serves as Medicare’s Supplemental Medical Review Contractor (SMRC). In its role as the SMRC, Noridian is tasked with conducting medical reviews of specific services and claims that CMS has identified as improperly billed. In recent years, Noridian has conducted reviews of General Inpatient Care level of care hospice services to determine whether the proper level of care was being billed. The contractor found that in several cases, the beneficiary was NOT suffering from uncontrolled pain and did not have unmanaged symptoms. While SMRC audits of hospice agencies have been infrequent during 2024, providers should be prepared for a resumption of SMRC audits in 2025. Common prior reasons for denial cited by the SMRC have included (1) lack of terminal prognosis, (2) no response to the documentation request, or (3) certification deficiencies.

Risk Significance of SMRC Audit Results. SMRC audits of hospice claims have been infrequent. Nevertheless, should a hospice provider do poorly in the audit, CMS may cite the negative results as the justification when placing a provider on suspension or proposing that the agency’s enrollment be revoked.

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

Although administrative, the primary purpose of Unified Program Integrity Contractors (UPICs) is to detect, deter, and prevent fraud, waste, and abuse in the Medicare and Medicaid programs. Each UPIC is responsible for handling Federal program integrity audits of both Medicare and Medicaid claims within a specific area of the country. Common problems identified by UPICs when auditing hospice claims have included:

  • Eligibility deficiencies. UPICs have identified instances where individuals have been improperly admitted to hospice when the beneficiary did not meet the criteria to qualify as terminally ill. (See 42 U.S.C. 1395d(a)).
  • Uninformed consent to elect the Medicare Hospice Benefit. There are significant consequences that will result if a beneficiary elects to receive hospice. A beneficiary’s election statement must include several elements. (See Medicare Benefit Policy Manual, Ch. 9, § 20).
  • Billing for a higher level of care than was medically necessary. Audits have often found that the level of hospice care provided was higher than was medically necessary. (See MBPM Ch.9, § 40).
  • Billing for hospice care provided by unqualified or unlicensed clinical personnel. All hospice personnel must be licensed and may only perform tasks within their scope of practice. (See 42 C.F.R. § 418.72).
  • Untimely or insufficient certifications and face-to-face encounters. UPICs have identified instances where the initial and/or subsequent certifications and/or face-to-face encounters are not timely or lack the requisite content to be valid. (See Medicare Benefit Policy Manual, Ch. 9, § 20).

Risk Significance of UPIC Audit Results. As set out in the Medicare Program Integrity Manual (MPIM), Ch.4, § 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". (Emphasis added).

UPICs are actively referring hospice providers to law enforcement for possible enforcement when a case appears to entail more than a mere overpayment. As UPICs continue to refer cases to law enforcement, it is more important than ever that hospices monitor their regulatory activities to better ensure compliance with applicable coverage, eligibility, medical necessity, documentation, coding, and billing requirements.

III. Hospice Audit Projects Conducted by the HHS, Office of Inspector General (OIG):

In recent years, the HHS OIG has ramped up its auditing of hospice agency claims around the country. Several recurring errors have been noted by the OIG. These include:

Hospice Eligibility Requirements Not Met.

As you will recall, to qualify for the Medicare hospice benefit, a Medicare beneficiary must be entitled to Medicare Part A and be certified[17] as being terminally ill.[18] The OIG has identified the following eligibility deficiencies when auditing hospice agency claims:

  • Clinical records do not support a terminal illness or prognosis. In one recent case, the OIG found that a number of the hospice records reviewed did not contain “sufficient clinical factors and descriptive notes to indicate that the associated beneficiary’s illness was terminal and progressing in a manner that a physician would have reasonably concluded that the beneficiary’s life expectancy was 6 months or less”.
  • Physician certification (or recertification) of terminal illness did not meet Medicare’s certification requirements. For example, the OIG has found that in some instances, physician certifications were missing. In other cases, the certification was not completed in a timely fashion.
  • Documentation of a proper face-to-face encounter was missing. The OIG has found that in some instances the medical record for the hospice beneficiary “did not contain evidence that the hospice physician or hospice nurse practitioner completed a face-to-face encounter”.

Hospice Services Not Properly Documented.

As OIG has repeatedly stated, under the Social Security Act, § 1815(a), no payments can be made under the Medicare program unless a provider has furnished the information necessary to determine the proper amount due in reimbursement for services rendered. The OIG has identified the following examples of documentation deficiencies when conducting hospice audits:

  • Claims for reimbursement of certain services were not documented. For example, in several instances, the OIG found that an agency was reimbursed for social work services ordered by a physician and included in the patient’s plan of care. However, nothing documented in the record supported that the social work services were provided. While these undocumented services did not impact Medicare’s reimbursement (they would have been included in the all-inclusive daily rate), it was still noted as a deficiency in documentation.

Level of Care is Not Supported.

