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Hospices Face Growing AI-Driven Oversight as CMS, HHS, and FBI Deploy Fraud-Detection Algorithms
Hospice providers across the United States are bracing for a new wave of regulatory scrutiny as federal agencies lean increasingly on artificial intelligence to uncover fraud, waste and abuse in Medicare and Medicaid. In a webinar on September 10, 2026, Angelo Spinola, chair of home health, home care and hospice practice at Polsinelli, explained that the Centers for Medicare & Medicaid Services (CMS), the U.S. Department of Health and Human Services Office of Inspector General (HHS‑OIG) and the Federal Bureau of Investigation (FBI) are all deploying AI‑driven algorithms to flag suspicious claims and enrollment patterns.
The move reflects a broader federal push to tighten program integrity. CMS issued a Request for Information on February 27, 2026, outlining the Comprehensive Regulations to Uncover Suspicious Healthcare (CRUSH) initiative. CRUSH would use data analytics to monitor billing claims and enrollment in real time, partnering with law‑enforcement agencies and targeting outliers such as unusually long hospice stays or repeated recertifications. The initiative is described as a “two‑pronged approach” that combines rule‑based and statistical methods with machine‑learning models to intercept fraud before payments are made.
HHS‑OIG has piloted a machine‑learning model to protect Medicaid integrity. Announced in September 2025, the pilot is part of a broader effort to test AI and machine‑learning models that enhance existing rules‑based and statistical methods. According to the OIG, the model is designed to detect anomalies that may indicate improper payments.
The FBI has reported that AI‑enabled fraud losses topped $893 million in 2025, with deep‑fake and other AI‑generated scams contributing to the rise. While the FBI’s figures focus on broader cybercrime, the agency’s use of AI in fraud detection signals a trend that could extend to healthcare fraud investigations.
Spinola stressed that hospices must grasp these technology trends to stay compliant. “Hospices need to look for those anomalies before the government finds them,” he said. He urged providers to develop internal compliance mechanisms that can identify high‑risk patterns such as extended stays or repeated recertifications.
Jennifer Sheets, CEO of the National Alliance for Care at Home, highlighted the complexity of the regulatory landscape. “Regulators are trying to modernize oversight of a sector that is itself being transformed by technology and workforce economics,” she said. Sheets noted that state laws vary widely in their oversight of AI, which can affect how hospices use these tools to improve access and operational efficiency. She warned that most states are moving faster than Congress on AI requirements, creating a patchwork of regulations that providers must navigate.
The convergence of AI and healthcare regulation has implications beyond fraud detection. As CMS and HHS expand AI tools, they also aim to safeguard utilization in healthcare delivery and operations. The CRUSH initiative, for example, will monitor billing practices across multiple payment streams, including molecular diagnostics and durable medical equipment. Real‑time monitoring could trigger audits or investigations before claims are paid.
Hospice providers that fail to adapt risk increased scrutiny and potential penalties. The industry’s reliance on Medicare Part A for hospice services means that fraud or abuse investigations can have significant financial and reputational consequences. Providers are therefore encouraged to invest in data analytics capabilities, establish robust internal controls, and stay informed about evolving federal and state AI requirements.
In the coming months, CMS is expected to release a draft rule for the CRUSH initiative, and HHS may expand its AI pilots to additional Medicaid programs. State regulators are also likely to issue guidance on AI governance, especially in states with large hospice markets. Providers that proactively align their compliance programs with these emerging AI tools will be better positioned to demonstrate integrity and avoid costly investigations.
The current regulatory environment underscores the growing role of AI in program integrity. As federal agencies deploy advanced algorithms to detect fraud, hospices must develop internal analytics and compliance frameworks that can match the speed and precision of government tools. The next phase of AI regulation will likely bring tighter oversight, greater transparency, and a more dynamic relationship between providers and regulators.
The move reflects a broader federal push to tighten program integrity. CMS issued a Request for Information on February 27, 2026, outlining the Comprehensive Regulations to Uncover Suspicious Healthcare (CRUSH) initiative. CRUSH would use data analytics to monitor billing claims and enrollment in real time, partnering with law‑enforcement agencies and targeting outliers such as unusually long hospice stays or repeated recertifications. The initiative is described as a “two‑pronged approach” that combines rule‑based and statistical methods with machine‑learning models to intercept fraud before payments are made.
HHS‑OIG has piloted a machine‑learning model to protect Medicaid integrity. Announced in September 2025, the pilot is part of a broader effort to test AI and machine‑learning models that enhance existing rules‑based and statistical methods. According to the OIG, the model is designed to detect anomalies that may indicate improper payments.
The FBI has reported that AI‑enabled fraud losses topped $893 million in 2025, with deep‑fake and other AI‑generated scams contributing to the rise. While the FBI’s figures focus on broader cybercrime, the agency’s use of AI in fraud detection signals a trend that could extend to healthcare fraud investigations.
Spinola stressed that hospices must grasp these technology trends to stay compliant. “Hospices need to look for those anomalies before the government finds them,” he said. He urged providers to develop internal compliance mechanisms that can identify high‑risk patterns such as extended stays or repeated recertifications.
Jennifer Sheets, CEO of the National Alliance for Care at Home, highlighted the complexity of the regulatory landscape. “Regulators are trying to modernize oversight of a sector that is itself being transformed by technology and workforce economics,” she said. Sheets noted that state laws vary widely in their oversight of AI, which can affect how hospices use these tools to improve access and operational efficiency. She warned that most states are moving faster than Congress on AI requirements, creating a patchwork of regulations that providers must navigate.
The convergence of AI and healthcare regulation has implications beyond fraud detection. As CMS and HHS expand AI tools, they also aim to safeguard utilization in healthcare delivery and operations. The CRUSH initiative, for example, will monitor billing practices across multiple payment streams, including molecular diagnostics and durable medical equipment. Real‑time monitoring could trigger audits or investigations before claims are paid.
Hospice providers that fail to adapt risk increased scrutiny and potential penalties. The industry’s reliance on Medicare Part A for hospice services means that fraud or abuse investigations can have significant financial and reputational consequences. Providers are therefore encouraged to invest in data analytics capabilities, establish robust internal controls, and stay informed about evolving federal and state AI requirements.
In the coming months, CMS is expected to release a draft rule for the CRUSH initiative, and HHS may expand its AI pilots to additional Medicaid programs. State regulators are also likely to issue guidance on AI governance, especially in states with large hospice markets. Providers that proactively align their compliance programs with these emerging AI tools will be better positioned to demonstrate integrity and avoid costly investigations.
The current regulatory environment underscores the growing role of AI in program integrity. As federal agencies deploy advanced algorithms to detect fraud, hospices must develop internal analytics and compliance frameworks that can match the speed and precision of government tools. The next phase of AI regulation will likely bring tighter oversight, greater transparency, and a more dynamic relationship between providers and regulators.
