Lawsuit Challenges Hospice Special Focus Program Rule and List

A group of four state associations and a hospice provider have filed a federal lawsuit in Texas challenging the Special Focus Program (“SFP”) Final Rule and the resulting list of hospices identified as poor performers. The lawsuit contends that the Department of Health and Human Services (“HHS”) and its Secretary (both defendants in the case) improperly strayed from Congress’ directives to identify that small subset of hospices that have substantially failed to meet Medicare requirements.

The plaintiffs in the lawsuit contend that HHS’ Hospice SFP Final Rule uses an algorithm to select hospices for the SFP that includes not only findings of noncompliance with Medicare requirements but also indicators other than noncompliance.¹ Contrary to the statutory mandate, those other indicators — (1) the Consumer Assessment of Healthcare Providers and Systems (“CAHPS”) survey; and (2) the Hospice Care Index (“HCI”) — do not measure a hospice provider’s compliance with Medicare requirements. Moreover, the Final Rule’s use of those indicators skews the results toward larger, established providers and away from smaller or new providers.

The lawsuit also alleges that the algorithm makes no adjustments for size of hospice provider in counting the number of substantiated complaints a provider had, meaning that larger providers who had a relatively smaller percentage of complaints per patients served are treated the same as a small provider who had a larger percentage of complaints per patients it served. The complaint asserts that problems with CMS’s approach were so apparent that members of Congress and leaders of the hospice community called on CMS to delay proceeding with the Special Focus Program List selections to give more time for flaws in the approach to be addressed.

Nevertheless, on December 18, 2024, HHS notified approximately 50 hospice providers that were selected for the Special Focus Program. CMS offered no procedure for these providers to correct errors in CMS’ data leading to their selection or to appeal their selection for the Program. Only two days later, on December 20, 2024, HHS published the list on a CMS website, publicly identifying those alleged 50 “poor performers” among the nation’s hospice providers.

The lawsuit alleges that HHS’ approach is arbitrary and capricious, rife with errors, and at odds with Congress’ statutory directive. The lawsuit also alleges that HHS violated the Administrative Procedure Act and failed to follow proper procedures when issuing the regulations. The lawsuit seeks preliminary and permanent declaratory and injunctive relief. The plaintiffs ask the court to set aside the Hospice SFP Final Rule and List, enjoin the Program, and order HHS to withdraw the list and underlying data immediately.

The plaintiffs only recently filed their lawsuit, and the defendants have not yet responded. The federal court judge will most likely decide the case without a jury. Typically, courts decide challenges such as this based on legal arguments and briefing, although the plaintiffs may request discovery to explore the rationale and data used by HHS in issuing the rule. We will continue to monitor the case and provide updates as it unfolds.

[1] See CMS, Calendar Year 2024 Home Health Prospective Payment System Final Rule, 88 Fed. Reg. 77,676, 77,879 (Nov. 13, 2023) (promulgating 42 C.F.R. § 488.1135).