BILL NUMBER: SB 1212 CHAPTERED 09/28/06 CHAPTER 529 FILED WITH SECRETARY OF STATE SEPTEMBER 28, 2006 APPROVED BY GOVERNOR SEPTEMBER 28, 2006 PASSED THE SENATE AUGUST 29, 2006 PASSED THE ASSEMBLY AUGUST 23, 2006 AMENDED IN ASSEMBLY AUGUST 10, 2006 AMENDED IN ASSEMBLY JUNE 29, 2006 AMENDED IN SENATE MAY 16, 2006 AMENDED IN SENATE MARCH 16, 2006 INTRODUCED BY Senator Torlakson (Coauthor: Senator Alquist) JANUARY 30, 2006 An act to amend Sections 1771.7, 1782, 1783.3, 1788, and 1790 of the Health and Safety Code, relating to continuing care. LEGISLATIVE COUNSEL'S DIGEST SB 1212, Torlakson Continuing care retirement communities: provider financial requirements. Existing law provides for the regulation by the State Department of Social Services of activities relating to continuing care contracts that govern care provided to an elderly resident in a continuing care retirement community for the duration of the resident' s life or a term in excess of one year. Existing law requires that a continuing care contract shall contain specified elements, including requirements for procedures and conditions under which a resident of a continuing care retirement community may be transferred. This bill would revise those elements. Existing law also requires that a continuing care contract shall contain a provision indicating whether a resident's rights under the contract include any proprietary interest in the assets of the provider or in the continuing care retirement community, or both. This bill would specify that any statement in a contract concerning an ownership interest shall appear in a large-sized font or print. Existing law requires an applicant for construction of a new continuing care retirement community, or for a construction project to add new units to an existing continuing care retirement community, before beginning construction, to obtain a written acknowledgment from the department that certain prerequisites have been met, including that the applicant has deposits equal to at least 20% of each depositor's applicable entrance fee placed into escrow for at least 50% of the number of residential living units to be constructed. Existing law requires an applicant seeking a release of escrowed funds to petition in writing to the department to certify, among other things, that at least 20% of the total of each applicable entrance fee has been received and placed in escrow for at least 60% of the total number of residential living units. This bill would reduce the percentages of each depositor's applicable entrance fee required to be placed into escrow by an applicant from 20% to 10%. Existing law requires each continuing care provider to submit an annual report of its financial condition, consisting of audited financial statements and required reserve calculations. This bill would also require that the report shall include the disclosure of any funds accumulated for identified projects or purposes and any funds maintained or designated for specific contingencies. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 1771.7 of the Health and Safety Code is amended to read: 1771.7. (a) No resident of a continuing care retirement community shall be deprived of any civil or legal right, benefit, or privilege guaranteed by law, by the California Constitution, or by the United States Constitution, solely by reason of status as a resident of a community. In addition, because of the discretely different character of residential living unit programs that are a part of continuing care retirement communities, this section shall augment Chapter 3.9 (commencing with Section 1599), Sections 72527 and 87572 of Title 22 of the California Code of Regulations, and other applicable state and federal law and regulations. (b) A prospective resident shall have the right to visit each of the different care levels and to inspect assisted living and skilled nursing home licensing reports including, but not limited to, the most recent inspection reports and findings of complaint investigations covering a period of no less than two years, prior to signing a continuing care contract. (c) All residents in residential living units shall have all of the following rights: (1) To live in an attractive, safe, and well maintained physical environment. (2) To live in an environment that enhances personal dignity, maintains independence, and encourages self-determination. (3) To participate in activities that meet individual physical, intellectual, social, and spiritual needs. (4) To expect effective channels of communication between residents and staff, and between residents and the administration or provider's governing body. (5) To receive a clear and complete written contract that establishes the mutual rights and obligations of the resident and the continuing care retirement community. (6) To manage his or her financial affairs. (7) To be assured that all donations, contributions, gifts, or purchases of provider-sponsored financial products shall be voluntary, and may not be a condition of acceptance or of ongoing eligibility for services. (8) To maintain and establish ties to the local community. (9) To organize and participate freely in the operation of independent resident organizations and associations. (d) A continuing care retirement community shall maintain an environment that enhances the residents' self-determination and independence. The provider shall do both of the following: (1) Encourage the formation of a resident association by interested residents who may elect a governing body. The provider shall provide space and post notices for meetings, and provide assistance in attending meetings for those