Medicaid hospice audits for dual-eligible nursing facility residents turn on a single payment mechanic: which program pays the room and board. When a resident enrolled in both Medicare and Medicaid elects hospice while living in a nursing facility, Medicare pays the hospice's clinical per diem and Medicaid pays the resident's room and board, a split that catches providers who assume one program covers both. State Medicaid auditors treat that room-and-board pass-through, and the agreement that routes it between the hospice and the facility, as a recurring review target, and getting the payment flow wrong can draw recoupment demands that reach well past the claim that triggered the review.
Medicaid Pays the Room and Board for Hospice Residents
The Centers for Medicare & Medicaid Services is explicit about that split in its hospice payment guidance: for a nursing facility resident who is also a Medicaid beneficiary, the state pays the hospice, and the hospice is responsible for passing that payment through to the nursing facility for the resident's room and board. The hospice receives at least 95% of the state's Medicaid daily nursing facility rate, a floor set under Section 1902(a)(13)(B) of the Social Security Act. The Medicare hospice per diem itself funds the clinical visit, medication management, and the interdisciplinary team, not the bed. A facility expecting Medicare to cover a dual-eligible resident's room and board, or a hospice that forwards less than the Medicaid pass-through requires, is already exposed to a finding before a state Medicaid audit opens the chart.
The Written Agreement CMS Requires Between Hospice and Facility
Federal hospice rules require more than a payment arrangement. Under 42 C.F.R. 418.112(c), the hospice and the nursing facility must have a written agreement specifying how hospice services integrate with the facility's existing duties, including that the facility continues to furnish 24-hour room and board, personal care, and nursing services at the same level it provided before the resident elected hospice. Auditors use that agreement as the baseline when a room-and-board claim looks inflated. A facility billed above what it would have received directly from Medicaid absent the hospice election has to show the increment reflects the fair market value of services the Medicaid daily rate does not already cover, not a markup tied to the hospice referral itself.
Where State Audits Find Overpayments
HHS's Office of Inspector General named the room-and-board arrangement directly in its November 2024 nursing facility compliance guidance, listing it among the suspect arrangements between nursing facilities and hospices that draw anti-kickback scrutiny: room and board billed above what the facility would have received directly from Medicaid, additional services billed separately that the Medicaid room-and-board rate already covers, services outside that rate billed above fair market value, and a facility providing hospice-type services back to the hospice above fair market value.
A room-and-board payment set above fair market value is an anti-kickback problem for the hospice and the nursing facility alike, not a line item to fix on the next invoice.
A state Medicaid program that finds the room-and-board arrangement itself inflated is not limited to the claim it reviewed: the facility's written agreement with the hospice covers every resident placed under it, so a recoupment demand can reach every resident the arrangement touched, not only the claim sampled. A referral pattern built on above-market room-and-board payments can also support a civil false claims act claim against the hospice or the facility, and conduct that a state refers as more than a billing error can expose the parties' owners to OIG exclusion from federal health care programs. Every state's audit letter sets its own deadline to file an audit appeal, and that clock runs whether or not the hospice and facility have sorted out which one controls the underlying agreement.
Other Medicaid program integrity reviews raise the same documentation stakes under different facts, including the issues covered in Electronic Visit Verification and Medicaid Audit Findings, EPSDT Claims and Medicaid Audit Exposure, and Florida AHCA Medicaid Audits.
Health Law Alliance's attorneys have overseen 2,000+ audits and handled 5,000+ matters, with 25+ years of experience.
Why Early Legal Counsel Is Critical
It is critical that healthcare providers promptly retain experienced healthcare defense counsel upon receiving a subpoena, audit notice, investigative request, or other government inquiry. Early legal intervention can protect the provider's rights, ensure appropriate responses to government requests, avoid inadvertent admissions, preserve relevant defenses, and allow counsel to communicate with investigators on the provider's behalf. Delaying legal representation can significantly affect the outcome of a matter and expose the provider to unnecessary risk.
How Health Law Alliance Can Help
Health Law Alliance's hospice and home health audit defense attorneys represent hospices nationwide against Medicare and Medicaid audit findings, including recoupment demands tied to dual-eligible residents' room-and-board payments. If your hospice or facility has received a Medicaid audit notice, document request, or recoupment letter involving a dual-eligible resident, contact Health Law Alliance's hospice and home health audit defense attorneys for a free, confidential consultation.
