As directed by the Joint Legislative Audit Committee, the California State Auditor conducted an audit of the State’s licensure and oversight of hospice agencies and found that the State’s weak controls have created the opportunity for large-scale fraud and abuse.

Hospice is a specialized form of interdisciplinary health care primarily designed to provide palliative care and alleviate the physical, emotional, social, and spiritual discomforts of a person who is experiencing the last phases of life because of a terminal disease.

The fraud indicators that were found particularly in Los Angeles County include the following:

– – A rapid increase in the number of hospice agencies with no clear correlation to increased need.
– – Excessive geographic clustering of hospices with sometimes dozens of separately licensed agencies located in the same building.
– – Unusually long durations of hospice services provided to individual patients.
– – Abnormally high rates of still-living patients discharged from hospice care.
– – Hospice agencies using possibly stolen identities of medical personnel.

According to the report “These indicators strongly suggest that a network or networks of individual perpetrators in Los Angeles County are engaging in a large and organized effort to defraud the Medicare and Medi-Cal hospice programs. Such fraud places at risk the extremely vulnerable population of hospice patients.”

Los Angeles County has experienced a 1,500 percent increase in its number of hospice agencies since 2010. It had more than six-and-a-half times the nationwide average number of hospice agencies relative to its aged population in 2019. Although the majority of hospice services were provided by nonprofit organizations in the past, this recent wave of growth is almost exclusively in for-profit companies.

Investigators identified several areas within Los Angeles County with extremely high concentrations of hospice agencies, including individual buildings supposedly housing dozens of hospice agencies. In fact, the California Department of Public Health reported a single building in the community of Van Nuys as having more than 150 licensed hospice and home health agencies – a number that exceeds the structure’s apparent physical capacity.

Further, numerous indicators suggest that many of these hospice agencies may have been created to fraudulently bill Medicare and Medi-Cal for services rendered to ineligible patients or services not provided at all. This type of fraud can be lucrative. For example, a hospice agency that bills for 20 patients at the most common rate can collect about $122,000 per month.

Despite these widespread problems in the hospice program, Public Health and the two state agencies primarily responsible for identifying and investigating hospice fraud in Medi-Cal – the California Department of Health Care Services and the California Department of Justice – have not sufficiently coordinated their efforts.

In October 2021, California passed a general moratorium on licensing new hospice agencies beginning Jan. 1, 2022, and lasting until one year after the publication of the auditor’s report.