residents who request it. In order to promote a free exchange of ideas, at least part of each meeting shall be conducted without the presence of any continuing care retirement community personnel. The association may, among other things, make recommendations to management regarding resident issues that impact the residents' quality of life, quality of care, exercise of rights, safety and quality of the physical environment, concerns about the contract, fiscal matters, or other issues of concern to residents. The management shall respond, in writing, to a written request or concern of the resident association within 20 working days of receiving the written request or concern. Meetings shall be open to all residents to attend as well as to present issues. Executive sessions of the governing body shall be attended only by the governing body. (2) Establish policies and procedures that promote the sharing of information, dialogue between residents and management, and access to the provider's governing body. The provider shall biennially conduct a resident satisfaction survey that shall be made available to the resident association or its governing body, or, if neither exists, to a committee of residents at least 14 days prior to the next semiannual meeting of residents and the governing board of the provider required by subdivision (c) of Section 1771.8. A copy of the survey shall be posted in a conspicuous location at each facility. (e) In addition to any statutory or regulatory bill of rights required to be provided to residents of residential care facilities for the elderly or skilled nursing facilities, the provider shall provide a copy of the bill of rights prescribed by this section to each resident at the time or before the resident signs a continuing care contract, and at any time when the resident is proposed to be moved to a different level of care. (f) Each continuing care retirement community shall prominently post in areas accessible to the residents and visitors a notice that a copy of rights applicable to residents pursuant to this section and any governing regulation issued by the Continuing Care Contracts Branch of the State Department of Social Services is available upon request from the provider. The notice shall also state that the residents have a right to file a complaint with the Continuing Care Contracts Branch for any violation of those rights and shall contain information explaining how a complaint may be filed, including the telephone number and address of the Continuing Care Contracts Branch. (g) The resident has the right to freely exercise all rights pursuant to this section, in addition to political rights, without retaliation by the provider. (h) The department may, upon receiving a complaint of a violation of this section, request a copy of the policies and procedures along with documentation on the conduct and findings of any self-evaluations and consult with the Continuing Care Advisory Committee for determination of compliance. (i) Failure to comply with this section shall be grounds for the imposition of conditions on, suspension of, or revocation of the provisional certificate of authority or certificate of authority pursuant to Section 1793.21. (j) Failure to comply with this section constitutes a violation of residents' rights. Pursuant to Section 1569.49 of the Health and Safety Code, the department shall impose and collect a civil penalty of not more than one hundred fifty dollars ($150) per violation upon a continuing care retirement community that violates a right guaranteed by this section. SEC. 2. Section 1782 of the Health and Safety Code is amended to read: 1782. (a) An applicant shall not begin construction on any phase of a continuing care retirement community without first obtaining a written acknowledgment from the department that all of the following prerequisites have been met: (1) A completed application has been submitted to the department. (2) A permit to accept deposits has been issued to the applicant or, in the case of continuing care retirement community renovation projects, the department has issued a written approval of the applicant's application. (3) For new continuing care retirement communities, or construction projects adding new units to an existing continuing care retirement community, deposits equal to at least 10 percent of each depositor's applicable entrance fee have been placed into escrow for each phase for at least 50 percent of the number of residential living units to be constructed. (b) Applicants shall notify depositors in writing when construction is commenced. (c) For purposes of this chapter only, construction shall not include site preparation, demolition, or the construction of model units. SEC. 3. Section 1783.3 of the Health and Safety Code is amended to read: 1783.3. (a) In order to seek a release of escrowed funds, the applicant shall petition in writing to the department and certify to each of the following: (1) The construction of the proposed continuing care retirement community or phase is at least 50 percent completed. (2) At least 10 percent of the total of each applicable entrance fee has been received and placed in escrow for at least 60 percent of the total number of residential living units. Any unit for which a refund is pending may not be counted toward that 60-percent requirement. (3) Deposits made with cash equivalents have been either converted into, or substituted with, cash or held for transfer to the provider. A cash equivalent deposit may be held for transfer to the provider, if all of the following conditions exist: (A) Conversion of the cash equivalent instrument would result