The Difference Between Thriving and Surviving: Hospice Providers on Certificates of Need

With certificate of need laws in a constant state of flux, hospices wrestle with the pros and cons of these regulations.

On one side of the coin, CON laws can limit access to hospice and their growth potential. On the other side, CONs can spell the difference between surviving and thriving hospice sustainability, along with quality care.

The presence or absence of CON regulations in a state can bear down on a hospice’s ability to do business within their service regions, according to Craig Dresang, CEO of California-based YoloCares.

“It’s the difference between surviving and thriving,” Dresang told Hospice News in an email. “In non-CON states, many of the best providers have to allocate significant resources to compete with — or fight off — a tsunami of loosely-regulated competitors who may value profit over people. CONs help high-quality, community-integrated programs to thrive. Without CONs, many of the best programs struggle just to survive.”

One hospice CEO told Hospice News on background that lax regulatory requirements in some states make the hospice industry an easy target for “bad acting” operators to step into. These operators get into hospice for the “wrong reasons” that focus solely on profit and not on patient care, the CEO said.

Standing out from the crowd in states that don’t require a CON can be a difficult feat for hospices. Some stretch their budgets thin by pouring money into marketing efforts and referral outreach.

CONs are primarily designed to help control health care costs by preventing market saturation and ensuring that community needs can support the presence of additional health care providers.

Because these laws exist at the state level, multiple approaches exist, and they often change. The future of CONs is uncertain in many markets. The requirements and applicability of these laws also vary widely from state to state.

As of December, 35 states and the District of Columbia had some type of CON program in place, reported the National Conference of State Legislatures (NCSL). Around 14 states have CON laws that include hospices. A few states have other statutory means to achieve similar goals.

Without these regulations in place, hospice fraud and abuse can “run rampant,” according to a hospice executive speaking on condition of anonymity.

State and federal law enforcement and regulatory agencies have been cracking down on hospice fraud in the past few years.

These cases often center around alleged False Claims Act violations. For hospices, these cases typically hinge on patient eligibility for services rendered. False claims cases have resulted in fines or settlements reaching millions of dollars, while others have led to criminal charges.

Hospice fraud cases have cropped up across states with CONs such as Georgia, Louisiana and Mississippi. But the states in which fraud is reportedly more prevalent often lack CONs such as California and Texas.

California and Texas are the states that see the highest incidence of hospice fraud, according to reports from the U.S. Department of Health & Human Services (HHS) Office of the Inspector General (OIG).

CON regulations are at the core of the fraud issues in the Golden State, according to Mike Milward, CEO of the California Hospice Network, a group of nonprofit providers. Insufficient regulation in the state has resulted in exponential growth of providers in the last decade, leading to a saturated market ripe for fraud, said Milward.

“As the number of hospices in California has skyrocketed, quality has plummeted and fraud has increased,” Milward told Hospice News in an email. “The unfortunate victims are patients and families, who often don’t know the difference in care that nonprofit, community-based hospices provide. Only recently has the state legislature stepped in to attempt to regulate this unnecessary growth.”

CONs can help curb abuse that gravely impacts the quality that patients receive, Milward said.

Other providers agree.

“We lose something by allowing so many underqualified players to hang a hospice shingle over their front door,” added Dresang. “The CON process strengthens and improves the network of hospice operators in a region, enabling high-quality providers to care for vulnerable patients with a “safety net” of regulations in place, he stated.

In states where CONs have been eliminated or don’t exist, “chaos and inconsistency in care prevails,” according to Dresang. Serious and terminally ill patients are more susceptible to receiving poor or substandard end-of-life care in markets without regulation, he continued.

While some highlight the benefits of CONs, others find fault in these laws. These regulations have a huge influence on hospices’ ability to expand access to care. In some cases, CONs can lead to market monopoly in which one or few providers hold all the keys that unlock patient access, one hospice CEO stated.

Views on CONs differ among providers. Some see them as a way to manage growth, while others view them as limiting consumer choice, Judi Lund Person, vice president of regulatory and compliance for the National Hospice and Palliative Care Organization, previously told Hospice News.

Additionally, these regulations can squelch hospices’ growth potential, both in geographic scale and service diversification.

Concerns about growth are rising among providers as regulations take shape, according to Sheila Clark, president and CEO of the California Hospice and Palliative Care Association (CHAPCA).

Though California does not have CON regulations in place, the state instituted a moratorium on hospice licensing last year. State officials began an audit of the licensure process that ultimately found that lax regulation contributed to widespread fraud. The moratorium requires that current hospice providers in the state now submit a needs assessment when expanding their service areas or adding new locations.

“CHAPCA members are most concerned that the current moratorium is limiting expansion of current hospice licenses,” said Clark. “[When looking to] either expand their current services area or add a branch location to a current licensed service area, the California Department of Public Health is requiring that hospice providers submit a needs assessment for both.”