BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: AB 1457
A
AUTHOR: Davis
B
AMENDED: July 1, 2009
HEARING DATE: July 8, 2009
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CONSULTANT:
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Bain/
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SUBJECT
Long-term health care facilities: admission contracts
SUMMARY
Requires current and incoming residents of a skilled
nursing facility (SNF) to be notified of the name of the
owner and licensee of the SNF, and the name and contact
information of a single entity that is responsible for all
aspects of patient care and the operation of the SNF.
CHANGES TO EXISTING LAW
Existing law:
Under existing law, all SNFs, intermediate care facilities
(ICFs), and nursing facilities (NFs), are required to use a
standard admission agreement that is developed and adopted
by the Department of Public Health (DPH). The standard
agreement must comply with all applicable state and federal
laws.
Existing law defines a "contract of admission" to include
all documents which a resident or his or her representative
must sign at the time of, or as a condition of, admission
to a long-term health care facility.
Continued---
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Existing law establishes requirements for contracts of
admission, including requiring the contract to be written
in clear, coherent, and unambiguous language, using words
with common and everyday meanings, requiring the Patients'
Bill of Rights to be a mandatory attachment to all SNF,
ICF, and nursing facility contracts, and requiring
contracts of admission to state clearly what services and
supplies are covered by the facility's basic daily rate.
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This bill:
This bill requires current and incoming residents of a SNF
to be informed of both of the following:
The name of the owner and licensee of the SNF; and,
The name and contact information of a single entity that
is responsible for all aspects of patient care and the
operation of the SNF.
This bill requires, for incoming residents, SNFs to include
the information as part of the contract through an
attachment that is placed before any other attachment. For
current residents and patients and the primary contacts
listed in the admission agreement, the SNF must send
written notification within 30 days of approval of a change
of ownership by DPH.
This bill requires DPH to accept a copy of the written
notice and a copy of the list of individuals and mailing
addresses to whom the SNF sent the notification as
satisfactory evidence that the facility provided the
required written notification.
FISCAL IMPACT
This bill is keyed nonfiscal.
BACKGROUND AND DISCUSSION
According to the author, this bill will improve the quality
of care in nursing homes by informing residents of the
ownership and management structure of the long-term care
facilities which provide their care. The author argues
that America's aging population is growing at a faster rate
than other population groups, that SNFs receive billions in
taxpayer funding from Medicare and Medi-Cal, and nursing
home abuse and neglect continues to be a serious problem.
This bill seeks to ensure quality of care in nursing homes
by requiring the identification of the name of the owner
and licensee of the SNF and, the name and contact
information of a single entity that is responsible for all
aspects of patient care and the operation of the SNF. To
ensure that existing residents of such facilities are
notified of this information when there is a change of
ownership, this bill was recently amended to require
STAFF ANALYSIS OF ASSEMBLY BILL 1457 (Davis) Page
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written notification to all current residents and to their
primary contacts listed on the admission agreement.
Current requirements on ownership and control disclosures
Existing law requires each applicant for a license to
operate a SNF or ICF to disclose to DPH the name and
business address of each general partner, if the applicant
is a partnership, or each director and officer if the
applicant is a corporation, as well as each person having a
beneficial ownership interest of five percent or more in
the applicant corporation or partnership.
Existing regulations make the licensee responsible for
compliance with licensing requirements and for the
organization, management, operation and control of the
licensed SNF. The regulations require the licensee to
delegate to the designated administrator, in writing,
authority to organize and carry out the day-to-day
functions of the SNF. Existing regulations prohibit the
delegation of any authority by a licensee from diminishing
the responsibilities of the licensee.
Additionally, existing regulations require specified
information to be conspicuously posted in a prominent
location accessible to the public in a SNF, including the
name, license number and date of employment of the current
administrator of the facility and a listing of all other
SNFs and ICFs owned by the same person, firm, partnership,
association, corporation or parent or subsidiary
corporation, or a subsidiary of the parent corporation.
DPH indicates there is no requirement in existing law for
the SNF or DPH to notify residents when a change in
ownership occurs. DPH indicates that from January 1, 2007
through December 31, 2008, it received 135 SNF change of
ownership applications, and it approved 115.
Recent media reports
The author cites recent New York Times (Times) articles
analyzing national trends at nursing homes purchased by
private investment groups. A 2007 Times article was based
on an analysis of data available from the federal Centers
for Medicare and Medicaid Services (CMS) that examined more
than 1,200 nursing homes and 14,000 other senior homes
(such as assisted living facilities). The Times states in
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recent years, large private investment groups have agreed
to buy 6 of the nation's 10 largest nursing home chains,
containing 9 percent of the nation's total beds. The Times
analysis compared these investor-owned homes against
national averages in a number of categories including
complaints to regulators, fines levied by state and federal
authorities and health and safety violations. The Times
found that, by many regulatory benchmarks, residents at
nursing homes acquired by private equity firms were worse
off, on average than they were under previous owners,
according to the Times' analysis of data collected by CMS
from 2000 to 2006. The Times found that managers at many
nursing homes acquired by large private investors had cut
expenses and staff, sometimes below minimum legal
requirements, and the typical number of serious health
deficiencies cited by regulators in 2006 was almost 19
percent higher at homes owned by large investment companies
than the national average. The Times stated that private
investment companies have made it very difficult for
plaintiffs to succeed in court and for regulators to levy
chain-wide fines by creating complex corporate structures
that obscure who controls their nursing homes. The Times
compared this to publicly owned firms, which are required
to disclose who controls their facilities in securities
filings and other regulatory documents.
Arguments in support
The California Advocates for Nursing Home Reform (CANHR)
writes in support that the purpose of this bill is to
enable nursing home residents and their representatives to
know who to contact if they have questions or concerns
about a facility in which they live. CANHR states nursing
home residents deserve to know who owns the facility in
which they live, but it is increasingly hard for them to
obtain this basic information as chain nursing home
operators routinely establish shell companies and complex
ownership structures to obscure true ownership and avoid
accountability. CAHNR states phantom ownership is
especially problematic with private equity companies, which
have been buying up large nursing home chains for
investment purposes. CAHNR argues even federal and state
regulators often have a hard time figuring out who really
owns a nursing home. CANHR argues publicly available
ownership information, such as that posted in nursing homes
or online, often fails to identify the person or entity
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that is fully responsible for the nursing home's operation.
Aging Services of California (ASC which represents
non-profit senior living facilities) also writes in support
that this bill addresses the growing problem of "secret"
unaccountable entities investing in long-term care to
maximize profit at the expense of patient care. ASC argues
it is fundamental in an open society where large sums of
public money are involved, to know who to hold accountable
for malfeasance in the quality of care or the operation of
a long-term care facility, and no legitimate provider can
object to such a fundamental provision.
PRIOR ACTIONS
Assembly Floor: 77-0
Assembly Health:16-0
POSITIONS
Support (prior version):
California Senior Legislature (sponsor)
Aging Services of California
Area Agency on Advisory Council
Area Agency on Aging of Lake & Mendocino Counties
California Advocates for Nursing Home
Reform
Oppose: None received
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