A hospice that boasts an astonishing 97% survival rate for terminally ill patients is accused of defrauding Medicare of $7.45 million.

The FBI arrested a couple on Thursday for allegedly fraudulently billing Medicare $7.45 million while running a hospice that reported a five-year survival rate of more than 97 percent. Federal officials told CBS News they were the first in a series of arrests planned for Thursday.

Because most people enter hospice care in the final stages of a terminal illness, high survival rates among hospice providers are one of a series of red flags identified as fraud by state auditors. In past fraud cases, operators were found to have used false or stolen identities to collect federal reimbursement for palliative care.

According to the FBI, the targets of the early-morning operation were Gladwin and Ameroo Gil, a physician and psychologist who is co-owner of 626 Hospice, doing business as St. Francis Palliative Care.

The FBI raid took place on a residential street in San Dimas, California, with FBI SWAT officers loudly announcing that they had a warrant for their arrest. CBS News was at its base in Southern California when FBI agents made the first early morning arrest. Dr. Mehmet Oz, the official appointed by President Trump to oversee the federal health care system, was also at the scene.

California’s hospice fraud has become a major focus for Republicans in Washington, who have highlighted the issue of political attacks against prominent Democratic state leaders. Vice President JD Vance was recently appointed head of anti-fraud operations.

California officials told CBS News that while the issue of hospice fraud is a national problem, state law enforcement officials have been investigating the issue over the past several years and have taken their own enforcement actions.

Bill Ezeiri, United States Attorney for the Central District of California, joined Oz from the scene where the FBI made these arrests. In response to a question about the politics surrounding the fraud issue, Essayri noted that Thursday’s enforcement action was approved by a federal judge who signed an arrest warrant in the case.

Ezeiri told CBS News that authorities have announced 15 defendants, more than half of whom are accused of hospice fraud. Some of these people are in prison and work with outsiders to commit fraud, Esseri said.

Red flags of fraud at hundreds of hospices

CBS News has been investigating fraud in Los Angeles County’s hospice industry for several months. The investigation examined the business and financial records of all currently operating hospices in Los Angeles County and identified operators that exhibited warning signs that a 2022 state audit identified as potential signs of fraud.

A CBS News analysis found that more than 700 of the approximately 1,800 hospices in Los Angeles County raised multiple red flags for fraud, as defined by the state. These key red flags include declining patient volumes, excessive billing, sharing of staff across multiple companies, and patients who appear to be terminally ill who are later discharged alive.

Another red flag: Multiple hospices concentrated in one building, including one office plaza. 89 hospices registeredpatient advocate Sheila Clark called “ground zero” for Medicare hospice fraud.

Medicare fraud is a serious problem in Southern California, but it is a national problem. The Department of Health and Human Services’ Office of Inspector General reported in 2023 that the total amount of suspected hospice fraud was estimated to be $198.1 million. Americans pay for taxpayer-funded health insurance for the elderly and disabled through their paychecks and premiums.

Congressional Oversight Committee launches investigation

Last month, House Republicans announced: Congress has launched an investigation into “rampant hospice fraud”. It alleges that tens of millions of dollars in taxpayer funds may have been lost in improper payments to Southern California companies. The committee cited the recent CBS News investigation in a letter to California Democratic Governor Gavin Newsom.

The Republican-led House Oversight Committee, which has investigative powers, sent a letter to Newsom requesting documents regarding the state’s “oversight and internal controls to detect and prevent fraud in federally funded hospice programs.”

“Recent reports have uncovered disturbing evidence of fraud in California’s hospice program, including agents overbilling Medicare and fraudulently enrolling beneficiaries without their knowledge,” committee members wrote.

California Attorney General’s Actions to Combat Hospice Fraud

State Attorney General Rob Bonta said his office has filed criminal fraud cases and about two dozen civil cases against more than 100 defendants in the hospice industry. But he acknowledged more needed to be done.

“We need to not only count the red flags, but also be sensitive to them,” Bonta, a Democrat, said. “Our main job is responsible parties, criminal investigations, civil investigations. Unfortunately, that’s after the damage has been done.”

The state’s moratorium on issuing new hospice licenses was recently extended until January 2027, as the state passed the deadline to enact new emergency regulations for hospices. Public health officials said they are balancing feedback from the public to vet new applicants and hold hospices accountable.

Bonta said multiple agencies are forming task forces to address the issue.

“So, to my fellow citizens who remain dissatisfied, I understand. I share your frustration. Please know that we are stepping up our efforts,” he said. “We are working overtime to ensure prevention and accountability, and we will continue to do so until hospice fraud is eradicated in California.”

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