Our previous installments, Strategic Hospice Revenue Cycle Management and Hospice Billing: How to Build a Clean-Claim Process, established that a healthy revenue cycle is the engine that allows an agency to maintain stability and focus on its clinical mission. However, hospice leadership typically focus more heavily on clinical delivery rather than the financial aspects of the agency. The connection between daily administrative tasks and long-term financial health can sometimes be difficult to see.
Many leaders find that their month-end feels like a period of high volatility rather than a repeatable operating process. To shift to a more predictible financial stance, leadership must transition from merely monitoring bank balances to auditing the upstream processes that dictate the agency’s cash flow.
Hospice leadership to not need to be a billing experts to lead a successful agency. However, it is essential to have a solid understanding of the operational triggers that dictate the agency’s cash flow. To gain an understanding of the agency’s health and whether the agency is running a disciplined or reactive process, leadership can use these seven questions in the next meeting with the revenue cycle manager.
1. The “First-Pass” Health Check
The Question:“What is our first-pass clean claim rate over the last 90 days, and what are the primary reasons for failure?”
Why it matters: A “first-pass” claim is one that is paid by Medicare the very first time the agency submits it. In a healthy agency, this should be above 95%. A high first-pass rate indicates that the intake and clinical teams are providing the billing office with clean, validated data. If the first-pass rate is low, it means the billing team is spending more time “fixing” old errors than processing new revenue. A low first-pass rate means that the billing team is spending more time reworking old claims and fixing old mistakes than processing new revenue.
Leadership needs to know why claims are failing. Is it because intake forms are missing signatures? Is it because the clinical notes don’t match the billing dates? This question tells leadership which department – Intake, Clinical, or Billing – needs more training.
2. The NOE Revenue Leak
The Question:“How many non-covered days did we incur last month due to late or returned NOEs, and what was the specific dollar impact?”
Why it matters: The Notice of Election (NOE) is the most time-sensitive document in hospice. An agency has exactly five calendar days from a patient’s admission to notify Medicare. If the agency misses that window, or if the agency submits it with an error and has to resubmit it late, Medicare will simply refuse to pay for the days the agency cared for the patient prior to the NOE submission date. This is not a “delayed” payment; it is lost revenue that can never be recovered. Thus, unlike most billing errors, Notice of Election (NOE) failures typically result in permanent losses, i.e., “non-reportable” days where care was provided but cannot be reimbursed.
Tracking the dollar amount of these “non-covered days” is the fastest way to see if the agency’s intake process is disciplined. Quantifying the non-covered days in dollars transforms a “paperwork issue” into a tangible loss that requires immediate leadership intervention.
3. Sequential Discipline
The Question:“Are we experiencing out-of-sequence rejections, and if so, what is the root cause?”
Why it matters: Hospice billing is linear. Medicare processes hospice claims in a strict chronological order. An agency cannot successfully bill for a patient’s February services until the patient’s January claim has been processed and paid. This is known as sequential billing. One unclosed transfer, discharge, or revocation can halt the entire chain of claims for a patient.
Sequencing issues usually point to a breakdown in communication between field staff and the office, indicating that patient statuses are not being updated in the EMR in real-time.
If a patient’s status changes – such as a transfer from another agency, a discharge, or a readmission – the paperwork must be finalized in the system with perfect accuracy. If a single status update is forgotten or entered incorrectly, it creates a billing stoppage. Every subsequent month of revenue for that patient is held in “suspense” by Medicare until the prior month is resolved. This question reveals whether the agency’s clinical and office staff are communicating patient status changes in real-time, or if the agency’s billing department is constantly waiting on clinical data to “unlock” the next month’s cash flow.
4. The Eligibility Safety Net
The Question:“What is our 30-day forward-looking tracker for recertifications and Face-to-Face (F2F) deadlines?”
Why it matters: To keep a patient on hospice, a physician must certify their eligibility at specific intervals. For some of these, a “Face-to-Face” visit is legally required. If that visit happens even one day late, the patient’s eligibility is voided for that period, and the claim will be denied. These are unnecessary and preventable revenue lossses.
Hospice leadership should ensure that the team isn’t just reacting to missed deadlines. Instead, the team should be actively managing a calendar of upcoming recertification requirements – proactively tracking patients with upcoming recertifications – to ensure no patient “falls out of compliance.”
