Changes of Ownership: 60-Month Rule for New California Hospices?
California enacted a slew of hospice reforms in 2021, including a minimum one-year hospice license moratorium. However, 2022 has brought more changes. Assembly Bill 2673, which was initially introduced in early 2022 but approved by the governor on September 29, 2022, not only extends the licensing moratorium, it also affects changes of ownership. Major provisions include the following:
- Regarding the moratorium, the licensing authority must adopt emergency regulations to implement recommendations made in a California State Auditor report by January 1, 2024. The moratorium will remain in place until the authority adopts the regulations.
- A prohibition on the licensing authority from approving a change of ownership of a licensed hospice agency within five years of the date a license was initially issued. The new statute states, “Only the person, political subdivision of the state, or other governmental agency issued a license for the purposes of operating a hospice agency may use that license during the five-year period.”
- Exceptions may be made in “extenuating circumstances” if the hospice agency demonstrates and provides evidence to the department of either (1) the need to ensure continuity of care for existing patients of the hospice agency; or (2) both a financial hardship and an unmet need of hospice services in the geographic area the hospice agency would serve.
- Expanding the licensing authority’s application requirements, requiring an applicant who has not previously qualified for a hospice agency license to, as a condition of licensure, demonstrate and provide evidence of an unmet need of hospice services in the geographic region the hospice would serve, except under specified circumstances. Applicants must also provide certain information for each individual in various personnel categories.
- The new law adds to the reasons for denial, suspension, or revocation of a license to include improperly certifying a patient as eligible for hospice care, and “demonstrating a pattern and practice of violations of state or federal standards during the last 3 years of a hospice agency owned, operated, or managed by the applicant or licensee.”
- The licensing authority must conduct annual surveys of 5% of initial hospice agency licenses approved by accrediting organizations during the previous calendar year.
- The authority must make a preliminary review and an onsite investigation within 10 business days after receiving a compliant.
The new law will be effective as of January 1, 2023. As with last year’s changes, this new law makes significant changes to the state’s regulation of hospice providers and perhaps represents a continued shift to greater regulation of hospices throughout the country.
For more information, please contact AGG Healthcare attorneys Hedy Rubinger or Alex Foster.
The Arnall Golden Gregory CHOW team leads all regulatory aspects of healthcare transactions for investors, operators, managers, capital partners, and developers of every size in all 50 states. The team streamlines the regulatory process so that clients close their transactions on or ahead of schedule. Whether obtaining licensure and Medicare/Medicaid approvals, structuring transactions to expedite closings, anticipating issues to minimize cash flow disruption, negotiating regulatory terms in deal documents, creatively resolving diligence issues, or advising on CHOW guidelines and compliance, the team provides extensive experience and practical solutions. To date, the CHOW team has served as primary regulatory counsel in transactions valued at more than $35 billion.
- Hedy Silver Rubinger
- Alexander B. Foster