BILL ANALYSIS
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THIRD READING
Bill No: AB 1169
Author: Ruskin (D)
Amended: 6/30/09 in Senate
Vote: 21
SENATE HUMAN SERVICES COMMITTEE : 5-0, 6/23/09
AYES: Liu, Maldonado, Alquist, Runner, Yee
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 51-28, 5/28/09 - See last page for vote
SUBJECT : Elderly care: continuing care contracts:
financial reporting
SOURCE : California Continuing Care Residents
Association
DIGEST : This bill specifies disclosures required of
continuing care retirement community providers in
continuing care contracts and annual financial reports.
ANALYSIS :
Existing law:
1. Provides for the regulation by the Department of social
Services (DSS) of activities relating to continuing care
contracts that govern care provided to an elderly
resident in a continuing care retirement community for
CONTINUED
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the duration of the resident's life or a term in excess
of one year.
2. Requires a provider of continuing care to submit an
annual report of its financial condition, including full
details on the status of reserves and on per capita
costs of operation offer each continuing care retirement
community (CCRC) operated.
3. Defines three reserve accounts that a CCRC must
maintain: a reserve for long-term debt obligations, a
reserve to cover 75 days or more of operating expenses,
and, a reserve to cover refunds if the CCRC offers a
refundable contract.
4. Requires CCRC providers to make specified disclosures in
a continuing care contract.
This bill:
1. Requires continuing care contracts to include a
disclosure that, if the provider is meeting its
statutory reserve requirements, resident funds,
including but not limited to, entry fees, monthly fees,
and other fees, may be:
A. Transferred from one CCRC to benefit the
residents at one or more other CCRCs controlled by
the same entity.
B. Used to meet community needs as required by the
provider's non-profit status under the Internal
Revenue Code.
2. Defines "reserves" for the purpose of a provider's
annual financial report to include:
A. For a not-for-profit provider, the entire excess
of assets over liabilities.
B. For a for-profit provider, all reserves that are
included within the provider's net worth.
3. Requires that a CCRC provider's annual financial report
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include disclosure of any funds accumulated for
identified projects or purposes, including, but not
limited to, project designated to meet the needs of the
community as required by the provider's nonprofit
status.
Background
A CCRC is a facility where services promised in a
continuing care contract are provided. CCRCs can be
apartment-type dwellings, high-rise buildings, a
subdivision setting, or any other housing design. Most
CCRCs have three levels of care: dependent living, assisted
living,and skilled nursing care. As a resident's needs
increase, he or she moves to a higher level of care within
the facility. California has nearly 80 CCRCs, which are
home to about 20,000 persons over the age of 60.
Approximately 70 CCRCs are organized as 501(c)(3) public
benefit corporations - non-profits.
The entire facility is licensed as a residential care
facility for the elderly (RCFE) by DSS and, separately,
receives a certificate of authority from the continuing
care contracts branch of DSS. Generally, the licensing
branch administers and enforces rules relating to health
and safety, and the contracts branch focuses on financial
and contractual matters.
Once a provider is issued a certificate of authority to
enter into continuing care contracts, audited financial
statements and reserve reports must be submitted to DSS on
an annual basis. Various financial reserve requirements
are mandated by the continuing care contract statutes. The
reserves help assure that providers will have sufficient
financial liquidity to meet their ongoing business
expenses, including anticipated repairs and upgrades and
unanticipated expenses from fire or flood damage, increased
costs, or reduced revenues. Providers must show their
compliance with the reserve requirements each year and
submit reports to DSS with their annual audited financial
statements.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
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SUPPORT : (Verified 7/15/09)
California Continuing Care Residents Association (source)
ARGUMENTS IN SUPPORT : The sponsors argue that the
sizeable investment a resident makes in many CCRCs
necessitate that residents have as much information as
possible regarding the CCRC's corporate finances. They
argue that IRS codes require not-for-profit institutions to
provide services at the lowest cost possible, and that
without a full accounting of a CCRC's reserves, the
residents cannot know if their fees are, indeed, the lowest
possible rather than also being used to benefit others
besides the CCRC residents.
ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Beall, Block, Blumenfield,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Coto, Davis, De La Torre, De Leon, Eng, Evans,
Feuer, Fong, Fuentes, Furutani, Galgiani, Hall, Hayashi,
Hernandez, Hill, Huber, Huffman, Jones, Krekorian, Lieu,
Bonnie Lowenthal, Ma, Mendoza, Monning, Nava, John A.
Perez, V. Manuel Perez, Portantino, Price, Ruskin, Salas,
Saldana, Skinner, Solorio, Swanson, Torlakson, Torres,
Torrico, Yamada, Bass
NOES: Adams, Anderson, Bill Berryhill, Tom Berryhill,
Blakeslee, Conway, Cook, DeVore, Duvall, Emmerson,
Fletcher, Fuller, Gaines, Garrick, Gilmore, Hagman,
Harkey, Jeffries, Knight, Logue, Miller, Nestande,
Niello, Nielsen, Silva, Smyth, Tran, Villines
NO VOTE RECORDED: Audra Strickland
CTW:do 7/15/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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