2023’s Most Impactful Hospice Regulatory Moves

Program integrity issues that have heated up in the hospice space during the past five years reached a boiling point in 2023.

Hospice providers have seen an array of increased regulatory oversight in 2023. That momentum has been fueled by two main concerns among regulators — risks of patient safety and evidence of malfeasance in the space.

Hospice News sat down with providers, advocacy groups, legal experts and other stakeholders to uncover the most significant hospice regulatory trends from this year and their anticipated impacts heading into 2024 and beyond.

“There is scrutiny on hospice care [that’s] setting the stage for the next phase of what hospice oversight looks like. But we know that action can work in a pendulum. It’s ensuring that it’s appropriate oversight for bad actors and lands in a good place for the rest of those providing care in good faith. It’s a critical time to be really engaged and on top of those facets of your operations, because the chances that you’re going to be under some level of scrutiny are pretty high right now.”

– Mollie Gurian, vice president, home-based and HCBS policy, LeadingAge

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Focus on improving quality, program integrity

The government’s new policies were designed to achieve two objectives — to improve patient safety and to rein in fraudulent hospice providers in four states.

The patient safety concerns bubbled up in 2019 with two reports from the U.S. Department of Health and Human Services Office of the Inspector General (OIG). The first report shook the industry with findings that around 20% of hospices surveyed by regulators or accreditors between 2012 and 2016 had a deficiency that posed a serious safety risk. The second provided specific details of the safety risks found at a sample of organizations.

Additionally, a host of newly licensed providers emerged in Arizona, California, Nevada and Texas caught the attention of regulatory watchdogs. Evidence suggests that possibly hundreds of these hospices provided either substandard care or none at all. Many established services for the purpose of selling the license at a profit or defrauding Medicare. In some instances, multiple hospices have been operating out of the same address under the same owners and executives.

In response, the U.S. Centers for Medicare & Medicaid Services (CMS) has rolled out a swath of new measures to reduce fraud, waste and abuse in the space.

CMS in November finalized the 2024 home health rule, which included hospice oversight measures. The final rule prohibits any change in majority ownership during the 36 months after initial Medicare enrollment, including acquisitions, stock transactions or mergers. The 36-month rule requirement mirrors a regulation that has existed for several years for home health agencies, signaling a tighter outlook on hospice ownership as CMS looks to curb hospice license flipping.

As part of the quality and patient safety end of the equation, CMS included in 2024 home health final rule the implementation of a hospice Special Focus Program (SFP), set to begin Jan. 1, 2024. Congress mandated the SFP in the Consolidated Appropriations Act of 2021, which contained language from the Helping Our Senior Population in Comfort Environments (HOSPICE) Act. The bill was spurred by the two 2019 OIG reports.

The SFP program will give regulators the authority to impose enforcement remedies against hospices with poor performance based on a data algorithm. These hospices will undergo surveys every six months, rather than the current three-year cycle. They could also face financial penalties or expulsion from the Medicare program.

“The 36-month rule is also very telling of regulatory concerns. It’s a sign that CMS is getting to a point of concern from a policy perspective of internal changes that may impact who actually owns and operates hospices. It’s a different world in which CMS wants to prohibit flipping of hospices.

In terms of mergers and acquisitions and joint ventures, the big key there is structuring your organization with an eye on this 36-month rule, it’s much more black and white as far as direct changes in ownership. It’s a really significant regulatory restriction that could result in pretty severe cash flow issues in certain transactions.”

– Adam Royal, attorney, Husch Blackwell

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“With the 36-month rule, it’s one of a lot of actions that CMS has taken in terms of its response to the fraudulent activity. We assume that in the future, they’ll continue that monitoring and oversight and see how these actions work in terms of controlling that activity. It’s part of a larger conversation about fraud and pushing for that as part of larger program integrity strategies.

– Gurian

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“CMS is really taking a much closer look at hospice ownership and operations. With the new ownership rule, to some degree that foreshadows where we are going to head. It sets the tone as far as the disclosure of ownership data and how it can be a scalpel or sword to be wielded in this patient focus and scrutinization of hospices that aids patients and families in their selection of providers.”

