Hospice Compliance: Conditions of Participation, Billing, and Fraud

Hospice Medicare compliance rests on five things: meeting the Conditions of Participation in 42 CFR Part 418, certifying and recertifying patient eligibility with real clinical support, billing the correct level of care every day, staying within the aggregate and inpatient payment caps, and running a functioning program to prevent False Claims Act and Anti-Kickback Statute violations. Miss any of them and the consequences range from claim recoupment to Medicare exclusion to criminal prosecution.

The Conditions of Participation

The Conditions of Participation (CoPs) are the baseline operational and quality standards every Medicare-certified hospice must satisfy. They live across the subparts of 42 CFR Part 418 and cover administrative structure, clinical operations, and patient protections.¹ State survey agencies and accrediting organizations inspect for CMS. A serious deficiency can trigger a corrective action plan or, in the worst case, decertification.

Patient Rights

Federal rules require hospices to give patients a written notice of their rights, in language they understand, before care begins. Those rights include effective pain management, participation in the plan of care, refusal of treatment, choice of attending physician, access to confidential clinical records, and the ability to voice grievances without retaliation.² Failing to inform patients of these rights, or restricting how they use them, is a survey deficiency.

The Interdisciplinary Group and the Plan of Care

Every patient must have an individualized plan of care developed and maintained by an Interdisciplinary Group. The IDG typically includes a physician, a registered nurse, a social worker, and a counselor, and it addresses physical symptoms, emotional needs, and spiritual concerns together. The plan has to be reviewed and updated as the patient’s condition changes. Documentation of IDG meetings and plan updates is a routine audit focus.

Quality Assessment and Performance Improvement

Hospices must maintain a Quality Assessment and Performance Improvement (QAPI) program that uses data to identify problems and produce measurable improvements.³ Surveyors will ask for evidence that the program tracks outcomes, analyzes adverse events, and tests changes. A policy manual on its own is not enough.

The 5 Percent Volunteer Rule

Volunteers must provide administrative or direct patient care services equal to at least 5 percent of the total hours worked by all paid hospice employees and contract staff.⁴ This is a time-based calculation, not a headcount. Hospices need running records that compare paid staff hours against documented volunteer hours. Growing agencies whose volunteer recruitment lags their hiring frequently slip below the threshold.

Eligibility, Certification, and Recertification

Coverage under the Medicare Hospice Benefit begins with a physician’s certification that the patient has a terminal illness with a life expectancy of six months or less if the disease follows its expected course.⁵ Either the hospice medical director or the patient’s attending physician must sign, and the clinical record must contain narrative documentation supporting the prognosis. Boilerplate certifications are among the fastest ways to trigger claim denials on review.

The benefit runs in election periods: two initial 90-day periods followed by an unlimited number of 60-day periods, as long as the patient continues to qualify.⁵ The hospice physician has to recertify at the start of each new period. A missed recertification creates a coverage gap, and the hospice absorbs the cost of services delivered during that window.

Starting with the third benefit period and every period after, a hospice physician or nurse practitioner must complete a face-to-face encounter with the patient no more than 30 calendar days before the recertification period begins. The clinician must then attest to the encounter and document the clinical basis for the continued terminal prognosis.⁶ Claims lacking a timely face-to-face attestation are denied.

Discharge and Revocation

A hospice may discharge a patient in only three situations: the patient moves outside the service area or transfers to another hospice, the hospice determines the patient is no longer terminally ill, or the hospice discharges for cause. Discharge for cause applies when patient or household behavior seriously impairs care delivery, and before pursuing it the hospice must notify the patient, make a genuine effort to resolve the problem, confirm the discharge is not simply because the patient is using necessary services, and document every step.⁷ Skipping any procedural step invites enforcement action.

Patients can revoke the hospice election at any point during a benefit period. Revocation requires a signed written statement with an effective date no earlier than the day it is made.⁸ After revocation the patient forfeits hospice coverage for the rest of that election period and returns to standard Medicare. Billing hospice days after a valid revocation is a False Claims Act exposure, so intake and discharge workflows need to catch revocations immediately.

Level-of-Care Billing

Medicare pays hospices a daily rate that depends on which of four levels of care the patient receives. Getting the classification right every day is one of the most consequential compliance duties a hospice has, because the payment differences are large and the audit scrutiny is intense.⁹

Routine Home Care (RHC) is the most common level, covering days when the patient receives hospice services at home, in a nursing facility, or in assisted living and is not in crisis. The FY 2026 base rate is $231.13 for the first 60 days and $182.18 after day 60.¹⁰
Continuous Home Care (CHC) is provided at home during a medical crisis. It requires at least 8 hours of care in a 24-hour period, with nursing making up more than half of the total hours. The FY 2026 base rate for a full day is $1,674.94, paid hourly. If nursing does not predominate or the 8-hour minimum is not met, the day has to be billed as routine home care instead.¹¹¹⁰
Inpatient Respite Care (IRC) is short-term care in a hospital, nursing home, or hospice inpatient unit so the primary caregiver can rest. Each respite stay is capped at 5 consecutive days.⁵
General Inpatient Care (GIP) covers inpatient pain control or acute symptom management that cannot be managed at home. The FY 2026 base rate is $1,199.86 per day. GIP carries the greatest compliance risk because every day must be supported by documentation showing that the patient’s symptoms genuinely required inpatient-level intervention.¹⁰

Billing for a higher level of care than what was medically necessary or actually delivered is upcoding, and it draws audits, denials, and recoupment demands. For every CHC or GIP day, the record must document specific symptoms, interventions attempted, and, for CHC, the exact hours of care and the clinician type providing them.

