A quiet change in California law in 2018 unleashed a deluge of new hospices and spurred millions of dollars in Medicare fraud that state and federal authorities are still trying to unwind.
Hospices shared addresses with burrito stands, car repair shops and vacant lots. They piled into nondescript office buildings offering cheap rent, month-to-month leases and little scrutiny. Hundreds appeared in Van Nuys, Glendale, Burbank and North Hollywood at rates far exceeding the need in those communities.
Within a few years, Los Angeles County had more hospices than a dozen other states combined.
It all started with three paragraphs added, at the request of the California Department of Public Health, to the end of an omnibus bill in 2018. CDPH had a backlog of 72 applications for hospice licenses at the time and wanted legislators to provide an alternative to a major bottleneck: its own inspectors.
Under SB 1495, hospices could choose to pay a third-party accrediting organization for the inspection needed for a license, instead of waiting weeks or months for the next available state employee.
Critics argue the change, combined with California’s already lax oversight, lifted a floodgate and gave control of one of the earliest means of detecting fraud — actually being on site — to organizations with a financial incentive to sign off on as many hospices as possible.
One described it as “the fox guarding the henhouse.”
‘They were overwhelmed’
Before, the state’s limited capacity kept new hospices low. CDPH received 115 applications for hospice licenses in 2018. By 2020, that jumped to 1,104, records showed.
Accrediting organizations, already performing inspections for the federal Medicare program, had the resources to move quickly. Shifting the workload also freed up funding and time for the state to focus on more serious complaint investigations.
“They were overwhelmed,” said Sheila Clark, the CEO and president of the California Hospice and Palliative Care Association, in an interview. “They saw all of these applications, all of this coming in, and they should have raised the red flag.
“They didn’t,” she said. “They opened the door.”
Unlike a restaurant, which must undergo fire, building and health inspections, the vast majority of hospices in California could suddenly obtain a license, and even approval to bill Medicare, without a public employee stepping foot on the property.
State inspectors handled only 12 licensure inspections in 2020, down from 138 in 2016, records showed.
Today, about 80% of all licensed hospices in California went through an accrediting organization. Nearly 70% used one to obtain the right to bill Medicare on the federal side as well.
It is rare for either CDPH or the federal Centers for Medicare and Medicaid Services (CMS) to deny a hospice recommended by an accreditor, according to interviews. Under SB 1495, CDPH must grant a license to any accredited hospice that meets the necessary conditions.
‘They created their own problem’
The largest of the three federally approved hospice accreditors, the Accreditation Commission for Health Care (ACHC), doesn’t believe AOs are to blame, however, and argues the state needs to “own responsibility for licensure issues.”
CDPH reviews the application and address before the accrediting organization goes out to perform the verification, ACHC said.
“They’ve created their own problem,” said Jose Domingos, the CEO of ACHC in an interview.
ACHC accredited nearly 1,000, or about 70%, of the hospices in Los Angeles County, including 170 in Van Nuys, from 2018 to 2025, according to the federal “Provider of Services” database. ACHC’s close relationship with consultants helped the nonprofit expand in California, while others slowed down during COVID, Domingos said.
A state audit previously found that while L.A. County experienced a 1,589% increase in hospices from 2010 to 2021, the population in need of such care went up only 40%.
Katy Barnett, director of home care and hospice operations and policy at LeadingAge, a nonprofit representing more than 5,300 providers of aging services, called the numbers “very concerning.”
“It definitely dampens people’s faith in accrediting organizations,” she said.
Still, the providers represented by LeadingAge prefer accreditation to working with state agencies as they get better support, she said.
“The accreditation organizations definitely played a role in the growth of these hospices (in California), but at the same time, a lot of our members are accredited … that accreditation means something to the hospice community,” she said.
Soaring growth
ACHC grew from the smallest hospice accreditor to the largest in the nation as a result of its expansion in California. Tax documents show its annual revenues more than doubled to $44 million from 2018 to 2022. Its competitors, Joint Commission and Community Health Accreditation Partners, or CHAP, saw increases of 22% and 12%, respectively, in the same time frame.
Two-thirds of the California hospices terminated by CMS in the last eight years were tied to ACHC, records showed. Joint Commission and CHAP accounted for 25% and 4% of the terminations, respectively. Both declined to comment.
ACHC credits its own audits, analysis and follow-up with uncovering the illegitimate agencies and argued others may have fewer terminations due to “less effort to verify that their accredited agencies were legitimate after the initial survey,” said Angela FitzSimmons, a spokesperson for ACHC, in an email. The accreditor performed hundreds of focused surveys in recent years and now has its surveyors check up on hospices unannounced when nearby.
