BILL NUMBER: SB 408 ENROLLED
BILL TEXT
PASSED THE SENATE SEPTEMBER 7, 2011
PASSED THE ASSEMBLY SEPTEMBER 1, 2011
AMENDED IN ASSEMBLY AUGUST 30, 2011
AMENDED IN ASSEMBLY JULY 12, 2011
AMENDED IN ASSEMBLY JUNE 28, 2011
AMENDED IN SENATE MAY 31, 2011
AMENDED IN SENATE APRIL 12, 2011
INTRODUCED BY Senator Hernandez
FEBRUARY 16, 2011
An act to add Section 1265.9 to the Health and Safety Code,
relating to health facilities.
LEGISLATIVE COUNSEL'S DIGEST
SB 408, Hernandez. Health facilities: licensure.
Existing law provides for the licensure and regulation of health
facilities administered by the State Department of Public Health. A
violation of these provisions is a crime.
Existing law requires those desiring a license for a health
facility, approval for a specified special service, or approval to
manage a specified type of licensed health facility, that have not
filed an application for a license to operate that facility, to file
with the department a verified application on forms prescribed and
furnished by the department, containing specified information.
Existing law provides that any requirement placed upon, or
reference to, a corporation in the provisions regulating health
facilities shall also apply to a limited liability company.
This bill would require a new license application to be filed for
a health facility, as defined, before there is a change of ownership,
as defined, or a major change in ownership interest, as defined.
This bill would also require a notice to be filed with the department
at least 90 days prior to an anticipated change in ownership, a
major change in ownership interest, or a change in control interest,
as defined, for certain health facilities. This bill would, for a
transaction that is a change in control interest, permit the
department to require a new license application to be filed or
withhold approval of the transaction, as prescribed.
Existing law establishes the Internal Departmental Quality
Improvement Account within the Special Deposit Fund, available upon
appropriation by the Legislature, for internal quality improvement
activities in the Licensing and Certification Program.
This bill would require the department to assess an administrative
penalty in the amount of $25,000 for each violation of these
provisions and permit the licensee to request a specified hearing if
the licensee disputes a determination by the department of a
violation. This bill would provide that penalties collected pursuant
to these provisions will be deposited in the Internal Departmental
Quality Improvement Account.
Because this bill expands the definition of a crime, it would
impose a state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1265.9 is added to the Health and Safety Code,
to read:
1265.9. (a) For purposes of this section, the following
definitions shall apply:
(1) "Change of ownership" means any of the following:
(A) For a partnership, the removal, addition, or substitution of a
partner, unless the partners expressly agree otherwise, as permitted
by state law.
(B) For an unincorporated sole proprietorship, the transfer of
title and property to another person.
(C) For a corporation, the merger of the licensee's corporation
into another corporation, or the consolidation of two or more
corporations, resulting in the creation of a new corporation. The
transfer of corporate stock or the merger of another corporation into
the applicant's or provider's corporation does not constitute a
change of ownership.
(D) For a lease, the lease of all or part of a licensee's facility
constitutes a change of ownership of the leased portion.
(2) "Major change in ownership interest" means a transaction where
any of the following occurs:
(A) A sale, transfer, lease, exchange, conveyance, or other
disposal of a limited partnership interest, corporate shares, or
limited liability company interest representing at least 50 percent
of all ownership interests in a health facility that is described in
subdivision (a), (b), or (f) of Section 1250 or in the current
licensee, including the final transfer or assignment of multiple
transfers over a 10-year period that cumulatively total at least 50
percent of ownership interests.
(B) The merger of an entity that owns or operates a health
facility described in subdivision (a), (b), or (f) of Section 1250
that does not result in a change in the taxpayer identification
number of the licensee.
(C) For a limited liability company, the merger of the applicant's
or provider's limited liability company into another limited
liability company, or the consolidation of two or more limited
liability companies, resulting in the creation of a new limited
liability company. The transfer of limited liability company interest
or the merger of another limited liability company into the licensee'
s limited liability company does not constitute a change of
ownership.