in a penalty or other substantial detriment to the depositor. (B) The provider and the depositor have a written agreement stating that the cash equivalent will be transferred to the provider, without conversion into cash, when the deposit escrow is released to the provider under this section. (C) The depositor is credited the amount equal to the value of the cash equivalent. (4) The applicant's average performance over any six-month period substantially equals or exceeds its financial and marketing projections approved by the department, for that period. (5) The applicant has received a commitment for any permanent mortgage loan or other long-term financing. (b) The department shall instruct the escrow agent to release to the applicant all deposits in the deposit escrow account when all of the following requirements have been met: (1) The department has confirmed the information provided by the applicant pursuant to subdivision (a). (2) The department, in consultation with the Continuing Care Advisory Committee, has determined that there has been substantial compliance with projected annual financial statements that served as a basis for issuance of the permit to accept deposits. (3) The applicant has complied with all applicable licensing requirements in a timely manner. (4) The applicant has obtained a commitment for any permanent mortgage loan or other long-term financing that is satisfactory to the department. (5) The applicant has complied with any additional reasonable requirements for release of funds placed in the deposit escrow accounts, established by the department under Section 1785. (c) The escrow agent shall release the funds held in escrow to the applicant only when the department has instructed it to do so in writing. (d) When an application describes different phases of construction that will be completed and commence operating at different times, the department may apply the 50 percent construction completion requirement to any one or group of phases requested by the applicant, provided the phase or group of phases is shown in the applicant's projections to be economically viable. SEC. 4. Section 1788 of the Health and Safety Code is amended to read: 1788. (a) A continuing care contract shall contain all of the following: (1) The legal name and address of each provider. (2) The name and address of the continuing care retirement community. (3) The resident's name and the identity of the unit the resident will occupy. (4) If there is a transferor other than the resident, the transferor shall be a party to the contract and the transferor's name and address shall be specified. (5) If the provider has used the name of any charitable or religious or nonprofit organization in its title before January 1, 1979, and continues to use that name, and that organization is not responsible for the financial and contractual obligations of the provider or the obligations specified in the continuing care contract, the provider shall include in every continuing care contract a conspicuous statement which clearly informs the resident that the organization is not financially responsible. (6) The date the continuing care contract is signed by the resident and, where applicable, any other transferor. (7) The duration of the continuing care contract. (8) A list of the services that will be made available to the resident as required to provide the appropriate level of care. The list of services shall include the services required as a condition for licensure as a residential care facility for the elderly, including all of the following: (A) Regular observation of the resident's health status to ensure that his or her dietary needs, social needs, and needs for special services are satisfied. (B) Safe and healthful living accommodations, including housekeeping services and utilities. (C) Maintenance of house rules for the protection of residents. (D) A planned activities program, which includes social and recreational activities appropriate to the interests and capabilities of the resident. (E) Three balanced, nutritious meals and snacks made available daily, including special diets prescribed by a physician as a medical necessity. (F) Assisted living services. (G) Assistance with taking medications. (H) Central storing and distribution of medications. (I) Arrangements to meet health needs, including arranging transportation. (9) An itemization of the services that are included in the monthly fee and the services that are available at an extra charge. The provider shall attach a current fee schedule to the continuing care contract. (10) The procedures and conditions under which a resident may be voluntarily and involuntarily transferred from a designated living unit. The transfer procedures, at a minimum, shall include provisions addressing all of the following circumstances under which a transfer may be authorized: (A) A continuing care retirement community may transfer a resident under the following conditions, taking into account the appropriateness and necessity of the transfer and the goal of promoting resident independence: (i) The resident is nonambulatory. The definition of "nonambulatory," as provided in Section 13131, shall either be stated in full in the continuing care contract or be cited. If Section 13131 is cited, a copy of the statute shall be made available to the resident, either as an attachment to the continuing care contract or by specifying that it will be provided upon request. If a nonambulatory resident occupies a room that has a fire clearance for nonambulatory residence, transfer shall not be necessary. (ii) The resident develops a physical or mental condition