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Hospice providers have been under close scrutiny. Denials, recoupments, and long-term exposure to compliance ensued because of errors in coding. In 2025, auditors and Medicare contractors will be emphasizing document logic, diagnosis sequence, and nurse narratives. Clinical and billing leaders need to be aware of typical error patterns in order to safeguard revenue and steer clear of audit traps.
This resource summarizes the most common hospice coding mistakes that trigger Medicare denials, the reasons behind them, and measures for prevention.
Chapter 11 of the Medicare Claims Processing Manual provides guidelines for hospice billing, such as principal diagnosis reporting requirements and acceptable levels of care. CMS Change Request 13074 revised the list of non-reportable principal diagnoses, effective April 1, 2025. Claims filed with unacceptable principal diagnoses are rejected and need to be corrected.
Denial statistics released by claim contractors reveal that leading denial reason codes are 5PM01 (documentation does not support terminal prognosis) and 5PX06 (invalid Notice of Election). (CGS Medicare)
Hospices were audited by the Office of Inspector General (OIG), which discovered that agencies with weak policies and enforcement wrote millions in excess payments due to documentation that did not support terminal prognosis or justification of care level.
Since Medicare and OIG audits emphasize narrative, medical record, and billing consistency, it is important to know typical mistake types.
CMS is now enforcing more stringent restrictions on permitted principal diagnoses under hospice. The new Medicare Code Editor (MCE) rules reject claims for impermissible principal diagnosis codes.
Legacy codes such as "debility," "adult failure to thrive," or "senile debility" are automatically denied except when they are only listed as secondary diagnoses accompanied by other terminal conditions that have been documented in the record.
When providers resort to these catch-all diagnoses to avoid detail, denials ensue. The right approach demands specificity: select a validated terminal-condition diagnosis and use comorbidities to report complexity.
Coding should indicate the condition most directly associated with terminal prognosis. Denial will be more probable if the physician narrative, interdisciplinary notes, or care plan highlight a disease other than the principal diagnosis submitted.
A clinician narrative highlighting severe Alzheimer's deterioration, yet the principal code on the claim is congestive heart failure, may initiate a mismatch denial (5PM01). The documentation should reconcile with the diagnosis.
In a single OIG hospice audit, close to one-fifth of claims that were denied resulted straight from records not supporting stated terminal prognosis.
Secondary comorbidities are part of complete clinical representation. Leaving out major comorbidities—like chronic kidney disease, COPD, or diabetes—undermines payment defensibility and audit stance.
Agencies must have comorbid conditions impacting symptom burden or interventions noted on physician orders, progress notes, or interdisciplinary notes. Without supporting documentation, auditors disregard these diagnoses in their audit.
Hospice claims require accurate correlation of level-of-care coding (Routine Home Care, Continuous Home Care, General Inpatient, Respite) with documentation. GIP claims are some of the highest audited.
Denials like 5PM02 (supporting documentation not documenting GIP necessity) and 5PM03 (level of inpatient care not warranted) are frequent where symptom severity is not confirmed. (CGS Medicare)
Also, auditors are focusing on admissions after inpatient hospital stays, suspecting unwarranted levels of care billed. OIG has ongoing audits in this area. (OIG Work Plan)
If a patient's symptom burden is not greater than could be treated elsewhere, the claim should never be coded GIP. Explicit documentation must substantiate escalation.
Claims can be denied if Notices of Election (NOE) are late, incomplete, or lack essential elements (5CNER denial). (Palmetto GBA)
Also, CMS now holds certifying and attending physicians accountable for ordering and referring edits. Claims with physicians who are not fully enrolled or opted out can be denied. (CMS Hospice Physician Enrollment Guidance)
Hospices must keep complete and timely records on election periods, occurrence codes, recertification windows, and physician certification narratives. Any gap welcomes denial or recoupment.
Hospice compliance requires documentation from each of the fundamental disciplines: nursing, social work, spiritual care, and physician supervision. In the absence of social work or spiritual care notes, or if they conflict, auditors can question the breadth of care.
These omissions undermine the narrative substantiating coded diagnoses and care-level determinations. Lack of interdisciplinary consistency is a frequent problem in OIG hospice audits.
Waiting until after claims have been submitted to audit documents loses the chance to catch denials in advance. Agencies must build concurrent review checkpoints into admission, recertification, and discharge to detect and fix errors in a timely manner.
Sound hospice operations incorporate QA into clinical processes, not as a back-end scrub.
1. Internal Sampling and Root-Cause Analysis
Routine audits—with small, rotating samples—assist in identifying trends in errors. Utilize findings to inform staff training and policy revisions.
2. Governance Oversight
Denial trends should be reviewed by compliance committees, follow-up action should be assigned, and dashboards be utilized to measure performance. OIG Compliance Program Guidance recommends that hospices implement written policies, audits, and corrective measures as part of a compliance program.
3. Continuous Education Aligned with CMS Updates
Tie training to CMS transmittals, change requests, and audit findings. Documentation of education supports audit defense.
4. Logic and Scrubbing Tools
EHR-integrated logic prompts and claim-scrubbing software help detect inconsistencies—mismatched diagnoses, missing signatures, or missing physician enrollment—before submission.
5. Vendor Certification and Sampling (for Outsourced Coding)
If using external coders, require that they pass validation audits and adhere to predefined accuracy thresholds. Sample their output regularly.
Red Road HBS provides a disciplined model to avoid denials and strengthen hospice coding integrity:
By reconciling clinical documentation, coding rationale, and QA control, hospices utilizing the Red Road model minimize risk, simplify appeals, and stabilize cash flow.
Medicare denials in hospice typically arise from avoidable errors such as non-reportable diagnosis codes, mismatches in documentation, inconsistencies in care levels, election inaccuracies, and inadequate interdisciplinary records. All these become red flags in contractor medical review and OIG monitoring.
Hospice leaders need to embrace proactive quality assurance models, govern, and incorporate documentation and coding standards into each care process. A coordinated system, not Band-Aid fixes, will be the best defense against denials and audit risk in 2025.
