Hospice Drug and DME Billing Audits: Related vs. Unrelated Determinations and Part D Overlap

When a Medicare beneficiary elects hospice, the hospice becomes responsible for providing virtually all care related to the terminal illness and related conditions, including drugs, medical supplies, and durable medical equipment (DME). These items are covered by the hospice's per diem payment. Items unrelated to the terminal illness may be billed by other providers under Medicare Part B or Part D.

The line between related and unrelated is one of the most scrutinized areas of hospice compliance. When hospices classify items as unrelated without clinical justification, Medicare may pay twice: once through the hospice per diem and again through Part B or Part D. CMS has reported substantial growth in non-hospice Medicare spending during hospice elections, and its FY 2027 hospice final rule included an analysis of non-hospice spending and finalized a Service and Spending Variation Index (SSVI) that includes non-hospice spending measures. CMS also made the hospice election statement addendum, which documents relatedness decisions, mandatory for all beneficiaries electing hospice on or after October 1, 2026.

This article explains the hospice's responsibility for drugs and DME, how to make and document relatedness decisions, Part D and Part B overlap, and how to audit relatedness practices. It is educational and does not replace legal or professional advice.

The Hospice's Responsibility

Covered Services

Under 42 CFR 418.202, covered hospice services include, among others, medical appliances and supplies, including drugs and biologicals, that are used primarily for the relief of pain and symptom control related to the individual's terminal illness and related conditions. DME is also covered as part of hospice services when related to the terminal illness and related conditions.

Drugs and DME Condition of Participation

Under 42 CFR 418.106, the hospice must provide drugs, biologicals, medical supplies, and DME as specified in the plan of care, and must meet standards including:

• Managing drugs and biologicals, with an individual having education and training in drug management, such as a licensed pharmacist, reviewing the patient's drug profile.

• Following policies for the safe use and disposal of controlled drugs in the home, with information provided to patients and families.

• Ensuring DME is in safe working order and that patients and families are instructed in its use.

• Ensuring suppliers meet applicable standards.

"Virtually All" Care Is Related

CMS has stated in rulemaking and in the election statement requirements that, when a beneficiary elects hospice, the hospice should provide virtually all care needed, and that services unrelated to the terminal illness and related conditions should be exceptional and unusual. Under 42 CFR 418.24(b), the election statement must include information explaining this.

What Counts as Related

Under Medicare rules, the hospice is responsible for items needed for the palliation and management of the terminal illness and related conditions. Related conditions are conditions that result from or are associated with the terminal illness, or with its treatment. CMS has explained that hospices should consider the patient's overall condition, because many conditions and their treatments contribute to the terminal prognosis and symptom burden.

Examples of items generally considered related include:

• Pain medications.

• Medications for nausea, constipation, anxiety, dyspnea, agitation, and other symptoms.

• Medications for conditions that contribute to the terminal prognosis, such as heart failure medications for a patient with end-stage heart disease.

• Oxygen and respiratory equipment for patients with terminal lung disease or dyspnea.

• Hospital beds, wheelchairs, and other DME needed because of functional decline from the terminal illness.

• Wound care supplies for wounds related to the terminal illness or decline.

Items that may be unrelated, depending on the patient, could include medications for a chronic condition that does not contribute to the terminal prognosis and is not needed for symptom management. These decisions must be made individually and documented.

The Election Statement Addendum

Why It Matters

The addendum documents the hospice's relatedness decisions and communicates them to the patient and other providers. Under 42 CFR 418.24(c) and (d), for elections on or after October 1, 2026, the hospice must provide the addendum, titled "Patient Notification of Hospice Non-Covered Items, Services, and Drugs," to every electing beneficiary within the first five days of the election, and update it within three days when plan of care changes affect relatedness determinations. CMS announced enforcement discretion through December 31, 2026.

Required Content

The addendum must include, among other items:

• The terminal illness and related conditions.

• A list of the patient's current diagnoses and conditions and the associated items, services, and drugs not covered by the hospice because they have been determined to be unrelated.

• A written clinical explanation, in language the patient can understand, of why the identified items are unrelated and not needed for pain and symptom management.

• References to relevant clinical practice, policy, or coverage guidelines.

• Information about the right to immediate advocacy through the Beneficiary and Family Centered Care Quality Improvement Organization.

Connecting the Addendum to the Record

Reviewers will compare the addendum with the plan of care, medication profile, and claims for unrelated items. Relatedness decisions should be documented in the clinical record by the interdisciplinary group, not only on the addendum.