that endangers the health, safety, or well-being of the resident or another person. (iii) The resident's condition or needs require the resident's transfer to an assisted living care unit or skilled nursing facility, because the level of care required by the resident exceeds that which may be lawfully provided in the living unit. (iv) The resident's condition or needs require the resident's transfer to a nursing facility, hospital, or other facility, and the provider has no facilities available to provide that level of care. (B) Before the continuing care retirement community transfers a resident under any of the conditions set forth in subparagraph (A), the community shall satisfy all of the following requirements: (i) Involve the resident and the resident's responsible person, as defined in paragraph (6) of subdivision (r) of Section 87101 of Title 22 of the California Code of Regulations, and upon the resident' s or responsible person's request, family members, or the resident's physician or other appropriate health professional, in the assessment process that forms the basis for the level of care transfer decision by the provider. The provider shall offer an explanation of the assessment process. If an assessment tool or tools, including scoring and evaluating criteria, are used in the determination of the appropriateness of the transfer, the provider shall make copies of the completed assessment available upon the request of the resident or the resident's responsible person. (ii) Prior to sending a formal notification of transfer, the provider shall conduct a care conference with the resident and the resident's responsible person, and upon the resident's or responsible person's request, family members, and the resident's health care professionals, to explain the reasons for transfer. (iii) Notify the resident and the resident's responsible person the reasons for the transfer in writing. (iv) Notwithstanding any other provision of this subparagraph, if the resident does not have impairment of cognitive abilities, the resident may request that his or her responsible person not be involved in the transfer process. (v) The notice of transfer shall be made at least 30 days before the transfer is expected to occur, except when the health or safety of the resident or other residents is in danger, or the transfer is required by the resident's urgent medical needs. Under those circumstances, the written notice shall be made as soon as practicable before the transfer. (vi) The written notice shall contain the reasons for the transfer, the effective date, the designated level of care or location to which the resident will be transferred, a statement of the resident's right to a review of the transfer decision at a care conference, as provided for in subparagraph (C), and for disputed transfer decisions, the right to review by the Continuing Care Contracts Branch of the State Department of Social Services, as provided for in subparagraph (D). The notice shall also contain the name, address, and telephone number of the department's Continuing Care Contracts Branch. (vii) The continuing care retirement community shall provide sufficient preparation and orientation to the resident to ensure a safe and orderly transfer and to minimize trauma. (C) The resident has the right to review the transfer decision at a subsequent care conference that shall include the resident, the resident's responsible person, and upon the resident's or responsible person's request, family members, the resident's physician or other appropriate health care professional, and members of the provider's interdisciplinary team. The local ombudsperson may also be included in the care conference, upon the request of the resident, the resident's responsible person, or the provider. (D) For disputed transfer decisions, the resident or the resident' s responsible person has the right to a prompt and timely review of the transfer process by the Continuing Care Contracts Branch of the State Department of Social Services. (E) The decision of the department's Continuing Care Contracts Branch shall be in writing and shall determine whether the provider failed to comply with the transfer process pursuant to subparagraphs (A) to (C), inclusive. Pending the decision of the Continuing Care Contracts Branch, the provider shall specify any additional care the provider believes is necessary in order for the resident to remain in his or her unit. The resident may be required to pay for the extra care, as provided in the contract. (F) Transfer of a second resident when a shared accommodation arrangement is terminated. (11) Provisions describing any changes in the resident's monthly fee and any changes in the entrance fee refund payable to the resident that will occur if the resident transfers from any unit. (12) The provider's continuing obligations, if any, in the event a resident is transferred from the continuing care retirement community to another facility. (13) The provider's obligations, if any, to resume care upon the resident's return after a transfer from the continuing care retirement community. (14) The provider's obligations to provide services to the resident while the resident is absent from the continuing care retirement community. (15) The conditions under which the resident must permanently release his or her living unit. (16) If real or personal properties are transferred in lieu of cash, a statement specifying each item's value at the time of transfer, and how the value was ascertained. (A) An itemized receipt which includes the information described above is acceptable if incorporated as a part of the continuing care