CMS freezes home health, hospice enrollment to stop fraud before it starts

Fraud, waste, and abuse are an inevitable byproduct of administering any large financial program, and Medicare has been no exception. The $1.1 trillion initiative loses an estimated 3-10% of total spending to these issues, with annual losses believed to be as high as $100 billion per year. 

Some areas of Medicare may be more prone to intentional fraud than others, with home healthcare and hospice services being a top area of concern for regulators.  The Office of the Inspector General (OIG) estimates that the improper payment rate (which includes unintentional errors) for Medicare home health agencies was around 7.7%, equating to $1.2 billion in 2023, while suspected hospice fraud was estimated at $198.1 million that same year. 

In recent months, CMS has targeted the home health and hospice industry with a series of fraud crackdowns, the latest of which is a 6-month pause on all new enrollments for home health agencies and hospice providers in the Medicare program. 

Preventing bad actors from entering the system in the first place

The action builds on efforts from a broader White House anti-fraud taskforce launched in March. 

“We’ve seen systemic and deeply troubling fraud in the hospice and home health space, with bad actors exploiting some of our most vulnerable Medicare patients and stealing money from the American taxpayer,” said CMS Administrator Dr. Mehmet Oz when announcing the moratorium.  

“Today we’re shutting the door on fraud—preventing new bad actors from entering Medicare while we aggressively identify, investigate, and remove those already exploiting them. This is about protecting patients, restoring integrity, and safeguarding taxpayer dollars.” 

During this period, CMS will “intensify targeted investigations, deploy advanced data analytics, and accelerate the removal of hospice and HHA providers from the Medicare program that are suspected of committing fraud,” according to the announcement.  

The approach is intended to stop bad actors from getting access to Medicare dollars at all. In addition, officials aim to prevent existing fraudsters from opening new businesses across state lines or implement changes in majority ownership, which are both common tactics to obscure improper activities, CMS says.  

Identifying and addressing hotbeds of fraud activity

Certain areas of the country, including Los Angeles County, have been previously flagged as centers for fraudulent home health and hospice activity, and are drawing further attention during this crackdown cycle. 

California regulators have already acknowledged that they have a problem in the county due to insufficient controls that have led to a suspicious surge in home health and hospice providers. For example, from 2019 to 2023, the number of home health agencies in the US decreased by 6%, while the number of agencies in LA County alone increased by 46%.  

And in 2022, Los Angeles County had more than 31% of all hospice agencies in the United States, despite having only about 2.5% of the nation’s senior population. 

CMS has already suspended payments to approximately 800 hospices and home health agencies suspected of fraud in Los Angeles alone that were responsible for $1.4 billion in Medicare spending last year, with $70 million in suspended funds thus far, officials said. 

Throughout the 6-month pause, CMS will continue to identify areas around the country with strong fraud signals and take action by conducting site visits to verify services, launching a public scoring system to increase transparency, implementing enhanced enrollment screenings and other oversight actions, and revoke or deactivate agencies that have committed improper activities.  

An overarching emphasis on reducing fraud in government programs

Medicare isn’t the only program that HHS has its eye on. The department has also announced the launch of the Audit Enforcement and Risk Oversight initiative (AERO), which will leverage artificial intelligence and other methods to ensure compliance with audits across every HHS subdivision.  

Through the Office of the Assistant Secretary for Financial Resources (ASFR), HHS will use “next-generation AI analytical tools” to conduct “a comprehensive, ongoing analysis of single audit information across all 50 states examining at least five years of audit history.”    

HHS officials note that many states are behind on compulsory audit activities, and some have “consistently failed to remedy serious internal control issues, with some persisting for three, four, or even five or more years.”  

“Taxpayers deserve to know that their dollars are being spent as intended,” said Gustav Chiarello, HHS Assistant Secretary for Financial Resources and Chief Financial Officer. “Years of audit reports documented serious vulnerabilities and failures in oversight, yet states and grantees faced little to no consequences.”  

“Following revelations of fraud in various states, we examined their audits more closely and found years of unresolved findings hiding in plain sight. Grantees who want to work with us to fix these problems will have a partner. Those that don’t may face consequences.” 

Jennifer Bresnick is a journalist and freelance content creator with a decade of experience in the health IT industry.  Her work has focused on leveraging innovative technology tools to create value, improve health equity, and achieve the promises of the learning health system.  She can be reached at [email protected].