Hospice Fraud Defense: CMS and Medicare Target Hospice in National Takedown

Hospice fraud is a serious enforcement priority for Medicare, and federal regulators are under pressure to police sham entities, abusive billing, and suspect ownership structures and healthcare fraud. Recent reporting and criminal enforcement actions, particularly in California, have added to that pressure. But aggressive enforcement creates a second danger: regulators may begin using labels like “high risk” or “at risk” in ways that function like a shutdown before the government clearly identifies the legal basis for its action.

That is where hospice fraud defense becomes critical.

In healthcare enforcement, the label often lands before the adjudication. Once a hospice is associated with suspected fraud, referrals may dry up, financial relationships may become unstable, payment may be interrupted, and the organization may find itself under broader scrutiny from contractors, regulators, private payers, and even criminal investigators. In some cases, the practical damage occurs before CMS fully explains what it is doing or why.

Not Every CMS “Exclusion” Means Fraud

One of the most important legal distinctions in this area is the difference between a true fraud-based enrollment action and some other form of administrative consequence.

The CMS document titled “FY2025 Hospices Excluded from APU” is not, on its face, a master list of hospices adjudicated to have committed fraud. It is tied to the Hospice Quality Reporting Program and the Annual Payment Update. The reasons reflected in that type of listing may include issues such as termination date, no Medicare data, or new-provider status. APU exclusion is not the same thing as a Medicare enrollment denial, a revocation of billing privileges, or an exclusion imposed by HHS-OIG.

That distinction is not academic. It determines what process applies, what remedies may be available, and how counsel should respond.

For a hospice facing regulatory heat, one of the first jobs of counsel is to separate reporting consequences, payment consequences, enrollment consequences, and fraud-based program integrity actions. Too many providers and advisors treat these categories as interchangeable. They are not.

Where the Real Risk Often Lies: CMS’s Undue-Risk Affiliation Authority

The more serious threat often arises under CMS’s affiliation disclosure and enrollment authority.

Under 42 C.F.R. § 424.519, CMS may require providers and suppliers to disclose certain present or former affiliations. If CMS determines that an affiliation presents an “undue risk of fraud, waste, or abuse,” that determination can lead to a denial of enrollment under 42 C.F.R. § 424.530(a)(13) or a revocation of enrollment under 42 C.F.R. § 424.535(a)(19).

This is one of the most important pressure points in modern hospice fraud defense.

The power is broad, but it is not supposed to be standardless. The regulation contemplates a fact-based analysis. CMS is supposed to evaluate the affiliation itself, the underlying disclosable event, the degree of the relationship, the duration of the relationship, and other evidence bearing on program risk. In other words, the agency is supposed to do more than say: this looks suspicious.

An “undue risk” finding is supposed to be a regulatory conclusion grounded in identifiable facts.

That matters because the real-world problem is often not simply that CMS investigates. It is that suspicion can begin to function like a final determination before the provider has been given a fair chance to answer the charge.

CMS Can Fight Fraud, But It Still Has To Follow the Rules

No serious healthcare lawyer disputes that hospice fraud can be real, costly, and harmful. Sham hospices, improper enrollment practices, and abusive billing schemes justify scrutiny. The government can investigate, deny, revoke, suspend, and refer matters for civil or criminal enforcement when the facts warrant it.

But lawful enforcement still requires process.

If CMS formally denies enrollment or revokes billing privileges, the regulations provide review rights. Under 42 C.F.R. § 424.545 and 42 C.F.R. Part 498, providers may have access to reconsideration and additional administrative review. Those rights matter because they force the agency to identify the actual basis for the action.

The more troubling scenario is when a hospice is effectively strangled through contractor communications, payment disruption, vague references to risk, affiliation concerns, or informal treatment as a suspect entity, while the government avoids issuing a clean, reviewable determination. In that setting, the agency may be obtaining the practical effect of revocation without squarely invoking the procedures that revocation is supposed to trigger.

That is where due-process and administrative-law arguments become strongest.

Why Red Flags Alone Are Not Enough

In the current climate, enforcement stories often focus on patterns: overlapping ownership, common addresses, unusual patient populations, rapid formation of new hospices, repeated use of the same professionals, or irregular mortality and utilization data. Those may be legitimate investigative indicators. In the right case, they may prove highly probative.

But they are still not adjudications.

The government must still connect the suspicious pattern to the specific provider and explain why that hospice, that owner, that manager, or that affiliation creates the kind of undue risk contemplated by the regulation. If the government cannot do that with specificity, the action begins to look less like disciplined enforcement and more like administrative profiling.

That distinction can decide the outcome of a case.

For purposes of hospice fraud defense, the issue is not whether the government may investigate red flags. It may. The issue is whether it can convert a pattern-based suspicion into a practical shutdown without identifying the governing authority and affording the procedures the law requires.

Common Mistakes in Hospice Fraud Defense

Providers often make avoidable errors once CMS tightens the screws.

The first is assuming the issue is merely administrative. Sometimes it is. Sometimes it is the beginning of something much more serious. An enrollment request, quality-reporting issue, affiliation inquiry, or contractor notice may be the front edge of a broader program-integrity or fraud matter.