contract. (B) When real property is or will be transferred, the continuing care contract shall include a statement that the deed or other instrument of conveyance shall specify that the real property is conveyed pursuant to a continuing care contract and may be subject to rescission by the transferor within 90 days from the date that the resident first occupies the residential unit. (C) The failure to comply with paragraph (16) shall not affect the validity of title to real property transferred pursuant to this chapter. (17) The amount of the entrance fee. (18) In the event two parties have jointly paid the entrance fee or other payment which allows them to occupy the unit, the continuing care contract shall describe how any refund of entrance fees is allocated. (19) The amount of any processing fee. (20) The amount of any monthly care fee. (21) For continuing care contracts that require a monthly care fee or other periodic payment, the continuing care contract shall include the following: (A) A statement that the occupancy and use of the accommodations by the resident is contingent upon the regular payment of the fee. (B) The regular rate of payment agreed upon (per day, week, or month). (C) A provision specifying whether payment will be made in advance or after services have been provided. (D) A provision specifying the provider will adjust monthly care fees for the resident's support, maintenance, board, or lodging, when a resident requires medical attention while away from the continuing care retirement community. (E) A provision specifying whether a credit or allowance will be given to a resident who is absent from the continuing care retirement community or from meals. This provision shall also state, when applicable, that the credit may be permitted at the discretion or by special permission of the provider. (F) A statement of billing practices, procedures, and timelines. A provider shall allow a minimum of 14 days between the date a bill is sent and the date payment is due. A charge for a late payment may only be assessed if the amount and any condition for the penalty is stated on the bill. (22) All continuing care contracts that include monthly care fees shall address changes in monthly care fees by including either of the following provisions: (A) For prepaid continuing care contracts, which include monthly care fees, one of the following methods: (i) Fees shall not be subject to change during the lifetime of the agreement. (ii) Fees shall not be increased by more than a specified number of dollars in any one year and not more than a specified number of dollars during the lifetime of the agreement. (iii) Fees shall not be increased in excess of a specified percentage over the preceding year and not more than a specified percentage during the lifetime of the agreement. (B) For monthly fee continuing care contracts, except prepaid contracts, changes in monthly care fees shall be based on projected costs, prior year per capita costs, and economic indicators. (23) A provision requiring that the provider give written notice to the resident at least 30 days in advance of any change in the resident's monthly care fees or in the price or scope of any component of care or other services. (24) A provision indicating whether the resident's rights under the continuing care contract include any proprietary interests in the assets of the provider or in the continuing care retirement community, or both. Any statement in a contract concerning an ownership interest shall appear in a large-sized font or print. (25) If the continuing care retirement community property is encumbered by a security interest that is senior to any claims the residents may have to enforce continuing care contracts, a provision shall advise the residents that any claims they may have under the continuing care contract are subordinate to the rights of the secured lender. For equity projects, the continuing care contract shall specify the type and extent of the equity interest and whether any entity holds a security interest. (26) Notice that the living units are part of a continuing care retirement community that is licensed as a residential care facility for the elderly and, as a result, any duly authorized agent of the department may, upon proper identification and upon stating the purpose of his or her visit, enter and inspect the entire premises at any time, without advance notice. (27) A conspicuous statement, in at least 10-point boldface type in immediate proximity to the space reserved for the signatures of the resident and, if applicable, the transferor, that provides as follows: "You, the resident or transferor, may cancel the transaction without cause at any time within 90 days from the date you first occupy your living unit. See the attached notice of cancellation form for an explanation of this right." (28) Notice that during the cancellation period, the continuing care contract may be canceled upon 30 days' written notice by the provider without cause, or that the provider waives this right. (29) The terms and conditions under which the continuing care contract may be terminated after the cancellation period by either party, including any health or financial conditions. (30) A statement that, after the cancellation period, a provider may unilaterally terminate the continuing care contract only if the provider has good and sufficient cause. (A) Any continuing care contract containing a clause that provides for a continuing care contract to be terminated for "just cause," "good cause," or other similar provision, shall also include a provision that none of the following activities by the resident, or