Five arrested in alleged $267M hospice fraud scheme that exploited California's Medi-Cal system

Five people have been arrested as part of an alleged multi-million dollar hospice fraud scheme in California, officials said Thursday.

California Attorney General Rob Bonta said the ring defrauded the state of more than $267 million through fraudulent billing to Medi-Cal, the state-administered Medicaid program. In total, 21 people have been charged.

The arrests were part of a state investigation dubbed “Operation Skip Trace,” which targeted locations in Southern California.

“This criminal scheme, this criminal operation, was no accident,” Bonta told reporters at a news conference to announce the arrests. “It wasn’t a case of billing errors, cutting corners, or up-charging care. This was a brazen, calculated criminal scheme that exploited the Medi-Cal system, stole from the State of California and Medicaid, and prevented services and care from going to sick individuals who actually need it.”

The probe began with a tip from the state Department of Health Care Services alleging hospice fraud at 14 companies. Bonta’s office investigated the companies and eight people suspected of money laundering.

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Investigators found that those involved purchased personal identifying information for people living outside of California on the dark web, then enrolled them in Covered California by posing as California residents.

“Straw owners” then bought a number of hospice companies and began billing Medi-Cal for services never provided to those stolen identities. The suspects used fake records, nonexistent offices, and fraudulent diagnoses to justify these claims, Bonta said.

“Meanwhile, the so-called patients were healthy, out-of-state, and completely unaware that they had been enrolled in hospice care,” he said.

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California Health and Human Services Secretary Kim Johnson said the DHCS halted payments and suspended all fraudulent hospice providers. “There is a moratorium currently in place through January 2027 for new licensed providers,” Johnson noted.

“Once the money was paid out, it was funneled through a complex web of over 130 shell companies and hidden across bank accounts, payment apps, and cryptocurrency to evade detection,” Bonta added. “The money was laundered.”

No actual medical services were provided, Bonta noted. He said all 21 suspects are accounted for through arrest, active warrants, or notices to appear before a judge. While announcing the suspected fraud, Bonta also criticized the Trump administration amid its claims of rampant fraud in California.

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“There are those in this federal administration who can only see things through a political lens and want to politically weaponize [this],” he said. “And they love to go after the fourth-largest economy in the world, the greatest state in the nation, the great state of California.”

California has been at the center of fraud concerns in recent weeks and has been called out by the federal anti-fraud task force led by JD Vance. Last week, eight people were arrested as part of a federal sweep tied to an alleged $60 million fraudulent Medicare billing scheme, Fox 11 Los Angeles reported.