– Jason Wallace, partner in health care, Barnes & Thornburg LLP

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Some stakeholders have urged CMS to reconsider its methodology of flagging hospices for the SFP program, citing flaws in the current algorithm. Industry groups such as the National Hospice and Palliative Care Organization (NHPCO), the National Association for Home Care & Hospice (NAHC) and LeadingAge are a few of these industry groups, among others.

“(CMS) is looking at those publicly reported quality measures as part of the Special Focus Program, and those are going to be one of the key reasons a hospice ends up in that program. It’s contrary to some of the integrity efforts that they convened in testing. They didn’t follow some of the recommendations, and that was a little disappointing for the entire industry.

There’s opportunity to continue to advocate for regulatory change around that program in some of the [requests for information (RFIs)], so that’s something to watch out for as well. The RFIs can point to what’s happening in CMS and proposals they might put forward for future rule making.”

– Katy Barnett, director of home care and hospice operations, LeadingAge

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“The significant changes in 2023 are probably just the tip of the iceberg when we talk about the types of scrutiny that hospices are going to be subjected to. It’s a reason to be very active about compliance and understanding the regulatory landscape you’re working within. Especially with the Special Focus Program, it’s avoiding getting hit and hampered by some of the unclear aspects, which means being proactive and getting your house in order. It’s best to be prepared and get ahead of those measures.”

– Wallace

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Both the 36-month rule and the SFP program carry signals of increasing hospice ownership, along with shortened time constraints tied to Medicare certification deactivation within the home health rule.

CMS can now deactivate a provider’s Medicare billing privileges after six consecutive months of inactive claim submission, shortened from the previous 12-month time frame.

“CMS is trying to crackdown on issues of shell companies in hospice. Some have gotten a Medicare license just looking to sell it for a profit. The deactivation for non-billing is an issue popping up in hospice. It’s not necessarily a huge issue for most providers, but it could potentially come up in a transaction if they are looking to sell.”

– Royal

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“The billing provisions in the home health rule allow CMS to take action against hospice or any provider that doesn’t bill for six months instead of a year. That’s one step in the direction throughout the program integrity process.”

– Gurian

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Tighter, shifting quality requirements

Beginning in 2024, hospices will face higher penalties for not submitting data to the Hospice Quality Reporting Program (HQRP). Providers who do not submit data incur a 4% annual payment reduction, a hike from 2% that CMS included in its 2024 hospice final payment rule.

CMS is also in the process of replacing the Hospice Item Set with a new measure, the Hospice Outcomes and Patient Evaluation (HOPE) tool.

“It’s more important now than ever before for hospices to take their quality reporting programs seriously and develop strong programs. With the 4% payment reduction if you don’t submit 90% of your data, it seems like we are picking up hints from CMS that there will be new hospice assessment tools that will be in the fiscal year 2025 proposed rule. CMS has floated two new quality measures under consideration that are based on the HOPE tool. We’ll see when the rule comes out, but providers need to be aware and start thinking about what they need to do to implement these assessments.

The hospice [Consumer Assessment of Healthcare Providers and Systems (CAHPS)] surveys are part of the measures under consideration as well. They are including changes to CAHPS surveys, and it’s adding even more questions, not reducing them. CMS might be going in the wrong direction to help hospices get more responses to this survey by adding more questions. It’s going to take more time for folks who are already going through the grief process to fill this out.”

– Barnett

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“All providers should be submitting all the quality data that helps to inform and improve quality of care for patients and their families. It’s supporting that process and encouraging and setting the expectation for quality. It’s not necessarily being opposed to a 4% penalty for those that don’t submit data. What we would like to see is some incentive alongside that for those that do, and do it effectively and well. I’m not sure how CMS views the way to close the gap and ensure that providers better understand the critical importance of providing quality data and how care can be provided and improved to allow people to make well-informed choices for their hospice care.”

