California auditors outline rampant fraud endangering LA County hospice patients

Weak oversight and enforcement from state agencies likely enabled a boom of fraudulent hospice agencies within California’s Los Angeles County, according to an audit published to the public Tuesday.

In the report, delivered to Gov. Gavin Newsom and state legislative heads, acting California State Auditor Michael Tilden highlighted a nearly 1,600% increase in Los Angeles County hospice agencies since 2010 while the area’s senior population only increased by an estimated 40% during the same time.

As of 2019, Los Angeles County had roughly 1,600 aged persons living in the area per hospice agency, according to the report. Additionally, the rest of the state excluding Los Angeles County had one hospice agency per 5,900 seniors—still well above that of other states such as New York (one hospice per 72,000 aged persons) and Florida (one hospice per 95,000).

Alongside sheer volume, the audit spotted high concentrations of hospice agencies within a single area, including “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.”

The county’s hospice agencies also had “unusually long durations of patient care and high rates of patients being discharged alive,” a red flag for what are supposedly end-of-life care agencies, and multiple cases where medical professionals were affiliated with Los Angeles hospice agencies “without their knowledge or consent, thereby obtaining hospice licenses under false pretenses,” 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 [the state’s federal Medicaid program],” Tilden wrote to state leaders. “Such fraud places at risk the extremely vulnerable population of hospice patients.”

The audit laid blame on the state’s Department of Public Health, the primary agency responsible for hospice licensing and oversight.

Auditors found that the department has not issued regulations around its licensing processes, did not deny licenses in cases where it was aware of possible fraud, has not promptly comprehensively investigated complaints of patient abuse and, since 2015, “has never suspended a hospice license and has revoked a hospice license only once.”

Further, the Department of Public Health, the Department of Health Care Services and the Department of Justice in California have each failed to coordinate fraud investigations and other regulatory efforts surrounding hospice agencies, leading to “gaps in the system” protecting against patient harm and fraud, per the report.

“For example, Health Care Services and Public Health do not coordinate with each other to comprehensively assess fraud risks, such as those we found in Los Angeles County,” auditors wrote in the report. “These siloed and disjointed efforts by state agencies are not sufficient to address the large‑scale fraud that is likely occurring in the hospice industry.”

Auditors noted that fraudulent hospice care “can be lucrative,” as agencies billing Medicare and Medi-Cal “at the most common rate” can bring in about $122,000 each month.

To clamp down on these trends and protect patients, auditors advised California legislators to require the public health department to “immediately” develop emergency hospice licensing regulations. Lawmakers could also revise state law so that the agency can levy monetary fines and other sanctions against hospice agencies that do not comply with licensing requirements, they wrote.

All three state departments should also convene a task force to spot and prosecute hospice agency fraud as well as establish a working group for statewide annual hospice program risk assessments, according to the report.

“We acknowledge that there are several opportunities for improvement in the oversight of hospice agencies,” Director and State Public Health Officer Tomás J. Aragón, M.D., wrote in a March 11 response to Tilden. “Public health has already begun or will soon begin to operationalize several of the recommendations made in the audit in advance of regulations and/or legislative initiatives. These include shoring up referrals made to other state departments where possible fraud may exist, training public health staff to better detect fraudulent activities, and adjusting our public website to improve reporting of ownership information for hospice agencies, among other things.