Part D Overlap

How Overlap Occurs

When a hospice patient fills a prescription at a pharmacy, the Part D plan may pay for the drug if it does not know the drug is related to hospice. If the drug was related to the terminal illness, it should have been provided by the hospice, and Medicare has paid twice. OIG has reported on Part D payments for drugs that should have been covered by hospice.

CMS Part D Guidance

CMS has issued guidance for Part D sponsors on drugs for hospice enrollees. Under that guidance, Part D sponsors may place prior authorization requirements on certain categories of drugs commonly used for hospice symptom management, such as analgesics, antinauseants, laxatives, and antianxiety drugs, to determine whether they are unrelated to the terminal illness before Part D pays. Hospices may be asked to provide information to the Part D sponsor or the prescriber about relatedness.

Hospice Responsibilities

• Provide all related drugs through the hospice.

• Communicate the patient's hospice status and relatedness decisions to pharmacies and prescribers.

• Respond promptly to Part D sponsor requests about relatedness.

• Make sure patients and families know which drugs the hospice provides and how to obtain them.

• File the Notice of Election promptly so Medicare systems reflect the hospice election.

Part B Overlap

Unrelated Part B Services

Other providers may bill Medicare Part B for services unrelated to the terminal illness during a hospice election. CMS's claims processing instructions require providers to use the GW modifier, which indicates a service not related to the hospice patient's terminal condition, on such claims. Claims for related services billed by other providers may be denied or recovered.

DME Supplier Claims

DME suppliers sometimes bill Part B for equipment provided to hospice patients. If the equipment is related to the terminal illness, the hospice is responsible. Hospices should coordinate with suppliers, arrange related DME through the hospice, and inform suppliers of the patient's hospice election.

Attending Physician Services

Attending physicians who are not employed by or under arrangement with the hospice may bill Part B for their professional services, with the appropriate modifier, as described in CMS's claims processing instructions. These services are distinct from unrelated services billed with the GW modifier.

Non-Hospice Spending and the SSVI

CMS's FY 2027 hospice final rule analyzed Medicare spending outside the hospice benefit during hospice elections and finalized the SSVI, which includes non-hospice spending measures such as total non-hospice spending and non-hospice spending per day. Hospices with high non-hospice spending may draw attention, because it may suggest that related items and services are being shifted to other parts of Medicare.

Hospices should:

• Review their SSVI results.

• Analyze non-hospice claims for their patients where data is available.

• Identify patterns, such as frequent Part D fills for symptom management drugs or Part B DME claims.

• Strengthen relatedness processes where patterns suggest problems.

Making Defensible Relatedness Decisions

Process

• The interdisciplinary group, including the hospice physician, reviews every diagnosis, medication, and item at admission.

• The group decides whether each is related, considering whether the condition contributes to the terminal prognosis or symptom burden.

• The group documents its reasoning in the clinical record.

• The hospice communicates unrelated determinations to the patient through the addendum and to other providers as needed.

• The group reviews relatedness when the patient's condition or plan of care changes.

Documentation

• A medication profile listing each drug and whether it is related or unrelated.

• A clinical explanation for each unrelated determination.

• Physician involvement in determinations.

• Updates when conditions change.

Medication Reviews

• A pharmacist or other qualified individual reviews the drug profile, as required by 42 CFR 418.106.

• Identify drugs that are no longer needed and discuss deprescribing with the patient, family, and physicians.

• Make sure all symptom management drugs are provided by the hospice.

Working With Pharmacy and DME Vendors

Many hospices contract with pharmacy benefit managers, pharmacies, and DME suppliers. Strong vendor arrangements help prevent overlap.

• Contract with vendors that understand hospice relatedness rules.

• Make sure vendors know which patients are on hospice.

• Use formularies and ordering processes that route related drugs through the hospice.

• Review vendor reports for drugs or equipment billed elsewhere.

• Include compliance and data sharing provisions in contracts.

Patients Transitioning to Hospice

When patients transition to hospice, they often have many existing prescriptions and equipment.

• Review every medication and item at admission.

• Arrange for the hospice to provide related drugs immediately.

• Discontinue drugs that are no longer needed, in consultation with the patient and physicians.

• Arrange pickup or transfer of related DME so the hospice is responsible.

• Inform pharmacies and suppliers of the election.

