California Leads the State-Level Battle Against Hospice Fraud

As hospice program integrity remains in the spotlight, California remains the only state to take action on curbing the problem.

Beginning in 2021, numerous reports emerged of unethical or illegal practices among hundreds of newly licensed hospices, particularly among new companies popping up in California, Texas, Nevada and Arizona.

California’s Department of Justice (CDOJ) in 2021 issued a report detailing the state’s history of lax oversight.

“The state’s weak controls have created the opportunity for large-scale fraud and abuse,” CDOJ indicated in its report. “We identified numerous indicators of such fraud and abuse by hospice agencies, which typically offer palliative end-of-life care to individuals with medical diagnoses of fewer than six months to live.”

These issues first came to light following two 2019 reports from the U.S. Department of Health & Human Services Office of the Inspector General (OIG) that rocked the hospice community. The first 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. The second cited specific examples of those risks.

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.

Since then, the state has been hard at work implementing new policies to address the rampant fraud, spearheaded by the California Department of Public Health (CDPH).

“CDPH is doing an excellent job in licensing and regulating hospices. Based on the California Auditor report, CDPH has already drafted, implemented and rolled out recommendations,” Sheila Clark, president and CEO of the California Hospice and Palliative Care Association (CHPCA), told Hospice News in an email. “More importantly, CDPH is collaborating with stakeholders, such as CHAPCA, to create more stringent hospice regulations that will come into effect from January 1, 2025. It’s crucial to acknowledge that CDPH is taking active measures to ensure that hospices in California are safe and effective for patients.”

Among the most significant actions that California has taken is a moratorium on hospice licensing, except in circumstances in which a community has a demonstrated need for an additional provider.

The moratorium originated in Oct. 2021 with two major reform laws passed that also mandated an extensive audit of the state’s licensing and oversight processes. The bills — Senate Bill 664 and Assembly Bill 1280 — followed a Los Angeles Times investigation into alleged misconduct among hospice providers statewide.

Subsequent legislation, Assembly Bill 2673 extended California’s moratorium on new hospice provider licenses, which now will remain effective until CDPH implements a series of emergency regulations.

That bill also established a ban on hospice license sales within 60-months of state licensure. This exceeds a federal requirement issued last year that prohibited changes of ownership within 36-months.

Moreover, the state revamped its rules and procedures for hospice license applications and expanded CDPH’s oversight authority. Additionally, CDPH must conduct validation surveys on 5% of all hospice providers that attained licensure via accreditation agencies during the previous year.

Despite these efforts, a January ProPublica investigation found that providers in California, Texas, Nevada and Arizona account for more than two-thirds of the nation’s newly Medicare-certified hospices.

In one instance, 15 new hospices received Medicare certification, all operating from the same two-story building in Los Angeles, ProPublica reported. In another: One location in Phoenix was approved for three new hospice licenses in 2023, all at the same location as dozens of other new providers in the past two years, according to ProPublica.

The investigation prompted the California Hospice Network (CHN), a regional provider collaborative, to issue a statement on continued concerns about oversight.

However, these factors do not diminish the work that California has done on hospice program integrity, according to Clark.

“CHN has expressed concerns, as reported, regarding the issuance of licenses to new hospices in California, despite a moratorium imposed by lawmakers and enforced by the CDPH,” Clark said. “However, it’s worth noting that CDPH has only granted licenses to very few hospices, as per the data available.”