On October 17, 2013, after being convened for exactly one month and one day, (1) a federal jury in the United States District Court for the Eastern District of Pennsylvania returned a guilty verdict on all thirty five counts against Matthew Kolodesh for various forms of healthcare fraud, (2) mail fraud, (3) money laundering, (4) aiding and abetting, (5) and conspiracy, (6) related to his ownership and operation of Home Care Hospice of Philadelphia, Pennsylvania. (7) The indictment alleged that Kolodesh and his co-conspirators fraudulently billed Medicare to the tune of an estimated $12.8 million for end-of-life care for patients who were not at the end of their lives. (8) The indictment alleged that another $1.5 million was billed and paid to Home Care Hospice for patients who were dying, but for whom Kolodesh and his co-conspirators did not provide the in-home around-the-clock-care they promised. (9) Presumably, many of the patients in this latter category died alone, without care--the exact circumstance that the hospice movement's benevolent pioneers sought to avoid (10) and that the federal government intended to guard against when it first considered adoption of the Medicare Hospice Benefit. (11)
According to the indictment, Kolodesh and his co-conspirators created phony schedules to make it look as if hospice caregivers were continuously visiting the dying patients when, in fact, the patients were all alone. (12) Sometimes the patients were already dead when the fraudulent schedules were created. (13) While the patients missed the care, Kolodesh and his company didn't miss a payment--some $800 per day--billed to taxpayers through Medicare. (14) Before it was all over, the Department of Justice ("DOJ") revised its Medicare losses to estimate that Kolodesh and his co-conspirators stole some $16.2 million from the Medicare system and the United States taxpayers. (15)
Kolodesh used the Pennsylvania hospice and its Medicare-funded revenues as his "private piggy bank," according to federal prosecutors Suzanne Ercole and Margaret Vierbuchen, and their boss United States Attorney Zane David Memeger. (16) Together with his co-conspirators, (17) including registered nurse Alex Pugman, (18) who was enlisted to serve as director of the hospice and who admitted to being the chief lieutenant of the fraud, Kolodesh "orchestrated a series of fraudulent schemes that enriched [his and his co-conspirators'] bank accounts and lifestyles by millions of dollars," claimed prosecutors Ercole and Vierbuchen in their sentencing memorandum. (19) "Simply put, they used [Home Care Hospice] as the vehicle to scam ... the Medicare program of $16.2 million in false claims." (20) According to the prosecutors, Kolodesh's greed infected the hospice's entire clinical team--harming patients and their families--and not only abused the Medicare payment system, but perhaps more insidiously perverted the medical system itself, corrupting the benevolent mission of hospice and denying the fundamental "altruistic impulse" (21) that theoretically drives all medicine. The fact that the matter at issue for Home Care Hospice's patients and their families was quite literally life and death made the breach of ethics and trust by Kolodesh and his co-conspirators all the more egregious. (22) The horror of Kolodesh's crimes was apparently not lost on the prosecutors who described it in terms that in other contexts might be considered hyperbole: "A culture of fraud permeated [Home Care Hospice]," stated the prosecutors in their sentencing memo. (23) "It infected the field clinicians, RNs and LPNs, who provided care for patients, as well as home health aides. Kolodesh and Pugman, motivated by greed, were responsible for creating this monster." (24)
On May 28, 2014, seven months after the jury pronounced Kolodesh guilty, United States District Judge Eduardo C. Robreno of the Eastern District of Pennsylvania sentenced him to serve 176 months for his crimes. (25) Over his attorneys' objections, Kolodesh was immediately remanded to the United States Marshals' custody to begin serving his fourteen and a half years in the federal penitentiary. (26) Judge Robreno recommended that the Bureau of Prisons enroll Kolodesh in mental health counseling and treatment programs for alcohol addiction. (27) He also sentenced Kolodesh to three years of supervised release upon completion of his prison term on standard terms with additional ongoing monitoring of all of his financial dealings, an order to not use alcohol, and an order to participate in an alcohol treatment program during his supervised release. (28)
Tellingly, Judge Robreno imposed additional restrictions directed at Kolodesh's financial dealings during his supervised release, requiring him to file monthly financial statements, banning him from opening or applying for any lines of credit, and forbidding him from incurring any credit charges on existing credit accounts. (29) These additional supervisory release terms may reveal Judge Robreno's view that extensive supervison of Kolodesh's financial activity is necessary to prevent him from perpetrating further fraud. (30)
Kolodesh's scheme of deceiving dying patients and their families for profit at the taxpayers' expense may be described as monstrous, (31) but unfortunately it cannot be described as unique. Beginning in 2000, (32) defendants associated with hospices around the country have been forced to re-pay the taxpayers for similar fraud allegations under the federal False Claims Act. (33) In the fifteen years since the first settlement was announced, the United States has used the False Claims Act to recover around $114,565,290 of fraudulent hospice claims to Medicare, and, in some cases, to bring criminal defendants to justice. (34)
At the time that this Article was written, all of the major national hospice chains had been accused (some more than once) of civil fraud related to false claims for payment under the Medicare Hospice benefit. (35) This Article seeks to bring attention to the current trend of hospice fraud enforcement actions and to explore the primary common thread that runs among most of them: their genesis in whistleblower actions under the federal False Claims Act.