Medicare has established four predetermined rates of hospice reimbursement that may be paid, depending on the level of medically necessary care that is provided. The four levels of care include (1) Routine Home Care, (2) Continuous Home Care, (3) Inpatient Respite Care, and (4) General Inpatient Care.[19] The OIG has identified examples of unsupported levels of care being provided and/or billed:

  • General Inpatient Care level of care was not supported. This level of care is intended for beneficiaries needing pain control or acute or chronic symptom management that cannot be managed in other settings, such as the beneficiary’s home. It is intended to be short-term. In some instances, the OIG found that the medical records did not show that a patient had uncontrolled pain or unmanaged symptoms. As a result, the patient could have been treated at home under a less expensive level of care.
  • Continuous Home Care level of care was not supported. As you will recall, the reimbursement rate for Continuous Home Care is the highest daily rate that Medicare pays. It costs the programs hundreds of dollars more each day for each beneficiary that receives this level of care rather than Routine Home Care. From its audits, OIG has identified several instances where the Continuous Home Care level of care was not documented as medically necessary. The Continuous Home Care level of care is intended for situations where a hospice beneficiary is undergoing a brief “period of crisis”.[20] This higher level of care is intended to allow the patient to be maintained at home and only as necessary to maintain the patient at home. A period of crisis is a period in which the beneficiary requires Continuous Home Care for palliation and management of acute medical symptoms.[21]

III. Responding to a Hospice Audit:

As set out in this article, hospice agencies are currently undergoing a broad scope of administrative audits by various CMS contractors. Depending on the results of an audit, a hospice provider may be subsequently subject to serious administrative consequences. In some instances, the government may also seek civil or criminal sanctions against a hospice provider. Considering the seriousness of the penalties that may be imposed if there is a poor showing, we recommend that providers promptly contact qualified legal counsel for assistance. Liles Parker attorneys have extensive experience representing healthcare providers nationwide in connection with administrative audits, civil False Claims Acts cases, and criminal prosecutions. For a free consultation, please give us a call: 1 (800) 475-1906.

Robert Saltaformaggio - Senior Counsel -150x150

Robert Saltaformaggio is Senior Counsel at Liles Parker. He is an experienced healthcare attorney. Robert also holds certifications as a Certified Professional Coder (CPC) and a Certified Medical Compliance Officer (CMCO). Robert’s practice is concentrated exclusively on healthcare law and particularly on the appeal of claim denials, regulatory guidance, and compliance planning. Over the last two years, Robert has represented numerous hospice providers in connection with administrative and False Claims Act investigations. Are your hospice claims being audited? Call an attorney who regularly handles these types of appeals. Give Robert a call at (202) 298-8750 or e-mail him at rsalt@lilesparker.com.

  • [1] Unified Program Integrity Contractors (UPICs) are the primary program integrity contractors focusing on the audit of Medicare hospice claims.
  • [2] Medicare Administrative Contractors (MACs) are responsible for the processing of Medicare claims for providers and suppliers.
  • [3] The Consolidated Appropriations Act, 2021, amended the Social Security Act, §§ 1822(b), 1865(a), and 1865(b) to require the development and implementation of new enforcement remedies for noncompliant hospice programs. Notably, these new remedies were intended to supplement, not supplant, existing enforcement remedies that could be taken against noncompliant hospices.
  • [4] CMS published a Final Rule titled “Medicare Program; Calendar Year (CY) 2024 Home Health (HH) Prospective Payment System Rate Update; HH Quality Reporting Program Requirements; HH Value-Based Purchasing Expanded Model Requirements; Home Intravenous Immune Globulin Items and Services; Hospice Informal Dispute Resolution and Special Focus Program Requirements, Certain Requirements for Durable Medical Equipment Prosthetics and Orthotics Supplies; and Provider and Supplier Enrollment Requirements”. The SFP hospice poor performance criteria that will be reviewed by CMS are merely one of the many program areas covered in this Final Rule. 88 Fed. Reg. 77676, 77677 (November 13, 2023).
  • [5] Deactivation actions are serious business. As CMS wrote in a later Federal Register notice:

    “Although a deactivation does not rise to the level of a revocation of Medicare enrollment and billing privileges under § 424.535—for a revocation bars the provider or supplier from reenrolling in Medicare for a period of 1 to 10 years (with certain exceptions)—a deactivated provider or supplier cannot resume billing Medicare until the requirements for reactivation are met. It has, in effect, been blocked from the Medicare program.Indeed, as with a provider or supplier that voluntarily terminated its Medicare enrollment and now seeks to rejoin the program via an initial, new enrollment application, a reactivating provider, too, is requesting to rejoin the program”. 89 Fed. Reg. 55312, 55409 (July 3, 2024).

