As California pursues hospice licensing reform, some providers in other states are watching for similar actions closer to home.
In December, California Gov. Gavin Newsom (D) approved legislation that tightened hospice oversight in the state. This includes establishing a moratorium on new hospice provider licenses until the California Department of Public Health (CDPH) sets emergency regulations. The agency has a deadline of Jan. 1, 2024.
The catalysts for these actions include a proliferation of new hospices in California, Texas, Arizona and Nevada that have stoked concerns about potential fraud and other abuses.
Hospices in these and other states may pause to reflect on how moves like California’s could affect their own regulatory environments, according to Howard Young, partner at global law firm Morgan Lewis.
“It’s understandable that hospice operators in other states are eyeing this warily,” Young told Hospice News. “Hospices in neighboring states and others like Texas, Arizona and Nevada will be cognizant of what California’s doing and consider whether or not to take similar action. There’s some history in the post-acute and home health care areas for putting moratoriums on licensures in place when concerns grew about the flipping of agency ownership. We’ll see how it plays out, but California is taking bold action in the hospice arena, and could be a sort of leader from a legislative perspective in these efforts.”
A key aspect of California’s policies is a prohibition on change of ownership approvals for hospices within the first five years of their initial licensure. Owners are now required to retain hospice assets for at least that length of time before putting them up for sale.
The restriction is intended to curb the number of new owners seeking to turn around a hospice for a quick profit, but other circumstances could lead a company to sell earlier than that five-year threshold, according to Young. Reasons could include financial hardship, labor pressures or the owner’s personal losses, he added.
The extended moratorium in California builds upon 2021 legislation that also mandated an extensive audit of the state’s licensing and oversight processes. Those two initial laws — Senate Bill 664 and Assembly Bill 1280 — followed a Los Angeles Times investigation into alleged misconduct.
“This new [moratorium] law makes significant changes to the state’s regulation of hospice providers and perhaps represents a continued shift to greater regulation of hospices throughout the country,” law firm Arnall Golden Gregory indicated in a recent report.
The new law imposes criminal penalties on any person who violates any provision of the act or any rule or regulation promulgated under the act.
“It boils down to concern over fraud. If the wrong operators are getting licenses for hospice, that makes it an easy mark for fraud, which harms the honest operators committed to doing the right thing,” Young said.
Anti-kick back and fraud cases have been on the rise in recent years, bringing serious repercussions for hospice owners in some cases. Some False Claims Act (FCA) cases have resulted in criminal charges brought against hospice owners and employees, with some resulting in lengthy prison sentences. Others have faced heavy fines.
The California law allows exceptions under certain circumstance,, such as situations where a new provider is necessary to maintain continuity of care for existing patients or to address an unmet need of hospice services in a specific region and financial hardship, CDPH reported.
The exceptions fall in line with President Biden’s executive order 13985 issued in 2021, which supports the advancement of racial equity and support for underserved communities, according to Julia Chacon, compliance officer and director of patient care services Parentis Health, a California-based senior care company.
This means existing providers may need to demonstrate “a dire need of hospice support” in an area before expanding, but also represents the potential to improve equitable health access, Chacon indicated.
“It’s fair to say that — although there is a moratorium in place which may restrict growth — there are opportunities for growth as well,” Chacon told Hospice News in an email.