By Douglas V. Gibbs
The California hospice system has been plagued by extensive fraud that has exploited vulnerable patients and cost taxpayers millions of dollars. Recent investigations have revealed that state officials, including Governor Gavin Newsom, were aware of these issues for years but failed to implement adequate oversight mechanisms. The reality is, nobody has been examining the systemic failures in California’s hospice regulation, the scale of fraud that occurred, the delayed response from state officials, and the policy implications of this regulatory breakdown until now – and I suppose we can thank Minnesota and Nick Shirley for it finally bubbling to the surface. The information we are now encountering draws primarily on a damning 2022 audit report that directly warned the Newsom administration about these issues, as well as subsequent enforcement actions and federal investigations.
The California hospice industry experienced explosive growth between 2010 and 2021, with the number of hospice agencies increasing by an astonishing 1,589% while the aged population grew by only 40% during the same period. This disproportionate expansion occurred within a regulatory framework that was fundamentally ill-equipped to provide adequate oversight. The California Department of Public Health had failed to issue regulations for its hospice licensing process despite having had the authority to do so since 1991, creating a permissive environment that facilitated widespread fraud.
The audit report addressed to Governor Newsom in 2022 explicitly warned that “the state’s weak oversight of hospice agencies has created opportunities for large-scale abuse and fraud.” This warning was not merely theoretical but was based on concrete evidence of regulatory failure and suspicious industry patterns that had been developing for years.
The fraud in California’s hospice system manifested in several distinct patterns that were clearly identifiable in the data. One of the most striking indicators was the excessive geographic clustering of hospices, with sometimes dozens of separately licensed agencies located in the same building. In Los Angeles County, auditors identified 210 active hospice agencies located within one mile of each other on Van Nuys alone; a concentration that defied any legitimate explanation based on patient demographics or healthcare needs.
Another red flag was the abnormally high rates of still living patients discharged from hospice care, despite hospice typically offering care for people expected to live six months or less. This anomaly suggested that patients were being inappropriately enrolled in hospice services solely for billing purposes. Robert F. Kennedy Jr. later confirmed this pattern, noting that investigators identified fraudulent operations because “the patients never died” despite being enrolled in end-of-life care.
The financial scope of this fraud was substantial. According to the House Oversight Committee, providers in Los Angeles County were overbilling Medicare by at least $105 million in a single year. The fraudulent scheme involved signing up patients, creating patient IDs, and charging approximately $6,000 monthly for each patient, regardless of whether they actually received hospice services. In some cases, these “hospices” existed only on paper, with physical locations that were completely abandoned, as evidenced by months of undelivered mail piled up at addresses that had supposedly passed state surveys.
Perhaps most concerning about the hospice fraud crisis is that state officials were explicitly warned about these problems but failed to take decisive action. The 87-page audit completed in 2022 and addressed directly to Governor Newsom detailed multiple indicators of potential fraud and provided clear recommendations for addressing them. Despite these warnings, the California Department of Public Health had never suspended a hospice license and had revoked a hospice license only once since 2015.
The audit also revealed that even when public health officials became aware of possible fraud during the licensing process, they still granted licenses to these hospice agencies rather than denying them. This regulatory negligence occurred despite the auditor’s conclusion 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.”
The failure to implement proper licensing oversight was compounded by the absence of basic regulatory standards. As Sheila Clark, a hospice industry observer, questioned: “How did that happen? How do you put a hospice in a burrito stand in California? How do you put a hospice in a tire store in California that all had to be vetted through licensure and through certification and accreditation?” These examples illustrate the absurd extremes to which the regulatory breakdown had extended.
While Governor Newsom did eventually sign legislation in 2021 imposing a moratorium on new hospice licenses, this action came years after the fraud patterns had become established and only after extensive public reporting on the issue. The moratorium, which remains in place but is set to expire, was a belated response to a crisis that could have been addressed much earlier had state officials acted on the warnings they received.
The delayed response has significant policy implications for regulatory oversight of healthcare programs. It demonstrates how regulatory capture and bureaucratic inertia can enable systemic fraud to flourish even when red flags are apparent and explicitly documented. The California case also illustrates the importance of implementing proactive oversight mechanisms rather than reactive enforcement after substantial financial damage has already occurred.
The House Oversight Committee’s investigation into the matter highlights the federal concern about state failures to protect taxpayer funds. In their letter to Governor Newsom, committee members emphasized that “the Newsom administration has been aware of state audit reports of hospice fraud for at least four years but has failed to prevent or detect it and has enabled hospice providers to defraud the American taxpayer and exploit vulnerable patients.”
The California hospice fraud crisis represents a significant failure of state regulatory oversight that allowed millions of taxpayer dollars to be diverted through fraudulent schemes while exploiting vulnerable patients. The 2022 audit report provided clear warnings about these issues, but state officials failed to implement timely and effective responses. This case illustrates the importance of robust regulatory frameworks, proactive oversight, and decisive action when fraud indicators are identified.
The delayed response from the Newsom administration raises important questions about accountability in state healthcare programs and the mechanisms needed to prevent similar failures in the future. While the eventual moratorium on new hospice licenses and the formation of a multi-agency task force represent steps in the right direction, these actions came years after the fraud patterns were established and after substantial financial damage had already occurred.
Moving forward, California and other states should consider implementing more rigorous licensing standards, enhanced monitoring of provider patterns, and stronger enforcement mechanisms to prevent similar crises from developing. The California hospice fraud case serves as a cautionary tale about the consequences of regulatory negligence in healthcare programs that serve vulnerable populations and rely on public funding.
It amazes me because when regulation should be in place, Democrats will have nothing to do with it – they would rather regulate when it ought not be, regulating against innovation, production and entrepreneurial energy. Why? Because they are parasites. They would rather justify fraud and corruption because they believe it is a good thing to take taxpayer money and funds from the evil rich to fund their socialist utopian dreams.
— Political Pistachio Conservative News and Commentary
