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San Diego Hospice Whistleblower Settlement


May 31, 2017, Los Angeles, California – – The law firm of Baum Hedlund Aristei & Goldman has announced a final $3,678,735 settlement against the San Diego Hospice & Palliative Care Corporation, resolving healthcare fraud allegations initially made by a whistleblower in 2012. The San Diego healthcare fraud settlement, which was initially announced in 2014, has been finalized with the final distribution of federal money from the bankruptcy court.

The final settlement resolves allegations made by the San Diego hospice whistleblower, who will receive a reward of roughly $625,000 (17 percent of the total recovery) for bringing the alleged hospice care fraud to the government’s attention. Mark H. Schlein, head of Baum Hedlund’s False Claims Act and Whistleblower Litigation Group, and Diane Marger Moore represented the whistleblower in the qui tam lawsuit (case no. 12CV2866-CAB [KSC]), which was filed under seal in December of 2012 in federal district court in California.

San Diego Hospice Whistleblower Allegations

The whistleblower, in this case, was a San Diego Hospice employee at various times working as a case manager, crisis care R.N. supervisor, shared care model Registered Nurse, and on the admissions team.

The lawsuit alleged San Diego Hospice & Palliative Care Corporation of falsely certified and recertified Medicare beneficiaries for hospice services who did not have qualifying terminal illnesses for Medicare reimbursement purposes, and that they received government reimbursement for those ineligible patients.

San Diego Hospice (SDH) received hundreds of millions of dollars from Medicare and Medicaid and other government health care programs for the provision of services, per the allegations, and the whistleblower estimated that during her employment about 40 percent of all patients in SDH’s care were not eligible to receive hospice services under federal and state guidelines.

Federal rules provide strict regulations for hospice providers, patients, and care because the Medicare per diem payment is costly to the government: approximately $170 per day per patient. The purpose of these regulations is to ensure that only qualified patients are accepted by hospice providers, and patients who were initially assessed as eligible, but are later found to be or become ineligible, be converted to more conventional treatment and care providers.

The alleged fraud scheme involving San Diego Hospice & Palliative Care Corporation began on or before December 8, 2005, when the company employed an “Open Access to Patients” policy of admitting virtually all patients referred to it for services, whether or not patients were terminally ill and met the other criteria mandated by federal law and rules regulating Medicare, Medicaid, and other federal and California health care laws and regulations.

The “Open Access to Patients” policy was reflected in a company memorandum, which read:

The Admission RN, Program Rep, or Intake Specialist will always keep “yes” at the forefront while speaking with and/or assessing any patient referred to SDH. If there is an inclination to say “no” to anything (i.e.: admission, treatment) a consultative call will be made to the MOD Doc [medicinal officer of the day] / Physician on-call and documented in the Misys clinical notes of the patient.

The San Diego Hospice whistleblower alleged that to achieve this “yes” attitude, the MOD doctor virtually always ordered patients to be admitted. Patient assessments were also allegedly falsified by staff who feared that they would be sanctioned or terminated if they refused to conform to the fraudulent scheme.

Per the complaint, the admission of patients who did not qualify under Medicare or Medicaid was further accomplished through the manipulation of admission standards. While many hospice facilities and physicians rely upon the Karnofsky Index Score and Functional Status scores to determine whether the patient is near the end of life (to meet the less than six months of life remaining criteria), SDH’s medical director allegedly rewrote these standards so that nearly every patient would qualify.

While SDH staff was under pressure to admit patients who did not meet Medicare/Medicaid criteria, the pressure on the staff to retain patients whose conditions had improved or who were otherwise ineligible for hospice care was even greater, the lawsuit alleged. The whistleblower and other registered nurses at SDH were allegedly directed to be “creative” in documenting patient records, and particularly in their “recertification summaries,” which documented the need for continuing hospice care. Management and doctors allegedly made suggestions to staff about what phrases to use to disguise the fact that a patient was not declining or was even improving.

