The Mechanics of "Ghost Hospice"

In April, the U.S. Department of Justice launched the West Coast Health Care Fraud Strike Force, uniting federal agents, the FBI, and the HHS Office of the Inspector General to target a massive spike in hospice, sober home, and wound care schemes across California, Arizona, and Nevada.

Concurrently, California Attorney General Rob Bonta and Governor Gavin Newsom announced criminal charges against organized crime groups involved in a $267 million scheme targeting the Medi-Cal program in Los Angeles. The operation involved 14 fraudulent hospice providers that used stolen identities to enroll thousands of seniors without their knowledge. During that conspiracy, investigators found that no legitimate hospice service was ever provided.

Corrigan says the vulnerability is in data breaches, not face-to-face scams. 'One of the biggest problems is stolen Medicare Beneficiary Identifiers (MBIs),' she explains. 'The main issue is not seniors giving away their IDs. Instead, computer breaches post MBIs on the dark web, where they are reused repeatedly.'

Once a bad actor buys these identifiers, they establish shell companies and begin billing Medicare for palliative services, medical equipment, and nursing visits that never happen.

In testimony before the House Committee on Ways and Means, Sheila Clark, President and CEO of the California Hospice and Palliative Care Association, warned that the damage goes far beyond the theft of tax dollars.

"Fraud in hospice does not necessarily end when the billing stops," Clark testified. "Under the current billing structure, the fraudulent hospice controls the paperwork needed to revoke or terminate a hospice election. If a fraudulent provider is uncooperative, unreachable, or no longer operating, the beneficiary may remain reflected in Medicare systems as if an active hospice election still exists. That can interfere with access to curative treatment, prescription drugs, and other needed services."

Seniors often find out they are "dying" on paper only when they visit their regular doctor or pharmacist, only to be told their standard coverage has been suspended because they are ostensibly enrolled in comfort care.

The Problem With "Whac-A-Mole" Enforcement

Government watchdogs have faced sharp criticism from lawmakers for failing to stop the bleeding sooner. A March congressional investigation by the House Committee on Oversight and Government Reform found that federal and state officials have been aware of these systemic vulnerabilities for years. The Committee highlighted an estimate from CMS that Los Angeles County alone accounts for roughly $3.5 billion in hospice fraud, nearly 18% of all hospice billing nationwide.

In response, California has instituted a moratorium on new hospice licenses, revoked over 280 licenses in the past two years, and put another 300 providers under investigation.

While Corrigan acknowledges that administrations favor the bold headlines generated by massive criminal takedowns, she argues that pure law enforcement is a temporary fix for a structural flaw.

Corrigan notes, "Many hospices were disenrolled and barred from the Medicare program during my tenure, but another 400 had to be shut down after my departure. This cycle is often called 'Whac-A-Mole.' While such actions garner headlines, states implementing certificates of need, moratoria on new hospice enrollment, changes in payment incentives, robust survey and certification programs, and limits on the number of hospices a physician can oversee receive less attention. A more meaningful impact would come from tackling these harder policy issues."

One change Corrigan advocates for is moving from backward-looking data analysis to proactive verification. During her tenure at CMS, her team proposed a pilot program to send letters directly to beneficiaries to confirm their enrollment. More recent efforts have explored immediate phone verifications. "There is a delicate balance here because you do not want to discourage people or scare them away from hospice," she notes. "But simply picking up the phone early just to verify that the enrollment was not fraudulent is a good step forward."

Re-engineering an Outdated Law

The deeper crisis, in Corrigan’s view, is that the panic over criminal enterprises is overshadowing a fundamental policy failure: the underlying law governing hospice is nearly a half-century old and no longer matches modern medicine.

When Medicare began covering hospice care in 1982, it was designed for cancer patients with predictable declines. The law required a physician's certification that a beneficiary had six months or less to live. Today, most hospice patients have neurodegenerative conditions like Alzheimer’s, Parkinson's, and dementia — diseases with long, unpredictable trajectories.

Corrigan watched this play out with her own parents. Her 92-year-old father contracted Covid-19, entered an emergency room, and died two weeks later. His transition to an inpatient hospice unit halfway through his stay allowed the family to use social workers and ensure his comfort.

Her mother, however, had been deteriorating from Parkinson’s and dementia for four years. Because her father viewed hospice as an admission of defeat, he refused the service for his wife. She was only able to access it for less than two months after he passed away.

"Oddly, if my mother had been put in hospice as recommended, her hospice care would have been almost exactly six months," Corrigan says. "I think my mother and our family would have benefited tremendously from hospice services much earlier. The hospice RN was more helpful than my mother's neurologist in discussing medications and figuring out what made sense. The social worker and the RN took the time to explain what my mom's refusal to eat meant."

To address the psychological barrier that delays crucial care, Corrigan proposes a straightforward legislative update: change the statutory language from 6 months to 1 year.

"Six months or less feels different from a year," she says. "This is subjective, of course. But there is a really good study by Jonathan Gruber and Jetson Leder-Luis about how an over-focus on fraud prosecutions in hospice can be a mistake if it drives up overall healthcare costs."

The research Corrigan cites includes work by MIT economists. It shows that timely hospice use creates massive savings for U.S. healthcare. For patients with Alzheimer's and related dementias, early hospice care saved about $29,000 per patient over five years, versus traditional hospital care. When families avoid hospice because of fear or legal confusion, patients return to emergency rooms, see specialists, undergo procedures, and drive up Medicare costs.

A New Model for Dignity

Corrigan thinks a completely different approach could be the solution: a new, dedicated federal palliative care benefit tailored to the reality of long, slow neurodegenerative declines. She envisions a system built from day one with modern anti-fraud controls. By requiring personal certifications from the actual physicians, nurse practitioners or physician assistants treating these complex diagnoses, she argues the care would remain anchored in legitimate medical practices rather than the types of stand-alone shell corporations currently making headlines.

"Our payment system, particularly in hospitals, incentivizes care in a silo," Corrigan says. "You have someone for wound care, the respiratory specialist, the nurse, the phlebotomist, the radiology tech. When hospice comes in, you turn to considering the whole person. For fraud specifically, I think palliative care provided or overseen by a licensed MD, NP, or PA is going to be far less subject to abuse. Right now, it is simply way too easy to set up a rogue hospice and bill millions without upfront oversight."

The widespread coverage of scammers in California's current news cycle might scare vulnerable families away from the legitimate, transformative care that honest providers deliver every day.

"A perception of out-of-control fraud affects even the best hospices," Corrigan says. “We already do not like to think about death in the United States, and if the hospice community is tarnished even more, people will not choose it even if it would make their lives better. Success means having hospice experts help families navigate some of the most difficult parts of life well, for as long as possible.”

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