BILL ANALYSIS Ó SB 897 Page 1 Date of Hearing: June 28, 2011 ASSEMBLY COMMITTEE ON HUMAN SERVICES Jim Beall Jr., Chair SB 897 (Leno) - As Amended: May 17, 2011 SENATE VOTE : 38-0 SUBJECT : Residential care facilities for the elderly SUMMARY : Requires licensees of residential care facilities for the elderly (RCFEs) to notify the State Long-Term Care Ombudsman and, in some instances, residents and potential residents, and the Department of Social Services (DSS) of specified events indicating financial distress. Specifically, this bill : 1)Requires an RCFE licensee to notify, in writing or as specified, the State Long-Term Care Ombudsman of the following events within two business days of the event or knowledge of the event: a) Failure to make one or more mortgage, lease, or rental payments on the property within 30 days of the due date; b) A provider of electricity, gas, or water services has sent notice of intent to terminate a utility on the property; or, c) A financial institution refuses to honor a check or other instrument issued by the licensee to its employees for a regular payroll due to insufficient funds. 2)Requires an RCFE licensee to notify, in writing, the State Long-Term Care Ombudsman; DSS; all residents and, if applicable, their legal representatives; all applicants for potential residency and, if applicable, their legal representatives, prior to admission, of the following within SB 897 Page 2 two business days of the event or knowledge of the event: a) Notice of default, trustee's sale, or any other indication of foreclosure issued on the property; b) An unlawful detainer action initiated against the licensee; or, c) Bankruptcy filing by the licensee. 3)Requires DSS to initiate a compliance plan, noncompliance conference, or other appropriate action upon receiving notice as specified in paragraph 2), above. 4)Authorizes civil penalties in the amount of $100 per day for failure to provide the notifications required above, not to exceed $2,000, and allows DSS to suspend or revoke a license or permanently revoke a licensee's ability to operate, or act as an administrator of, a facility anywhere in the state, if a resident is relocated without the notification required by the section and suffers transfer trauma or other harm to his or her health and safety. 5)Clarifies that suspension or revocation proceedings related to the provisions of this bill are to be conducted pursuant to due process procedures applicable to suspension or revocation actions under existing law. 6)Exempts RCFE licensees that have obtained a certificate of authority to offer continuing care contracts from the requirements above. EXISTING LAW 1)Under the Residential Care Facilities for the Elderly Act, provides for the licensure of residential care facilities for the elderly (RCFEs) by DSS, Community Care Licensing Division SB 897 Page 3 (CCL). 2)Provides that any person who violates the Residential Care Facilities for the Elderly Act, or who willfully or repeatedly violates any rule or regulation adopted under the Act, is guilty of a misdemeanor, with a fine not to exceed $1,000, by imprisonment in the county jail for up to a year, or by both the fine and imprisonment. 3)Provides broad authority for the director of DSS to take enforcement action, including, but not limited to, actions to suspend or revoke a license and to impose civil penalties (generally between $25 and $50 per day, but no greater than $150 per day) for violations of RCFE statutes. 4)Provides for a state long-term care ombudsman office (including approved organizations) within the Department of Aging to investigate and seek to resolve complaints and concerns communicated by, or on behalf of, patients, residents, or clients of any long-term care facility. 5)Establishes due process appeal procedures for proceedings related to suspension or revocation of an RCFE license. FISCAL EFFECT : Unknown COMMENTS : RCFEs are licensed assisted living facilities for persons 60 years of age and over and persons under 60 with compatible needs. Need for this bill : According to the author, this bill "will protect the elderly residents living in RCFEs from the emotional, physical and unexpected upheaval that results from abrupt foreclosure of RCFEs." As of June 1, 2011, there were 7,673 RCFEs in California with a total capacity of 170,724 residents. Approximately 75%, are located in single-family dwelling units, operated by a lone individual or family with a mortgage on the property, and have 6 or fewer residents. "In recent years," the author notes, "1 in 8 homes have been foreclosed in California; RCFEs in foreclosure or bankruptcy have also surged, leaving vulnerable residents subject to loss SB 897 Page 4 of their home and needed care." The author further says that: Under current law, RCFEs are not required to provide notice to the residents or to ÝCCL] when these homes are in foreclosure or suffering from severe financial distress. In some foreclosure cases, residents had no idea they were losing their home until sheriffs forcibly removed them. Without timely notice, RCFE residents are effectively deprived of their legal recourse. They are rendered much more vulnerable to transfer trauma and placements in homes that are not able to meet their needs. Without timely notice, family, guardians and friends of the residents are subject to hardships as they struggle to find a safe, secure and compatible living arrangement for the loved one. Under existing law, the RCFE Relocation Act of 2008, RCFEs are required to provide 60-day notice when RCFEs close due to the sale of the business for different uses or forfeiture of the RCFE license. SB 897 will require RCFE operators give notice to all residents