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There are about 7,000 senior citizens in the Van Nuys neighborhood north of Los Angeles and 591 state-sanctioned hospice agencies, 161 of which are located in a mirrored two-story building anchored by an HVAC repair and a Diva Touch beauty salon. The building advertises “professional business mailing addresses” starting at $25 a month, and a live telephone receptionist for those who need to “*appear as if you are in the office no matter where you are*” for just $225.
When Sarah Palin and Michele Bachmann, the Lauren Boebert and Marjorie Taylor Greene of the age, began in summer 2009 to prophesy the proliferation of bureaucratic “death panels” in Obamacare’s America, this is not the image they conjured. And yet, as a new study published by Private Equity at Work authors Eileen Appelbaum and Rosemary Batt and the researcher Emma Curchin details, the death business has been infiltrated by an onslaught of professional grifters since 2010, and our bureaucrats seem alarmingly content to allow it to stay that way.
Medicare pays hospice agencies a daily rate, ranging from $203 to $1,462, to provide care to senior citizens a doctor has deemed terminally ill and likely to die within six months. To bill the highest rate, a hospice agency is supposed to provide at least eight hours of continuous home care to a dying patient. At the $203 daily rate—which is, by the way, more than some states pay nursing homes to house, feed, and care for Medicaid patients—there are literally no minimum requirements whatsoever. A courier can bring pain meds to the house once a month, or not at all; they can offer up a counselor to show up during a patient’s final days, or ghost them entirely. “Why anybody commits fraud is a mystery to me,” Appelbaum marvels, “because you can make so much money playing within the guidelines the way the payment scheme operates.”
Theoretically, a hospice agency must employ a licensed physician as its medical director, maintain an inventory of medication and supplies, and employ a staff of registered nurses licensed to dispense them. But as with everything else Medicare funds, compliance with these rules is largely left to the states, which are often breathtakingly lax about even pretending to enforce them.
In California, obtaining a hospice license mostly involves writing a $3,000 check and filling out a packet of documents no one will bother to verify, including a line promising you have never been convicted of a felony. The public-health department is required to visit the site of the promised hospice agency, but what purpose the visit is supposed to serve is unclear, since the agency imposes no requirements upon hospice providers until they are licensed, at which point it is virtually guaranteed they’ll never hear from them again, as no one in the agency is actually charged with tracking complaints.
Medicare spent an estimated $22.4 billion paying hospice providers in 2022, nearly double the expenditure in 2010. In a health care industry jam-packed with gravy trains, death care is, for now anyway, likely the most lucrative scam going.
Hospice fraud takes a few different forms depending on the size and sophistication of the operator.
Appelbaum and Batt are two of the world’s pre-eminent scholars of the private equity business, which has spent billions of dollars rolling up hospice providers and plowed close to $1 trillion into the health care industry since the passage of the Affordable Care Act. The pair has comprehensively chronicled a whole litany of PE tactics designed to extract windfall profits from hospitals and nursing homes, emergency rooms, urgent care clinics, air ambulances, billing and collections (known as “revenue cycle management”), and more. In those subsectors, however, the modes of profiteering are at least somewhat complex, generally involving a dizzying array of highly credentialed co-conspirators, a finger on the pulse of the current trends in upcoding and fraud detection, and deep benches of both well-remunerated attorneys and underpaid care workers capable of easily vanquishing overwhelmed regulators and trial lawyers.
Hospice requires virtually none of that, which is why Appelbaum and Batt’s latest effort focuses less on shenanigans of PE financiers and more on, in Appelbaum’s words, “What the heck is going on with CMS?” (That’s the Centers for Medicare & Medicaid Services, which is supposed to regulate this stuff.)