The Aggregate Cap and the Inpatient Limit

Even a hospice whose individual claims are all clean can face repayment demands under two aggregate limits. Both are calculated after the close of the cap year, which runs November 1 through October 31.

The first is the annual per-beneficiary aggregate cap. For FY 2026 it is $35,361.44 per beneficiary.¹² Medicare multiplies that amount by the number of beneficiaries served, with patients who received care from more than one hospice counted proportionally based on their share of hospice days at each provider.¹³ If total payments during the cap year exceed the resulting figure, the hospice refunds the difference. Long-stay patients drive this risk: they add daily payments without adding to the denominator. Cap exposure has to be tracked throughout the year, not measured after the fact.

The second is the 20 percent inpatient day limitation. GIP and respite days combined cannot exceed 20 percent of a hospice’s total Medicare patient care days over a 12-month period.¹¹ Days above the threshold are not denied outright; instead, payment for the excess is recalculated at the routine home care rate and the hospice refunds the overpayment. A hospice that leans heavily on GIP needs to monitor this ratio continuously.

Fraud Statutes and Compliance Programs

Federal enforcement against hospice fraud has intensified, with civil settlements and criminal cases pursued in 2026.¹⁴ Two statutes carry most of the weight.

The False Claims Act

The False Claims Act creates civil liability for knowingly submitting a false or fraudulent claim to the federal government. In hospice, that reaches claims for patients who never met the terminal illness standard, claims for services not actually provided, and upcoded levels of care. Each false claim carries a civil penalty between $14,308 and $28,619 at the current inflation adjustment, plus treble damages.¹⁵ Because each day of service is a separate claim, penalties compound quickly when ineligible patients stay on service for months.

The FCA also lets private individuals, often current or former employees, file suit on the government’s behalf and share in the recovery. That whistleblower mechanism drives a large share of hospice investigations, which is why internal reporting culture matters as much as written policy.

The Anti-Kickback Statute

The Anti-Kickback Statute is criminal. It makes it a felony to knowingly offer, pay, solicit, or receive anything of value in exchange for referring patients for services covered by a federal health care program. Conviction can bring fines up to $100,000 and up to 10 years of imprisonment per violation.¹⁶ The common hospice risk areas are arrangements with nursing facilities, physicians, and marketing staff where compensation is tied, directly or indirectly, to referral volume. The financial arrangement itself creates liability even when the underlying care was appropriate, and a violation triggers Medicare exclusion.

The Seven Elements of a Compliance Program

The HHS Office of Inspector General recommends that hospice compliance programs be built around seven elements:¹⁷

Written policies and standards of conduct addressing the specific fraud risks hospices face.
A designated compliance officer and compliance committee with real authority.
Regular training and education for all staff, clinical and non-clinical.
Accessible reporting channels that let employees flag concerns without retaliation.
Internal monitoring and auditing of billing patterns, eligibility documentation, and level-of-care assignments.
Consistent enforcement through published disciplinary guidelines.
Prompt corrective action when problems are found, including voluntary self-disclosure to the OIG when appropriate.

What matters to enforcement agencies is whether the program actually functions. A hospice that catches a billing problem through its own auditing and self-discloses to the OIG sits in a different place than one that first hears about the problem through a whistleblower complaint. The program shapes how the government reads intent when something goes wrong.

1
eCFR. 42 CFR Part 418 – Hospice Care
2
eCFR. 42 CFR 418.52 – Patient’s Rights
3
Centers for Medicare & Medicaid Services. QAPI Description and Background
4
eCFR. 42 CFR 418.78 – Volunteers
5
Medicare.gov. Hospice Care
6
eCFR. 42 CFR 418.22 – Certification of Terminal Illness
7
eCFR. 42 CFR 418.26 – Discharge From Hospice Care
8
eCFR. 42 CFR 418.28 – Revoking the Election of Hospice Care
9
Medicare.gov. Medicare-Certified 4 Levels of Hospice Care
10
Medicaid.gov. Medicaid Hospice Payment Rates for FY 2026
11
eCFR. 42 CFR 418.302 – Payment Procedures for Hospice Care
12
Centers for Medicare & Medicaid Services. FY 2026 Hospice Wage Index and Payment Rate Update Final Rule
13
eCFR. 42 CFR 418.309 – Hospice Aggregate Cap
14
U.S. Department of Health and Human Services Office of Inspector General. Enforcement Actions
15
Department of Justice. The False Claims Act
16
Office of the Law Revision Counsel. 42 USC 1320a-7b – Criminal Penalties for Acts Involving Federal Health Care Programs
17
U.S. Department of Health and Human Services Office of Inspector General. Seven Elements of an Effective Compliance Program