Care Alternatives: What Did Medicare Know When It Paid?

The Care Alternatives hospice false claims case challenged Medicare billing backed by certifications that former employees said the patient records could not support. Care Alternatives argued that the missing support could not have mattered much because Medicare kept paying. But Medicare paid the claims while the supporting charts stayed at the hospice. The Third Circuit’s answer exposed the gap in that defense: paying a bill did not tell Medicare what was missing from the patient’s chart.

Care Alternatives operated a for-profit hospice in New Jersey. A regional manager, a chaplain, a registered nurse case manager and a community liaison brought the hospice fraud case over claims from 2006 and 2007. They alleged that the company billed Medicare even though the clinical records did not support the certifications of terminal illness. The government declined to take over, and the employees continued the case.

What the Complaint Said Staff Could See

The employees’ complaint alleged pressure to increase admissions and change the records supporting them. The court dismissed the altered-record and kickback claims. The appeals concerned unsupported hospice certifications.

The complaint alleged that missing records became newly created records:

The same passage alleged that a consultant instructed staff to rewrite documents to support diagnoses or supply supporting symptoms. Elsewhere, the employees alleged that administrators told liaisons to leave service failures out of daily reports.

The admissions language was equally direct:

The complaint tied staff bonuses to referral and admission growth. It also alleged promises of extra aides and nurses, meals and gifts used to obtain patients. Those allegations raise the separate questions about referral payments and benefits that staff in marketing may see before a patient reaches the clinical team.

The payment model explains why admissions have financial weight. Medicare pays a daily rate for enrolled hospice patients, including days without a visit. In its 2015 report on hospice care in assisted living facilities, the HHS Office of Inspector General found longer stays and higher payments there than in other settings. It described the broader incentive plainly:

That payment structure gives the certification process financial importance every time a patient is recertified. In the Care Alternatives allegations, the clinical records were the support for continuing to bill.

What Supported the Hospice Certifications?

Hospice eligibility requires a physician’s certification of a prognosis of six months or less if the illness runs its normal course. Clinical information must support that prognosis in the medical record. Medicare’s benefit consists of two 90-day periods followed by an unlimited number of 60-day periods, with a new certification required for each period. The clinical question returns each time.

At Care Alternatives, nurses, social workers, aides and other team members worked alongside physicians serving as hospice medical directors. The teams met to review care plans and patients coming up for recertification. Those meetings and records connected what staff saw to the decision to keep the patient in hospice.

The Care Alternatives expert disagreement centered on that clinical support. The whistleblowers’ expert reviewed forty-seven patients and found inadequate support in thirty-five percent of their hospice certification periods. The later district court opinion described his findings as improper certifications or recertifications and periods of ineligibility in 45% of the files he reviewed.

Their accounting expert used the disputed patient billings to calculate over $3.6 million in allegedly improper Medicare charges.

Care Alternatives’ expert disagreed with the clinical assessment, saying a physician could reasonably have certified the patients. In its 2020 opinion, the appeals court ruled that a jury could decide whether the certifications were false. What the company knew remained a separate question.

The separate AseraCare decision required evidence beyond a reasonable difference of medical opinion. Care Alternatives took a different approach: the expert’s assessment of the missing clinical support could be evidence that the claims were false. Both the medical basis for a certification and the company’s knowledge mattered.

What Did Care Alternatives Know About Its Charts?

The district court’s later opinion found enough evidence for a jury to consider whether Care Alternatives knew about the documentation failures. Its own audits and management testimony described the gaps.

In the Southwest New Jersey region, the share of randomly audited charts containing all the required information fell from 56.5% in the first quarter of 2007 to 43.6% in the fourth quarter. An internal audit reported missing information required for reimbursement and patient information filed in the wrong chart. The chief executive acknowledged the difficulty of getting accurate clinical notes into the files.

The company knew its audit results. Its chief executive testified that it did not report those results to Medicare. That left a gap between what the hospice knew about its own records and what the payer could see.

Why Did Continued Medicare Payment Fail to End the Case?

Care Alternatives’ second appeal overturned a dismissal that had treated continued government payment as the decisive answer. The issue was whether the missing support would have mattered to Medicare’s decision to pay. The Third Circuit held that payment history had to be weighed alongside the importance of the requirement, the seriousness of the alleged failures and what the government actually knew.

The district court had ruled for Care Alternatives in 2021 because the government kept paying. The appeals court overturned that ruling in 2023. Hospices keep certifications and their clinical support in patient files instead of sending them with every reimbursement claim. Processing a claim did not tell Medicare what was missing from the chart.

The government had investigated and requested patient records, company policies, internal documents and employee emails. But the disputed claims had already been paid, and the court said the government’s knowledge of the alleged violations and their full seriousness remained disputed.

The opinion distinguished knowing that someone had alleged fraud from actually knowing the violations occurred. It also considered testimony that staff shaped charts to depict hospice eligibility. If the chart itself gave a misleading account, obtaining it would leave another question about what the government could see.

Continued payment remained evidence for Care Alternatives. It could not settle the question by itself. The court also had to consider evidence of widespread documentation failures and why clinical support mattered to eligibility.

Patients had something at stake, too. Electing Medicare hospice means giving up Medicare payment for curative treatment of the terminal condition. An unsupported terminal diagnosis can put needed treatment out of reach while taxpayers pay for hospice care.

What Evidence Is Needed to Prove Fraud?

The evidence needs to connect the patient’s condition, the certification, the Medicare claim and the company’s knowledge. Care Alternatives shows why the supporting chart and internal audits can matter as much as the signed certification. The appeals examined both the clinical basis and what management knew about missing support.

The connection from the patient record to the bill is part of the work we do with insiders. For hospice fraud whistleblowers, firsthand knowledge can explain how those records came to say what they say. We work with healthcare insiders to connect that account to the care, the decisions and the claims. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

The Care Alternatives Dismissal in 2024

The parties agreed to dismiss the case in March 2024.

For someone inside a hospice, the case’s central question remains concrete. A physician signed, the company billed, and Medicare paid. The court still had to examine the clinical support and who knew what about it. A paid claim tells only part of the story of the health care behind it.

When You Know What Was Behind the Signature

If you saw unsupported certifications move through review, or instructions that changed the clinical story, speak with our whistleblower experts about what happened inside your hospice. We work beside you to build your strongest hospice whistleblower case around the patient records, management’s decisions and the Medicare claims. We bring in hospice fraud whistleblower lawyers who understand clinical certification disputes and stay with you through the process.