Hospice Fraud: On the Law-Enforcement Horizon
Hospice Fraud Is a Top Federal Enforcement Priority in 2025 and 2026
Federal enforcement of hospice fraud has entered an aggressive new phase. In January 2026, CMS and DOJ held a joint press conference focused specifically on hospice fraud. That kind of coordinated announcement is reserved for enforcement priorities on the receiving end of the highest level of attention from both agencies. CMS Administrator Dr. Mehmet Oz stated that DOJ is building a dedicated team to investigate hospice fraud. First Assistant United States Attorney Bill Essayli of the Central District of California described the scale of the problem as "almost beyond even our imagination."
The billing data for this industry is driving the scrutiny. About 18 percent of the nation's total home health and hospice Medicare billing activity originates from Los Angeles County alone. That concentration has produced a seven-fold increase in hospice billing in the region over recent years. In January 2026, Dr. Oz and senior CMS officials conducted a personal site visit to Los Angeles to investigate fraud. Congressional hearings followed within days.
CMS referred 343 cases to law enforcement in 2025, which in total represents $3.4 billion in suspected fraudulent billing. Hospice fraud cases were among those charged in DOJ's June 2025 National Health Care Fraud Takedown. The DOJ Fraud Section's 2025 Year in Review identifies hospice fraud as an active Healthcare Fraud Unit enforcement category alongside wound care, telehealth, and controlled substances.
Recent federal prosecutions confirm an upward trajectory. In November 2025, four California defendants were sentenced to federal prison for their roles in a $16 million Medicare fraud scheme involving sham hospice companies. The lead defendant received 12 years and was ordered to pay over $17 million in restitution. In January 2026, the California Attorney General filed felony charges against seven additional individuals, including hospice owners, physicians, and a nurse, for enrolling patients without terminal diagnoses and cycling them between related companies to avoid detection.
CMS has placed newly enrolling hospices in Arizona, California, Nevada, Texas, Georgia, and Ohio in a Provisional Period of Enhanced Oversight. Billing privileges have been revoked for 122 operators in those states. The enforcement is national in scope. Prosecutions are active in Florida, Texas, Ohio, Georgia, and Arizona in addition to California.
"We only know about the fraud that gets reported to us, or that our investigators uncover, or through what whistleblowers bring to us."
— First Assistant U.S. Attorney Bill Essayli, Central District of California, 2026Key Issues That Trigger Federal Hospice Fraud Investigations
Federal hospice fraud investigations are commonly initiated in one of three ways: (1) a current or former employee files a qui tam whistleblower complaint under the False Claims Act; (2) CMS data analytics identify a hospice as a billing outlier and refer the case to HHS-OIG; or (3) a patient, family member, or referral source reports information directly to the government.
Patient Eligibility: The Central Fraud Theory
Medicare hospice benefits are available only to patients whom a physician has certified as having a terminal illness with a life expectancy of six months or less, if the illness runs its normal course. See 42 U.S.C. section 1395f(a)(7); 42 C.F.R. section 418.22.
The government's central allegation in most hospice fraud cases is that operators systematically enrolled patients who did not meet this standard. The theory covers operators who recruited patients without terminal diagnoses, pressured physicians to certify ineligible patients, and created false clinical documentation to support certifications that were never clinically grounded.
On the defense side, there is significant gray area in these physician certifications. In the absence of a kickback arrangement, these certifications generally go to medical necessity. Proving a lack of medical necessity is often an uphill battle for federal prosecutors in a healthcare fraud case involving hospice fraud or any other type of covered service.
Hospice Billing Patterns That Attract CMS and DOJ Data Analytics
Kickback and Patient Recruiting Arrangements
The Anti-Kickback Statute, 42 U.S.C. section 1320a-7b, prohibits any payment to induce patient referrals to a hospice that then submits claims to a federal healthcare program for medical services. Federal prosecutors have charged marketers, patient recruiters, and referring physicians under the AKS in hospice cases across the country.
Certifying physicians who received compensation in exchange for terminal-illness certifications are consistently named as co-defendants in both criminal indictments and FCA civil proceedings. CMS Administrator Oz specifically identified kickback arrangements between hospice operators and certifying physicians as a central focus of the federal investigation.
Documentation Failures and False Certifications
Federal regulations require face-to-face encounters between a hospice physician or nurse practitioner and each patient prior to the third benefit period recertification, and for each recertification thereafter. 42 C.F.R. section 418.22(a)(4). The government regularly charges operators for billing recertification periods without documented encounters and for creating false documentation of encounters that never occurred. Pre-programmed EHR systems that generate false clinical notes automatically have been a specific charging theory in recent federal hospice prosecutions.
Key Potential Federal Charges in a Hospice Fraud Case
Federal hospice fraud prosecutions do not typically result in a single charge. The government layers multiple counts across distinct legal theories. Each count carries its own statutory maximum, and sentencing exposure compounds quickly.
Money laundering charges have become a consistent feature of federal hospice prosecutions. In the November 2025 California sentencing, defendants were charged with both concealment money laundering under section 1956 and transactional money laundering under section 1957. Those charges were based on moving Medicare fraud proceeds through shell company bank accounts and real estate purchases. Money laundering charges dramatically increase sentencing exposure and enable the government to pursue forfeiture of any asset traceable to fraud proceeds.