  • [6] The four Consumer Assessment of Healthcare Providers and Systems (CAHPS®) Hospice Survey Index measures most aligned with caregiver experience include: (1) Help for Pain and Symptoms, (2) Getting Timely Help, (3) Willingness to Recommend the Hospice, and (4) Overall Rating of the Hospice.
  • [7] See CMS guidance titled “Overview of the Hospice Special Focus Program (SFP)". Ref: QSO-25-02-Hospice.(October 4, 2024).
  • [8] CMS announced this program in July 2023 in MLN7867599, titled “Period of Enhanced Oversight for New Hospices in Arizona, California, Nevada, & Texas”.
  • [9] During the period of oversight, CMS defined a new hospice as an agency that is:
    • Newly enrolling in the Medicare Program (starting July 13, 2023)
    • Submitting a change of ownership (CHOW) that meets all the regulatory requirements under 42 C.F.R. § 489.18
    • Undergoing a 100% ownership change that doesn’t fall under 42 C.F.R. § 489.18.
  • [10] Palmetto GBA guidance titled “Pre-Payment Review Results for Hospice Provisional Period of Enhanced Oversight on New Hospices in Texas for January to March 2024”. (Published June 6, 2024).
  • [11] A more detailed discussion of the TPE program is set out in our article titled “TPE Audits: The Process & Expected Targets in 2023”.
  • [12] In 2014, CMS first began its Probe and Educate audit initiative, a review process in combination with education for providers to help them learn their problematic areas in the claims and documentation procedures.On October 1, 2017, CMS and the MACs implemented the national Targeted Probe and Educate (TPE) Program which is applicable to a variety of provider types.On September 17, 2018, the TPE Program was added to the Medicare Program Integrity Manual (MPIM), replacing the existing Progressive Corrective Action (PCA) medical review process.The TPE Program can be found in Chapter 3.2.5 (Rev.10228, 07-27-20) of the Medicare Program Integrity Manual (MPIM).The purpose of the TPE audit initiative is to “decrease provider burden, reduce appeals, and improve the medical review/education process”.
  • [13] See CMS Transmittal 1919 / Change Request 10249, titled “Targeted Probe and Educate”. (September 15, 2017).
  • [14] See CGS guidance titled “Top Provider Questions - Targeted Probe and Educate”.
  • [15] As amended by the Improper Payments Elimination and Recovery Improvement Act of 2012.
  • [16] CMS "2023 Medicare Fee-for-Service Supplemental Improper Payment Data".
  • [17] As set out under Medicare Benefit Policy Manual (MBPM) Ch.9, §20.1:

    “For the first 90-day period of hospice coverage, the hospice must obtain, no later than 2 calendar days after hospice care is initiated, (that is, by the end of the third day), oral or written certification of the terminal illness by the medical director of the hospice or the physician member of the hospice IDG, and the individual’s attending physician if the individual has an attending physician.

    No one other than a medical doctor or doctor of osteopathy can certify or re-certify an individual as terminally ill, meaning that the individual has a medical prognosis that his or her life expectancy is 6 months or less if the illness runs its normal course. Nurse practitioners and physician assistants cannot certify or re-certify an individual as terminally ill. In the event that a beneficiary’s attending physician is a nurse practitioner or a physician assistant, the hospice medical director or the physician member of the hospice IDG certifies the individual as terminally ill”. (Emphasis added).

  • [18] See MBPM Ch.9, §10. As the section states:

    “An individual is considered to be terminally ill if the medical prognosis is that the individual’s life expectancy is 6 months or less if the illness runs its normal course. Only care provided by (or under arrangements made by) a Medicare certified hospice is covered under the Medicare hospice benefit”. (Emphasis added).

  • [19] As set out under MBPM Ch.9, § 40:

    "Provided the above coverage criteria are met, hospices are paid a per diem rate based on the number of days and level of care provided during the election period.Levels of care are defined as:

    • Routine home care (refer to §40.2.1); A routine home care day is a day on which an individual who has elected to receive hospice care is at home and is not receiving continuous home care.
    • Continuous home care (refer to §40.2.1); A continuous home care day is a day on which an individual who has elected to receive hospice care is not in an inpatient facility (hospital, SNF, or hospice inpatient unit) and receives hospice care consisting predominantly of nursing care on a continuous basis at home.Hospice aide or homemaker services or both may also be provided on a continuous basis.Continuous home care is only furnished during brief periods of crisis and only as necessary to maintain the terminally ill patient at home.
    • Inpatient respite care (refer to §40.1.5 and §40.2.2); An inpatient respite care day is a day on which the individual who has elected hospice care receives care in an approved facility on a short-term basis for respite.
    • General inpatient care (refer to §40.1.5); A general inpatient care day is a day on which an individual who has elected hospice care receives general inpatient care in an inpatient facility for pain control or acute or chronic symptom management which cannot be managed in other settings.” (Emphasis added).
  • [20] As CGS, a HH/H Medicare Administrative Contractor (MAC) notes:

    “A period of crisis is a period of time when the beneficiary requires the higher level of "continuous care" for at least 8 hours in a 24-hour period (midnight to midnight) to achieve palliation or management of acute medical symptoms. The care does not need to be "continuous," but must total eight hours or more of care within the 24-hour period.The care must be predominantly nursing care provided by an RN, LPN, or LVN”. (Emphasis added).

  • [21] 42 C.F.R.§§ 418.204(a) and 418.302(b)(2).