5. “Return to Provider” (RTP) Velocity
The Question:“What is our average ‘Time to Correct’ for claims that are Returned to Provider (RTP)?”
Why it matters: Claims are often returned for small technical errors (like a misspelled name or an incorrect ZIP code). While the error might be minor, the impact on cash flow is major. If it takes the billing team five days to notice and fix an error, the agency has effectively added five days to its “Days in AR” (the time it takes to get paid). To keep cash moving, high-performing teams aim to correct and resubmit RTPs within 24–48 hours. A high “time to correct” often indicates that the billing team lacks the necessary support from clinical leadership to resolve documentation gaps.
6. Handoff Accountability
The Question:“If you could fix one upstream process – Intake, Clinical, or Medical Director workflows – to reduce rework, which would it be?”
Why it matters: The answer to this important question gives significant insight into where “administrative friction” can be slowing down a hospice agency’s money. Billing managers often see the “symptoms” of problems that start elsewhere. For example, if the billing manager says they spend hours chasing doctors for signatures, the problem isn’t the billing – it’s the physician’s workflow.
This question breaks down operational silos. It gives the revenue cycle manager permission to identify where “dirty data” originates. Often, a minor adjustment to an admission packet or how a Medical Director receives prompts can eliminate 50% of the billing team’s manual labor.
7. The Close Process
The Question:“What is our documented ‘Month-End Close’ checklist and who owns the accountability for each handoff?”
Why it matters: The “Month-End Close” is the process of finalizing all clinical and financial data so the bills can go out. If clinical notes aren’t finished on time, the biller can’t bill. If the biller is waiting on the director to approve a report, the biller can’t bill. A clear, written checklist ensures that everyone knows their role and how it contributes to the agency’s overall ability to bill on time. Hospice leadership owns the accountability for ensuring that the clinical staff doesn’t treat documentation as an “optional” task; such an approach to documentation can delay the entire agency’s payroll and vendor payments.
When the month-end process is a mystery to everyone but the billing team, the result is process uncertainty and cash flow volatility. A disciplined system relies on a written checklist that defines when clinical notes are due, when statuses must be closed, and when the pre-bill review occurs. Accountability ensures the billing team isn’t held responsible for a clinical manager’s late paperwork.
Why This Matters for Hospice Leadership
By moving from a “scramble” to a “system,” hospice leadership protects the agency’s ability to serve patients. When the revenue cycle is predictable, leadership can stop worrying about whether payroll can be met and can start focusing on the quality of the end-of-life care that the team provides.
In our first installment on Revenue Cycle Management (RCM) – Silent Killers of Hospice Cash Flow (and How to Fix Them) – we discussed why consistent working capital is the foundation of an agency’s operational stability. It impacts staffing levels, vendor relationships, and the leadership’s ability to focus on the clinical mission.
This second installment investigates the “micro-leaks” that disrupt that stability. In hospice, financial volatility rarely stems from a single catastrophic error. More often, it is the result of repeatable administrative defects: claim rejections, late Notice of Election (NOE) filings, and chronic rework that causes accounts to sit unpaid for months.
The Anatomy of a “Clean Claim”
A clean claim is a submission that is reimbursed on the first attempt. Achieving a high first-pass pay rate is not the result of a billing team working overtime at month-end; it is the product of a repeatable system. It requires that every claim is built on accurate election documentation, verified coverage mechanics, and clinically supported eligibility before it ever reaches the billing office.
Most “dirty claims” are caused by three predictable upstream breakdowns:
Incomplete Election Packets: Missing signatures or dates that stall the billing process.
Technical NOE Failures: NOEs that are rejected (RTP) due to data entry errors, pushing the filing past the five-day window.
Sequencing Conflicts: Out-of-order billing cycles caused by uncoordinated patient transfers or discharges.
Establishing Operational Guardrails: The Three Control Points
High-performing agencies do not view billing as a back-office function that happens at the end of the month. Instead, they treat the revenue cycle as a continuous relay where each department is responsible for “passing a clean baton.” To achieve this, leadership must implement specific control points – operational “gates” that stop administrative defects before they can cascade into financial losses.
1. The Intake Gate: Securing the Revenue Foundation
The revenue cycle begins the moment a patient is referred, but the most common “micro-leaks” occur during the handoff from intake to billing. If a patient is admitted with an incomplete election packet, the agency is effectively providing care without a secured promise of reimbursement.
