CMS’s Affiliation Rule: Medicare Enrollment Risk for Hospice Medical Directors

By Scott S. Driggs

A physician with a clean disciplinary record, no history of fraud, and no involvement in false billing can lose the ability to treat Medicare patients for up to ten years. The physician need not have submitted a single improper claim. Under Medicare enrollment regulations, the physician’s affiliation with another provider or supplier might be enough by itself.

The regulatory authority permits the Centers for Medicare & Medicaid Services (CMS) to revoke a provider’s or supplier’s Medicare enrollment if CMS determines the provider or supplier “has or has had an affiliation” that “poses an undue risk of fraud, waste, or abuse to the Medicare program.” Although this provision applies to all Medicare providers and suppliers, its impact has fallen most heavily on one group: hospice medical directors.

This alert explains how the affiliation rule works, examines the Administrative Law Judge (ALJ) decisions that are defining its reach, and considers what physicians can do to protect themselves before, during, and after a medical director engagement.

The Industry Context: Rapid Growth, Rising Fraud Concerns

Approximately 1.8 million Medicare beneficiaries receive hospice care each year, and Medicare pays roughly $27.5 billion annually for those services (HHS Office of Inspector General data). The number of Medicare-certified hospice agencies increased from approximately 4,840 in 2019 to 6,706 in 2024, a nearly 40% increase (Congressional Research Service (CRS), Program Integrity in the Medicare Hospice Benefit, R49060 (Aug. 4, 2026), citing Medicare Payment Advisory Commission (MedPAC) data).

CMS revoked 149 hospice providers in 2025 alone, suspended payments to approximately 800 hospice and home health agencies in Los Angeles, and imposed a six-month nationwide moratorium on new hospice Medicare enrollment effective May 13, 2026 (91 Fed. Reg. 27,946) (CRS, R49060).

The enforcement response reflects a real problem. The rapid growth of for-profit hospice agencies has outpaced effective oversight. Structural features of the benefit compound the problem: care is delivered in the home, eligibility turns on clinical prognosis rather than objective diagnostic criteria, and per diem payments create incentives that are difficult to audit. Together, these conditions have made the hospice benefit vulnerable to fraud, waste, and abuse.

The question this alert addresses is not whether CMS should have and vigorously exercise program-integrity tools, but whether the affiliation rule as currently applied provides adequate process and proportionate consequences for individual physicians who may bear no personal responsibility for a hospice’s misconduct.

How the Affiliation Rule Works

The affiliation framework rests on two regulatory provisions, both authorized by Section 1866(j)(5) of the Social Security Act, 42 U.S.C. § 1395cc(j)(5). First, 42 C.F.R. § 424.519 requires providers and suppliers to disclose certain affiliations on enrollment applications and revalidation submissions, and CMS evaluates those affiliations for undue risk. Second, 42 C.F.R. § 424.535(a)(19) authorizes CMS to revoke the enrollment of any provider or supplier whose affiliation CMS determines poses such an undue risk.

The central statutory question is whether § 424.535(a)(19) unlawfully extends the statute’s denial-only authority to revocation of existing enrollment, an issue now before the U.S. Court of Appeals for the Ninth Circuit in Lee v. Kennedy, No. 26-1820 (9th Cir.), discussed below.

What Counts as an “Affiliation”

For hospice medical directors, the critical category is operational or managerial control. Under 42 C.F.R. § 424.502, an affiliation also includes (1) a 5% or greater direct or indirect ownership interest, (2) a general or limited partnership interest, (3) service as an officer or director, or (4) reassignment of Medicare benefits under § 424.80.

The regulation expressly defines “managing employee” to include “a hospice or skilled nursing facility administrator and a hospice or skilled nursing facility medical director.” 42 C.F.R. § 424.502.

Thus, even a part-time medical director has a reportable affiliation with the hospice, and revocation of the hospice makes that affiliation a disclosable event under § 424.519. CMS then evaluates whether the affiliation poses an undue risk under § 424.519(f), considering the length and nature of the affiliation and the circumstances of the disclosable event. If CMS finds an undue risk, it may revoke an existing enrollment under § 424.535(a)(19).

