Since hospice was first introduced in the mid 1970s, the business of caring for the dying, and its profitability, has flourished. Today, more than half of those people dying in the United States receive some form of hospice care, and the industry’s annual revenue is estimated at $22 billion.
Since Medicare is the primary source of payment for the hospice benefit, paying for 83.7 percent of all hospice care today, it should not be surprising that regulators contend that fraud and abuse in the hospice industry is rampant.
One need only read a recent Department of Justice (DOJ) fraud enforcement news releases to confirm this fact. Private and nonprofit hospice providers, owners, and officers are being audited, sued by DOJ and qui tam whistleblowers under the False Claims Act (FCA), paying settlement damages in the millions of dollars. In order to understand the financial operations of a hospice provider, it helps to understand the concepts of the level of care and the length of stay.

The Economics Of Hospice Care

The level of care is the form of hospice care provided to a patient and varies in reimbursement or cost. The vast majority of hospice care is routine home care, which is reimbursed at 96.5 percent and provided in the patient’s residence, nursing home, or residential facility.

Today, an increasing number of hospice patients reside in nursing homes while they receive longer and more sustained care for chronic progressive diseases before they die, and this is a particularly problematic relationship, according to the Office of Inspector General (OIG). The skilled nursing center provides room, board, and care to the hospice beneficiary that is unrelated to the terminal illness.

The nursing center is reimbursed for room and board, while the hospice provider is reimbursed solely for hospice services. Because nursing centers provide similar services to hospice providers, there is the potential for overlap in services reimbursed under the Medicare hospice benefit.

The length of stay is the total number of days during which a patient receives hospice care, regardless of the form of care. The length of stay can be impacted by a variety of factors, including disease cause, timing of a referral, and access to care.

Hospice Care Time Limits

So how long is too long for hospice care? According to the Centers for Medicare & Medicaid Services:
■ Hospice care is intended for people with six months or less to live if the disease runs its normal course.

■ A patient who lives longer than six months can still get hospice care if the hospice medical director or other hospice doctor recertifies that the patient is terminally ill.

Hospice care is given in benefit periods that start the day the patient begins to get hospice care and ends when each 90-day or 60-day period ends. Patients can receive hospice care for two 90-day benefit periods, followed by an unlimited number of 60-day benefit periods.

Patients also have the right to change providers once per benefit period. However, at the start of each period, the hospice medical director or other hospice doctor must recertify that the patient is terminally ill. In contrast to curative health care, the hospice caretaker must painfully document the deteriorating—in contrast to improving—condition of the hospice patient to demonstrate that the patient is entitled to the Medicare hospice benefit. Unfortunately, in today’s “fraud and abuse” world, some patients simply don’t die quickly enough, which leads to allegations of fraud.

Fraud And Abuse Enforcement

Within this context, it should not be surprising that hospice fraud and abuse enforcement is on the rise. Regulators have vowed to fight Medicare fraud and abuse, and the Affordable Care Act empowers law enforcement with more funding, increased coordination, and high-tech tools, including data mining, to better identify fraud and abuse.

On top of that, strengthened whistleblower provisions in the FCA make “blowing the whistle” on questionable practices a profitable business for whistleblowers and their lawyers.

The FCA authorizes treble damages (that is, three times the government’s loss); penalties of $5,500 to $11,000 per claim, as well as statutory debarment; or discretionary exclusion from federal programs.

Risk and Compliance

When it comes to risk, the Greek philosopher Epictetus said, “prevention is the best cure.” Effective communication, training, and monitoring are essential to preventing and detecting fraud and abuse. OIG has identified more than 20 potential fraud-and-abuse risk areas, which should serve as a starting point for any institutionalized risk assessment process.

Based on a thorough review of FCA cases over the past decade, however, it is especially important to focus on these problematic areas:

■ Eligibility criteria. Those in the medical profession know that terminal illness can be unpredictable. That is why it is crucial for members of the interdisciplinary team to properly document their clinical judgments every day.

In order to remain eligible, terminal patients must have six months or less to live at the time of admission or recertification. It is important to clearly document evidence of the initial and continuing prognosis of a terminal illness and life expectancy of six months or less. This area is the primary source of government audits and often lacks adequate documentation of the patient’s deteriorating condition and continuing eligibility for the Medicare hospice benefit.

■ Technical requirements. Is there an individualized plan of care with a review no less than every 15 days? Is there a face-to-face encounter, and are the forms properly signed, dated, and in the correct format?

■ Relationship between hospice provider and nursing facility. Since nursing homes provide similar services to hospice providers, there is great potential for overlap in services reimbursed under the Medicare hospice benefit. OIG has issued several alerts and bulletins highlighting problematic relationships.

Best Practices for Providers

From a risk management perspective, hospice providers and their nursing care center partners should adopt the following practices to help reduce the chance of fraud:

■ Proactive risk assessments. These should be performed annually to determine the risk of being audited or having potential liability to the government, whether it is administrative, civil, or criminal. Providers should carefully monitor OIG Fraud Bulletins and Advisory Memos and pay attention to OIG’s Annual Work Plan, which identifies areas of focus for the government. From that information, providers can conduct a proactive risk assessment based on the most up-to-date guidance.

■ Employee hotline. Any effective compliance program will incorporate an employee hotline or other type of reporting mechanism for employees or patients to report suspected wrongdoing anonymously.

■ Prospective audits. Any complaints received from employees or patients should be fully investigated with a prospective audit to determine if there is a problem. If a problem is found, an internal corrective action plan should be developed in order to bring the organization into compliance.

■ Voluntary disclosures. Of course, if a compliance problem is found in the company’s records, it has an obligation to report the issue though a voluntary disclosure. The government, with its limited resources, needs health care providers to self-regulate, self-enforce, and self-govern, and it provides many incentives for companies to do so. The penalties for self-reporting instances of fraud are far more lenient than if the fraud was reported by a whistleblower or uncovered by a federal agent.
■ Training and education. Another key element of an effective compliance program is a good training and education program. Employees should be educated about internal policies, procedures, and the company’s code of ethics; Medicare regulations pertaining to the hospice benefit; accurate billing procedures; and overall compliance with federal regulations.

Compliance isn’t a destination, it’s a continual improvement process. If providers are serious about avoiding fraud and abuse, they should strive to maintain an educated and ethical workplace. Increased scrutiny and penalties from the government make this absolutely essential.

From a business perspective, it is also more cost-effective to proactively mitigate potential fraud and abuse to avoid being subjected to a time-consuming and costly investigation or enforcement action.
Latour “LT” Lafferty is a partner in Holland & Knight’s Tampa, Fla., office, focusing his practice on white collar criminal defense/litigation, corporate internal investigations, False Claims Act qui tam litigation, business tort litigation, corporate compliance, and organizational ethics. He represents home health, nursing, and hospice providers in regulatory enforcement matters. He can be reached at (813) 227-6361 or