The Leadership Mandate: Leadership must move beyond a “get it in eventually” mindset and establish a Hard Stop Policy. This means defining exactly what constitutes a “Complete Admission.” If a signature is missing or the Notice of Election (NOE) has not been initiated within 24 hours of admission, the process should be flagged for immediate intervention. By treating the intake gate as a non-negotiable requirement, you ensure that 100% of your census is backed by an accepted NOE within the 48-hour window.
2. The Eligibility Gate: Synchronizing Clinical and Financial Data
Hospice is unique because its reimbursement is tied to strict clinical timelines, such as Face-to-Face (F2F) encounters and benefit period recertifications. In many agencies, these clinical requirements are tracked in a silo, only surfacing as a “billing problem” when a claim is held at month-end.
The Leadership Mandate: To protect audit integrity, leadership must insist on a centralized, real-time tracking system that bridges the gap between clinical operations and the billing office. This gate ensures that every patient approaching a certification deadline has a confirmed visit scheduled and a physician signature pending. When clinical leadership and billing work in a synchronized operating rhythm, you eliminate the month-end scramble.
3. The Submission Gate: The Final Quality Review
The final control point occurs just before the claim is transmitted to Medicare. This is the Pre-Bill Review, a methodical check designed to catch “out-of-sequence” errors that frequently lead to Returned to Provider (RTP) status.
The Leadership Mandate: Mandate a “double-check” protocol. The individual responsible for the final submission should verify that the claim sequence is intact and that all discharges or transfers from the prior month have been closed cleanly in the system. By catching technical errors here, rather than waiting for a Medicare rejection, you ensure a steady, predictable flow of cash.
Operational Control Summary
Use the following framework to evaluate your internal discipline and identify where your current “gates” may be failing:
Control Point
Leadership Requirement
Weekly KPI Metric
Intake/Admission
Formal definition of a “complete” packet.
Active patients without an accepted NOE.
Eligibility
Single owner for F2F and Recert tracking.
Patients with deadlines in the next 15 days.
Submission
Mandatory pre-bill sequence check.
Percentage of claims requiring resubmission.
Executive Questions for the Billing Manager
You do not need to be a billing expert to lead the revenue cycle but you do need to ask the right questions to determine if you have a stable system or a constant scramble:
On Performance: What is our “first-pass clean claim rate” for the last 90 days, and what are the top three reasons for rejection?
On NOEs: How many non-payable days did we incur last month due to late or returned NOEs?
On Sequencing: What is the root cause of our out-of-sequence issues? (Is it intake, discharge workflow, or claim timing?)
On Prevention: If you could fix one upstream process to reduce your team’s rework by 50%, which one would it be?
The Result: Predictable Cash Flow
Clean claims are not a “billing achievement”; they are the result of leadership decisions and enforced operating discipline. When NOE acceptance is reviewed daily and eligibility is tracked proactively, avoidable denials drop, and the agency moves toward a truly predictable operating rhythm.
No hospice leader enters this field because they love claims and remittances. Their focus is not hospice cash flow optimization. Hospice leadership’s goal is to ensure a dignified end-of-life journey for patients and families. They work to build an organization that can reliably deliver compassionate care, 24/7, without “behind the scenes” chaos.
However, the operational reality is simple: Clinical excellence requires financial oxygen. Even agencies with a strong census and elite clinical teams can be squeezed by delayed claims, avoidable denials, and a collections process that is only “handled when we have time.” When the revenue cycle lags, it isn’t just a billing issue; it is a threat to the agency’s staffing stability, vendor relationships, and ultimately, the patient experience.
The operational reality is that hospice revenue cycle management is the engine that keeps care moving. This blog is the first in a series designed for hospice leadership who want to move their financial operations from a state of constant triage to a predictable operating rhythm.
The Three Pillars of Hospice Financial KPIs for Leadership
To achieve true hospice cash flow optimization, leadership must move from a reactive to a proactive stance. Confusion in the revenue cycle often stems from a lack of accountability. To effectively manage the pipeline, leadership must distinguish between three distinct functions:
Billing (Accuracy & Compliance): The front-end process of generating clean claims. This includes timely filing of the Notice of Election (NOE). In hospice, a late NOE isn’t just a delay. It can result in non-payable days that can never be recovered.