The regulatory framework gives CMS broad discretion. The ALJ decisions show how that discretion is exercised.

Why Medical Directors Cannot Distance Themselves: The ALJ Decisions

The key development is the emerging body of ALJ decisions interpreting the rule. All but one reject efforts to characterize a medical director role as limited, honorary, or brief; Aguiluz and Khanna are the leading examples. St. Joseph reached the opposite result on facts that illustrate the narrow conditions under which a defense may succeed.

The “Honorary Title” Defense: Aguiluz

CMS revoked a California physician’s enrollment based on his role as medical director of Forever in Peace Hospice Care, Inc., in Amable R. Aguiluz, Jr., M.D., DAB CR6964 (Aug. 21, 2026), after the hospice’s enrollment was revoked under 42 C.F.R. § 424.535(a)(8)(ii).

His name and signature appeared throughout patient records. He claimed the signatures were forged and his title merely “honorary or descriptive,” but the ALJ found those claims not credible. The holding went further: “[N]o physician affiliated with a provider and no physician who accepts the title of medical director, even if he considers it honorary or descriptive, can ignore that provider’s billing practices.”

The ALJ then addressed the alternative scenario: even if the hospice had used Dr. Aguiluz’s credentials without his knowledge, the outcome would be the same. The ALJ found that “he passively affiliated himself with this rogue enterprise, giving it access to his NPI and DEA certification number. Even without his active involvement, such an affiliation poses an undue risk.”

CMS also revoked Dr. Aguiluz’s separate medical practices, imposed a ten-year reenrollment bar, and placed him on the preclusion list, which bars Medicare Advantage organizations from paying for his services and Part D plan sponsors from filling his prescriptions.

The “Brief and Insignificant” Defense: Khanna

In Ritu Khanna, M.D., DAB CR6854 (Mar. 10, 2026), CMS revoked an Arizona physician’s enrollment based on her role as medical director of Asclepius Hospice Care, LLC. She signed an agreement on June 1, 2023, served for approximately one year, and argued that the relationship was “brief and insignificant.” The ALJ rejected that characterization: “Petitioner’s efforts to distance herself from the hospice . . . establish that she was not fulfilling her obligations.” The ALJ found the hospice’s denied claims were “attributable to the medical director’s lack of involvement” and held that minimizing her engagement confirmed the lapse that created undue risk. CMS imposed a ten-year reenrollment bar and preclusion-list placement, and the ALJ affirmed.

The pattern extends beyond Aguiluz and Khanna to include Fernando D. Palacios, DAB CR6754 (2025), Edmond Petrossian & Sterling Physicians Medical Group, DAB CR6758 (2025), and OneCare Hospice, LLC, DAB CR6929 (2026).

The Counter-Authority: St. Joseph

In the single outlier, St. Joseph Healthcare Agency, Inc., DAB CR6879 (2026), CMS revoked a hospice’s enrollment based on the alleged affiliation of its former medical director, Dr. Aguiluz, with a separate revoked hospice, but the ALJ reversed. The ALJ found no direct affiliation between St. Joseph and the revoked hospice because Dr. Aguiluz’s disclosable event occurred after he resigned from St. Joseph. Relying on CMS’s 2019 preamble, 84 Fed. Reg. 47,815 (Sept. 10, 2019), the ALJ held that “an owning or managing party must be in an ownership or managerial role with the provider in order for an affiliation to exist.” St. Joseph confirms that timing matters: a physician who fully separates from a hospice before the hospice’s disclosable event may have a viable defense.