As with the vast majority of hospice fraud enforcement actions, a False Claims Act qui tam whistleblower first alerted prosecutors of Kolodesh's fraud. (36) The Kolodesh investigation, (37) culminating in the strictest measure of fraud enforcement and penalty, began when two nurses became whistleblowers, choosing to stand up to the fraud and alert authorities of what they had witnessed by filing a sealed civil False Claims Act qui tam complaint.
As this Article will demonstrate, the public-private partnership endorsed by Congress in the federal False Claims Act has been, and will continue to be, the driving force in prosecuting allegations of fraud under the Medicare Hospice Benefit. In the interest of full disclosure, the author reminds the reader that he is lead trial counsel for qui tam plaintiffs in many of the pending and completed civil False Claims Act hospice fraud actions. (38) Accordingly, this Article will not focus directly upon, nor discuss, any of the details of those cases outside of what is stated in publicly available court documents. (39) Rather, the scope of this Article is to examine the general trend of Medicare Hospice fraud enforcement actions, periodically referencing the particulars of the Kolodesh case as a paradigm. Section I will outline the history of hospice in general and the Medicare Hospice Benefit in particular, while examining the emergence of profit motive into the industry and the corresponding rise in fraud enforcement actions. Section II will explore the civil False Claims Act and its use as the primary tool in enforcing the Medicare Hospice regulations. Section III will examine the centrally contested legal issue currently at play in civil False Claims Act enforcement actions under the Medicare Hospice Benefit--the role of physicians in certifying patients for hospice--and will argue that a physician's certification of terminal illness should not be allowed to absolve a Medicare hospice provider of civil False Claims Act liability. Finally, this Article will offer brief conclusions and predictions about the future of Medicare Hospice fraud enforcement actions.
THE MEDICARE HOSPICE BENEFIT
The foundation of the modern hospice movement is credited largely to a charismatic British nurse named Cicely Saunders, (40) who famously administered cocktails of heroin, honey, and whiskey to dying patients and focused on addressing their "spiritual, psychological, social, and practical needs" as opposed to what she viewed as the way hospitals traditionally approached dying patients with--in her words--a "never-ending, intensive treatment carried to the bitter end as patients suffered and became more helpless." (41) Saunders traveled Great Britain and the United States in the 1950s and 1960s preaching the then-radical idea that end-of-life care should focus primarily on providing comfort for the dying, endorsing the prescription of wine, beefsteaks, violin music, and narcotics rather than debilitating and brutally aggressive medical treatments, such as chemotherapy. (42) She used an interdisciplinary team approach that put healthcare decisions in the hands of patients, their families, and a team of caregivers, social workers, and clergy rather than "the opinions of specialists or the convenience of nurses or the rules of hospitals, government health programs, or insurance companies." (43) Saunders named her treatment program, "hospice," from the Latin hospes, for "both guest and host" and in honor of the hospices that sheltered members of the early Christian (44) church and pilgrims of the Middle Ages. (45)
By 1969, just as Dame Cicely Saunders's ideas were gaining momentum in the United States and elsewhere, a Swiss-born...