The hospice racket is now thoroughly mainstream, Appelbaum points out: CVS and UnitedHealth, respectively, paid $8 billion and $5.5 billion to acquire home health and hospice providers last year. But those who dominate the death business in Los Angeles County, where the hospice industry has swollen from just over 100 providers in 2010 to nearly 2,000 in 2022, are a fair bit more downscale. They expose a regulatory state so pathetic, so negligent, that it raises the question of whether the government is really in the death panel business after all.
A brief aside on those 591 hospice agencies in little Van Nuys, where the industry is likely less “competitive” than it seems. In a recent audit of hospice oversight, the California state auditor noticed one hospice license application that had been filed by a medical director who was already listed as the medical director of more than 30 other hospice agencies in the state.
The federal government’s one semi-enforced deterrent against hospice fraud is a rule capping each hospice agency at a total annual tab of $32,000 per patient treated. So while individual patients are allowed to receive hospice care for as long as a doctor will vouch that they are still dying, hospices must balance healthier patients with patients who are likely to die to avoid exceeding the caps. But actually-dying patients are their own kind of risk, requiring expensive pain medications that limit the profits a hospice can rake in on their care, so profit-oriented agencies run a delicate numbers game to admit as many non-moribund patients as they can and avoid raising red flags. Among Van Nuys hospice agencies, the “live discharge rate”—considered a reliable sign of fraud—is a whopping 51 percent, roughly triple the national average and nearly quintuple the rate in 2014.
Hospice fraud takes a few different forms depending on the size and sophistication of the operator. Sometimes smaller hospice agencies will admit healthy patients without their knowledge, by bribing a physician or a hospital social worker or a professional identity thief. Since the agencies aren’t required to actually perform any minimum level of service, these cases often go completely undetected until the patient experiences a medical emergency and attempts to use their Medicare benefits, which are no longer active, because—and this is frankly the creepiest thing about hospice—recipients are only entitled to receive “palliative care” if they are willing to absolve CMS of the responsibility to pay for traditional care. Those scams are likely to result in complaints, but complaints don’t mean much in most states.
Other dubious hospice providers lure in patients with the promise of powerful narcotics, and many have been known to use those narcotics to finish the job if a hospice is approaching its reimbursement cap. Since autopsies aren’t performed on hospice patients, the possibility of getting caught killing one is exceedingly remote.
More sophisticated hospice operators hire sales representatives with a knack for convincing healthy but emotionally vulnerable patients that their lives are too excruciating to continue medical treatment. Perversely, hospitals will often revive imminently dying patients with do-not-resuscitate orders for long enough to admit them to hospice programs solely to get the deaths “off their books.”
The list is long of American entrepreneurs who have attained great wealth monetizing the insatiable national demand for disposing of our undesirables. But our public-health intellectuals still profess to hand-wring over the nation’s plunging life expectancy, the alarming epidemic of death by “despair.” Do they realize that nearly half of Americans over the age of 65 who die each year are enrolled in programs whose sales teams are specifically incentivized to sell basically healthy people on the benefits of dying sooner?
Recently, CMS rolled out its “solution” to the problem of hospice fraud, a pilot program developed in conjunction with the health insurer and hospice provider Humana, based on the Medicare Advantage system. The pilot program, which has recently been extended until 2030, replaces the old per diem hospice reimbursement formula with a lump-sum payment for every Medicare patient who dies, thus elevating the profitability of a terminal cancer patient to something approaching that of a not-actually-dying old person.
Noting that Medicare Advantage plans already serve to deprive patients of necessary but expensive medical care, rejecting fully 13 percent of patient claims that would have been authorized by traditional Medicare, Appelbaum and Batt point out that the pilot program would largely serve to double down on that care-rationing business model, rewarding insurers with a $32,000 bounty for convincing a patient to forgo medicine altogether in favor of “comfort care” in something like the opposite of the “accountable” and “outcome-based” incentive structures that are supposed to undergird sound health care policy. “This approach, which many fear may be the wave of the future,” they write, “is a serious step backward.” And yet it’s hard to imagine that whoever designed it didn’t know exactly what they were doing.
