In court documents, the government contends that since at least 2007, Texas-based AseraCare Hospice has fraudulently certified patients as terminally ill to illegally collect Medicare payments.
"The United States alleges that AseraCare, through its reckless business practices, admitted and retained individuals who were not eligible to receive Medicare hospice benefits, because it was financially lucrative - and did so even after AseraCare's auditor alerted AseraCare to troubling problems," court documents state. "AseraCare misspent millions of Medicare dollars intended for Medicare recipients."
Hospice care provides palliative care - ranging from pain relief to psychological and spiritual services - to patients who have less than six months to live. About $13 billion in Medicare funding is spent on hospice care each year, and the industry annually serves about 1.5 million Americans and more than 91,000 Californians.
AseraCare is a subsidiary of Golden Living, a post-acute health care company that provides services ranging from nursing homes to home health care. Through a series of legal entities, 1 percent of Golden Living is owned by the San Francisco private equity firm Fillmore Capital Partners, and 99 percent is owned by the Washington State Investment Board, whose investments are managed entirely by Fillmore.
The government's current case stems from a whistleblower lawsuit filed by a former AseraCare Hospice executive director and an AseraCare nurse in Alabama, and attorneys in that case say the alleged fraudulent practices occur throughout the organization.
"The case is nationwide in scope," said James F. Barger Jr., an attorney representing the two Alabama whistleblowers.
Additional cases claiming questionable hospice certification practices at AseraCare have been filed against Golden Living in Wisconsin and Georgia. The company has three hospice administrative offices in Fresno, Stockton and Concord and serves an average of 180 patients per day throughout the state, typically in regions near its offices. Additionally, there are 20 Golden Living skilled nursing facilities in California.
In its complaint, the government describes a corporate culture in which AseraCare employees were given heavy incentives to enroll and retain hospice patients - even if they don't qualify - because hospice providers are paid per patient per day. Top performers were rewarded with prizes like massage chairs, while those who didn't meet patient admission goals were disciplined. An internal audit stated in a December 2007 report that a reduction in the number of hospice patients led to layoffs.
The audit also found that "Medical Directors (who are physicians) are not adequately involved in making initial eligibility determination(s)" and that many AseraCare employees "do not demonstrate good understanding of initial and ongoing assessment for eligibility."
For example, one Alabama patient was admitted into hospice care on May 7, 2007, for end-stage heart disease, which typically means the individual is unable to walk due to shortness of breath. Medical records, however, showed that this patient could be found "wandering" the nursing home, and he took trips to his granddaughter's graduation in June 2007 and then went on a berry-picking excursion with a friend two months later.
He was discharged from hospice care in July 2008 because he needed to be treated for other medical conditions, but in his year with AseraCare, the company collected $61,162.23 from Medicare to provide care for him. The median length [PDF] of hospice service nationwide, according to the National Hospice and Palliative Care Organization, ran about 21 days in 2009.
In 2009, nearly 80 percent of the terminally ill patients in the AseraCare Hospice facility in Mobile, Ala., were discharged alive.
Golding Living denies all allegations of Medicare fraud.
"We believe that the allegations are without merit or are not violations of the law, and we intend to vigorously defend ourselves against all claims," Blair Jackson, Golden Living's vice president of corporate communications, said in an e-mail. "AseraCare operates in full compliance with the law. We believe this case is all about access to appropriate hospice care for Medicare beneficiaries. We are on the side of protecting the rights of our patients to receive the care they need and the hospice benefit they are entitled to. The action of the government in this case is especially troubling because it has the potential to deny Medicare beneficiaries the hospice benefit they are entitled to."
Jackson also noted that the length of a terminal illness can be difficult to predict, which can affect hospice patient certification.
"Because of the progressive nature of many terminal illnesses, however, it is simply not possible to precisely predict how patients will respond to illnesses such as end-stage heart disease, lung disease, kidney disease, AIDS, Parkinson's disease, and Alzheimer's disease," Jackson wrote. "As a result, there are some hospice patients who live longer than others and remain alive longer than their doctors felt they would at the time the doctors determined their eligibility for hospice care."
But in addition to problematic certifications, the original Alabama case also claims that Golden Living games the Medicare system and maximizes profits by misclassifying patients and funneling the same patients through its various health care services. This corporate initiative is referred to internally by staffers as "synergy," court documents said.
In some instances, Golden Living patients were admitted to hospice care, then discharged just before the date at which the patient would reach the Medicare payment cap. That individual is then placed in the company's nursing home facilities until that Medicare cap is reached, before being admitted once again to its hospice care, according to court documents.
The lawsuit also contends that some hospice patients are recruited by staffers who troll public hospitals, tour public housing complexes or ride along with Meals-on-Wheels food deliveries.
"AseraCare employees are trained to market hospice services to these patients regardless of qualification and to admit these patients to hospice," the Alabama complaint said, by "appealing to the needs of the patients and obfuscating the true nature of hospice care." Corporate training materials remind staffers that "effective communication is the transfer of emotion, not information."
But the opposite scenario also happens, court documents said. A "patient who is currently appropriate for hospice and unsuitable for therapeutic treatment will nonetheless be enrolled in (Golden Living's) skilled nursing facility and put through rehabilitative therapy so that Medicare can be billed approximately $15,000 ... before the patient is then almost immediately referred to (AseraCare's) hospice and properly given palliative care until his or her death," court documents said.
The lawsuit filed by a former patient care coordinator and nurse at a Wisconsin AseraCare facility claim that a doctor signed blank certifications of terminal illness that were later used to admit non-eligible patients to hospice care.
The original Alabama lawsuit was filed based on the federal False Claims Act, which allows citizens to sue federal contractors that have allegedly defrauded the U.S. government. If the U.S. government intervenes, as it did in the AseraCare case, the damages awarded to the government and whistleblowers who brought the case can total three times the amount of money that the government was found to be defrauded.
Barger, the attorney representing the Alabama whistleblowers, said his clients filed the suit because they were "fed up. They went into hospice to provide care to patients at the end of their lives and realized that they were being treated like marketers to sell a product that makes a company a bunch of money for people who don't need it. It really turned their stomach, and they decided they had to do something about it."
He added that while hospice care is laudable, the uncertainties of terminal illness can invite fraud.
"Hospice is one of the most important and valuable types of health care in this country, but it's subject to easy abuse because you have a benefit that's limited to the last six months of someone's life," Barger said. "That's as much a metaphysical question as a medical question - no one knows the date and time of someone's death. There's a lot of wiggle room, and where there's wiggle room, you have people who will take advantage of it for their financial gain."
Hospice care advocates say allegations of fraud should not deflect from its benefits.
"We believe that hospice care is the highest-quality palliative care available to patients and family caregivers struggling with advanced, life-limiting illness," Susan Negreen, CEO and president of the California Hospice and Palliative Care Association, wrote in an e-mail. "Having said that, we know that there are always a few people who will want to 'game' the system. We support efforts to maintain quality care and standards in hospice."
Read more California investigative reports at CaliforniaWatch.com.