Federal and state regulators are employing artificial intelligence to combat fraud in the hospice industry, a move that legal experts warn could unfairly target legitimate providers. These data-driven oversight methods, which include advanced analytics and machine learning, are designed to identify suspicious billing patterns but may have unintended consequences for compliant organizations.
Esperance Becton, an associate at Sheppard, Mullin, Richter & Hampton LLP, emphasized the importance of hospices understanding how AI tools are evolving in regulatory oversight. “Compliance is not just about preparing for an audit, it’s also about understanding what the data may be telling regulators and being prepared to explain it,” Becton stated. She added that regulators need to balance program integrity with continued access to hospice care, ensuring that legitimate providers are not discouraged from serving patients with complex needs.
The surge in AI-driven fraud detection comes after an influx of new providers entered certain states, leading to issues like “license flipping.” States such as Arizona, California, Nevada, and Texas were early hotspots for alleged fraud, later joined by Georgia and Ohio. The U.S. Centers for Medicare & Medicaid Services (CMS) is using its Fraud Prevention System, which employs predictive analytics and machine learning to flag high-risk Medicare claims.
However, the expanding use of AI has created challenges for established hospices. Howard Young, a partner at Morgan, Lewis & Bockius LLP, noted that data-driven regulatory efforts can have a “cascading effect” on high-quality providers. Some hospices have ceased operations following license revocations, which can include a decade-long ban on re-enrollment. AI tools are reportedly examining not only billing data but also patterns in hospice ownership and employee management.
Regulators are scrutinizing key data points, such as the affiliations of medical directors. Hospice regulations require these directors to be reported as managing employees. If a medical director is linked to a company under suspicion, it can be considered a fraud risk, potentially leading to license revocation. “CMS is taking a much broader view on who it believes are the agency’s managing employees,” Young said. “AI tools and other data analytics look across the entire enrollment database.”
Edo Banach, a partner at Foley Hoag LLP, expressed concern that legitimate hospices, especially smaller ones, may lack the financial resources to keep pace with AI advancements in regulatory oversight. He suggested that technology-enabled tactics could disadvantage smaller providers compared to those with greater financial capacity. “I feel like the government is trying to bury some of these providers in paperwork and make it almost impossible for them to continue operating,” Banach told Hospice News. “They are not presumed to be innocent. They are presumed to be guilty through these revocations.”
To remain sustainable, hospices need to invest in quality and compliance, Banach advised. The increased use of technology by compliance teams and regulatory agencies has raised the cost of doing business. He believes that surviving the AI-enabled fraud hunt is critical for improving access to hospice care as the aging population grows.
Becton recommends an “AI-defensible” approach to compliance. This involves hospices identifying potential regulatory risks through strong documentation, staff training, and adaptable policies. “Hospices should take a more proactive approach to compliance as regulators increasingly rely on data analytics to monitor billing and utilization,” Becton said. She stressed the need to understand data points that attract regulatory attention, monitor for unusual patterns, and ensure clinical documentation supports claims.
Steve Shelton, senior director of clinical services at Mosai, a tech platform for home-based companies, has observed hospices making more “urgent” attempts at proactive compliance. This urgency stems from the scale and speed of data-driven and AI-assisted oversight. Shelton highlighted the need for documentation that supports clinical decisions regarding eligibility, recertification, service intensity, and length of stay.
Understanding regulatory technology can help providers integrate their own AI policies. Hospices should regularly review billing and patient data to anticipate regulatory inquiries. Considering the clinical context behind any “unusual” billing patterns is also crucial. Shelton concluded that hospices with clear policies, defined accountability, consistent monitoring, and ongoing education will be better prepared as Medicare expands its use of AI and analytics.
