[Federal Register Volume 63, Number 79 (Friday, April 24, 1998)]
[Notices]
[Pages 20415-20417]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-10907]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General


Publication of OIG Special Fraud Alert: Fraud and Abuse in 
Nursing Home Arrangements With Hospices

AGENCY: Office of Inspector General (OIG), HHS.

ACTION: Notice.

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SUMMARY: This Federal Register notice sets forth a recently issued OIG 
Special Fraud Alert concerning fraud and abuse practices involving 
nursing home arrangements with hospices. For the most part, OIG Special 
Fraud Alerts address national trends in health care fraud, including 
potential violations of the Medicare anti-kickback statute. This 
Special Fraud Alert, issued to the health care provider community and 
now being reprinted in this issue of the Federal Register, specifically 
identifies and highlights some vulnerabilities in nursing home 
arrangements with hospices and instances of potential kickbacks between 
nursing homes and hospices to influence the referral of patients.

FOR FURTHER INFORMATION CONTACT: Joel J. Schaer, Office of Counsel to 
the Inspector General, (202) 610-0089.

SUPPLEMENTARY INFORMATION:

I. Background

    The Office of Inspector General (OIG) issues Special Fraud Alerts 
based on information it obtains concerning particular fraudulent and 
abusive practices within the health care industry. These Special Fraud 
Alerts provide the OIG with a means of notifying the industry that we 
have become aware of certain abusive practices which we plan to pursue 
and prosecute, or bring civil and administrative action, as 
appropriate. The Special Fraud Alerts also serve as an effective tool 
to encourage industry compliance by giving providers an opportunity to 
examine their own practices.
    Special Fraud Alerts are intended for extensive distribution to the 
health care provider community, as well as those charged with 
administering the Medicare and Medicaid programs. To date, the OIG has 
published in the Federal Register the texts of 8 previously-issued 
Special Fraud Alerts (December 19, 1994, 59 FR 65372; August 10, 1995, 
60 FR 40847; and June 17, 1996, 61 FR 30623), and we have indicated our 
intention of publishing future Special Fraud Alerts in this same manner 
as a regular part of our dissemination of such information.
    With regard to nursing home arrangements with hospices, this newly-
issued Special Fraud Alert discusses (1) the nature of hospice care and 
who is eligible to receive such care; (2) the reimbursement for hospice 
care provided by nursing homes; (3) the vulnerabilities in nursing home 
arrangements with hospices; (4) several suspected kickback arrangements 
that are designed to induce Medicare or Medicaid referrals. A reprint 
of this Special Fraud Alert follows.

II. Special Fraud Alert: Fraud and Abuse in Nursing Home 
Arrangements With Hospices (April 1998)

    Office of Inspector General was established at the Department of 
Health and Human Services by Congress in 1976 to identify and eliminate 
fraud, abuse and waste in the Department's programs and to promote 
efficiency and economy in departmental operations. The OIG carries out 
this mission through a nationwide program of audits, investigations, 
and inspections.
    To reduce fraud and abuse in the Federal health care programs, 
including Medicare and Medicaid, the OIG actively investigates 
fraudulent schemes to obtain money from these programs and, when 
appropriate, issues Special Fraud Alerts that identify segments of the 
health care industry that are particularly vulnerable to abuse. This 
Special Fraud Alert focuses on the interrelationship between the 
hospice and nursing home industries and describes some potentially 
illegal practices the OIG has identified in arrangements between these 
providers.

What Is Hospice Care and Who Is Eligible To Receive It?

