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Lawsuit Accuses Company Of Fraudulently Cycling Patients Through Nursing Homes, Hospice Care

A national hospice company improperly cycled patients through nursing homes and hospice with a goal of making as much profit as possible from Medicare, according to a whistleblower lawsuit announced this week.

Federal attorneys also sued the hospice company, AseraCare, alleging it milked Medicare’s hospice benefit by pressuring its employees to enroll people into hospice who weren’t dying and resisted discharging them despite evidence they weren’t deteriorating. One hospice patient who should have been immobile from end-stage heart disease was healthy enough to go to his granddaughter’s graduation and a berry-picking excursion with a friend, the government charges.

For years, some critics of Medicare’s hospice benefit have said that the way the government pays providers gives them financial incentives to abuse the system. The suits against AseraCare, a Fort Smith, Ark.-based hospice company operating in 19 states, follow several other suits against big hospice companies but go further in their allegations that the company coordinated its use of nursing care and hospice care to maximize Medicare reimbursements.

The company is owned by Golden Living, a national company that provides skilled nursing services and other services as well as hospice. The whistleblowers contend that AseraCare first recruited patients eligible for skilled nursing care –also provided by Golden Living— for 20 days, for which Medicare pays the entire bill. After 20 days, when Medicare requires patients pick up a part of the tab, AseraCare had the nursing homes send the patients to hospice, according to the lawsuit. In hospice, AseraCare would collect a flat payment from Medicare for each day they are enrolled.

“Typically, a patient admitted into Defendant’s web of operations will be referred and re-referred until that patient has received—and Medicare has been billed for—the maximum number of days of skilled nursing care, including rehabilitative therapy … home health care, and hospice care,” says the lawsuit, brought by Dawn Richardson, an AseraCare nurse manager, and Marsha Brown, who ran several AseraCare offices in Alabama.

In written statements, AseraCare disputed the allegations and said it adhered to all Medicare rules for admitting hospice patients. “Consistent with hospice providers nationwide, AseraCare Hospice has evolved in recent years to treat more terminally ill patients with unpredictable disease progressions,” AseraCare’s president, Dr. David Friend, said in the statement. “It is simply not possible to precisely predict how patients will respond to challenging illnesses such as end-stage heart, lung and kidney disease, AIDS, and Alzheimer’s.”

AseraCare said it would “vigorously” defend itself against the whistleblower allegations. Under the False Claims Act, whistleblowers are entitled to a portion of the money the government recovers when it joins their lawsuit.

The cases were filed in the U.S. District Court for the Northern District of Alabama.

The government is joining the whistleblowers’ complaint, though its complaint didn’t include the nursing home allegations. It’s not known if that’s because prosecutors felt that part of the lawsuit wasn’t as strong as the hospice portion, or because they wanted to tailor a narrower case. However, auditors at the federal Department of Health and Human Services have been probing the business relationship of hospice and nursing homes.

 “Congress intended that the hospice care benefit be used during the last several months of an individual’s life,” Daniel Levinson, inspector general of the Department of Health and Human Services, said in a statement announcing the lawsuit against AseraCare. “We will continue to recover misspent Medicare funds from companies that abuse the hospice benefit.”

The government complaint accuses AseraCare of intensely pressuring employees to enroll as many hospice patients as possible, setting high targets. A regional sales director in 2007 was placed on a correction action plan in part because his region failed to admit at least 33 people each week for hospice care. In June 2006, the company offered a massage chair as a prize to the employee who “wins the game” by meeting its admission goal and being the first to admit a patient in July, according to the complaint.

An outside auditor hired by AseraCare in 2007 suggested in a report that the company’s personnel policies were affecting clinical decisions, according to the federal complaint.  He said that since the company laid employees off when the number of hospice patients dwindled, workers were “resistant to patient discharge” even if the patients no longer were eligible for Medicare hospice benefits. Under Medicare rules, hospices are supposed to discharge patients if their prognosis no longer indicates that they are terminal and expected to die within six months.

The government’s complaint outlined several cases in which AseraCare allegedly kept elderly people despite evidence they weren’t dying. The patient admitted for end-stage heart disease, which usually renders people unable to walk, was able to go to the graduation and field trip even as he was kept on hospice for more than a year. When he was finally discharged, it was because he needed treatment for other medical conditions, the government alleged.

Medicare has tried to discourage hospices from enrolling long-stay patients by placing a cap on how much they can collect on average for a patient. Hospices that exceed the cap have to repay the money. The whistleblowers contend AseraCare avoided exceeding the cap — $22,386 in 2008 — by recruiting “last breath” referrals, or patients expected to die within a few days, so that the average would stay low. In its quest for new patients, AseraCare sent employees to “patrol hospitals,” ride along with “Meals-on-Wheels” and go “door-to-door” in housing run by the Department of Housing and Urban Development, according to the lawsuit brought by the whistleblowers, who are represented by Birmingham attorney, Jim Barger. In a separate suit settled in 2009, Barger won the largest settlement in a hospice care case against SouthernCare, and is also representing whistleblowers suing Vitas HealthCare

The whistleblowers contend that large numbers of AseraCare hospice patients are discharged while alive: 48 percent of those cared for by the Monroeville, Ala., branch and 79 percent of patients enrolled in the Mobile, Ala., branch. “It is hardly plausible that such a high percentage of Defendants’ hospice enrollees would be discharged alive unless such patients were nonterminal and fraudulently enrolled from the outset,” the lawsuit charges.

This article was produced by Kaiser Health News with support from The SCAN Foundation.

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