Patients in Facilities

For patients in nursing facilities and assisted living facilities, coordination with the facility's pharmacy is essential. Hospices should:

• Provide the facility with the hospice medication information required by the Conditions of Participation.

• Make sure the facility pharmacy knows which drugs the hospice provides.

• Review facility medication administration records.

Common Audit Problems

• Classifying symptom management drugs as unrelated.

• Classifying medications for conditions that contribute to the terminal prognosis as unrelated.

• Generic or missing explanations for unrelated determinations.

• Addenda not provided or not consistent with the record.

• Related DME billed by suppliers to Part B.

• Related drugs filled through Part D.

• Relatedness not reviewed when conditions change.

• Medication profiles that do not match orders or medication administration records.

• Patients and families told to obtain related drugs through their own insurance.

Examples of Relatedness Decisions

The following examples illustrate how relatedness may be considered. Decisions must always be individualized.

Example 1

A patient with end-stage heart failure takes a diuretic, a beta-blocker, a statin, and an eye drop for glaucoma. The diuretic and beta-blocker manage heart failure symptoms and are related. The statin may no longer be needed for comfort and could be discontinued after discussion with the patient and physician, or the hospice may decide it is related to cardiovascular disease. The glaucoma drop may be unrelated if glaucoma does not affect the prognosis or symptoms, with a clear explanation in the addendum.

Example 2

A patient with advanced dementia takes a medication for diabetes. If diabetes complicates the patient's condition, contributes to decline, or requires management for symptom control, it is likely related. If it does not, the hospice must document a clear clinical explanation for an unrelated determination, keeping in mind that unrelated items should be exceptional.

Example 3

A patient with lung cancer needs oxygen and a hospital bed. Both are related to the terminal illness and its effects on function and must be provided by the hospice.

Auditing Drug and DME Practices

Step 1: Review Admission Medication Profiles

For a sample of patients, compare medication profiles with relatedness determinations and the addendum.

Step 2: Review Unrelated Determinations

Check whether each unrelated determination is clinically justified and documented.

Step 3: Review Non-Hospice Claims Data

Where available, review Part D and Part B claims for hospice patients to identify related items paid outside the hospice.

Step 4: Review DME Arrangements

Confirm that related DME was provided through the hospice and that suppliers were informed.

Step 5: Review Communication

Confirm that patients, families, pharmacies, prescribers, and suppliers were informed of the hospice election and relatedness decisions.

Step 6: Correct and Educate

• Train interdisciplinary group members on relatedness.

• Update medication profile and addendum templates.

• Strengthen pharmacy and DME vendor coordination.

• Evaluate overpayment obligations under 42 CFR 401.305 if the hospice billed for items it did not provide, or if related items were improperly shifted to other payers in ways that affect hospice claims.

A Relatedness Checklist

• Every diagnosis, medication, and item reviewed by the interdisciplinary group at admission.

• Each unrelated determination clinically justified and documented.

• Physician involvement documented.

• Addendum provided within five days for elections on or after October 1, 2026, with patient-specific explanations.

• Addendum updated within three days of relevant plan of care changes.

• Symptom management drugs provided by the hospice.

• Related DME provided by the hospice.

• Pharmacies, prescribers, and suppliers informed of the hospice election.

• Part D sponsor requests answered promptly.

• Notice of Election filed on time.

A Hypothetical Example

A hospice reviews its SSVI results and finds high non-hospice spending per day. Data shows that many of its patients filled prescriptions for opioids and antianxiety drugs through Part D during their hospice elections, and that DME suppliers billed Part B for hospital beds for several patients. The hospice's addenda listed many medications as unrelated with generic explanations.

The hospice retrains its interdisciplinary group, requires physician review of all unrelated determinations, revises its addendum template to require patient-specific explanations, contracts with a pharmacy and DME vendor to provide all related items, and educates staff and families. It works with counsel to evaluate any overpayment obligations. Its non-hospice spending declines over the following year.

Questions Leadership Should Ask

• How many of our patients have unrelated determinations, and are they truly exceptional?

• Are our addenda patient-specific and consistent with the clinical record?

• How does our non-hospice spending compare with peers?

• Are related drugs and DME being billed outside the hospice?

• Do our pharmacy and DME vendors know which patients are on hospice?

Training Topics

• The definition of related conditions and the "virtually all" standard.

• How to document unrelated determinations.

• Addendum content and timing.

• Part D prior authorization and communicating with pharmacies.

• DME coordination with suppliers.