Collections (Velocity and Resolution): The engine that turns claims into cash. This involves payer-facing follow-up: resolving rejections, correcting errors, and appealing denials. It is not about calling families; it is about holding insurance providers accountable.
Accounts Receivable Management (Visibility and Strategy): The dashboard used to monitor the money the agency has earned but not yet received. Effective AR management allows leadership to see if the agency is waiting on payers or if the team is waiting on itself.
Proactive vs. Reactive Operations
A healthy hospice agency doesn’t just “bill;” it runs a disciplined cycle. The table below can be used to evaluate where an agency currently stands:
Phase
Reactive Agency (At-Risk)
Proactive Agency (High-Performing)
Intake & Election
NOEs filed near the 5-day deadline; high risk of non-payment.
NOEs filed within 24–48 hours; zero “non-payable” days.
Documentation
Clinicians chasing signatures for 30-day-old claims.
“Done in a Day” culture; documentation billing-ready in 72 hours.
Payer Follow-up
Working the “loudest” payer or only the oldest claims.
Automated work queues prioritizing high-dollar and high-probability claims.
Leadership Review
Reviewing AR only when the bank balance feels “tight.”
Weekly KPI reviews that predict cash flow 30 days out.
End Result
Constant Triage: Staff is burnt out and cash is unpredictable.
The biggest threats to an agency usually aren’t dramatic disasters. They are repeatable breakdowns that quietly drain agency bandwidth:
Stalled Clinical Handoffs: A lack of “billing-ready” documentation at the point of care is a primary driver of aging AR. When the billing team is faced with clinical documentation integrity concerns leaving them unable to process a claim due to missing elements, the task is sent back to the clinician. This not only delays payment but also increases the administrative overhead per patient, as the same chart must be touched multiple times before it can be finalized
Preventable Technical Denials: The 5-day filing window for the Notice of Election (NOE) is a critical compliance threshold. If the intake process is not airtight, the agency effectively provides unreimbursable care. These technical denials represent a permanent loss of revenue that cannot be recovered through the appeals process, directly impacting the agency’s bottom line.
Unapplied Cash and Posting Delays: When payments are received but not timely reconciled within the billing system, the accounts receivable data becomes distorted. This “hidden” AR leads leadership to make strategic decisions based on inaccurate financial reports, often resulting in the team chasing resolved items while legitimate denials remain unaddressed.
Unmonitored Medicare Cap Liability: Without a proactive monthly monitoring process, the aggregate cap can become a significant, unforeseen year-end liability. Failing to track the relationship between patient stays and reimbursement levels can lead to a repayment demand that exceeds the agency’s available margins, threatening long-term operational stability.
What “Good” Looks Like: Making RCM Boring
In hospice revenue cycle management, the goal is not heroics. It is predictability. “Good” looks like a billing cadence that is “boring” in the best possible way. It means the work is driven by repeatable, auditable habits rather than last-minute scrambles. When the revenue cycle is boring, leadership meetings can focus on growth and quality rather than “Where is the cash?”
The Executive Dashboard That Leadership Should Trust
Hospice leadership does not need to be a billing experts but they do need a credible set of numbers. Every hospice leader should have weekly visibility into:
Days in AR: Is the agency getting paid faster or slower than last month?
The 90-Day Bucket: What percentage of money is drifting toward a write-off?
Clean Claim Rate: How often is billing right the first time?
Time to Bill: How many days pass between the end of the month and the first claim submission?
Five Actions Leadership Can Immediately Take
Improving the agency’s revenue cycle does not require a total overhaul. Leadership can take action to increase visibility and control starting today:
Designate One Owner: Assign a single individual to own the end-to-end pipeline from “Admission to Cash.”
Audit the Aging: Pull a one-page AR report by payer. If AR over 90 days is >15%, there is likely a process breakdown.
Identify Top 3 Drivers: Ask the team: “What are the three most common reasons claims are being rejected right now?”
Set a “Touch” Rule: Implement a rule that any claim over 45 days must be touched and documented weekly until resolved.
Schedule a 30-Minute Rhythm: Schedule a weekly revenue cycle review. Focus on patterns and removing blockers for the team.
Financial stability is the foundation of compassionate care. By moving from a reactive to a proactive revenue cycle, leadership can ensure that the agency’s focus remains exactly where it belongs: on the patient.