on behalf of the resident, constitutes "just cause," "good cause," or otherwise activates the termination provision: (i) Filing or lodging a formal complaint with the department or other appropriate authority. (ii) Participation in an organization or affiliation of residents, or other similar lawful activity. (B) The provision required by this paragraph shall also state that the provider shall not discriminate or retaliate in any manner against any resident of a continuing care retirement community for contacting the department, or any other state, county, or city agency, or any elected or appointed government official to file a complaint or for any other reason, or for participation in a residents' organization or association. (C) Nothing in this paragraph diminishes the provider's ability to terminate the continuing care contract for good and sufficient cause. (31) A statement that at least 90 days' written notice to the resident is required for a unilateral termination of the continuing care contract by the provider. (32) A statement concerning the length of notice that a resident is required to give the provider to voluntarily terminate the continuing care contract after the cancellation period. (33) The policy or terms for refunding any portion of the entrance fee, in the event of cancellation, termination, or death. Every continuing care contract that provides for a refund of all or a part of the entrance fee shall also do all of the following: (A) Specify the amount, if any, the resident has paid or will pay for upgrades, special features, or modifications to the resident's unit. (B) State that if the continuing care contract is canceled or terminated by the provider, the provider shall do both of the following: (i) Amortize the specified amount at the same rate as the resident' s entrance fee. (ii) Refund the unamortized balance to the resident at the same time the provider pays the resident's entrance fee refund. (34) The following notice at the bottom of the signatory page: "NOTICE" (date) This is a continuing care contract as defined by paragraph (8) of subdivision (c), or subdivision (l) of Section 1771 of the California Health and Safety Code. This continuing care contract form has been approved by the State Department of Social Services as required by subdivision (b) of Section 1787 of the California Health and Safety Code. The basis for this approval was a determination that (provider name) has submitted a contract that complies with the minimum statutory requirements applicable to continuing care contracts. The department does not approve or disapprove any of the financial or health care coverage provisions in this contract. Approval by the department is NOT a guaranty of performance or an endorsement of any continuing care contract provisions. Prospective transferors and residents are strongly encouraged to carefully consider the benefits and risks of this continuing care contract and to seek financial and legal advice before signing. (35) The provider may not attempt to absolve itself in the continuing care contract from liability for its negligence by any statement to that effect, and shall include the following statement in the contract: "Nothing in this continuing care contract limits either the provider's obligation to provide adequate care and supervision for the resident or any liability on the part of the provider which may result from the provider's failure to provide this care and supervision." (b) A life care contract shall also provide that: (1) All levels of care, including acute care and physicians' and surgeons' services will be provided to a resident. (2) Care will be provided for the duration of the resident's life unless the life care contract is canceled or terminated by the provider during the cancellation period or after the cancellation period for good cause. (3) A comprehensive continuum of care will be provided to the resident, including skilled nursing, in a facility under the ownership and supervision of the provider on, or adjacent to, the continuing care retirement community premises. (4) Monthly care fees will not be changed based on the resident's level of care or service. (5) A resident who becomes financially unable to pay his or her monthly care fees shall be subsidized provided the resident's financial need does not arise from action by the resident to divest the resident of his or her assets. (c) Continuing care contracts may include provisions that do any of the following: (1) Subsidize a resident who becomes financially unable to pay for his or her monthly care fees at some future date. If a continuing care contract provides for subsidizing a resident, it may also provide for any of the following: (A) The resident shall apply for any public assistance or other aid for which he or she is eligible and that the provider may apply for assistance on behalf of the resident. (B) The provider's decision shall be final and conclusive regarding any adjustments to be made or any action to be taken regarding any charitable consideration extended to any of its residents. (C) The provider is entitled to payment for the actual costs of care out of any property acquired by the resident subsequent to any adjustment extended to the resident under paragraph (1), or from any other property of the resident which the resident failed to disclose. (D) The provider may pay the monthly premium of the resident's health insurance coverage under Medicare to ensure that those payments will be made. (E) The provider may receive an assignment from the resident of the right to apply for and to receive the benefits, for and on behalf of the resident. (F) The