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From the institution of the Department of Government Efficiency (DOGE), the second Trump administration made cutting down on “fraud, waste and abuse” its mantra.
In home-based care, the focus on fraud has dramatically expanded to become one of the hot-button issues of the year.
To me, the issue seems personal for the administrator of the U.S. Centers for Medicare & Medicaid Services (CMS), Dr. Mehmet Oz. In addition to meeting with stakeholders, putting boots on the ground in Medicare home health fraud hot spots and seeking out more information about Medicaid integrity efforts, Oz has appeared impassioned about fraud in the home-based care industry.
If you watch this video he posted about fraud in the home health industry, specifically in California, I think you’ll see what I mean.
Home-based care advocacy groups and provider organizations have largely responded by supporting a crackdown on bad actors. When I recently met with Jennifer Sheets, the new CEO of the National Alliance for Care at Home (the Alliance), she said fraud was the organization’s top priority.
“As the Alliance, one of the main reasons for meeting with [Oz] is saying, ‘Look, as an industry, we are right there with you. We agree there’s no place for fraud,’” Sheets told me. “Now, we also don’t want that broad brush, and we have to make sure that we are impacting bad providers without hurting the good ones and the compliant ones, which is most of them.”
This broad brush concern has been at the top of my mind recently, particularly as some providers are starting to voice concerns about what could happen to the industry based on this fraud crackdown, and as I consider what CMS is doing in adjacent sectors like durable medical equipment (DME).
In this week’s exclusive, members-only HHCN+ Update, I explore the industry’s reaction to the home-based care fraud crackdown, offering insights and key takeaways, including:
– The embers of concern that could spark and spread among providers
– The precedent set in the durable medical equipment (DME) industry
– Why home-based care providers should be concerned
Industry reactions
The Alliance, and many providers I’ve spoken with, have aligned themselves with CMS’ fraud crackdown, essentially saying that fraud investigations will help with industry struggles like the Medicare fee-for-service payment rate. The argument is that without anomalous data, CMS’ methodology used to determine the payment rate will be more favorable for the industry.
Excluding such data is critical, and the industry has pushed for CMS to do so, including by asking CMS to reopen rulemaking after its decision regarding the CY2027 rate cut.
The Alliance is currently pushing CMS to create a task force dedicated to rooting out home health fraud, and has offered to take part in the initiative, Sheets told me. To be clear, she emphasized to me that the crackdown must focus on real fraud.
“This is not one of the five critical billing errors, right? Criminals are smart. They’re not going to trip a billing error,” Sheets told me. “So how can we help [the] administration really get to what we’re talking about when we talk about fraud, which is [when] there’s not really a patient there. There’s not really an agency.”
And Sheets said that the industry must be prepared for increased program integrity. But some providers have highlighted some unwanted consequences.
Addus HomeCare Corporation (Nasdaq: ADUS) executives spoke on Monday at the Oppenheimer 36th Annual Healthcare MedTech & Services Conference, and said that the company is well-positioned and well-resourced to survive additional program integrity enforcement.
But they also highlighted that not all providers are thus equipped.
“As you see more focus in some of these markets on fraud abuse, what you could see is that it will be force [or] dynamic for some of the folks that maybe can’t do the things needed to effectively operate in this market around that issue, might decide that it’s time to consider moving on and letting somebody else take their business,” Dirk Allison, Addus CEO, said. “And that could affect our ability to do smaller deals, some of the deals we’ve done in the past year. So we’re starting to see some opportunities for small acquisition opportunities coming up, and some of that could be driven by the fact that people are concerned.”
I echo Allison’s sentiments, especially given recent examples from another health care industry, DME, which show that getting the right balance between supporting anti-fraud efforts and protecting legitimate actors is crucial and tricky.
Fraud crackdown precedent
There have been cycles of heightened regulatory enforcement in the DME industry over the past few decades, but the current administration is narrowing in on fraud in the sector – to the tune of hundreds of millions of dollars in deferred payments.
In response to questionable Medicaid claims and an overall focus on fraud, waste and abuse, the Department of Health and Human Services (HHS) changed its approach to DME payments – a shift that has the potential to add pressure to compliant providers as well as noncompliant.
In the words of HHS Secretary Robert F. Kennedy, Jr., CMS shifted from a “pay and chase” model to a “detect and deploy” strategy. Essentially, this means expanding and deepening a shift away from post-payment audits to prepayment controls. In recent months, CMS added seven codes to its required prior authorization list, making prior authorization a condition of payment for these codes, effective April 2026.
“CMS is done trying to catch fraudsters with their hands in the cookie jar – instead, we’re padlocking the jar and letting them starve,” Oz said in a statement. “This proactive approach will help us crush fraud, protect taxpayer dollars and make sure the vulnerable Americans who depend on our programs get the care they need.”
The administration also put a moratorium on new entrants into the DME market. This was designed to give the government time to find ways to reduce instances of fraud, waste and abuse.
And a temporary freeze on new entrants has also recently been seen in the home-based care industry recently. In December, the Minnesota Department of Human Services (DHS) announced a two-year pause on new home- and community-based services provider licenses.
With a moratorium on new licenses, growth pipelines – even for compliant operators – can stall.
CMS’ approach to DME fraud should be on home-based care providers’ radars. If CMS takes a similar approach to at-home care, providers already struggling with margins due to the rise of Medicare Advantage, staffing shortages or other pressures, could feel the squeeze from a potential major payment shift. Those most likely to feel the squeeze are smaller, mom-and-pop providers. If all of this comes to pass, it could ultimately hasten the consolidation trend that Allison spoke about, as smaller providers increasingly struggle and larger, well-resourced providers snap up those that cannot sustain in tougher operating conditions.
It will be tough for industry advocacy groups to do anything other than align themselves with the administration’s desire to crack down on fraud, lest the organization appear supportive of criminal activity. But – and the Alliance has mentioned this, but I think it deserves an even greater emphasis – heightened oversight needs to be applied in a way that protects smaller providers, and does not subject providers to payment disruptions that might wreak far too much collateral damage on quality providers – and their patients – in the interest of starving the fraudsters.