Many hospice administrators are familiar with the hospice PEPPER report. A smaller number of hospice leaders, however, are familiar with its counterpart: the Comparative Billing Report (CBR) and eCBR, the electronic version of the Comparative Billing Report. While the PEPPER provides a general overview of a hospice agency’s billing data, the CBR is a specific tool used by Medicare to identify individual agencies whose billing patterns differ significantly from their peers. To manage hospice compliance effectively, it is important to understand the purpose and the mechanics of the CBR.
What is a CBR and Who Generates It?
A CBR is a formal educational resource produced by CMS (the Centers for Medicare & Medicaid Services). It provides data-driven insights into a hospice agency’s billing patterns compared to state and national averages.
The report is a collaborative effort:
CMS: defines the metrics (like length of stay) used to monitor for billing errors.
National Contractors: CMS hires private companies to do the data analysis. CMS may hire different companies to handle the data work versus managing distribution of the reports to providers.
MACs (Medicare Administrative Contractors): An agency’s local contractor (like Palmetto GBA, CGS, or NGS) may also provide their own version, called an eCBR, through their provider portal.
How the CBR Highlights Outliers
The CBR is a proactive tool designed to encourage providers to review their own data before a formal audit occurs. It identifies “outliers” – agencies that fall outside of normal billing ranges – by following a simple comparison process:
“Finding your Neighbors”: Instead of comparing a small local hospice to a massive national chain, the CBR groups each hospice agency with similar agencies. An agency’s data is compared against other hospices in their specific state. This ensures the comparison is fair and based on the local market.
The 1-to-100 Ranking: For each metric that is measured, the report provides the agency’s “percentile” score, ranking the agency on a scale from 1 to 100.
Imagine 100 hospices are standing in a line, ordered from the lowest billing to the highest.
If an agency’s CBR report indicates that the agency is in the 90th percentile, it means that the agency is billing more than 90 of the other hospices.
This is why the 90th percentile is the “red flag” area; it tells Medicare that the agency is at the very edge of the pack.
Clear Results There is no need to be a trained statistician to read or interpret the CBR report. The report uses clear labels:
Significantly Higher: This is the primary “outlier” signal. It indicates that the agency’s billing for a specific metric is in the top 10% (90%th percentile) of all providers. While not proof of wrongdoing, it is a high-priority “red flag” that warrants an immediate internal review of patient charts.
Higher: The agency is billing more than the average hospice. This is a signal to monitor the trend to ensure it does not move toward the 90th percentile.
Does Not Exceed: The agency’s billing is aligned with or lower than the average of its peers.
Not Applicable (N/A): The agency did not have enough claims in that category during the reporting period to create a statistically valid comparison.
Real-World Metric Examples
Each CBR focuses on a narrow “Target Area” of vulnerability. Two common examples for hospices include:
Non-Cancer Length of Stay (NCLOS) > 210 Days: Comparing the agency’s percentage of long-stay non-cancer patients against jurisdiction benchmarks.
GIP Average Length of Stay (ALOS): Benchmarking the agency’s inpatient stays (Q5004–Q5009) against state averages to identify potential overutilization.
How CBR Differs from PEPPER
It is helpful to view these two reports as different tools for the same goal:
Feature
PEPPER
CBR / eCBR
Primary Intent
Provides a broad risk profile across many areas at once.
Focuses on a specific billing trend with educational detail.
Result
A list of scores for 12+ different categories.
A specific label like “Significantly Higher” for one area.
Comparison
National, MAC, and State averages.
Usually State, Region, and Jurisdiction National averages.
Converting Comparative Data into Operational Action
The value of these reports lies in the establishment of a functional loop that transforms comparative data into focused action. Hospice leadership should treat PEPPER and CBR/eCBR results as signals tied to specific topics and timeframes. By comparing results against national or state benchmarks, leadership can determine whether a specific billing pattern requires continued monitoring or a formal investigation.
Determining the Response: Monitor vs. Investigate
A hospice agency that appears as a statistical outlier should view the data as a prompt for a focused internal review rather than evidence of an error. The Hospice PEPPER User’s Guide clarifies that these reports do not identify improper payments directly; instead, they serve as guides for auditing and monitoring billing changes over time. When a hospice agency looks materially different from its peers – particularly when that difference persists across multiple quarters – leadership should initiate a targeted investigation.