provider is not responsible for the costs of furnishing the resident with any services, supplies, and medication, when reimbursement is reasonably available from any governmental agency, or any private insurance. (G) Any refund due to the resident at the termination of the continuing care contract may be offset by any prior subsidy to the resident by the provider. (2) Limit responsibility for costs associated with the treatment or medication of an ailment or illness existing prior to the date of admission. In these cases, the medical or surgical exceptions, as disclosed by the medical entrance examination, shall be listed in the continuing care contract or in a medical report attached to and made a part of the continuing care contract. (3) Identify legal remedies which may be available to the provider if the resident makes any material misrepresentation or omission pertaining to the resident's assets or health. (4) Restrict transfer or assignments of the resident's rights and privileges under a continuing care contract due to the personal nature of the continuing care contract. (5) Protect the provider's ability to waive a resident's breach of the terms or provisions of the continuing care contract in specific instances without relinquishing its right to insist upon full compliance by the resident with all terms or provisions in the contract. (6) Provide that the resident shall reimburse the provider for any uninsured loss or damage to the resident's unit, beyond normal wear and tear, resulting from the resident's carelessness or negligence. (7) Provide that the resident agrees to observe the off-limit areas of the continuing care retirement community designated by the provider for safety reasons. The provider may not include any provision in a continuing care contract that absolves the provider from liability for its negligence. (8) Provide for the subrogation to the provider of the resident's rights in the case of injury to a resident caused by the acts or omissions of a third party, or for the assignment of the resident's recovery or benefits in this case to the provider, to the extent of the value of the goods and services furnished by the provider to or on behalf of the resident as a result of the injury. (9) Provide for a lien on any judgment, settlement, or recovery for any additional expense incurred by the provider in caring for the resident as a result of injury. (10) Require the resident's cooperation and assistance in the diligent prosecution of any claim or action against any third party. (11) Provide for the appointment of a conservator or guardian by a court with jurisdiction in the event a resident becomes unable to handle his or her personal or financial affairs. (12) Allow a provider, whose property is tax exempt, to charge the resident on a pro rata basis property taxes, or in-lieu taxes, that the provider is required to pay. (13) Make any other provision approved by the department. (d) A copy of the resident's rights as described in Section 1771.7 shall be attached to every continuing care contract. (e) A copy of the current audited financial statement of the provider shall be attached to every continuing care contract. For a provider whose current audited financial statement does not accurately reflect the financial ability of the provider to fulfill the continuing care contract obligations, the financial statement attached to the continuing care contract shall include all of the following: (1) A disclosure that the reserve requirement has not yet been determined or met, and that entrance fees will not be held in escrow. (2) A disclosure that the ability to provide the services promised in the continuing care contract will depend on successful compliance with the approved financial plan. (3) A copy of the approved financial plan for meeting the reserve requirements. (4) Any other supplemental statements or attachments necessary to accurately represent the provider's financial ability to fulfill its continuing care contract obligations. (f) A schedule of the average monthly care fees charged to residents for each type of residential living unit for each of the five years preceding execution of the continuing care contract shall be attached to every continuing care contract. The provider shall update this schedule annually at the end of each fiscal year. If the continuing care retirement community has not been in existence for five years, the information shall be provided for each of the years the continuing care retirement community has been in existence. (g) If any continuing care contract provides for a health insurance policy for the benefit of the resident, the provider shall attach to the continuing care contract a binder complying with Sections 382 and 382.5 of the Insurance Code. (h) The provider shall attach to every continuing care contract a completed form in duplicate, captioned "Notice of Cancellation." The notice shall be easily detachable, and shall contain, in at least 10-point boldface type, the following statement: "NOTICE OF CANCELLATION" (date) Your first date of occupancy under this contract is: _____________________________________________ "You may cancel this transaction, without any penalty within 90 calendar days from the above date. If you cancel, any property transferred, any payments made by you under the contract, and any negotiable instrument executed by you will be returned within 14 calendar days after making possession of the living unit available to the provider. Any security interest arising out of the transaction will be canceled. If you cancel, you are obligated to pay a reasonable processing fee to cover costs and