Federal Task Force Suspends 447 Hospices in LA as Regulatory Pressure Mounts Across the Sector

A federal anti-fraud task force led by Vice President J.D. Vance suspended 447 hospices and 23 home health agencies in the Los Angeles area on Wednesday, citing an estimated $600 million in suspected Medicare fraud. The task force, established by the Trump administration in March, includes members of the Departments of Justice, HHS, Homeland Security, and the Department of Labor. It represents one of the most significant single enforcement actions against the hospice sector in recent memory as pressure increases to crack down on fraud in California. Hospice operators in the state have been under particular scrutiny following an explosive investigation from CBS News last month, which found evidence of widespread fraud in the LA region. The investigation found one medical director who claimed to work at 45 different hospices, a single address that had 89 hospices registered to it, among other problems.

The California Hospice and Palliative Care Association has welcomed this week's enforcement action, as well as other crackdowns on bad actors. "In California, scammers exploit Medicare and Medi-Cal benefits by deceptively and illegally enrolling seniors in hospice and skilled home health programs they never consented to," said CEO Sheila Clark in a statement. "Every dollar stolen from hospice and skilled home health is a dollar of care not provided to Medicare patients who need it. Not only do these scams have devastating impacts on seniors and their families, but they also divert precious resources away from the legitimate providers delivering high-quality care across California and the nation."

Documented fraud patterns in the region include enrolling patients without their knowledge or consent, transferring patients between hospice organizations in exchange for payments, and "license flipping."

Still, experts say the crackdown on fraudsters will impact compliant providers as well, and could create heightened operational risks both now and in the near future. Here's what to know.

The California context

This week's suspension follows a series of escalating enforcement actions in the state. Earlier this month, California AG Rob Bonta announced charges against 21 suspects and the dismantling of a separate fraud scheme — dubbed "Operation Skip Trace" — that prosecutors say defrauded the state of $267 million. Five suspects were ultimately arrested.

Collateral effects on legitimate providers

The suspensions land as the broader enforcement environment is already difficult to navigate for compliant providers. CMS implemented a Provisional Period of Enhanced Oversight (PPEO) in 2023 for newly enrolled hospices and those undergoing ownership changes in Arizona, California, Nevada, and Texas. The agency added Georgia and Ohio to the program this year and expanded prepayment reviews in the original four states. As of June 2025, CMS had revoked billing privileges for 122 hospices subject to PPEO medical review, with nearly $456,000 in claims denials that year — a denial rate of 40%.

Attorneys who have advised hospices through multiple PPEO periods say the process is creating serious and at times unpredictable downstream consequences for legitimate operators.

For example, clinical claim denials have become increasingly common outcomes of PPEO periods. Some providers have been subject to prepayment review for 100% of their claims, while others have moved directly into billing revocation. Attorneys, including Zaina Niles from Husch Blackwell, recommend investing heavily in upfront compliance to prevent denials before they occur.

During a recent Brellium webinar, Niles identified two recurring audit failure patterns: reviewers misapplying clinical eligibility standards by treating local coverage determination guidelines as hard requirements rather than flexible parameters, and placing excessive weight on quantitative decline metrics while ignoring qualitative clinical indicators. Physicians, she advised, need to explicitly connect clinical observations to prognosis — and synthesize why those findings support a terminal prognosis, instead of just recording numbers. Niles noted that what reviewers are looking for is changing rapidly, especially as PPEOs expand. She recommended hospices work with compliance experts, including pre-billing experts like Brellium, to ensure they're up to date on the latest compliance requirements.

What's coming next: the FY 2027 proposed rule

On top of existing PPEO pressure, CMS published its FY 2027 Hospice Proposed Rule (CMS-1851-P) on April 2, which would extend the agency's fraud-detection reach well beyond newly enrolled providers.

The most significant new element is the Service and Spending Variation Index (SSVI) — a nine-measure scoring system that tracks non-hospice Medicare spending patterns during a hospice election. CMS has flagged a near-4,000% increase in carrier claims for pressure ulcers between FY 2020 and FY 2024 (rising from $18 million to $714 million), and the SSVI is designed to identify providers whose patterns of care and associated outside spending look anomalous. High variation scores would trigger increased transparency requirements and potentially additional oversight. This is a meaningful shift: it moves CMS's monitoring lens from enrollment and billing compliance toward clinical utilization patterns.

The proposed rule would also make the hospice election addendum mandatory for all patients at the time of enrollment, rather than available only upon request. Providers would be required to deliver it within five calendar days of election. This is an operationally significant change for intake and admissions workflows, and given that technical deficiencies in election statements have already been among the most common PPEO denial triggers, the stakes of getting the addendum right from day one are high.

Key proposed rule dates

Public comments on FY 2027 Hospice Proposed Rule are due June 1, 2026. Proposed changes, including the mandatory addendum requirement, would take effect October 1, 2026 if finalized.

Additional proposals in the rule include: conforming changes allowing a physician designee or IDG physician member (not only the medical director) to discharge a patient from hospice care; an icon on the Medicare.gov Compare Tool identifying hospices that fail to meet HOPE quality reporting requirements; and telehealth face-to-face policy changes aligned with the Consolidated Appropriations Act, 2026.

The practical steps compliance experts recommend across all of these overlapping pressures: conduct pre-billing reviews or use automated auditing tools to catch documentation gaps before claims are submitted, review election statements and addendums against 42 CFR standards, and respond to PPEO reviews promptly to limit financial exposure.

Also developing

Earlier this week, Hospice News reported CMS is weighing a national moratorium on hospice Medicare enrollment.

The agency has not yet confirmed the rumor, but the move would have ripple effects across the industry. NPHI supports a temporary national pause to root out fraud, while state associations and individual attorneys worry the moratorium could disrupt care access in underserved markets.