The second is failing to distinguish the type of threat involved. A reporting deficiency, claim-level problem, payment hold, enrollment denial, revocation, and fraud referral are not the same thing. Each carries different standards, timelines, and review rights.

The third is waiting too long to build the record. If CMS is relying on an affiliation theory, counsel needs to identify the specific affiliation at issue, the underlying disclosable event, the evidence connecting the provider to that event, and the evidence available to rebut or contextualize the government’s position.

The fourth is treating reputational fallout as secondary. In healthcare cases, the legal issue is often only part of the problem. Once a hospice is marked as risky, referral sources, lenders, vendors, and payers may react long before any formal adjudication occurs.

Strategic Questions To Ask Immediately

When CMS or a contractor signals that a hospice is “high risk” or “at risk,” counsel should move quickly and begin with a disciplined framework.

1. What is the legal mechanism?

Is this a Hospice Quality Reporting Program issue, an enrollment denial, a revocation matter, a payment issue, a state licensure problem, or a fraud-related program integrity action?

2. What is the actual asserted basis?

If the concern is affiliation-based risk, what affiliation is CMS relying on? What event makes it disclosable? What facts supposedly make it an undue risk?

3. What review rights have been triggered?

A provider cannot defend itself properly unless it knows whether it is in a reconsideration process, rebuttal posture, Part 498 appeal track, or some more ambiguous administrative status.

4. What collateral exposure exists beyond CMS?

In serious cases, the same facts may trigger False Claims Act scrutiny, criminal investigative attention, state licensing exposure, managed-care consequences, and private payer fallout.

That is why effective hospice fraud defense is not just about responding to a single letter. It is about identifying the government’s theory early, forcing clarity where possible, preserving the administrative record, and managing the civil, regulatory, and criminal risk together.

The Larger Legal Issue

CMS is entitled to protect Medicare. It is not entitled to treat suspicion as a substitute for process.

That is the larger issue beneath the current hospice enforcement climate.

A hospice may lose an APU for reporting-related reasons. A hospice may also face denial or revocation if CMS lawfully determines that a disclosed affiliation creates an undue risk to the program. Those are different actions, arising from different authorities, with different legal consequences and different avenues of review.

When those categories get blurred, bad law and bad process follow.

And in the hospice space, where reputational damage and operational collapse can occur quickly, that blurring can destroy a provider long before a neutral decision-maker ever reviews the file.

Conclusion

Hospice fraud deserves serious enforcement. But serious enforcement still requires precision, discipline, and procedural fairness.

CMS cannot simply rely on an atmosphere of suspicion, attach a “high risk” label to a hospice, and achieve the practical equivalent of a shutdown without clearly identifying the authority it is invoking and affording the review the regulations require. The government has strong tools. It does not have unlimited discretion to collapse suspicion into guilt.

That is why early, strategic hospice fraud defense matters. In many of these cases, the outcome turns on whether counsel quickly identifies the legal theory, separates rhetoric from regulatory authority, develops the factual record, and forces the government to operate within the rules.

Contact Chapman, Dowling & Mallek

If your hospice, healthcare business, or professional practice is facing Medicare enrollment scrutiny, an alleged undue-risk affiliation issue, payment disruption, or signs of escalating CMS enforcement, early intervention matters. These matters can move quickly from administrative confusion to existential threat. Chapman, Dowling & Mallek represents clients in high-stakes healthcare, white collar, and government-investigation matters where a disciplined legal response can make a critical difference.

Get Help Today

If your hospice, healthcare business, or professional practice is facing Medicare enrollment scrutiny, an “undue risk” affiliation issue, payment disruption, or signs of escalating CMS action, early counsel matters. These cases often turn on how quickly the legal theory is identified, how the administrative record is developed, and whether the government is forced to justify its action within the rules. Chapman, Dowling & Mallek advises clients in high-stakes federal healthcare and white collar matters where regulatory action can quickly become existential.

About Ron Chapman

Ron Chapman is a federal criminal defense attorney and trial lawyer who represents individuals, professionals, and businesses in white collar and healthcare-related matters. His work includes defending clients in federal investigations, prosecutions, compliance-related disputes, and other high-stakes matters involving government scrutiny.

Sources

• CMS, FY2025 Hospices Excluded from APU. (Centers for Medicare & Medicaid Services)

• CMS, HQRP: Achieving a Full Annual Payment Update (APU) and HQRP reconsideration materials. (Centers for Medicare & Medicaid Services)

• 42 C.F.R. § 424.519, Disclosure of affiliations. (eCFR)

• 42 C.F.R. § 424.530, Denial of enrollment in the Medicare program. (eCFR)

• 42 C.F.R. § 424.535, Revocation of enrollment in the Medicare program. (ECFR.io)

• 42 C.F.R. § 424.545 and 42 C.F.R. Part 498, Provider appeal rights and administrative review procedures. (Legal Information Institute)

• HHS/CMS, Provider Enrollment Appeals Procedure; HHS DAB, Guidelines: ALJ Decisions on Provider/Supplier Medicare Enrollment. (Centers for Medicare & Medicaid Services)

• CBS News, Investigation into hospice fraud in Los Angeles County. (CBS News)

• U.S. Department of Justice, Central District of California, 8 Arrested in Health Care Fraud Takedown. (Department of Justice)