to pay for the reasonable value of the services received by you from the provider up to the date you canceled or made available to the provider the possession of any living unit delivered to you under this contract, whichever is later. If you cancel, you must return possession of any living unit delivered to you under this contract to the provider in substantially the same condition as when you took possession. Possession of the living unit must be made available to the provider within 20 calendar days of your notice of cancellation. If you fail to make the possession of any living unit available to the provider, then you remain liable for performance of all obligations under the contract. To cancel this transaction, mail or deliver a signed and dated copy of this cancellation notice, or any other written notice, or send a telegram to (Name of provider) at (Address of provider's place of business) not later than midnight of _____________ (date). I hereby cancel this _________________________ transaction (Resident or Transferor's signature)" SEC. 5. Section 1790 of the Health and Safety Code is amended to read: 1790. (a) Each provider that has obtained a provisional or final certificate of authority and each provider that possesses an inactive certificate of authority shall submit an annual report of its financial condition. The report shall consist of audited financial statements and required reserve calculations, with accompanying certified public accountants' opinions thereon, the reserve information required by paragraph (2), Continuing Care Provider Fee and Calculation Sheet, evidence of fidelity bond as required by Section 1789.8, and certification that the continuing care contract in use for new residents has been approved by the department, all in a format provided by the department, and shall include all of the following information: (1) A certification, if applicable, that the entity is maintaining reserves for prepaid continuing care contracts, statutory reserves, and refund reserves. (2) Full details on the status, description, and amount of all reserves that the provider currently designates and maintains, and on per capita costs of operation for each continuing care retirement community operated. (3) Disclosure of any funds accumulated for identified projects or purposes and any funds maintained or designated for specific contingencies. Nothing in this subdivision shall be construed to require the accumulation of funds or funding of contingencies, nor shall it be interpreted to alter existing law regarding the reserves that are required to be maintained. (4) Full details on any increase in monthly care fees, the basis for determining the increase, and the data used to calculate the increase. (5) The required reserve calculation schedules shall be accompanied by the auditor's opinion as to compliance with applicable statutes. (6) Any other information as the department may require. (b) Each provider shall file the annual report with the department within four months after the provider's fiscal yearend. If the complete annual report is not received by the due date, a one thousand dollar ($1,000) late fee shall accompany submission of the reports. If the reports are more than 30 days past due, an additional fee of thirty-three dollars ($33) for each day over the first 30 days shall accompany submission of the report. The department may, at its discretion, waive the late fee for good cause. (c) The annual report and any amendments thereto shall be signed and certified by the chief executive officer of the provider, stating that, to the best of his or her knowledge and belief, the items are correct. (d) A copy of the most recent annual audited financial statement shall be transmitted by the provider to each transferor requesting the statement. (e) A provider shall amend its annual report on file with the department at any time, without the payment of any additional fee, if an amendment is necessary to prevent the report from containing a material misstatement of fact or omitting a material fact. (f) If a provider is no longer entering into continuing care contracts, and currently is caring for 10 or fewer continuing care residents, the provider may request permission from the department, in lieu of filing the annual report, to establish a trust fund or to secure a performance bond to ensure fulfillment of continuing care contract obligations. The request shall be made each year within 30 days after the provider's fiscal yearend. The request shall include the amount of the trust fund or performance bond determined by calculating the projected life costs, less the projected life revenue, for the remaining continuing care residents in the year the provider requests the waiver. If the department approves the request, the following shall be submitted to the department annually: (1) Evidence of trust fund or performance bond and its amount. (2) A list of continuing care residents. If the number of continuing care residents exceeds 10 at any time, the provider shall comply with the requirements of this section. (3) A provider fee as required by subdivision (c) of Section 1791. (g) If the department determines a provider's annual audited report needs further analysis and investigation, as a result of incomplete and inaccurate financial statements, significant financial deficiencies, development of work out plans to stabilize financial solvency, or for any other reason, the provider shall reimburse the department for reasonable actual costs incurred by the department or its representative. The reimbursed funds shall be deposited in the Continuing Care Contract Provider Fee Fund.