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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Enhanced Controls Needed to Assure Validity of Medicare Hospice Enrollments," (A-05-96-00023)

November 4, 1997

Complete Text of Report is available in PDF format (3.6 mb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


The objective of this report was to consolidate and present issues disclosed by our ongoing Project Operation Restore Trust (ORT) audits of Medicare hospice services. Some of the hospices which we have audited and referred to in this report are also the subject of continuing Office of Inspector General (OIG) review.

The Medicare hospice program, while highly respected and successful in its mission, is a program which has experienced a substantial number of ineligible enrollments as identified in our audits. The reviews focused on determining whether the beneficiaries met the Medicare definition of “terminally ill” at the time of enrollment in the hospice program. The audits covered 12 large hospices located in 4 ORT States (Illinois, Florida, Texas, and California). Working with us, physicians from Medicare Peer Review Organizations (PRO's) reviewed the medical files of all 2,109 long-term beneficiaries in those hospices that had been in care over 210 days, or that had been discharged from hospice at some point after reaching the 210 day threshold. The PRO physicians concluded that 1,373 of the selected beneficiaries were ineligible for hospice because, at the time of initial diagnosis, they were not terminally ill as defined by Medicare regulations, i.e,. having a life expectancy of 6 months or less (we hereinafer use the phrase "terminally ill" as defined in Medicare regulations). To date, we have issued 5 individual reports to the Health Care Financing Administration (HCFA) recommending that the Regional Home Health Intermediaries (RHHI) recover about $17.2 million for ineligible payments made to these hospices. The remaining seven hospices are pending further OIG review of their activities. Combining the findings on all 12 hospices, Medicare paid about $83 million on behalf of the 1,373 ineligible beneficiaries. Payments for some of these beneficiaries could be continuing today. For 262 additional beneficiaries reviewed, eligibility could not be established because medical evidence was missing from patient files or was incomplete. Medicare payments applicable to these 262 patients totaled about $14 million.

Although our audits covered only 12 large hospices and were focused only on long-term patients, analysis of the HCFA data base for hospice beneficiaries showed evidence of numerous long-term beneficiaries in other hospices across the country. Significant growth in the number of long-term patients admitted by hospices occured after hospice regulations were modified to add a fourth, indefinite length, period of care for reimbursement purposes. As of February 1996, over 11,000 beneficiaries (about 14 percent of hospice beneficiaries nationwide) had been in care for more than 210 days.

These ORT reviews followed a more limited audit of hospices in Puerto Rico which noted large numbers of ineligible beneficiaries. An island-wide statistical sample in Puerto Rico disclosed that about $20 million was paid by Medicare for beneficiaries who were not terminally ill at the time of diagnosis. This amount together with our results at the selected hospices in ORT States brings the total of identified Medicare payments for ineligible recipients to more than $100 million. We recommended to HCFA that it recover about $37.2 for ineligible payments made to these hospices.

We have identified several underlying factors which we believe contributed to the problems we noted in our hospices audits.

Some of the problems noted in this report are longstanding and have been pointed out by others. A recent article in The New England Journal of Medicine concluded that patients in large and for-profit hospices have relatively long survival periods after enrollment and suggested that such hospices may encourage early enrollments to recoup the high up-front costs associated with admissions. Other questions were posed in the article regarding whether such hospices have efficient "outreach" programs or place fewer "barriers to enrollment." We believe the results of our audits as detailed in this report will help HCFA respond to these questions. Other recently issued OIG reports have highlighted vulnerabilities in the Medicare program for hospice beneficiaries residing in nursing homes.

To date, we have issued 5 individual reports to HCFA recommending that the RHHIs recover $17.2 million for payments made for ineligible beneficiaries. The remaining 7 hospices representing ineligible payments totaling $65.8 million are pending additional OIG review of their activities. In the report, we are making broader recommendations for HCFA to consider that, in our opinion, will prevent various problems or abusive practices we have identified in the hospice program from recurring. Our recommendations include:

The Balanced Budget Act of 1997, enacted after publication of our draft report, resulted in numerous modifications of Medicare's hospice benefit. These modifications included allowing hospices to discharge patients whose conditions improved without loss of future benefits to the hospice beneficiary (which addressed one of the above recommendations) and a new requirement for more frequent certifications of eligibility after 180 days of hospice care.

The HCFA generally concurred with the recommendations in our draft report. They noted, however, that from their readings the art of accurate predictions about terminal prognoses is not exact. Although they do not believe this negates the findings overall (giving recognition to the PROs that reviewed our cases), they noted there could be some degree of inaccuracy in some of the individual cases found ineligible. We appreciate the state of the art, but we have no reason to dispute the medical opinion of the PRO reviewers who determined that 1,373 beneficiaries were not terminally ill as defined by HCFA.

We have paraphrased HCFA's response after each recommendation in the Results of Review section of the report and have added our additional comments, where appropriate.