Associated Press

California’s lax oversight of its hospice system has led to widespread fraud within the rapidly growing industry of end-of-life care, potentially putting patients at risk of harm in their final days, according to a state audit made public Tuesday.

The report concludes the California Department of Public Health isn’t rigorous enough in vetting hospice facilities applying for state licenses and then doesn’t adequately follow-up on investigations of suspected fraud, Michael Tilden, the acting state auditor, wrote in a letter to Gov. Gavin Newsom and California legislators.

“Without regulations to guide its oversight, its initial licensing site visits and ongoing monitoring do not adequately safeguard patient care or prevent fraud. Its investigation of complaints involving hospice agencies is often incomplete and slow, which increases the risk that patients may receive substandard care or that hospice agencies may engage in fraudulent activity,” Tilden wrote.

In addition, Public Health and the California Department of Health Care Services do not coordinate with each other to comprehensively assess fraud risks, according to the audit.

The number of hospice facilities in Los Angeles County has shot up since 2010, the report said, without a proportional need in the county for end-of-life care. Some patients were discharged after receiving hospice services for long periods of time, clear indications of potential fraud, according to the audit.

Auditors uncovered “excessive geographic clustering” of facilities, including a single building in the Van Nuys neighborhood of Los Angeles that had more than 150 licensed hospice and home health agencies — “a number that exceeds the structure’s apparent physical capacity,” the report said.

Los Angeles County has 818 hospice agencies, 45 times as many as in the entire states of New York or Florida, officials said.

In the past the majority of hospice services were provided by nonprofit organizations. The recent wave of growth is almost exclusively in for‑profit companies that bill state and federal programs, auditors said.

“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,” Tilden wrote. “Such fraud places at risk the extremely vulnerable population of hospice patients.”

Auditors uncovered indicators of fraudulent billing to Medicare and Medi-Cal for services rendered to ineligible patients or services not provided at all. This type of fraud can be lucrative, auditors said. For example, a hospice agency that bills for 20 patients at the most common rate can collect about $122,000 a month.

Last month, 16 people were charged in San Bernardino County with defrauding the California Medi-Cal and federal Medicare systems of more than $4.2 million by enrolling people who were not terminally ill into hospice care. Many of the patients told investigators that they were enrolled in hospice care without their knowledge or understanding of what hospice is, state prosecutors said.

Auditors noted that Public Health approved licenses for some for-profit facilities even after becoming aware of potential problems, essentially enabling “operators who are possibly fraudulent to continue functioning, placing patients at serious risk of not receiving appropriate care.”

The auditor recommended that the state Legislature require the agencies to create a task force to investigate and prosecute fraud and abuse by hospice providers. Lawmakers should also revise state law to authorize regulators to fine hospice agencies that don’t comply with licensing requirements, the report said.

Tomás J. Aragón, director of the Department of Public Health, said his agency agrees with the majority of the audit’s findings.

“Public Health will continue its efforts to develop regulations for hospice agencies and facilities and if the Legislature provides Public Health with authority to promulgate emergency regulations, we will transform our efforts to meet that mandate,” Aragón wrote in a detailed letter to Tilden.

A moratorium on new licenses for hospice agencies went into effect Jan. 1 and will remain for 365 days after the audit report’s publication date, “to spur attention and action to improve what many stakeholders, including hospice providers themselves, agree is a regulatory system in need of reform,” auditors wrote.