Report of Medicare Fraud in Hospice Care Bodes Ill
for Both Patient Care and Cost Savings from Policy Shift

By S. Van McCrary, Health Law & Policy Institute

A recent newspaper report notes that hospice care is the fastest growing component of the federal Medicare budget and that, associated with this growth, hospice-related fraud and abuse has also burgeoned.

A central allegation is that one hospice program signed up patients for Medicare who were not dying, created false lists of recipients, and siphoned off approximately $28.5 million in Medicare funds. A federal grand jury last year indicted the owner of this particular hospice, Joseph A. Kirschenbaum, on charges that he paid nursing homes $10 for each new "hospice" patient, and paid physicians $89 per month to certify patients as terminally ill without examining them (New York Times, 5-10-98). In addition, a new federal report concludes that almost one third of nursing home patients receiving hospice care are ineligible under current rules. A related problem is that federal and state agencies lack adequate resources to monitor the rapidly-expanding network of elder care services that include hospices and nursing homes. For example, the state of Illinois employs 21 nurses to enforce regulations in approximately 7,115 facilities.

The U.S. Department of Health and Human Services issued a special fraud alert on this topic in March, 1989, warning that some patients who were not terminally ill were receiving services and that payments for patient referrals were illegal. The Inspector General of HHS recommended that outside services for hospice patients be completely eliminated for nursing home patients. Other federal officials reportedly viewed this recommendation as an overreaction.

In contrast, officials of the hospice industry argued that these accounts of fraud are exaggerated, but that they plan to issue guidelines soon which will clarify the roles of hospices and nursing homes regarding proper reimbursement.

One major problem, which the current newspaper report does not adequately address, is the difficulty for physicians to certify that any particular patient has less than six months to live--a standard criterion for eligibility to receive hospice services. Current clinical criteria are ambiguous on this point and are not necessarily designed to make such a precise prediction. Thus, the physician must rely on his or her personal experience. The lawyer for the defendant named in the recent indictment cited this issue in his defense, stating "They're claiming that because the patients lived longer there must be something wrong, but there was not." In the absence of detailed facts, it is difficult to determine the merits of this particular claim, but the mere fact that the defendant is relying on this issue illustrates that this ambiguous criterion may continue to cause problems.

Because home-based care, including hospice, originally was "sold" politically as a money saving device, a large increase in fraud brings potentially ominous consequences. The shift in policy emphasis from inpatient to outpatient care is likely to save money if the system is properly regulated and monitored. If it is not, abuses will almost certainly occur. It is possible that if Medicare-supported hospice care comes under political attack on fiscal grounds then patients may be unable to receive appropriate care near the end of their lives and unnecessary suffering may result. Hospices provide a vital and distinctive component in the spectrum of health care across the human lifespan, and are important in reducing suffering among terminally ill patients. Plausible public policy should seek ways to trim systemic fraud in Medicare hospice reimbursements while ensuring that patients continue to receive adequate pain relief and other necessary care at the end of life.