In interviews and emails, ACHC’s leadership stated every provider that received its seal of approval met the state and federal requirements at the time, even though ACHC felt some of those standards were not stringent enough.
“There are no concerns about the way we handled it,” Domingos said. “There are concerns about the rules that were in place that allowed organizations to do exactly what you’re witnessing.”
Red flags ignored
California’s regulations, until recently, didn’t prohibit many of the glaring red flags outlined in the state audit in 2022, such as medical directors or administrators working for dozens of hospices at the same time, or hospices clustered in the same building. That information could not be used to disqualify a hospice by itself, ACHC argued.
“We can’t deny somebody based on vibes, we deny somebody based on objective data,” Domingos said. “We don’t really have a choice to say you’re not going to get accredited by us because we felt something was off.”
One of ACHC’s competitors, however, disagrees and says it made exactly those kinds of calls.
In an open letter, Nathan DeGodt, the CEO of Community Health Accreditation Partners, and Teresa Harbour, the chief operating officer, stated that CHAP intentionally “did not accredit any hospice or home health organizations operating from the notorious Friar Street address highlighted in recent media coverage and congressional hearing.”
“Before any organization advances in our accreditation process, CHAP conducts address validation and ownership verification,” they wrote. “These steps are designed to surface red flags early, including multiple agencies operating from a single location, overlapping leadership, or staffing structures. When those reviews raised concerns related to applications at the Friar Street address, CHAP did not move forward.”
Ground zero for fraud
ACHC accredited at least 83 hospices and 25 home health care agencies at that building at 14545 Friar St. in Van Nuys, records showed. The state auditor first flagged the unusually high amount of agencies in the building in 2022 and it was recently dragged into the national spotlight again earlier this year.
There were reportedly more than 150 licensed hospice and home health agencies there in 2022, a number that “exceeds the structure’s apparent physical capacity,” the audit found.
Hospices in those offices billed at least $38 million to Medicare in 2023.
CBS News called it one of the most extreme cases of clustering in the state. More than 700 hospices in L.A. County had “multiple red flags for fraud,” CBS found.
The state audit in 2022 detailed a rapid increase in hospices in Los Angeles County with no correlation to need, excessive clustering of hospices in the same geographic area, and signs of improper care, including unusually long stays and high rates of discharges for patients who are supposed to be at the end of their life.
Auditors concluded the “highly questionable” growth was “likely driven by fraudulent providers.”
At least 22 hospices that opened in the Friar Street building were later terminated by Medicare, though that number is likely higher because the federal database only lists hospices by the most recent address.
Four hospices could not be located during a sweep by CDPH in April and now may lose their licenses. CDPH found only 19 licensed hospices remaining.
Deflects responsibility
ACHC itself now calls the same Friar Street building “problematic,” but its leadership says it does not bear responsibility and that it has reported any suspicious activity to the state. FitzSimmons accused CHAP of “playing Monday morning quarterback” in its recent letter.
“Association by location is not a valid reason to disqualify an agency from evaluation,” FitzSimmons wrote.
CHAP did not have the relationships in California to gain business like ACHC and is now trying to position itself as “taking the high road,” she argued.
While accreditors are required to forward findings from inspections, CDPH is mandated to audit only 5% of the reports annually.
The Southern California News Group began investigating hospices in the building after finding one group registered 22 in a year. Of those, 15 were incorporated on a single day, all using variations of the same suite number, despite prohibitions on hospices using the same office.
The landlord for the property claimed his leases did not permit subdivision, nor did suites have enough space for multiple hospices.
A man who registered most of those hospices told a reporter he flipped those businesses years ago, a practice that, surprisingly enough, was legal at the time.
No one at the state, CMS or at ACHC could answer how those specific hospices managed to get licenses.
ACHC handled the licensing inspections for 14 of the 15, according to a spokesperson. She declined to provide details about findings, but stated only three are currently accredited by ACHC and none remain on Friar Street. Others lost their accreditation for undisclosed reasons, she said.
Subsequent inspections by ACHC, published on the federal side, occurred within days of each other, records showed, but the reports made no mention of shared office space.
The building’s owner openly advertised “virtual offices” with physical mailing addresses for licensing purposes, with day passes available to use an office. Such a lease, however, would disqualify a hospice from obtaining a license, and a provider would need to intentionally deceive inspectors to disguise a day office, experts said.
Rent at the Friar Street building was inexpensive and month-to-month leases were common. New hospices would rent a room, get licensed and then move elsewhere, according to ACHC.
