California Passes Major Hospice Reform Laws

California Gov. Gavin Newsom (D) has signed into law two pieces of legislation designed to strengthen hospice oversight. The new laws include a moratorium on new hospice provider licenses as well as an extensive audit of California’s licensing and oversight processes. 

State legislators began pursuing these bills — Senate Bill 664 and Assembly Bill 1280 — following a Los Angeles Times investigation into alleged misconduct among California hospice providers.

The Times reported that the number of providers operating in the state has ballooned during the past several years, particularly among for-profit companies. This rapid expansion has contributed to rising instances of fraud and negligence, according to the Times, which also cited a “cottage industry” of kickbacks and deceptive practices. 


“We have a responsibility to ensure that patients who are at the end of life receive appropriate care and an obligation to stop fraud that preys on those patients, diverts precious resources, and steals money intended to provide care to the dying,” California Assemblymember Jacqui Irwin (D-Thousand Oaks) wrote in an Ventura County Star guest editorial.

The licensing moratorium is slated to begin Jan. 1, 2022. It would end either 365 days following the state that the California State Auditor reports on hospice licensure or when the new law’s provisions expire in 2027, whichever comes first. The state will not issue new licences unless regulators make a written finding that a particular region has a demonstrable need for additional providers.

 A second impetus was the two reports from the U.S. Department of Health & Human Services Office of the Inspector General that rocked the industry in 2019. The first 2019 OIG report indicated that about 20% of hospices surveyed by regulators or accreditors between 2012 and 2016 had a condition-level deficiency that posed a serious safety risk.


A second report discussed 12 examples of those deficiencies in-depth. OIG examined state agency and accreditor survey findings as well as complaint data from 2012 through 2016. Regulators and accreditors surveyed nearly all hospice providers in the nation during those years.

OIG indicated that California and Texas were the states that saw the most serious deficiencies. The agency identified 313 hospices nationwide as “poor performers” in 2016, representing 18% of the total number of providers surveyed that year. Of those, 39 were in California. Each had at least one serious survey deficiency or one substantiated serious complaint. 

These reports also spurred action at the federal level in the form of the HOSPICE Act that passed earlier this year and has been incorporated into the U.S. Centers for Medicare & Medicaid Services (CMS) home health payment rule for 2022. 

An ongoing statewide audit in California may ultimately lead to more reforms. The audit is expected to examine the factors that contributed to the expansion of hospice providers in the state during the last decade and determine the scope of fraud or abuse.

Auditors will review the impact of hospice fraud on the state’s Medicare and Medi-Cal programs, investigate licensing procedures, and evaluate California’s current oversight processes and capabilities. Medi-Cal is the state’s Medicaid program.

“We’re certainly in favor of any and all efforts to level the playing field and provide Californians an informed choice about receiving the quality of care they deserve at the end of life. Both pieces of legislation seem like they are pointed in the right direction,” said Michael Milward, CEO of the California Hospice Network. “At the end of the day, I think it’s important to do anything that we can both legislatively and within our own organizations to level this playing field.”

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