    Medicare's hospice benefit provides palliative care to individuals 
who are terminally ill. Palliative care focuses on pain control, 
symptom management, and counseling for both the patient and family. 
Medicare hospice payments increased from about $958 million for Fiscal 
Year 1993 to over $1.8 billion for Fiscal Year 1995. Although the 
hospice benefit is still a relatively small portion of total Medicare 
Part A expenditures (about 1.5 percent), it has grown considerably over 
the past several years.
    In order to elect the hospice benefit, a Medicare beneficiary must 
be entitled to Medicare Part A services and certified as terminally 
ill, which is defined as a medical prognosis of a life expectancy of 6 
months or less if the illness runs its normal course. A beneficiary who 
elects to enroll in a hospice program waives his or her rights to all 
curative care

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related to his or her terminal illness. Medicare will continue to pay 
for services furnished by the patient's non-hospice attending physician 
and for the treatment of conditions unrelated to the terminal illness.
    The hospice must have a written plan of care which covers physician 
and nursing services; physical, occupational, and speech therapy; 
medical social services; home health aides and homemakers; short-term 
inpatient care; counseling; respite care; and medical supplies, 
including drugs and biologicals. Certain of the hospice services 
(``core services'') must be provided directly to the beneficiary by 
employees of the hospice, while other non-core hospice services may be 
provided in accordance with contracts with other providers. However, 
the hospice must retain professional management for all contracted 
services.

Reimbursement for Hospice Care Provided in Nursing Homes

    Medicare does not have a separate payment rate for routine hospice 
services provided in a nursing home. Because hospice services are 
typically provided to patients in their homes, the routine home care 
hospice rate does not include any payment for room or board. For 
services provided to patients in nursing homes, hospices receive the 
Medicare routine home care rate, which is a fixed amount per day for 
the services provided by the hospice, regardless of the volume or 
intensity of the services provided. Accordingly, where the hospice 
patient resides in a nursing home, the patient remains responsible for 
payment of the nursing home's room and board charges.
    If, however, a patient receiving Medicare hospice benefits in a 
nursing home is also eligible for Medicaid, Medicaid will pay the 
hospice at least 95 percent of the State's daily nursing home rate, and 
the hospice is then responsible for paying the nursing home for the 
beneficiary's room and board. The specific services included in the 
daily rate payment are determined by a State's Medicaid program and may 
vary from State to State.
    In addition to the room and board payment, a hospice may contract 
with the nursing home for the nursing home to provide non-core hospice 
services (i.e., those services which the hospice is not required by law 
to provide itself) to its hospice patients.

Vulnerabilities in Nursing Home Arrangements With Hospices

    Hospice services may be appropriate and beneficial to terminally 
ill nursing home residents who wish to receive palliative care. 
However, arrangements between nursing homes and hospices are vulnerable 
to fraud and abuse because nursing home operators have control over the 
specific hospice or hospices they will permit to provide hospice 
services to their residents. An exclusive or semi-exclusive arrangement 
with a nursing home to provide hospice services to its residents may 
have substantial monetary value to a hospice. In these circumstances, 
some nursing home operators and/or hospices may request or offer 
illegal remuneration to influence a nursing home's decision to do 
business with a particular hospice.
    Hospice patients residing in nursing homes may be particularly 
desirable from a hospice's financial standpoint. First, a nursing 
home's population represents a sizeable pool of potential hospice 
patients. Second, nursing home hospice patients may generate higher 
gross revenues per patient than patients residing in their own homes 
because nursing home residents receiving hospice care have, on average, 
longer lengths of stay than hospice patients in their homes. Also, 
there may be some overlap in the services that the nursing homes and 
hospices provide, thereby providing one or the other the opportunity to 
reduce services and costs. A recent OIG report found that residents of 
certain nursing homes receive fewer services from their hospice than 
patients in their own homes. Since hospices receive a fixed daily 
payment regardless of the number of services provided or the location 
of the patient, fewer services may result in higher profits per 
patient.
    However, a hospice's access to nursing home patients depends on the 
nursing home operator. Nursing home operators may restrict residents to 
one or two hospice providers. While an exclusive or semi-exclusive 
arrangement can promote efficiency and safety by permitting the nursing 
home operator to coordinate care, screen hospice caregivers, and 
maintain control of the premises, it also enhances the value of the 
nursing home operator's decision. In these circumstances, some nursing 
home operators or hospices may request or offer illegal inducements to 
influence the selection of a hospice.

