The U.S. Centers for Medicare & Medicaid Services’ (CMS) period of enhanced oversight for hospices in California, Nevada, Arizona, and Texas has resulted in nearly $456,000 in claims denials to date. This aggressive initiative represents a significant step in the agency’s ongoing battle against fraud, waste, and abuse in the hospice sector.
Financial Impact of Enhanced Oversight
Cumulatively, the Medicare Administrative Contractor (MAC) company Palmetto found 330 claims with edit effectiveness through a pre-payment review, 99 of which were denied. This represents a substantial 40% denial rate. The total dollar amount reviewed exceeded $1.5 million, indicating the scale of potential improprieties in hospice billing practices across these four states.
Industry analysts note that this high denial percentage suggests systematic issues within hospice billing procedures that merit further investigation. The financial ramifications extend beyond the immediate denials, as providers must now allocate additional resources to compliance measures and administrative appeals.
Implementation of Enhanced Oversight Measures
CMS first announced a “provisional period of enhanced oversight” for new hospices in the four targeted states in July 2023. A cornerstone of this enhanced scrutiny includes comprehensive medical reviews of claims before a Medicare Administrative Contractor authorizes payment.
“To combat fraud, waste, and abuse under the hospice benefit, CMS will expand prepayment medical review this September in Arizona, California, Nevada, and Texas,” the agency stated. “To help reduce burden on compliant providers, initial review volumes will be low and adjusted based on results. If you’re noncompliant, we may implement extended review or take additional administrative actions.”
This measured approach demonstrates CMS’s intent to balance fraud prevention with operational efficiency for legitimate hospice providers.
Background and Justification for Increased Scrutiny
These oversight actions follow numerous reports of potentially unethical or illegal practices among hospice providers, particularly among newly established companies in the four targeted states. These concerning reports have prompted calls for stronger oversight from lawmakers, patient advocacy groups, and industry stakeholders.
The hospice sector has experienced rapid growth in these regions, with California seeing a 37% increase in hospice providers between 2018 and 2022, compared to a national average of 13%. This disproportionate growth triggered regulatory concerns about market integrity and patient care standards.
Broader Regulatory Response
In response to these concerns, both CMS and the State of California have implemented a series of new regulations designed to combat fraud, waste, and abuse in the hospice sector. These measures include:
- Enhanced enrollment screening for new hospice providers
- Stricter financial reporting requirements
- Unannounced site visits to verify operational compliance
- Increased documentation standards for hospice eligibility
- Expanded training requirements for hospice staff
While Palmetto has not indicated whether any of the hospices with denied claims had been implicated in fraud investigations, the high denial rate suggests potential areas of noncompliance that warrant closer examination.
Impact on Legitimate Hospice Providers
For compliant hospice organizations, these enhanced oversight measures create additional administrative burdens. Industry experts recommend that hospice providers in the four affected states conduct internal audits of their documentation and billing practices to identify potential vulnerabilities before submitting claims.
The National Hospice and Palliative Care Organization (NHPCO) has expressed support for efforts to eliminate fraud while emphasizing the importance of maintaining access to quality end-of-life care for eligible patients.
Looking Forward: The Future of Hospice Oversight
Healthcare compliance experts anticipate that CMS may extend similar enhanced oversight measures to additional states if the current initiative proves effective in reducing improper payments. The agency has indicated that its approach will remain data-driven, with oversight intensity adjusted based on compliance rates and identified risk factors.
As the hospice industry continues to evolve, providers must prioritize documentation accuracy, eligibility verification, and regulatory compliance to avoid payment denials and potential administrative actions.
The results of this enhanced oversight period will likely influence future CMS policy regarding hospice regulation nationwide, potentially establishing new standards for program integrity across the Medicare system.
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