Common Myths

• "If the patient took it before hospice, it is unrelated." Not necessarily; relatedness depends on the patient's current condition and the terminal illness.

• "Listing a drug on the addendum makes it unrelated." The determination must be clinically justified and documented.

Monitoring Relatedness Over Time

• Track the share of patients with any unrelated determinations.

• Track the most common unrelated drugs and conditions.

• Review addenda updates when conditions change.

• Compare non-hospice spending trends with peers.

Staying Focused

Clear relatedness decisions help patients and families understand what the hospice provides and protect the Medicare program from paying twice.

Key Takeaways

• The hospice must provide drugs, supplies, and DME related to the terminal illness and related conditions.

• CMS expects virtually all care to be related; unrelated items should be exceptional.

• The addendum is required for all elections on or after October 1, 2026.

• Part D and Part B overlap can result in duplicate payments and audit risk.

• Non-hospice spending is now a visible measure in CMS's SSVI.

• Individualized, documented, physician-involved relatedness decisions are the best defense.

Frequently Asked Questions

Who pays for drugs related to the terminal illness?

The hospice, through its per diem payment.

What does "virtually all" care being related mean?

CMS expects the hospice to provide nearly all care needed after election, with unrelated services being exceptional and unusual.

What is the election statement addendum?

A notice listing conditions, items, services, and drugs the hospice has determined are unrelated, with explanations. It is required for all elections on or after October 1, 2026.

What is the GW modifier?

A modifier used by non-hospice providers to indicate that a service is not related to the hospice patient's terminal condition.

Why does non-hospice spending matter?

High non-hospice spending may suggest that related items and services are being billed outside the hospice benefit. CMS's SSVI includes non-hospice spending measures.

Conclusion

Drug and DME relatedness decisions determine whether Medicare pays once or twice for hospice patients. With the addendum now mandatory and non-hospice spending a visible measure in CMS's SSVI, hospices must make individualized, clinically justified relatedness decisions, document them in the record and addendum, provide all related items, coordinate with pharmacies and suppliers, and audit their practices regularly. These steps protect patients, prevent duplicate payments, and position hospices well for review.

How HealthBridge Can Help

HealthBridge is a healthcare management consulting firm that helps hospices strengthen relatedness practices through medication profile and addendum audits, non-hospice spending analysis, interdisciplinary group education, pharmacy and DME coordination reviews, and corrective action planning. If you want to make your relatedness decisions audit-ready, please get in touch with us. We will be happy to help you with this topic.

References

• Electronic Code of Federal Regulations. 42 CFR 418.202, Covered Services. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-418/subpart-F/section-418.202

• Electronic Code of Federal Regulations. 42 CFR 418.106, Condition of Participation: Drugs and Biologicals, Medical Supplies, and Durable Medical Equipment. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-418/subpart-D/section-418.106

• Electronic Code of Federal Regulations. 42 CFR Part 418, Subpart B (including 418.24, Election of Hospice Care). https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-B/part-418/subpart-B

• Electronic Code of Federal Regulations. 42 CFR 401.305, Requirements for Reporting and Returning of Overpayments. https://www.ecfr.gov/current/title-42/chapter-IV/subchapter-A/part-401/subpart-D/section-401.305

• Federal Register. Medicare Program; FY 2027 Hospice Wage Index and Payment Rate Update and Hospice Quality Reporting Program Requirements (August 3, 2026). https://www.federalregister.gov/documents/2026/08/03/2026-15686/medicare-program-fy-2027-hospice-wage-index-and-payment-rate-update-and-hospice-quality-reporting

• Centers for Medicare & Medicaid Services. Hospice News and Announcements. https://www.cms.gov/medicare/enrollment-renewal/providers-suppliers/information-centers/hospices/news-announcements

• Centers for Medicare & Medicaid Services. Medicare Benefit Policy Manual, Chapter 9, Coverage of Hospice Services Under Hospital Insurance. https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/bp102c09.pdf

• Centers for Medicare & Medicaid Services. Medicare Claims Processing Manual, Chapter 11, Processing Hospice Claims. https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/clm104c11.pdf

• Centers for Medicare & Medicaid Services. Medicare Prescription Drug Benefit Manual. https://www.cms.gov/medicare/prescription-drug-coverage/prescriptiondrugcovcontra/partdmanuals

• U.S. Department of Health and Human Services, Office of Inspector General. Reports and Publications. https://oig.hhs.gov/reports/all/