Extracted from Law360
Home health agencies and hospice providers are facing intensified scrutiny from the Centers for Medicare & Medicaid Services as the Trump administration utilizes recent program integrity and enrollment initiatives to stamp out fraud, waste and abuse in the Medicare program.
Specifically, hospice providers are now subject to rigorous provisional period of enhanced oversight, or PPEO, audits following new enrollments and certain transactions, and CMS has begun to expand the use of its affiliates authority when reviewing provider enrollments, and to revoke the Medicare billing privileges of providers who have or had an affiliation that poses an undue risk of fraud, waste or abuse.
The administration's aggressive approach on PPEO audits and deployment of its affiliates authority has already resulted in home health and hospice providers losing their ability to bill Medicare, often without a thorough review of the underlying facts, thoughtful consideration and little due process to challenge CMS' determination.
CMS' approach creates new risks and complications for parties engaging in transactions. As potential buyers contemplate the acquisition of home health or hospice providers, and those same providers prepare for a sale, planning and executing a strategy to avoid the potential suspension of the newly acquired entity's Medicare billing privileges must become a focal point.
The Administration's Priorities
In March 2025, CMS launched its Fraud Defense Operations Center — better known as the Fraud War Room — to combat suspected fraud and improper payments.[1] From March 31 through Dec. 31, 2025, the Fraud War Room's efforts resulted in more than $1.8 billion in payment suspension based on CMS' belief that overpayments existed or the payments may not be correct.[2]
These Fraud War Room enforcement activities have focused on home health and hospice providers. Last year, CMS Administrator Dr. Mehmet Oz painted a stark picture: "Drive around certain neighborhoods in Los Angeles and you'll pass empty office buildings that could be hubs of criminal activity. There are more than 1,000 potentially fraudulent hospice operations identified in Los Angeles."[3]
Against that backdrop, CMS has adopted a more proactive enforcement posture and shifted away from purely post‑payment corrective action, commonly referred to as pay-and-chase. Two initiatives — the PPEO and CMS' expanded authority to revoke or deny enrollment based on affiliations — illustrate how this shift has materially altered the risk profile for hospice and home health providers.
PPEO was designed to address CMS' concern that new hospices, and hospices undergoing a change of ownership present heightened program integrity risk.
Under PPEO, CMS may subject affected hospices to a period of 100% prepayment review of Medicare claims for a period of between 30 days and one year, meaning that no claims are paid unless and until CMS affirmatively determines that the services were medically necessary, properly documented and meet applicable Medicare requirements.[4]
Although PPEO is framed as a temporary oversight mechanism, it poses an immediate operational and financial strain on providers, particularly those that lack sophisticated compliance infrastructure at the time PPEO begins, or for providers who are unprepared following a transaction and resulting change of ownership.
While PPEO was initially implemented by the Biden administration in 2023, its impact is now being felt by hospice providers. In 2025, the Trump administration revoked the Medicare enrollments of 181 hospices of the 817 hospices, or 22.1%, that underwent PPEO.
While this may not seem like a significant number nationwide, PPEO was limited to Arizona, California, New Mexico and Texas in 2025. With the expansion of PPEO to cover hospices in Georgia and Ohio in 2026, additional revocations are inevitable.[5]
CMS has also begun utilizing its affiliates authority to expand its compliance and oversight efforts. Using the powers granted by Title 42 of the Code of Federal Regulations, Section 424.535, CMS can extend the scope of Medicare enrollment sanctions beyond a single bad actor.
CMS can deny or revoke a provider's Medicare enrollment if the provider "has or has had an affiliation … that poses an undue risk of fraud, waste, or abuse" to Medicare because the affiliate had a prior disclosable event.[6]
In this context, a disclosable event refers to a prior Medicare or Medicaid program debt, a payment suspension, an exclusion by the U.S. Department of Health and Human Services Office of Inspector General, or an enrollment denial or revocation, including voluntary terminations to avoid revocation.[7]
Section 424.519 defines affiliation broadly. It is any 5% or greater ownership (directly or indirectly), control or management relationship between two organizations. Even certain payment relationships like reassignment of Medicare billing rights qualify as affiliations.
In practical terms, this means that the people and entities behind a provider such as its owners, executives and parent companies, tie that provider's fate to their other healthcare business interests. If one business or individual in the network runs afoul of Medicare rules, the others may be pulled in as well.
