Hospice Admissions are Soaring — So is fraud and improper care. Medicare is cracking down.

The U.S. Centers for Medicare & Medicaid Services (CMS), headed by Mehmet Oz, have ramped up investigations of suspected hospice fraud, as well as healthcare waste and abuse overall.

As of December, newly licensed hospices in Georgia and Ohio have faced a provisional period of enhanced oversight, joining heightened scrutiny efforts already in place in hospice-rich states such as Arizona, California, Nevada and Texas, according to CMS.

Improper care — such as leaving patients in unnecessary pain, signing up people without their consent, or failing to properly screen and train employees — has become more common as hospice companies propagate, according to the U.S. Department of Health and Human Services’ Office of Inspector General.

“Healthcare fraud is real, documented and devastating — and stealing from people at the most vulnerable moment of their lives isn’t just fraud, it can cost them their future,” Oz said in a statement to MarketWatch. “When bad actors trick patients into fraudulent care, they don’t just drain taxpayer dollars — they strip people of medical care that could help them live longer. That’s unconscionable, and CMS is going to drive these predators out of the health system.”

Hospice provides care for people with terminal illnesses with a prognosis of six months or less. The goal is to manage pain and symptoms, rather than curing the disease, in the patient’s final months, weeks or days before death.

The hospice industry has been growing, fueled in part by the aging U.S. population. Hospice admissions grew 42% to 1.7 million from 2011 to 2021, according to MedPAC, the independent agency that advises Congress on Medicare issues.

The industry said it supports rooting out suspected fraud and negligence.

“We support CMS taking action to address fraudulent activity and profiteering in the hospice space, particularly when bad actors exploit vulnerable patients and misuse the Medicare hospice benefit,” said Tom Koutsoumpas, founder and CEO of the National Partnership for Healthcare and Hospice Innovation, a national organization representing nonprofit hospice providers. “These practices have no place in hospice care and undermine the trust that patients and families place in providers during some of the most important moments of their lives.”

For-profit hospice providers represent more than 70% of the industry, with many companies owned by private-equity firms, according to a 2022 report by ProPublica.

About 1.8 million Medicare beneficiaries receive hospice care each year, and Medicare pays about $27.5 billion annually for this care, according to the HHS inspector general. In 2023, suspected hospice fraud totaled an estimated $198.1 million.

A separate 2019 report from agency’s inspector general found that about 20% of Medicare-certified hospice agencies had deficiencies severe enough to pose serious safety risks to patients, such as unmanaged pain or neglect.

The study, analyzing data from 2012 to 2016, also showed that 87% of all hospices had at least one deficiency — such as leaving patients in unnecessary pain and discomfort for days, failing to screen employees for prior abuse and neglect, and failing to properly train staff. Other suspected fraud schemes involve enrolling beneficiaries without their consent and improper billing practices.

The HHS inspector general recommended changes such as increasing oversight of hospices with a history of serious deficiencies, strengthening requirements to report abuse and neglect, and creating easier ways for patients and families to submit complaints.

CMS has specifically been vocal about targeting suspect hospice activity in California’s Los Angeles County, where it says as much as 18% of the nation’s overall home health and hospice Medicare billing activity occurs.

In 2022, California’s state auditor reported that Los Angeles County had seen a 1,500% increase in the number of hospice companies since 2010 — more than six times the national average relative to its elderly population. The state auditor estimated that the county’s hospice agencies likely overbilled Medicare by $105 million in 2019 alone.

A CBS News analysis found that more than 700 of the roughly 1,800 hospices in Los Angeles County had multiple red flags for fraud as defined by the state — such as having multiple hospice companies in one building or geographic cluster, low patient counts, high rates of terminally ill patients later discharged alive, excessive billing, and staff shared among multiple companies.

California has been cracking down on hospice fraud on its own. In 2021, the state put a moratorium on hospice licensing, except in circumstances in which a community has a demonstrated need for an additional provider. The state has also ramped up its own investigations and launched the Hospice Fraud Task Force, which makes arrests, shares intelligence, investigates fraud and coordinates enforcement.

California has also revoked the licenses of more than 280 hospices in the past two years and identified about 300 additional hospices that are being evaluated for revocation, according to a press statement from California Gov. Gavin Newsom.

Still, even with the focus on fighting hospice fraud, CMS has given mixed signals. Last year, it suspended the Hospice Special Focus Program, halting a Biden-era initiative designed to increase oversight of poorly performing hospices. The pause followed industry criticism that the methods used may misclassify high-quality providers and cause unfair penalties.

The National Partnership for Healthcare and Hospice Innovation said nonprofit, community-based hospice providers have long called for stronger oversight and enforcement. Such hospice providers are not owned by private-equity firms or for-profit entities.

“Hospice care, when delivered as intended, is one of the most compassionate services in our healthcare system, and we must protect both patients and the providers who serve them with integrity,” Koutsoumpas said.