– Ben Marcantonio, COO and interim CEO, NHPCO

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“The penalty increase around quality is part of the additional risks and pressures hospices are facing in 2024 and beyond. The number one takeaway for hospices of all sizes and shapes to be aware of is that the industry is under the microscope of CMS, and that’s pretty apparent from regulatory actions like this. A few percent of payment cuts is all part of that enhanced scrutiny process.”

– Wallace

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“If you don’t meet these quality reporting requirements, you face financial penalties that impact more than your compliance pieces. That 4% reduction may ultimately impact payment for hospices exploring value-based arrangements in the future, potentially in Medicare Advantage as those entities sort of follow suit and look at quality reporting and star ratings in a different way.”

– Gurian

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Ramped up auditing activity

Hospices have seen an uptick in auditing activity during the past three years, a trend expected to gain speed heading into 2024.

Increased have been reported across multiple types of audits, including Targeted Probe and Educate (TPE) audits conducted by Medicare Administrative Contractors (MACS) and others involving Unified Program Integrity Contractors (UPIC), Supplemental Medical Review Contractors (SMRC) and Recovery Audit Contractors (RAC).

Audits around general inpatient care (GIP) stays have been among the most controversial and confusing points of contention in the hospice space.

Longer GIP hospice stays and high-cost issues are reasons the OIG this June launched a nationwide audit. Dubbed the “Audit of Selected, High-Risk Medicare Hospice General Inpatient Services,” the OIG will concentrate on Medicare claims for hospice enrollees transferred to GIP settings following an acute hospitalization. The audit is among a host of others in the health care space that the agency rolled out this month in its Work Plan initiatives. OIG anticipates the audit’s results to roll out in the fiscal year 2025.

The regulatory watchdog indicated that many hospice GIP claims are at “high-risk for inappropriate billing,” with roughly one-third of Medicare claims for these services billed in error on average each year.

The increased auditing activity also has hospices navigating a variety of different appeal processes that can place administrative burdens on billing and compliance staff. Additionally, the varied methodologies behind each individual audit has given rise to inconsistencies in the process.

“We’ve heard from hospices that there have been a number of gaps in different audits and auditors across the industry. Some agencies are getting audited for not having enough general inpatient care, while others get attention for having too much. There’s really some confusion out there on what specifically CMS wants their contractors to look at, especially around GIP.”

– Barnett

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“Those audits at face value may seem like outliers, but it’s something to be aware of as far as the end all, be all of enhanced scrutiny. CMS is really operating with a broad brush, and that’s one thing that’s been frustrating for some of the good operators that are getting dragged down by these bad operators. When CMS is looking at things, it’s a need to synthesize all that information under their belt. It just seems like right now these auditing and other regulatory policies are really far-reaching without drilling down on the actual data that indicates and targets where it’s needed.”

– Wallace

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“It’s important not to get bogged down in the day-to-day of what it means to respond to the oversight. Different pieces of it work well and other pieces don’t. A lot of these conversations about audits are how they could be better targeted. A lot of the concerns are about the number of audits going on and whether they are targeted at the right providers.”

– Gurian

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“When we’re talking about government audits, the focus areas the government is interested in [are] eligibility and levels of care,  having the patient in the right care at the right time based on their acuity level. What we see most often in the payment denials are those audits for GIP stays. TPE probes also seem to be where the government is cherry picking claims that are often the most difficult to prognosticate and sometimes difficult to show on patient records. These audits tend to have higher error rates.”

– Carrie Uebel, senior vice president and chief ethics and compliance officer, Compassus

“It’s not a surprise that post-PHE hospice providers have seen an uptick in audit activity from CMS. Most notably, and probably the most aggressive, is the surge in UPIC audits. Prior to the PHE, CMS utilized the MACs and SMRC to review hospice claims, however, it seems that as we finish 2023 and move into 2024, the UPICs are going to be very active in the hospice space. I say aggressive because they have the authority to refer to law enforcement to consider civil or criminal prosecution, identify extrapolated overpayments or refer to CMS for a payment suspension.

Document, document, document. Audit and appeal results have continuously shown that without documenting key metrics throughout the patient’s hospice stay it is an uphill battle to receive and keep reimbursement.”

— Kelly Grahovac, general manager, The van Halem Group