Acquiring the Risk
The breadth of CMS' efforts to prevent fraud, waste and abuse in the home health and hospice industries has already caused significant disruptions, particularly for entities looking to acquire those providers during transactions. Typically, acquiring entities have time to right the ship after a transaction, but PPEO's immediate and intense scrutiny often does not allow for such course correction.
Even in non-PPEO states, CMS' unified program integrity contractors are auditing home health agencies and hospice providers. In some instances, the Medicare administrative contractors have revoked provider enrollments based on a few as 10 claims reviewed by the unified program integrity contractors, hardly a representative or statistically significant sample.
This is disconcerting. Given that unified program integrity contractors often adopt stringent positions on the required documentation for services, view existing documentation in the light least favorable to a provider, and often have their adverse determinations against providers overturned on appeal at the Medicare administrative contractor, quality improvement contractor or administrative law judge levels.
Acquired entities must perfect documentation practices from the moment they are purchased, or realistically, even before. This puts significant pressure on the deal teams to take more than a cursory look at claims, medical records and billing and coding practices to determine whether the target entity needs to adopt more thorough processes even before the deal has closed.
Allowing these fixes, which have historically and routinely fallen to the post-closing period, is no longer a low-risk proposition.
CMS' increased use of its affiliates authorities compounds these risks. Because of the extensive reach of the affiliation requirements, which CMS hasn't fully implemented yet, because it must first update the Medicare provider enrollment application, the revocation or suspension of one provider, could result in revocations, suspensions or enrollment denials across an entire organization.
This is especially true in the hospice, home health and skilled nursing provider segments.
Owners, medical director or other managing personnel who are engaged or involved with multiple Medicare enrolled providers at once could cause a chain reaction if they, or an entity with which they are affiliated, are subject to revocation or suspension.
Managing these affiliation risks will add time, cost and complexity to the deal process to ensure that the acquired entity has a process to screen for and avoid enrollment-related compliance risk, and that no known issues exist.
Closing With Confidence
Given the significant fraud, waste and abuse concerns targeting the home health and hospice industries, the challenges posed by PPEO, more routine unified program integrity contractor audits and CMS' growing use of its affiliates authority, buyers and sellers in transactions need to take additional steps to avoid regulatory risk and post-closing disputes.
Below are some suggestions for parties engaged in or contemplating transactions involving hospice or home health providers.
Buyers should place an increased premium on healthcare regulatory diligence during transactions with a particular focus on the target entity's billing, coding and documentation practices.
Beyond reviewing existing policies and procedures, reviewing a sufficiently representative sample of the targets' recent claims and documentation is critical to determine potential areas of noncompliance and improvement.
Remediate gaps in billing, coding or documentation as soon as possible. Do not relegate those tasks to the post closing period when the initiation of the PPEO process is imminent. Buyers and sellers should work together, so the target graduates the PPEO process shortly after closing.
Invest more time and resources to diligence the target's enrollment information, and understand the relationships between the individuals and entities who own, manage or operate the target entity and those individuals or entities outside roles or activities.
In deals where the parties will obtain representation and warranty insurance, the underlying insurance policy should be carefully reviewed to ensure coverage for representations addressing compliance with documentation, billing, coding and enrollment requirements. In the event of potential exclusions from representation and warranty insurance coverage, or to address known and disclosed issues, buyers should include appropriate indemnification in the purchase agreement.
Include covenants in the purchase agreement outlining the corrective actions that must be taken by the target to address billing, coding, documentation or enrollment concerns before or immediately after closing.
Consider adjustments to the purchase price or payment mechanics to mitigate the risk of a purchaser acquiring an entity that performs poorly during PPEO, leading to revocation of its Medicare enrollment. For example, a portion of the purchase price could be held in escrow until the entity successfully navigates the PPEO process rather than paying the entire purchase price at closing.
[1] CMS, Fraud Defense Operations Center – Fast Facts (Jan. 2026), https://www.cms.gov/files/document/fdoc-fact-sheet-updated.pdf.
[2] Id.
[3] Mehmet Oz and Kimberly Brandt, Fraud Is a National Problem, L.A. Times, at A1 (Mar. 24, 2025), https://www.latimes.com/opinion/story/2025-07-15/mehmet-oz-medicare-fraud-task-force.
[4] CMS, Hospice Fraud – Fast Facts (Jan. 2026), https://www.cms.gov/files/document/hospice-fact-sheet-1-28-26.pdf.
[5] Id.
[6] 42 C.F.R. § 424.535(a)(19).
[7] 42 C.F.R. § 424.502; 42 C.F.R. § 424.519.