Maintaining a Narrow Scope
If an investigation is necessary, the review should remain strictly tied to the specific topic that triggered the signal. Effective hospice leadership avoids broad “audit everything” exercises in favor of targeted analysis:
Length of Stay (LOS) > 210 Days: The agency should review the long-stay patient population and the documentation patterns driving extended care.
GIP Average Length of Stay (ALOS): Leadership should focus on General Inpatient stays, discharge transitions, and the specific documentation supporting those inpatient days.
Closing the Loop
To finalize the process, the hospice agency must document the scope of the review, the specific findings, and any subsequent process changes. Re-checking the trend in the following cycle ensures these reports become a permanent part of the agency’s operating rhythm. CMS and MACs intend for these tools to function as educational resources that support a self-audit culture within the hospice organization.
Summary: Key Takeaways for Hospice Leadership
Effective compliance management requires utilizing both the PEPPER and the CBR as complementary tools for agency oversight. While the PEPPER serves as a broad indicator across many categories, the CBR functions as a targeted tool for identifying specific billing trends that may require immediate attention.
Hospice leadership should prioritize internal reviews for any metric labeled “Significantly Higher” or landing in the 90th percentile, as these results indicate the agency is a statistical outlier compared to its peers. By conducting narrow, focused chart audits based on these specific signals and documenting the findings within the QAPI process, a hospice agency can demonstrate a proactive approach to billing accuracy. Ultimately, treating the CBR as an educational resource rather than a threat allows leadership to refine workflows and improve documentation standards before external audits are initiated.
Hospice agencies are under increasing scrutiny by government auditors. A particularly concerning and financially devastating aspect of government audits is the use of statistical extrapolation. Understanding the extrapolation process is essential for providers to safeguard the financial healthof their agencies and ensure compliance with all regulations.
What is Government Extrapolation in Hospice Audits?
Extrapolation is a statistical methodology used by auditors, particularly the Office of Inspector General (OIG). Extrapolation can significantly amplify the financial implications of audit findings. The process of extrapolation is governed by the Medicare Program Integrity Manual, Chapter 8. This chapter of the manual outlines the specific statistical methods and requirements for conducting extrapolation studies.
What is Extrapolation?
Extrapolation is a sampling technique used to project audit findings from a small sample of claims to an entire population of claims. Instead of reviewing every single claim that a hospice has submitted for payment, auditors select a statistically valid sample for review. They then use the error rate found in the sample to estimate overpayments across all similar claims in the population. This allows auditors to perform a detailed review of only a small sample of claims while estimating the total amount of improper claims across a large population.
Auditing every single claim in the population is impractical due to time and resource constraints. By examining a representative sample, auditors can make statistically valid projections about a much larger group of claims without having to review each one individually.
How Does the Extrapolation Process Work?
The extrapolation process typically follows the following key phases:
Universe Definition:
Auditors define the “universe” or population of claims to be examined. This may be all Medicare hospice claims submitted by your agency within a specific period (e.g., all claims billed between January 1, 2024, and December 31, 2024) or a subset of claims (e.g., all General Inpatient Care claims).
Sample Selection:
Using statistical sampling software, auditors select a statistically valid random sample from the universe. The term “statistically valid” is significant because it ensures that the sample accurately represents the entire population. This allows for reliable projections from the sample to the larger group. The industry standard software used to support sample creation is called RAT STATS (created by the OIG for the U.S. Department of Health and Human Services). Typically, samples consist of 100 claims, though this can vary.
Medical Review:
Each claim in the sample is rigorously reviewed by independent medical contractors who determine whether the services provided met Medicare requirements for hospice eligibility and documentation. The auditors review the documentation for compliance with Medicare regulations, including patient eligibility, physician certifications, medical necessity for services, and appropriate billing for levels of care. Any claim found to be out of compliance is identified as an “error,” and the precise dollar amount of the overpayment for that specific claim is calculated.
Calculation of Error Rate:
A monetary error rate is determined for the sample. This is calculated by dividing the total dollar amount of improper payments found in the sample by the total dollar amount of payments for all claims in the sample.
Extrapolating to the Universe/Statistical Projection:
The calculated monetary error rate from the sample is applied to the entire “universe” of claims. This projects the estimated total overpayment across all claims in the defined audit scope. The estimated total overpayment is calculated as the monetary error rate of the sample multiplied by the total dollar paid for the audit universe.
How Does Extrapolation Impact a Hospice Agency?