In one example cited in the complaint, a patient under the care of San Diego Hospice had a diagnosis of chronic obstructive pulmonary disease (COPD). On one of this patient’s recertification summaries, the whistleblower allegedly wrote that the patient was gaining weight and that the patient’s condition was improving. Upon seeing the recertification summary for this patient, one of the physicians allegedly suggested to the whistleblower that the patient record should falsely reflect that the weight gain was because the patient was “retaining fluid”—which does not indicate improvement.

San Diego Hospice allegedly sought patients who were not eligible for hospice care, then kept them in their care for long periods of time – well over six months – violating federal guidelines in an effort to maximize reimbursement from Medicare. In some cases, the San Diego Hospice & Palliative Care Corporation kept patients in hospice care for years, according to the allegations.

In 2009, the San Diego Hospice whistleblower began to voice concerns to management about the company’s alleged fraud, but the complaints were ignored, according to the complaint. The whistleblower purportedly sent an email to the Chief Executive Officer of the company in 2010, again voicing concerns that were shared by other coworkers. A meeting was scheduled to discuss the concerns, but again, the whistleblower claimed that no actions were taken to address the concerns.

Months later, the whistleblower was allegedly given a “Corrective Action Form” for “persistent negativity ….” The reprimand allegedly said, in part, that the whistleblower’s “disagreement with SDHIPM’s philosophy of admission criteria” was one of the bases for her discipline. The whistleblower was terminated shortly thereafter. One reason provided in her written termination letter was “Openly and consistently disagreeing with San Diego Hospice treatment and practice philosophies.”

In February of 2011, the whistleblower contacted the California Department of Human Services to express concerns about the illegal admission and retention policies at SDH, and a federal investigation followed sometime later. The whistleblower also sought experienced legal counsel and hired Baum Hedlund Aristei & Goldman to represent her in a lawsuit against San Diego Hospice, which they filed on December 5, 2012.

The federal investigation, coupled with the whistleblower lawsuit, led San Diego Hospice to declare Chapter 11 bankruptcy and cease operations.

Although the bankruptcy complicated the resolution of the case, the government was able to collect $3,678,735. The settlement would have been significantly larger had San Diego Hospice not declared bankruptcy.

The San Diego Hospice whistleblower case sends a clear message to the hospice care industry — if you defraud government healthcare programs, you will be caught.

“Hospice is intended to provide compassionate care for people facing a terminal illness or injury,” said whistleblower attorney Mark Schlein following the settlement announcement. “It is centered on the belief that each of us has the right to die pain-free and with dignity. I am very proud that my client had the courage to stand up and say that when federal dollars are spent on patients that do not need hospice services, patients that truly need this precious end-of-life care may not receive it. Hopefully, this case will serve as a reminder to all hospice providers that they have been given a sacred trust which they must not abuse.”

The federal investigation into the false claims act lawsuit was conducted by Assistant U.S. Attorneys for the Southern District of California Joseph Price, Deputy Chief, Civil Division and Douglas Keehn, the U.S. Department of Justice, the Federal Bureau of Investigation and the Office of Inspector General of the U.S. Department of Health & Human Services.

The claims settled in this agreement represent allegations only. There has been no determination of liability.

About Whistleblower Attorney Mark Schlein

Mark Schlein oversees all whistleblower litigation for Baum Hedlund Aristei & Goldman, P.C. Before joining Baum Hedlund, Mark worked as a government attorney, where he investigated a wide variety of healthcare fraud and insurance-related crimes, whilst also participating in whistleblower litigation that resulted in the recovery of hundreds of millions of dollars at the federal and state levels.

Mark also served as the Director of Florida’s Medicaid Fraud Control Unit for nine years and implemented the Attorney General’s false claims litigation unit. He also helped develop global litigation strategies for the National Association of Medicaid Fraud Control Units and managed the successful settlement of multimillion-dollar health care fraud cases.

About Qui Tam Attorney Diane Marger Moore

Diane Marger Moore is board certified by the National Board of Trial Advocacy as a civil trial attorney. An accomplished attorney, public servant, magistrate, educator, mediator, arbitrator, lecturer, writer, editor, and community service volunteer, Diane has tried over 200 jury trials in courts across the United States throughout her career. At Baum Hedlund Aristei & Goldman, she focuses on the firm’s whistleblower protection cases and commercial transportation accident litigation.


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