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Matting and hair loss can be a sign of several different things in older kitties like Lily. The most common problem is fleas...you may see something like pepper on her skin which is flea excrement. If she is grooming excessively, itchy, and if her hair feels stubbly, then fleas are very likely. If the hair is falling out in patches, or if she is pulling her hair out, I would be suspicious that she may be painful, as older kitties can get sore from arthritis. Either way, you may want to have her thoroughly examined by your vet to ensure nothing more serious is going on.