Extrapolation can have a significant financial impact on hospice agencies. Even a small number of denied claims or identified overpayments in a sample can result in a large demand for repayment. This can pose a severe financial challenge. Further, responding to an extrapolated audit can pose a significant administrative burden on hospice agencies, requiring considerable time and resources from administrative and compliance teams.
Additionally, OIG audit findings are often publicly released. This raises concerns about agency reputational risk and may jeopardize relationships with referral sources and the community. An adverse extrapolated audit outcome can also lead to increased scrutiny in future audits and potentially trigger further investigative actions.
Mitigating Extrapolation Risk
Given these potential significant negative impacts of extrapolation, hospice agencies should consider proactive actions that could help mitigate the likelihood of negative audit findings. The most effective actions include:
Robust Compliance Program: Agencies should implement and strictly adhere to a comprehensive compliance program. This includes continuous staff education on Medicare regulations, thorough patient eligibility assessments, diligent documentation of physician certifications, and accurate coding for all levels of care.
Internal Auditing: Conduct regular, proactive internal audits of claims and medical records. Focus on high-risk areas identified by Medicare (e.g., General Inpatient Care (GIP) stays, long lengths of stay, live discharges). Identifying and correcting deficiencies internally before an external audit is crucial.
Looking Ahead
Government extrapolation in hospice audits represents a significant financial risk for hospice agencies. Understanding the statistical methodologies, maintaining excellent documentation practices, and implementing robust compliance programs are essential for surviving in this challenging regulatory environment.
The False Claims Act (FCA) was established in 1863 during the Civil War to combat fraud and abuse perpetrated by suppliers of the federal government. At that time, the law was referred to as “Lincoln’s Law.”
The FCA has evolved significantly in recent years and is now one of the main tools used by the government to fight fraud. The FCA penalizes individuals or entities that submit fraudulent claims to the government, cause fraudulent claims to be submitted, or conspire to submit fraudulent claims.
One of the noteworthy provisions of the FCA is the qui tam provision, also known as the whistleblower provision. The qui tam provision allows private citizens, also referred to as “relators”, to report details of alleged fraud to the government. The whistleblower “stands in the shoes” of the government to prosecute the claim. This action benefits the government and the taxpayer as well as potentially the relator, who may receive a share of what is recovered.
How does the FCA relate to a hospice agency?
The False Claims Act allows hospice agency employees, patients, families of patients, or any individuals with alleged knowledge of fraud or abuse by the agency to report the behavior. Under the qui tam provision of the FCA, the relator may be entitled to a percentage of recovered funds.
What are different types of false claims?
A claim is a request for money made to the government. A false claim is money that is obtained from the government due to false or fraudulent claims. False claims include claims where the service
Has not been provided
Is already included as part of a different claim (i.e., double billing)
Is not coded correctly
Is not supported by the patient’s medical record
Claims may also be false and are covered under the FCA if they result from a referral made in violation of the Federal Anti-kickback statue (Stark Law).
The False Claims Act also includes payment from the government based upon false certification.
False claims include claims that the hospice agency should have known were false or fraudulent.
What is a claim that a hospice agency “should have known” is false?
The FCA expressly includes claims that a hospice agency “should have known” were false or fraudulent. “Should have known” means deliberate ignorance or reckless disregard of truth. As such, a hospice agency cannot avoid liability by simply ignoring inaccuracy in their claims. Examples of “should have known” include:
Ignorance of billing rules, i.e., lack of knowledge of the rules
Failure to act on consistent trends that are indicative of inaccurate billing
Failure to act on inaccuracies or system errors identified by outside or internal auditing teams
Failure to correct inaccurate billing (impacting either past or future claims)
A hospice agency must understand the rules and take proactive measures — such as conducting internal audits within the organization — to ensure compliance and accurate billing.
How can False Claims Act matters be initiated?
There are two ways that FCA matters can be initiated:
Initiated by the government: When a FCA matter is initiated by the government, this type of matter typically starts with an audit or an investigation by the government. The government would determine that there is a false claim made to it and would initiate a matter, usually by a subpoena or civil investigative demand (CID). The government would issue the CID directly to the hospice agency. CID is a form of subpoena that requires the hospice agency to engage in one-sided discovery. That is, the hospice agency is required to produce documents demanded, respond to interrogatories, and provide sworn oral testimony. However, the hospice agency may not conduct any discovery.
