Attorney General Bonta Conducts First-Ever Review of Proposed Hospice Affiliations, Conditionally Approves Transactions to Ensure Continued Access to Hospice Services

OAKLAND — California Attorney General Rob Bonta today announced conditionally approving the affiliations of Chapters Health System, Inc., a Florida not-for-profit hospice provider, with two nonprofit hospice providers in California. Chapters Health System, Inc. is seeking to expand its current operations, which are largely based on the East Coast, through the creation of “Chapters West Region,” a nonprofit hospice network covering California, Nevada, and Oregon. Specifically, in California, Chapters Health System, Inc. proposed affiliations with East Bay Integrated Care, Inc. (doing business as Hospice East Bay) and Hospice of Santa Cruz County. Both Hospice East Bay and Hospice of Santa Cruz County are longstanding providers of hospice and palliative care in their respective communities. Under California law, any transaction involving the sale, or transfer of control and governance of a nonprofit health facility, must secure the approval of the Attorney General’s Office. Today’s conditional approval represents the first-ever review involving nonprofit hospice providers by the Attorney General’s Office; the overwhelming majority of hospice providers are for-profit entities.  

“The hospice industry has increasingly attracted scrutiny, in part because of the potential for fraud and abuse. Earlier this month, I launched a new initiative aimed at addressing that very problem, and now, I am announcing that my office is, for the first time, conditionally approving transactions involving nonprofit hospice care providers,” said Attorney General Bonta. “The conditions we have developed are the result of a thorough review and serve the public interest by ensuring continued access to services for terminally ill patients and their loved ones. At the California Department of Justice, we remain committed to prioritizing oversight of the hospice industry.” 

For over 40 years, Hospice East Bay has served the counties of Contra Costa, Alameda, and Solano. Similarly, for over 40 years, Hospice of Santa Cruz County has served the counties of Santa Cruz and Monterrey. Under the two proposed affiliation agreements, Chapters Health System, Inc. would become the sole corporate member of Hospice East Bay and Hospice of Santa Cruz County. No sale or transfer of assets are contemplated, and both Hospice East Bay and Hospice of Santa Cruz County will retain separate governing bodies, nonprofit status, and irrevocable use of their assets, revenues, fundraising, gifts, and bequests.

After conducting a review of the proposed affiliations, Attorney General Bonta consented to the affiliations subject to numerous conditions. The conditions, each of which would be in place for five years, would facilitate the continued operation of Hospice East Bay and Hospice of Santa Cruz County. Highlights of the conditions include requiring the parties to: 

• Ensure that Hospice East Bay and Hospice of Santa Cruz County continue their nonprofit legacies in providing hospice and palliative care and remain continuously licensed as hospices, as well as continuously certified by The Centers for Medicare and Medicaid Services (CMS). 
• Offer employment to staff in good standing and honor existing employment agreements, as well as provide for appropriate staffing levels required for hospice licensure and certification. 
• Provide timely and effective patient triage and referral systems to prevent delays in patient care. 
• Create and maintain quality advisory committees at both Hospice East Bay and Hospice of Santa Cruz County to provide recommendations for quality of life and care of patients. The parties will provide an annual summary of those recommendations to the Attorney General.
• Use commercially reasonable efforts to continue to maintain specialty services at Hospice East Bay that are not otherwise covered by the traditional Medicare hospice benefit, including veteran’s programs, children’s grief programs, and music therapy. 
• Annually report on compliance with the conditions, provide information reasonably necessary for the Attorney General to monitor compliance, and consent to all conditions upon closings of the affiliations. 
• Reserve the Attorney General’s rights to enforce conditions and recover attorneys’ fees. 

The California Department of Justice’s Healthcare Rights and Access Section (HRA) works proactively to increase and protect the affordability, accessibility, and quality of healthcare in California. HRA’s attorneys monitor and contribute to various areas of the Attorney General’s healthcare work, including nonprofit healthcare transactions; consumer rights; anticompetitive consolidation and conduct in the healthcare market; anticompetitive drug pricing; privacy issues; civil rights, such as reproductive rights and LGBTQ healthcare-related rights; and public health work on tobacco, e-cigarettes, and other products.   

A copy of the conditional approval letter is available here.