Narrow ALJ Review and Due Process Concerns

The procedural framework compounds the substantive risk. ALJs reviewing Medicare enrollment revocations assess only whether CMS had a legal basis to revoke, not whether revocation was proportionate or wise. The ALJ cannot consider mitigating circumstances, weigh equities, or substitute judgment for CMS’s. Devine Solutions Group, LLC, DAB No. 3159 at 22 (2024); Norman Johnson, M.D., DAB No. 2779 at 11 (2017). The physician’s only effective opportunity to build a factual record is at reconsideration, which proceeds on a paper submission before revocation takes effect. Evidence not submitted then may be excluded at the ALJ hearing absent good cause. 42 C.F.R. § 498.56(e).

Whether this structure satisfies constitutional due process under Mathews v. Eldridge, 424 U.S. 319 (1976), is among the questions the Ninth Circuit may address in Lee v. Kennedy, No. 26-1820 (9th Cir.), argued August 31, 2026, after CMS revoked Dr. Mansur Hsin-Chia Lee’s enrollment based on his affiliation as medical director of Passion and Love Hospice, whose billing privileges were revoked. The issues include whether the revocation regulation exceeds the statute’s denial-only authority, whether the administrative process provides constitutionally adequate due process, and whether the ALJ’s inability to review CMS’s exercise of discretion insulates the revocation from meaningful judicial review.

The Unreviewable Reenrollment Bar

Separate from whether CMS had authority to revoke is the question of what happens after the revocation. When CMS revokes a physician’s enrollment, it also sets the length of the reenrollment bar, which can range from one to ten years (up to twenty for a second revocation). 42 C.F.R. § 424.535(c). In every recent hospice medical director case, CMS has imposed the maximum ten-year bar.

The bar’s length is not an appealable determination. 42 C.F.R. § 498.3(b). Neither the ALJ nor the Departmental Appeals Board (DAB) has authority to review, shorten, or modify it. The ALJ in Aguiluz expressly noted this limitation, as have other decisions. This means that even if a physician prevails on every other issue and demonstrates minimal involvement with the hospice, the ten-year bar set by CMS stands unchallenged through the entire administrative process.

For a practicing physician, ten years without Medicare billing privileges is not a temporary disruption. It can end a medical career. The physician cannot treat Medicare patients, cannot write prescriptions that Part D sponsors will fill, and cannot furnish services that Medicare Advantage plans will reimburse. The preclusion list extends these consequences beyond traditional Medicare. And because CMS may revoke all of the physician’s enrollments (as it did in Aguiluz), the bar does not just affect one practice location; it can affect the physician’s entire professional livelihood. The inability of any adjudicator to review whether a ten-year bar is proportionate to the physician’s actual conduct is, for many medical directors, the single most consequential feature of the affiliation rule.

CMS Proposes to Widen the Net

On July 6, 2026, CMS published proposed changes to the affiliation framework in the Calendar Year 2027 Home Health Prospective Payment System rule (CMS-1844-P). 91 Fed. Reg. 41,216 (July 6, 2026). Key proposals include:

What Revocation Means for the Physician

A revocation under § 424.535(a)(19) carries consequences that extend well beyond the loss of a single enrollment:

Practical Steps for Hospice Medical Directors to Consider

None of the steps below will eliminate the affiliation that the medical director title creates under 42 C.F.R. § 424.502 or guarantee a favorable outcome. They can, however, strengthen a physician’s position at reconsideration and preserve the record for any subsequent judicial challenge.

Bottom Line

The affiliation rule has created a structural trap for hospice medical directors. The title alone establishes the affiliation. The clinical duties that define the role are the same duties that create the exposure. And when CMS acts, the reenrollment bar is not reviewable by HHS adjudicators. A physician who does everything right can still lose Medicare enrollment for a decade because of what the hospice did wrong or is perceived to have done wrong.

Until a federal court addresses whether this framework exceeds CMS’s statutory authority (as the Ninth Circuit may do in Lee v. Kennedy), physicians considering the medical director role should understand exactly what they are accepting. And physicians already in the role should be building the record now, not after a revocation notice arrives.

*This alert is for informational purposes only and does not constitute legal advice. Readers should consult qualified legal counsel regarding their specific circumstances.