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Hospice Fraud Costing Medicare Millions

Hospice Fraud Costing Medicare Millions

March 9, 2016

No one knows how big the problem of hospice fraud is — all types of improper Medicare payments are estimated at $65 billion for 2010 — but federal investigators prosecuted more than 60 cases in the last year alone, involving hundred of millions of dollars nationwide.

The system that was built to help dying patients live out their remaining days with dignity and comfort has few quality metrics to meet, no minimum requirements for how often care is provided, and low barriers to getting into the business. Critics say that can make end-of-life care seem ripe for abuse.

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“There’s a built-in incentive to get patients in the door,” said Claire Sylvia, a lawyer representing whistleblowers in health care fraud cases at the San Francisco offices of Phillips & Cohen LLP. “Money is usually a driver of fraud.”

Consider the case of former Horizons Hospice chief operating officer Mary Ann Stewart, under indictment in federal court in Pittsburgh on charges of inflating enrollment at her company’s Monroeville facility by recruiting patients who often weren’t really dying. Ms. Stewart, 48, of Louisiana, had been set to go to trial on March 14, but has since indicated she has reached a plea deal with the U.S. attorney’s office.

A long-awaited reform in how Medicare pays hospice providers that went into effect in January will do little to curb such abuse, experts say. Medicare began staggering payments to better reflect the cost of care — the first reimbursement change since the benefit began in 1983.

Yet, critics say, the reform doesn’t address the aggressive enrollment practices that have been a hospice fraud hallmark.

And losses don’t stop with dollars and cents. Admission to hospice means the patient forgoes curative medical interventions which could extend life.

Recruiting at the bus stop

In the Horizons case, prosecutors say Ms. Stewart was pressuring her employees to recruit anyone they could find — even people at bus stops in Pittsburgh’s inner-city, according to a source familiar with the case.

The goal was to keep her census high so she could bill Medicare and Medicaid for millions.

Despite a salary of more than $300,000, the government says Ms. Stewart put Medicare and Medicaid money into her company’s accounts and then used it for herself, spending it on such things as restaurant meals, gift cards and party buses.

Horizons’ aggressive enrollment strategy was not isolated. Federal prosecutors are seeking $202 million from West Allis, Wis.-based AseraCare Inc., where they allege nurses and other staff were instructed to increase hospice census “at all costs” and the mere suspicion of lung cancer was enough to enroll a patient for end-of-life care.

The opportunity to die at home 

Hospice became a Medicare benefit in 1983 for people with terminal conditions who had less than six months to live. Publication of Elisabeth Kubler-Ross’ “On Death and Dying” in 1969 and a surge of public support eventually led to a government benefit that allowed patients to forgo heroic lifesaving measures in return for comfort measures and the opportunity to die at home.

Some of the biggest health care expenses occur at the end of life, so the thinking was the program would also wind up saving the government money as people turned away from costly end-of-life care that often had little benefit.

Instead, hospice spending has ballooned — more than quadrupling to $15.1 billion in 2012 from $2.9 billion in 2000 without denting overall Medicare spending, according to the Medicare Payment Advisory Commission, an independent agency that advises Congress on matters involving the federal health care program.

The ground rules offer clues about how such a noble idea could go so wrong.

Medicare pays hospices about $154 a day for people with terminal medical problems who receive care at home, the most popular option. For providers, there are few quality standards to meet and no minimum requirements for how often to provide care, MedPAC reported in March 2015.

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Patients staying longer

Hospice costs shot up because an increasing number of seniors used the program, but also because the time that patients spend in hospice has been rising. The average length of a stay rose to 86 days in 2011 from 54 days in 2000, MedPAC found — a period that coincides with an influx of for-profit outfits into the industry.

The number of for-profit hospices nearly doubled from 2000 to 2012, according to MedPAC. By 2013, 3,925 hospices were in operation, up 5.3 percent from the previous year. Of those, about two-thirds were for-profit.

The average length of stay in a for-profit hospice was much longer than a nonprofit in 2013 — 105 days versus 68 days, MedPAC reported.

Hospice care is not designed to extend life, so the treatment offered is not intended to cure, but rather to provide comfort. Still, fewer patients have been dying within Medicare’s six-month guideline.

The percentage of people who leave hospice alive rose from 13.2 percent in 2000 to 18 percent in 2012, according to a study done by Cambridge, Mass.-based Abt Associates, a Medicare contractor.

“You look at the lengths of stay at some of these places — it defies reality,” said Ari Yampolsky, an associate at the law firm of Constantine Cannon LLP, which has offices in San Francisco and represents whistleblowers in health care fraud lawsuits.

Proposals for reform

Tougher scrutiny of facilities with the longest patient stays is among the reforms that Washington, D.C.-based National Hospice & Palliative Care Organization has been seeking, Senior Vice President Jon Keyserling said.

Hospice reimbursement issues have snared for-profits and nonprofits alike, Mr. Keyserling said, so it would be a mistake to single out for-profit providers for wrongdoing.

Since 2009, MedPAC has lobbied for Medicare to change the way it reimburses hospice providers to help curb fraud — changes that were implemented in January.

The new formula pays hospice providers a bigger per diem rate for the first few months after enrollment, which drops somewhat in succeeding months as the costs of providing care decline as resources are assembled and patients get settled.

Mr. Keyserling said it’s too early to know whether the change will reduce fraud or impede care.

But the reimbursement change doesn’t address hospice’s basic incentive to increase revenue through what Constantine Cannon’s Mr. Yampolsky calls a “sales driven eligibility process.”

“The principal incentive the hospice has is to keep its census high,” he said. “This doesn’t reduce that.”

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EDITOR’S NOTE, March 6: Medicare fraud of all types is estimated by federal investigators to be $65 billion. A headline and a sentence in a story on hospice fraud were incorrect.

Original article published on KHN. Photo credit: