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Are some hospice care providers fudging the rules? Elizabeth Brackett reports on federal investigations into hospice fraud.

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JIM LEHRER: Now, another in our continuing series of reports on the changing health care system in America. Federal investigators have been looking into charges of fraud at hospices across the country. Hospice operators say it's unfair. Elizabeth Brackett of WTTW-Chicago reports.

SPOKESPERSON: Hi, Bill. How are you today?

ELIZABETH BRACKETT: It's hard to predict how much time 87 year old Billy Whitaker has left. Once a Virginia coal miner, Whitaker has suffered from Black Lung Disease for years. Last January, he was certified for hospice care. His daughter says she couldn't manage his care without the help of a hospice staff.

WHITAKER'S DAUGHTER: I could never do it by myself, really, especially with his bath and personal things.

ELIZABETH BRACKETT: Before being admitted to hospice care and before Medicare will pick up the cost, a patient must be diagnosed as having less than six months to live. Patients must agree to give up all curative medical care. Hospice care consists of pain management and helping patients and their families face the upcoming death. Medicare began paying for hospice care in 1983. Since then, the number of patients has jumped from around 100,000 to nearly 400,000.

SPOKESPERSON: People ask us a lot of times how can you do that job, or why do you like that job, but we just--we have a group of individuals that, you know, they really love the work, the support of the families. You know, we meet so many nice people, and when we can walk away and know that we've made a difference in the way that the end of that loved one's life came to an end, you know, when we see that, it's just--it's very rewarding, and that they aren't in pain.

ELIZABETH BRACKETT: But now Hospice Nurse Theresa Gobelli has more than her patients to worry about. Her hospice, the Visiting Nurses Association Hospice, in Rockford, Illinois, is under federal investigation for Medicare abuse. The problem: Patients who are diagnosed with a terminal illness but live longer than seven months. Federal investigators say they found the first evidence of such fraud in Puerto Rico. The investigation is being run by the Inspector General's Office and the Department of Health & Human Services. Inspector General June Gibbs Brown spoke with NewsHour reporter Murray Jacobson.

JUNE GIBBS-BROWN, Inspector General: Well, we found a high percentage of people that were being entered into the hospice program, and they didn't have an ailment that they would expect not to live more than six months. Actually, when we dove into it and found that certain of the providers were abusing the program, and we decertified 30 of them.

ELIZABETH BRACKETT: After Puerto Rico, a nationwide fraud investigation called Operation Restore Trust was begun. Twelve hospices in five states--Florida, California, Texas, New York, and Illinois--were audited. The audit found that in cases where patients lived longer than seven months 2/3 of the records did not justify a terminally ill diagnosis, therefore, the patients should not have been certified for hospice care. As a result, the hospices are being asked to pay back 83 million dollars in Medicare payments.

JUNE GIBBS-BROWN: We have had medical people review records, particularly where somebody has some organization, had a very, very high percentage of people who were still living after seven months, and we found that of those that were living after seven months in these what I might call problematic providers, that about 2/3 of them had chronic, rather than some type of terminal illness.

ELIZABETH BRACKETT: Surveyors from the Health Care Finance Authority, which cooperated with Operation Restore Trust, inspected the medical records at the Rockford Visiting Nurses Association in August. Hospice President Susan Schreier says the records of their 15 Medicare patients were looked at. She was told the records of eight patients did not indicate a terminal illness and three other cases were questionable.

SUSAN SCHREIER, Hospice President: We were just appalled because, of course, we work with physicians to determine that people are terminally ill before they are provided the hospice care. The primary care physician, who has been working with the patient usually on a very long-term basis, has sometimes known the patient and family for years before they've had a terminal diagnosis says to us, yes, we believe this person is terminally ill, has less than six months to live, and we also have all of our cases presented to our hospice medical director, who also says, yes, this person is terminally ill.

DR. KRISHNA SANKARAN, Hospice Medical Director: Clearly, this is someone with a very advanced disease doing poorly who we really did expect to die fairly soon. I'm glad we were able to provide him with appropriate comfort care measures.

ELIZABETH BRACKETT: The hospice's medical director took another look at the records the federal surveyors questioned. He says he would still certify all of the patients for hospice care today. His hospice has not been asked to return any Medicare funds, but Dr. Krishna Sankaran says he worries about the impact of the investigation on the hospice.

DR. KRISHNA SANKARAN: We are talking about a situation where clearly there is judgment involved. There's no absolutes; there's no rules that fit perfectly; and you have to make some assessments which--which may have some differences in time frame and people's expected survival. I think holding to rules and holding people accountable for those types of differences that can't be reasonably gauged will basically deny those patients care.

ELIZABETH BRACKETT: Dr. Steven Rothschild is the former medical director of a large Chicago hospice. He says it may be easy for federal auditors to look at medical records in hindsight and decide that patients who took longer than six months to die should not have been certified for hospice care. It's a lot harder, he says, to predict up front when a patient will die.

DR. STEVEN ROTHSCHILD, Former Hospice Medical Director: It is extremely difficult to predict when patients are going to die. This idea that we all have from movies of you have three months to live, the doctor walking into the room--I always think of Betty Davis in "Dark Victory"--doesn't exist. It does not exist. We're able to predict within a few hours in most cases but all of us have seen patients went home with a prognosis of a few days who have lived months. It is extremely difficult.

JUNE GIBBS-BROWN: Of course, the practice of medicine is an art and it's a very difficult thing to know exactly when a patient will expire. And we're not trying to say that this is an exact science. I think one of the important factors here is we're very concerned about the patients. Some patients need curative care. Once they go into hospice they're getting palliative care, which is only things to make them more comfortable. And if they aren't given the care they need, it could jeopardize that patient's life span. Also, once they have gone out of hospice they can't re-enter for the same illness, if it's over six--the seven month period.

DOCTOR TALKING TO PATIENT: Do the medicines help your pain?

ELIZABETH BRACKETT: Dr. Michael Preodo founded the Horizon Hospice in Chicago 19 years ago. He says the real problem in the hospice movement is not that patients are living too long; it's that they are not being referred soon enough. A University of Chicago study found that 50 percent of all hospice patients die within a month and 15 percent die within a week of referral. Dr. Preodo blames some of the late referrals on Operation Restore Trust.

DR. MICHAEL PREODO, Hospice Doctor: Operation Restore Trust has led us to be very apprehensive about taking people into our program where the prognosis is not clear. There are many illnesses where prognosticating is difficult, if not impossible, where the needs for the patient and family are entirely palliative. But we're unable to take those patients if we can't be sure they're going to die in the six month allotted time.

ELIZABETH BRACKETT: Louise Uschlog is one of those patients. The 86 year old woman lives alone, had surgery for stomach cancer last year, and Dr. Preodo would like to certify her for hospice care, but Operation Restore Trust has made him reluctant to make the referral.

DR. MICHAEL PREODO: When we look at Mrs. Uschlog, she has had a serious malignancy. She's also had a decline in her general functional status. She's lost weight, though she hasn't quite lost a third of her body mass. She meets a few of the criteria which make it likely that she would be hospice appropriate; however, does she meet enough of those criteria, and what do we do as a hospice program if she functions at exactly this same level nine, twelve months from now. Are we then in jeopardy for having charged Medicare for services that they don't feel are justified?

ELIZABETH BRACKETT: Congressman Bill Thomas chairs the congressional subcommittee that oversees Medicare. He says the results of Operation Restore Trust show that too often doctors make the wrong decision when they refer patients for hospice care.

REP. BILL THOMAS, (R) California: The problem is the way in which the program is currently being conducted is simply unacceptable if the levels of fraud and abuse that I believe are there and are being documented are there. It isn't that you would stop the hospice program. You would make sure that you have a decision-making structure that won't allow for those abuses, and we believe we have legislation that would correct it.

ELIZABETH BRACKETT: Currently, hospice patients are re-certified after three months, six months, and seven months of care. After that, patients can remain under hospice care indefinitely. Congressman Thomas says that's where much of the abuse has occurred. His legislation proposes frequent eligibility checks for patients who live longer than seven months. Most hospice workers do not object to more frequent eligibility checks. What they do object to is the assumption that there is widespread fraud in the industry based on Operation Restore Trust's findings in only 12 hospices.

SUSAN SCHREIER: My reaction is that they're looking for fraud and abuse that really doesn't exist. And they're not quite sure how to go about doing it because hospice has grown rapidly; they think that there is fraud and abuse, and I just--I don't feel that that's the case. I think that our society is searching this kind of compassionate care, and that as a society we have not dealt with the issues of death and dying and that this a service that is dealing with the issues. And every one of us has to go through this process and many times with our family members, and I believe that, you know, we really need to assist people so that they can receive the compassionate care they need.

ELIZABETH BRACKETT: But the inspector general's office says there is enough concern to warrant expanding Operation Restore Trust. In addition to hospices, the investigation has already looked for fraudulent Medicare payments to nursing homes, home health agencies, and medical equipment suppliers. Eventually, Operation Restore Trust is expected to expand to all 50 states.

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