Paying or Receiving Kickbacks in Order to Induce Medicare or Medicaid 
Referrals

    Because kickbacks can distort medical decision making, result in 
overutilization, and have an adverse effect on the quality of care 
patients receive, they are prohibited under the Federal health care 
programs, including Medicare and Medicaid. Under the anti-kickback 
statute, it is illegal to knowingly and willfully solicit, receive, 
offer, or pay anything of value to induce referrals of items or 
services payable by a Federal health care program.
    The OIG has observed instances of potential kickbacks between 
hospices and nursing homes to influence the referral of patients. In 
general, payments by a hospice to a nursing home for ``room and board'' 
provided to a Medicaid hospice patient should not exceed what the 
nursing home otherwise would have received if the patient had not been 
enrolled in hospice. Any additional payment must represent the fair 
market value of additional services actually provided to that patient 
that are not included in the Medicaid daily rate.
    Specific practices which are suspected kickbacks include:
    <bullet> A hospice offering free goods or goods at below fair 
market value to induce a nursing home to refer patients to the hospice.
    <bullet> A hospice paying ``room and board'' payments to the 
nursing home in amounts in excess of what the nursing home would have 
received directly from Medicaid had the patient not been enrolled in 
hospice.
    <bullet> A hospice paying amounts to the nursing home for 
``additional'' services that Medicaid considers to be included in its 
room and board payment to the hospice.
    <bullet> A hospice paying above fair market value for 
``additional'' non-core services which Medicaid does not consider to be 
included in its room and board payment to the nursing home.
    <bullet> A hospice referring its patients to a nursing home to 
induce the nursing home to refer its patients to the hospice.
    <bullet> A hospice providing free (or below fair market value) care 
to nursing home patients, for whom the nursing home is receiving 
Medicare payment under the skilled nursing facility benefit, with the 
expectation that after the patient exhausts the skilled nursing 
facility benefit, the patient will receive hospice services from that 
hospice.
    <bullet> A hospice providing staff at its expense to the nursing 
home to perform duties that otherwise would be performed by the nursing 
home.
    Parties that violate the anti-kickback statute may be criminally 
prosecuted or subject to civil monetary penalties, and also may be 
subject to exclusion from the Federal health care programs.

What To Do if You Suspect Fraud Involving Arrangements Between Nursing 
Homes and Hospices

    If you have information about nursing homes and hospices engaging 
in any of

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the activities described above, contact any of the regional offices of 
the Office of Investigations of the Office of Inspector General, U.S. 
Department of Health and Human Services, at the following locations:

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         Field offices              States served          Telephone    
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Boston........................  MA, VT, NH, ME, RI,         617-565-2660
                                 CT.                                    
New York......................  NY, NJ, PR, VI.......       212-264-1691
Philadelphia..................  PA, MD, DE, WV, VA,         215-861-4586
                                 DC.                                    
Atlanta.......................  GA, KY, NC, SC, FL,         404-562-7603
                                 TN, AL, MS.                            
Chicago.......................  IL, MN, WI, MI, IN,         312-353-2740
                                 OH, IA, MO.                            
Dallas........................  TX, NM, OK, AR, LA,         214-767-8406
                                 CO, UT, WY, MT, ND,                    
                                 SD, NE, KS.                            
Los Angeles...................  AZ, NV, So. CA.......       714-246-8302
San Francisco.................  No. CA, AK, HI, OR,         415-437-7960
                                 ID, WA.                                
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To Report Suspected Fraud, Call or Write

    1-800-HHS-TIPS (1-800-447-8477), Department of Health and Human 
Services, Office of Inspector General, P.O. Box 23489, L'Enfant Plaza 
Station, Washington, D.C. 20026-3489.

    Dated: April 15, 1998.
June Gibbs Brown,
Inspector General.
[FR Doc. 98-10907 Filed 4-23-98; 8:45 am]
BILLING CODE 4150-04-P