New California Law Further Tightens Hospice License Oversight

California Gov. Gavin Newsom (D) recently approved legislation that expands upon last years’ moves to strengthen hospice oversight in the state, among other enforcement actions.

Assembly Bill 2673 extends California’s moratorium on new hospice provider licenses, which now will remain effective until the California Department of Public Health (CDPH) sets emergency regulations. The agency has a deadline of Jan. 1, 2024.

The moratorium originated last October 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.

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The California Department of Justice (CDOJ) issued a report in March 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.”

The halt on licensing took effect Jan. 1, 2021, and was slated to end either 365 days following associated reports from the California State Auditor, or when the provisions of last year’s new law expire in 2027. The law stipulated that the state would issue new hospice licenses only if regulators made a written finding that a particular area had demonstrated a need for additional providers.

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The legislation passed this week requires the forthcoming emergency regulations to do the following:

  • Establish standards that put a cap on staff travel time and distance to patients in rural and urban settings
  • Set standards for hospice nursing staff patient caseloads
  • Limit the number of hospice agencies that management personnel can be involved with concurrently
  • Require management personnel to meet minimum standards of hospice-specific training and experience
  • Set timelines for reporting changes of name, location or mailing address

The legislation also expands the “grounds for possible denial, suspension, or revocation” of a hospice provider’s license, according to the bill’s language.

Additionally, it prohibits change of ownership approvals for hospices within the first five years of their licensure. This means buyers have to retain hospice assets for a handful of years before putting them up for sale. The law allows exceptions for certain circumstances, such as a necessity to maintain continuity of care for existing patients or an unmet need of hospice services in a specific region and financial hardship, the CDPH reported.

Additionally, CDPH must conduct validation surveys on 5% of all hospice providers that attained licensure via accreditation agencies during the previous year.

The ongoing statewide audit in California may ultimately lead to more reforms. The audit is expected to examine the factors that contributed to the expansion of hospice providers in the state during the last decade and determine the scope of fraud or abuse.

Auditors will review the impact of hospice fraud on the state’s Medicare and Medi-Cal programs, investigate licensing procedures, and evaluate California’s current oversight processes and capabilities. Medi-Cal is the state’s Medicaid program.

The tighter regulatory oversight came after the Los Angeles Times reported that the number of hospice providers operating in the state has swelled for the last several years running, particularly among for-profit companies. This rapid expansion has contributed to rising incidence of fraud and negligence, according to the Times, which also cited a “cottage industry” of kickbacks and deceptive practices.

Last week, a group of hospice industry organizations wrote to U.S. Centers for Medicare & Medicaid Services (CMS) Administrator Chiquita Brooks-LaSure requesting additional federal oversight to address similar problems in several states.The signatories included LeadingAge, the National Association for Home Care & Hospice (NAHC), the National Hospice and Palliative Care Organization (NHPCO) and the National Partnership for Healthcare and Hospice Innovation (NPHI).

“We believe that, in addition to action at the state level, increased federal oversight is needed to protect hospice patients and their families, as well as the vast majority of hospice providers that properly observe Medicare and Medicaid laws and regulations,” the groups wrote in the letter. “When similar activities were occurring in the home health program, CMS took decisive action to maintain the integrity of the benefit through imposition of temporary moratoria on the admission of new agencies in select areas of the country.”

A second driving force behind California’s crackdown is the two 2019 reports from the U.S. Department of Health & Human Services Office of the Inspector General (OIG) that rocked the industry. 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.