For certifying physicians, the government's theory does not require proof that the physician personally submitted a claim. It is sufficient that the physician signed certifications of terminal illness without clinical basis, knowing those certifications would be used to generate Medicare claims. Physicians face significant criminal exposure on this conduct alone.
Key Federal Investigators in Hospice Fraud Cases
Hospice fraud investigations are multi-agency by design. A CMS billing privilege revocation or an HHS-OIG audit may simultaneously be feeding a parallel criminal investigation at DOJ's Fraud Section or a local USAO. Executives and medical professionals who respond to CMS or OIG inquiries without criminal defense counsel may be making statements that will be used against them in a subsequent criminal proceeding.
| Agency | Role | Primary Tools |
|---|---|---|
| DOJ Fraud Section, Healthcare Fraud Unit | Lead federal criminal prosecutors for healthcare fraud investigations nationwide. Directs Strike Force investigations and makes charging decisions. | Grand jury subpoenas, search warrants, cooperating witness agreements, criminal indictments |
| U.S. Attorney's Office | Local federal prosecutors. Co-prosecutes Fraud Section cases and brings cases in federal districts around the country. | Grand jury, civil FCA complaints, forfeiture actions |
| HHS Office of Inspector General | Primary investigative agency for federal prosecutors. Conducts audits of billing data and refers cases to DOJ. | Administrative subpoenas, Civil Investigative Demands, exclusion proceedings, data analytics |
| FBI | Criminal investigative partner of federal prosecutors. Executes search warrants and conducts witness interviews. | Search warrants, undercover operations, financial analysis |
| CMS Program Integrity | Identifies billing anomalies and refers cases to civil and criminal authorities. Revokes billing privileges and imposes PPEO. | Data analytics, UPIC audits, billing privilege revocation, prepayment review |
| State Medicaid Fraud Control Units | Investigates Medicaid fraud in parallel proceedings with DOJ and often in partnership with federal law enforcement. | State subpoenas, joint investigations with DOJ, parallel state criminal charges |
| IRS Criminal Investigation | Investigates tax evasion and money laundering of fraud proceeds in larger hospice cases. | Financial forensics, tax records analysis, money laundering investigation |
Key Defenses in a Federal Hospice Fraud Case
Federal hospice fraud prosecutions are defensible at every stage. Cases in this area often intersect with judgment calls and questions of medical necessity.
Lack of Willfulness and Specific Intent
Federal healthcare fraud under section 1347 requires proof that the defendant knowingly and willfully executed a scheme to defraud. The Anti-Kickback Statute similarly requires proof of knowing and willful conduct.
Billing errors, documentation failures, and good-faith clinical disagreements do not satisfy the willfulness element, even when they are substantial. Physicians who relied on their clinical judgment in good faith, however mistaken in retrospect, retain a substantial defense on intent grounds.
Clinical Judgment and the Prospective Nature of the Eligibility Standard
Medicare hospice eligibility does not require that a patient actually die within six months. The standard requires a prospective clinical judgment that the patient's life expectancy would be six months or less if the illness runs its normal course. 42 C.F.R. section 418.22(b)(1).
Patients who survive longer than expected do not by that fact alone establish that the initial certification was fraudulent. Experienced defense counsel retains palliative care specialists and other clinical experts to demonstrate that the certifications at issue were clinically supported at the time they were made.
Challenging the Government's Data Analytics and Billing Outlier Theory
Statistical billing outliers are investigative tools, not proof of fraud. Defense counsel challenges the government's benchmark populations, the selection of the comparison group, and the clinical characteristics of the defendant's patient population that legitimately explain deviations from statistical norms. A high live discharge rate may reflect a practice of enrolling patients earlier in the disease trajectory. Early enrollment is legally appropriate and does not indicate fraud.
Safe Harbor Analysis for Compensation and Referral Arrangements
Not every payment arrangement between a hospice and a referring physician violates the Anti-Kickback Statute. The AKS provides statutory exceptions and regulatory safe harbors that protect bona fide compensation arrangements, including the employee safe harbor, the personal services safe harbor, and the fair market value safe harbor. Experienced defense counsel analyzes each challenged arrangement against applicable safe harbors and retains fair market value experts where compensation amounts are at issue.
Preventing Obstruction Exposure and Managing Parallel Proceeding Risk
Document destruction after notice of an investigation constitutes obstruction of justice and carries significant criminal exposure beyond the underlying conduct under investigation. Defense counsel must immediately implement a formal litigation hold upon any indication of investigation, whether a subpoena, agent contact, CMS audit, or whistleblower filing. Statements made in civil depositions or written OIG responses can be used against a defendant in a parallel criminal proceeding.
What to Do if You Receive a Subpoena, CID, or Agent Contact
Frequently Asked Questions
Facing a Federal Hospice Fraud Investigation?
Armstrong & Bradylyons PLLC defends hospice executives, owners, and certifying physicians nationwide. As a former Assistant Chief from DOJ's Fraud Section, Scott Armstrong defends medical professionals and healthcare executives in federal investigations involving healthcare fraud and violations of the Anti-Kickback Statute. As the former Assistant Chief of the Fraud Section's Miami Strike Force, Drew Bradylyons similarly defends individuals in healthcare fraud investigations. Together, the firm provides a trial-ready defense in complex healthcare fraud investigations.