(D) For any unincorporated sole proprietorship, corporation,
limited liability company, partnership, lessee, nonprofit
corporation, or any other entity that operates or controls a health
facility described in subdivision (a), (b), or (f) of Section 1250, a
substitution of a new corporate member or member of the governing
body, or any arrangement, written or oral, that would transfer voting
control of, responsibility for, or governance of, that health
facility.
(3) "Change in control interest" means a transaction where any of
the following, except a change of ownership or major change in
ownership interest, occurs:
(A) A sale, transfer, lease, exchange, conveyance, or other
disposal of any partnership, limited partnership interest, corporate
shares, or limited liability company interest representing at least
10 percent of all ownership interests in a health facility described
in subdivision (a), (b), or (f) of Section 1250, or in the licensee,
but that represents less than 50 percent of the ownership interests
in the health facility or licensee.
(B) A change in any member of the governing body or principal
officers of a health facility described in subdivision (a), (b), or
(f) of Section 1250.
(C) Any transaction that affects more than 10 percent of the value
of a health facility or facilities that are described in subdivision
(a), (b), or (f) of Section 1250 that are operated or controlled by
the licensee.
(b) A new license application for a health facility described in
subdivision (a), (b), (c), (d), or (f) of Section 1250 shall be filed
before there is a change of ownership in the health facility. A
change of ownership shall not occur until the department approves the
license application and issues a new license.
(c) A new license application for a health facility described in
subdivision (a), (b), or (f) of Section 1250 shall be filed before
there is a major change in ownership interest in the health facility.
A major change in ownership interest shall not occur until the
department approves the license application and issues a new license.
(d) (1) At least 90 days prior to an anticipated change of
ownership, a major change in ownership interest, or a change in
control interest in a health facility that is described in
subdivision (a), (b), or (f) of Section 1250, a notice of the change
shall be filed with the department. If the transaction is a change in
ownership or a major change in ownership interest, a new license
application shall be filed with the notice. If the transaction is a
change in control interest, the licensee shall notify the department
of the change on a form provided by the department.
(2) Within 10 days of the receipt of a notice pursuant to
paragraph (1), the department shall post receipt of the notice on the
department's Internet Web site.
(3) With regard to a transaction that is a change in control
interest, the department may, within 90 days of the notice pursuant
to paragraph (1), require a new license application to be filed or
withhold approval of the transaction, if the department has reason to
believe, based on past compliance history, that any person or
entity, whose control interests in the facility or facilities
operated or controlled by the licensee are affected by the
transaction, has not complied with state or federal laws or
regulations, or is under investigation for any alleged violation of
state or federal laws or regulations.
(e) (1) If a licensee of a health facility under Section 1250
fails to comply with any requirement of this section, the department
may assess the licensee an administrative penalty in an amount not to
exceed twenty-five thousand dollars ($25,000) per violation. If the
licensee disputes a determination by the department regarding the
alleged violation, the licensee may, within 10 days of receipt of the
penalty assessment, request a hearing pursuant to Section 131071. An
administrative penalty shall be paid when appeals have been
exhausted and the penalty has been upheld. All administrative
penalties collected by the department pursuant to this section shall
be deposited in the Internal Departmental Quality Improvement Account
within the Special Deposit Fund created pursuant to subdivision (f)
of Section 1280.15.
(2) In enforcing this subdivision, the department shall take into
consideration the special circumstances of small and rural hospitals,
as defined in Section 124840, in order to protect access to quality
care in those hospitals.
(f) Notwithstanding the rulemaking provisions of Chapter 3.5
(commencing with Section 11340) of Part 1 of Title 2 of the
Government Code, the department may implement this section by means
of all facility letters, or similar instructions, without taking
further regulatory action.
SEC. 2. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.