“Our verification is that they have a lease and they’re the only one in that location,” said Susan Mills, the senior program director for ACHC. “As long as the lease is valid, we don’t know that the other agency didn’t move.”
ACHC’s surveyors spotted irregularities during its visits. Suites in the building were not consistently or consecutively numbered. One noticed a different hospice in a location recently inspected.
ACHC reported it to CDPH and did not license that provider, Mills said.
Consultant targeted
In June, Domingos penned an article stating that its internal audit process in late 2022 identified “patient data irregularities associated with a consultant supporting new hospice agencies in California.”
ACHC ended up “invalidating all accreditation associated with this individual” as a result, he wrote.
A high percentage of those invalidated surveys were at the Friar Street address, according to FitzSimmons. She declined to elaborate on the specifics, but stated it led to a “100% audit of all consultant-associated surveys for the year.”
Last year, a federal grand jury indicted Jessa Zayas, 34, of Santa Clarita for health care fraud and aggravated identity theft for allegedly submitting at least $2.5 million in fraudulent billings to Medicare from June 2023 to May 2025 for more than 100 people who were not terminally ill. A doctor paid $84,000 by the hospice told investigators he had only qualified four of the 122 patients and believed his identity had been stolen for the rest.
One of the two hospices used in the scheme, Humane Love, was among the 15 hospices formed on Friar Street on June 18, 2020. The other, Healing Hands Hospice, opened in the same building a year earlier.
Both were accredited by ACHC, records showed.
Hospices provide crucial services and care to patients at the end of their lives, but hospice fraud can also be devastating for those improperly enrolled. A healthy person whose identity is stolen can lose their Medicare benefits and face roadblocks when seeking other treatments in the interim.
Congressional rep intervenes
A presentation by California Health Advocates and the California Hospice and Palliative Care Association to CMS officials in September 2024 raised concerns about several hospices accredited by ACHC, including one that allegedly submitted fraudulent billings that prevented a woman from receiving a new battery for her pacemaker.
It took four months of fighting and the intervention of U.S. Rep. Linda Sanchez’s office to terminate her hospice enrollment and restore her Medicare benefits, according to the presentation. The hospice in question was terminated by CMS in March 2024.
Sanchez is co-sponsor of the proposed Hospice CARE Act, which, among many hospice reforms, would require a comprehensive review of each accrediting organization’s performance and any potential conflicts of interest.
“We need stronger federal and state oversight of accrediting organizations to root out fraud without disrupting the care that legitimate hospices are providing for their patients,” Sanchez said in a statement. “But accrediting organizations are just one piece of the puzzle. We also need to stop fraudulent hospices from collecting Medicare payments when they are not providing care and make sure patients actually receive the services they deserve.”
California’s Legislature placed a moratorium on licenses for new hospices in 2022, but that did not prevent those that had obtained a license already from enrolling in Medicare after the fact. California hospices continued to do so, largely through accreditation, until this year.
In April, CMS reapproved ACHC as a national accreditation organization for hospices and granted it a six-year extension, the longest term possible. The federal agency announced this month that it had removed 1,076 hospices in California from Medicare since 2025 due to fraud.
Reforms rolled out
Both California and CMS rolled out long-awaited regulations in June that could turn the tide. In a statement, ACHC said it advocated for many of the regulations coming down the pipeline.
The new rules from CMS, unveiled after instituting its own moratorium on hospices, require AOs to adhere to more consistent standards for inspections, to better prevent conflicts of interest, and to stop intentionally, or inadvertently, tipping off healthcare providers ahead of “unannounced” inspections.
California’s emergency regulations, in the works for the past four years, limit ownership transfers, give CDPH the ability to conduct unannounced inspections at “any time” and require new hospices to prove there is a need for their services. Hospices can only have 12 patients per licensed nurse and nurses must be able to respond in person within two hours at any time of day, among other significant changes.
Medical directors can now only work for one hospice, unless in a rural area with limited options. At the Friar Street building, one medical director was tied to 44 hospices.
Assemblymember Jacqui Irwin, D-Thousand Oaks, authored a 2022 bill that put the initial safeguards in place and continued the moratorium until the state adopted new regulations.
California has revoked nearly 300 hospice licenses in the past two years, with another 300 under investigation, she said.
Irwin called the new regulations a “crucial milestone, giving the state stronger tools to oversee hospice providers and take enforcement actions against those that violate the law.”
Clark, of CHAPCA, applauded CDPH for finally delivering on its promises.
“They are doing something about it,” she said. “They’re not saying, ‘Oh it wasn’t my problem.’ They’re taking the bull by the horns and they’re working with stakeholders to get the job done, and they deserve that credit.”