Medicare Crackdown on Hospice Affiliations Threatening Providers

A new federal enforcement trend is sending shockwaves through California’s hospice sector and beyond. Health care providers are discovering that their Medicare enrollment, and often their entire practice, can be jeopardized simply because of whom they once worked with, not because of anything they personally did.

The Centers for Medicare and Medicaid Services calls it affiliation. Under federal regulations, CMS or its contractors can revoke a provider’s Medicare enrollment if the agency determines that an affiliation poses an “undue risk” of fraud, waste, or abuse.

Affiliation risk is becoming one of the most aggressive and far-reaching enforcement mechanisms CMS has deployed in years. The rule was designed to prevent bad actors from migrating across the Medicare program.

But as it’s now applied, affiliation-based revocations are less a precision tool than an accelerant, extending a single hospice revocation into a chain reaction affecting physicians, medical groups, skilled nursing facilities, and other providers completely disconnected from the underlying conduct.

Hospice Fraud Crackdown

Over the past several years, CMS has intensified its crackdown on hospice fraud in Los Angeles County, an area long criticized for market saturation and questionable ownership structures. The agency’s Provisional Period of Enhanced Oversight audits have led to a surge in hospice revocations, sometimes based on reviews of as few as four claims.

As disruptive as the PPEO wave has been, the real aftershock is coming from something different: revocations arising solely from “affiliations” with a sanctioned hospice.

In theory, CMS is supposed to apply a detailed, multifactor analysis of risks posed by affiliations. In practice, providers say these assessments rarely occur.

Instead, once a hospice loses its enrollment—or even lands under suspicion—the Medicare Administrative Contractor often moves quickly against anyone connected to it: part-time medical directors, former officers, short- term contractors, and even clinicians who worked only a few hours a month.

These sanctions are especially concerning because they’re imposed before any due process occurs. By the time a provider can appeal, the damage is often irreversible, leading to the loss of a business or a physician’s career.

Revocation typically comes with a 10-year reenrollment bar, forcing institutions to sever ties immediately. Compounding the problem, the affiliation rule allows a single revocation to ripple outward and affect other providers even before the first provider has a fair chance to challenge the action.

The situation is made more troubling by the fact that Medicare Administrative Contractors, which are private health care insurers who process medical claims for Medicare, have the authority to impose these revocations.

That means a private entity effectively can end a provider’s career without meaningful procedural safeguards. In December, CMS broadened revocation grounds in the Home Health Physician Fee Schedule update, quietly authorizing retroactive revocations in many additional circumstances.

Moonlighting Doctors

The ripple effects can be enormous. Many physicians who moonlight as hospice medical directors also work for large medical groups or hospitals. When CMS revokes the enrollment of a physician tied to a revoked hospice, every entity employing that physician must assess its own exposure.

In serious cases, they may face enrollment problems; in others, they must determine how to handle claims associated with the revoked individual. The concern becomes not only whether a hospice partner was sanctioned, but whether anyone in the organization had even limited involvement with one.

The result is a fast-moving cascade of sanctions and unintended consequences across multiple provider types, prompting emergency reconsideration requests and federal lawsuits. Several cases have already reached district courts, where providers are seeking temporary restraining orders to halt what they argue are unlawful revocations.

While some litigants have won temporary relief or interim settlements, the litigation now unfolding is forcing courts to grapple with a foundational question: What is the legal basis for CMS (or its private contractor) to impose decade long bans on providers whose only alleged misconduct is an attenuated connection to an allegedly noncompliant hospice?

The emerging case law reflects the difficulty of the issue. CMS asserts broad authority to guard the Medicare program. Providers respond that the affiliation rule was never meant to be wielded so broadly, especially when revocations take effect before appeals are resolved.

California Political Clash

Adding fuel to the debate is a high-profile political clash now unfolding in the national spotlight.

After CMS Administrator Dr. Mehmet Oz released a video alleging that Armenian-owned operators in Los Angeles were running large-scale hospice fraud schemes, California Gov. Gavin Newsom (D) filed a civil rights complaint accusing Oz of targeting and stigmatizing ethnic communities.

The dispute has escalated beyond regulatory policy into a fight about discrimination, federal authority, and the politics of Medicare enforcement.

Meanwhile, affiliation-based revocations continue. Providers have described how CMS revoked a physician who worked only a few hours per week at a hospice, despite not being involved in the conduct that led to the hospice’s revocation.

These sequential revocations can stretch across multiple years, ensnaring organizations that had no reason to suspect they were at risk.

As litigation expands and political scrutiny intensifies, the central question remains unresolved: Is the affiliation rule a legitimate tool for safeguarding Medicare, or has it become a punitive label that unfairly entangles providers based solely on proximity?

For now, the answer depends on whether a provider can act quickly enough to avoid CMS’s newest weapon.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Patric Hooper is a founding partner at Hooper, Lundy & Bookman focused on health regulatory, compliance and transactional matters.

Jordan Kearney is a partner at Hooper, Lundy & Bookman focused on complex regulatory issues, compliance, and health care transactions.

Maydha Vinson is an associate at Hooper, Lundy & Bookman focused on health care regulatory and compliance.

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