On April 2, 2026, the U.S. Attorney's Office for the Central District of California charged eight defendants in a $50 million health care fraud takedown, allegedly built in part on kickbacks to beneficiaries and marketers and on hospices that enrolled patients who were not terminally ill. One hospice in the case posted a non-death discharge rate of roughly 85%, nearly five times the national average of 17.2%, cited by prosecutors as proof the hospice was not caring for the dying. Health Law Alliance's companion article, Hospice Fraud Investigations: Eligibility and Certification Theories, covers the civil eligibility and certification theories DOJ uses against hospice claims. This article covers the criminal side: the grand jury process, the kickback and false-certification charges, and the prison exposure an owner, medical director or marketer actually faces.
From Civil Inquiry to Grand Jury Subpoena
A hospice fraud matter can start on the civil or the criminal track, and the document a provider receives signals which track it is on. A civil investigative demand comes from a civil fraud team probing False Claims Act liability under a preponderance-of-the-evidence standard, where the remedy is money. A grand jury subpoena means the criminal division is building toward an indictment, where conviction requires proof beyond a reasonable doubt and the exposure is prison, not just dollars. DOJ runs both tracks on the same hospice at once, so the response built for Responding to a Civil Investigative Demand (CID) does not carry over to a grand jury subpoena.
Proving the Kickback and the Sham Certification
DOJ's April 2026 complaint shows how prosecutors turn a kickback allegation into a criminal count. One hospice allegedly paid a beneficiary couple $300 a month each in cash to pose as terminal patients; neither told anyone they had a terminal illness, and their own physician confirmed they did not. At another hospice in the case, prosecutors allege a physician's signature was forged on Medicare enrollment forms to support the claims. The criminal Anti-Kickback Statute, 42 U.S.C. 1320a-7b(b), asks whether remuneration was exchanged to induce the referral, not whether the care was medically necessary. A forged certification is the paper trail prosecutors use to show that intent.
A federal jury can convict on a health care fraud count and a kickback count from the same set of facts, because the false certification and the payment that produced it are two sides of the same scheme.
Charges and Sentencing Exposure
The eight charged on April 2, 2026 face health care fraud counts carrying a statutory maximum of 10 years under 18 U.S.C. 1347, wire fraud counts up to 20 years, and a mandatory, consecutive 2-year aggravated identity theft term. Sentencing varies sharply by role and history. Nita Almuete Paddit Palma, a Glendale hospice owner previously excluded from Medicare over earlier kickback convictions, was sentenced on August 5, 2025 to 108 months after a jury convicted her of 12 health care fraud counts and 16 kickback counts tied to roughly $10.6 million in fraudulent claims, with $8,270,032 in restitution ordered. Her co-defendant received probation. The same name resurfaced in DOJ's April 2026 indictment, which charges her alongside her husband with operating three more hospices, a reminder that one sentence does not end a prosecutor's interest in that owner's next venture.
Civil Exposure Runs Alongside the Criminal Case
A kickback that supports a criminal count can also support civil False Claims Act liability, because a claim tainted by an illegal referral payment is treated as a false claim regardless of the criminal outcome. Where a referring physician holds a financial relationship with the hospice or its medical director role, that arrangement still falls outside Stark Law because hospice services are not one of the designated health services the statute's referral ban covers, so the exposure runs through the Anti-Kickback Statute and the False Claims Act instead. Building an Effective Compliance Program That Counts covers the referral and compensation review that gets ahead of that exposure.
Why Early Legal Counsel Is Critical
It is critical that hospice owners, medical directors and marketers promptly retain experienced healthcare defense counsel upon receiving a grand jury subpoena, a civil investigative demand, or any other government inquiry into referral or certification practices. Early legal intervention can protect the recipient's rights, support an accurate response to the specific demand received, help avoid inadvertent admissions during an interview or document production, and preserve defenses that are harder to raise once an indictment is returned. Delaying representation can significantly affect the outcome.
How Health Law Alliance Can Help
Health Law Alliance's hospice and home health audit defense attorneys handle both sides of this exposure, the civil eligibility audit and the criminal referral, within the same matter. Health Law Alliance's attorneys have overseen 2,000+ audits and handled 5,000+ matters, with 25+ years of experience. Those attorneys practice federal healthcare fraud defense. If your hospice, medical director or marketing arrangement has received a grand jury subpoena or a civil investigative demand, contact Health Law Alliance's hospice and home health audit defense attorneys for a free, confidential consultation.