Qui tam matter: this type of matter is initiated by a whistleblower, also known as a “relator,” typically through the filing of a sealed lawsuit in a federal district court. The hospice agency does not know about the qui tam lawsuit since the lawsuit is initially served on the government. The case remains under seal while it is investigated by the government.
What is the qui tam process?
Qui tam actions are initially filed under seal. That is, only the US Attorney and some members of the Department of Justice (DOJ) have knowledge of and access to documents related to the case. The relator serves the complaint on the government together with a written disclosure of all material evidence.
The purpose of the sealed qui tam action is to allow the DOJ time to evaluate the relator’s allegations and for the DOJ to decide whether it would like to take over primary responsibility for prosecuting the case. If the DOJ decides to take over primary responsibility for the case, the DOJ is said to “intervene.”
The complaint remains under seal for 60 days during which time the DOJ investigates the relator’s allegations. This 60-day period can be (and typically is) extended. In fact, the government may spend months – or even years – investigating the case.
While the DOJ conducts its investigation, it may issue a Civil Investigative Demand (CID). This form of subpoena requires the defendant (the hospice agency) to engage in one-sided discovery where the hospice agency must produce documents, respond to interrogatories, and provide sworn oral testimony, as demanded. The CID is “one-sided discovery” because the hospice agency may not conduct any discovery.
If the government decides to intervene, the government is then responsible for litigating the case and files its own complaint instead of the complaint that was filed by the relator. The relator remains a party to the complaint.
If the government declines to intervene, the relator may proceed in her own name subject to the government’s right to dismiss the claim or to intervene at a later date.
Whether or not the government decides to intervene, the government remains the real party of interest. (As a reminder, the relator is only “standing in the shoes” of the government.) As such, the government must agree to any decisions on the case. The relator may not agree to dismiss or settle the case without the government’s approval.
What are the key phases in a False Claims Act investigation?
Phase 1: FCA investigation is triggered. Triggers may include:
Qui tam (whistleblower) lawsuit
Call to OIG hotline
Information identified during audit or claim review
Complaints
Data mining
Phase 2: Formal investigation launches. Investigation may involve:
Review of corporate filings
Interview current or former employees
Review financial records
Electronic surveillance
Physical surveillance of employees or of company premises
DOJ civil investigative demand (CID), or the like
Government search warrant or raid
Phase 3: Litigation or resolution
Who are common whistleblowers?
Anyone can be a whistleblower and anyone may report alleged fraudulent activity to the government. The most common relators are:
Business partners
Current or former employees
Competitors
Patients
Individuals who mine CMS data to identify anomalies/FCA claims
How can a hospice agency reduce the chance of qui tam lawsuits?
Any complaints or concerns that are raised – by employees, vendors, patients, or competitors, or any other individuals should be investigated and treated with concern as these have the potential to reveal compliance issues that need to be resolved by the hospice agency.
Employee complaints – whether from departing or active employees – are often an excellent source of information on potential compliance issues. A hospice agency should have a clearly established method – that is clearly and often communicated to employees – for employees to raise concerns. It should also have an organized process to diligently investigate and address any concerns raised by employees.
Internal complaints:
There must be an organized process – that is communicated regularly to employees – for employees to raise concerns
All concerns must be investigated
Have a plan to address any issues that are identified
Take any necessary corrective actions
Follow up with the individual who raised the complaint
Provide training, as needed
Departing employees
Treat employees fairly as they leave
Conduct exit interviews to identify any potential compliance concerns – investigate any issues that may be identified
Potential releases (e.g., recovery from FCA claims)
Employees must feel that there is a process for raising concerns and that their concerns are heard. Employees should not fear retaliation for raising concerns. A hospice agency should be diligent and careful to respond to all employee complaints that are raised internally or to any complaints that are raised when employees leave the organization.
What are the financial benefits of avoiding FCA violations?
False claims act matters can be quite costly for a hospice organization. In addition to returning the payments associated with the false claims identified and incurring the costs associated with attorney fees to defend the matter, the hospice agency potentially faces the following significant costs:
Treble damages: The FCA has a treble damages provision which provides that a hospice agency that is found to have violated the FCA statute may be liable to pay three times the amount of the actual false claim amount
Penalty per claim: Under the FCA, a civil penalty may be assessed for each false claim that is submitted. The civil penalty dollar amount per claim has increased with inflation and currently may be as much as $23,000 per claim.
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