“Shady” brokers allegedly continue to facilitate “license flipping” among fraudulent hospices, though new regulations have started bearing down on the practice.

Some hospice owners have been selling their licenses soon after obtaining them, or before regulators can act on alleged malfeasance, according to several industry sources who spoke with Hospice News. The practice appears to stem from a rash of newly licensed hospices that have emerged in California, Nevada, Texas and Arizona – states identified by federal watchdogs as hotspots for hospice fraud. Many of these sales involve certain brokers who move the licenses between owners.

“There’s a lot of shady people out there, and they put a high value on their agencies. Right now they’re selling like hot tamales from anywhere between $300,000 to $500,000 per license,” one former hospice leader told Hospice News on condition of anonymity. “They’re all done through the same brokers and the same people.”

Some of these providers have secured licenses, as well as Medicare certification and, sometimes, accreditation, multiple hospice executives told Hospice News on background. They then proceed to enroll a small number of patients, for whom they sometimes never bill Medicare. By not billing, they are better able to avoid regulators’ attention.

A number of companies advertise their licenses on websites designed to connect buyers and sellers across a range of industries, including hospices. On two of these sites combined, Hospice News observed that close to 200 hospice companies had posted about licenses for sale, with most asking for prices in the vicinity of $300,000 to $350,000.

Many of the characteristics of the hospices for sale on these sites fit the profile of those providers who are committing fraud, waste and abuse. This includes no alternative dispute resolutions, no cap liability and low patient count, among other factors.

These practices can have an adverse effect on the buyer, even when they are a legitimate hospice, according to Sheila Clark, president and CEO of the California Hospice and Palliative Care Association (CHAPCA).

“They go out and get a license, open up a hospice and fill it with a bunch of non-appropriate patients. When that license number is no longer pristine, by the time they get audited the hospice is already sold to a new owner,” Clark told Hospice News. “And when you buy that license, you buy the history.”

However, new federal and state regulations are starting to make a difference, Clark said.

The U.S. Centers for Medicare & Medicaid Services (CMS) in its home health payment rule for 2024 instituted a 36-month ownership requirement before a hospice can sell. The rule forbids any change in majority ownership during the 36 months after initial Medicare certification, including acquisitions, stock transactions or mergers. This mirrors current regulations for home health providers.

The State of California has gone further, requiring five years of ownership before a change of ownership can take place.

CMS has also implemented a period of enhanced oversight for the four states in which fraud is reportedly rampant, which has helped chip away at these license sales, according to Clark.

“We have enhanced oversight now. That’s the other thing that’s kind of tempered the sales here. Our State of California has done a much better job at restricting [license sales],” Clark said. “They are making a difference. It is declining.”