and their legal representatives of any foreclosure proceedings when they are initiated. This will allow residents to prepare for a possible transfer to a new home with appropriate levels of care. SB 897 will also require RCFE operators to notify CCL and the state Ombudsman of events indicating financial distress that would threaten the housing security of the residents such as foreclosure proceedings, a missed mortgage payment, or threatened utility shut-off. Such notice would enable CCL to monitor the facility and ensure the residents are protected. SB 897 will ensure vulnerable RCFE residents and their loved ones are notified when their home is being threatened. With such notification, they will be able to carefully plan for a possible move and avoid dangerous last-minute evictions. RCFE foreclosures : According to CCL data, 41 RCFEs were in foreclosure or had been foreclosed between January 2009 and March 2010, out of 65 foreclosures for all CCL-licensed residential facilities statewide. RCFEs do not report any SB 897 Page 5 annual financial information to CCL. The author gives several illustrative examples of recent foreclosures: In Hemet, Parkside Gardens was abruptly shut down when the staff refused to report to work after the facility failed to make payroll. One hundred two residents were forced to immediately find placement without any prior notice. At Paradise Living, an RCFE in Granite Bay, a resident's family member was shocked to learn that the facility was for sale following 18 months of foreclosure proceedings. The residents had not been given any notice. Residents of Northstar Manor in Woodland were abruptly served with eviction notices by the sheriff on April 7, 2010. The residents and their families had no idea that their home had already been foreclosed and sold at auction. This bill requires that RCFE operators give notice to residents (and, when applicable, to their families) whenever their homes are subject to foreclosure, bankruptcy, or unlawful detainer. This advance notice will give residents an opportunity to investigate the stability of their placement and to explore other housing options. This bill also requires RCFE operators to give notice to CCL and the State Office of the Long-term Care Ombudsman when a facility is in foreclosure, bankruptcy, or suffers other specified indicators of severe financial distress. Under this bill, CCL's response in most instances is discretionary; although, early reports of financial troubles will enable CCL to counsel facilities through their crisis or to minimize transfer trauma to residents of the closing facility. In the case of foreclosure, bankruptcy, or unlawful detainer, on the other hand, this bill requires CCL to take appropriate action. At its discretion, CCL may initiate a compliance plan, noncompliance conference, or other appropriate administrative action. Prior legislation : SB 1329 (Leno 2010) was substantially similar to this bill. SB 1329 was heard by this committee and passed by the Legislature in the last Session, but was vetoed by Governor Schwarzenegger. The veto message stated: SB 897 Page 6 While I appreciate the author's continued effort to improve protections for residential care facilities, this bill would represent a new unfunded workload and redirect scarce resources that are currently dedicated to immediate health and safety issues. This bill differs from SB 1329 in several respects: This bill includes notification to the State Office of the Long-term Care Ombudsman. SB 1329 would have authorized suspension or revocation proceedings if relocation occurs without adequate notification or a resident suffers transfer trauma or other harm to his or her health or safety; this bill requires both lack of notification and transfer trauma or other harm to the resident's health or safety. This bill clarifies licensees' due process appeal rights in the event that DSS takes action to suspend or revoke a facility's license. The civil penalty provided for under this bill is discretionary; the civil penalty under SB 1329 was mandatory. SB 781 (Leno), Chapter 617, Statutes of 2009, requires an RCFE to include additional information when providing a notice of eviction to a resident, including the reason for the eviction, the effective date of the eviction, and additional information informing the resident of his/her rights regarding evictions AB 407 (Beall), Chapter 442, Statutes of 2009, imposes requirements on continuing care retirement communities in the event of their permanent closure, including requiring the continuing care retirement community to provide written notice to DSS and to the affected residents or designated representatives 120 days prior to the intended date of closure of a continuing care retirement community. SB 1137 (Perata, Corbett, Machado), Chapter 69, Statutes of 2008, imposes requirements related to real estate foreclosures, including requiring the holder of a mortgage to mail a specified notice to the tenant(s) of a property on which foreclosure SB 897 Page 7 proceedings have begun. AB 949 (Krekorian), Chapter 686, Statutes of 2007, establishes procedures to be followed by an RCFE prior to transferring a resident to another facility or living arrangement as a result of forfeiture of a license or change in the use of the facility, and provides remedies for noncompliance. REGISTERED SUPPORT / OPPOSITION : Support AARP Alzheimer's Association Alzheimer's Association Bet Tzedek Legal Services (cosponsor) California Advocates for Nursing Home Reform (cosponsor) California Alliance for Retired Americans California Commission on Aging California Commission on the Status of Women California Long-Term Care Ombudsman Association California Senior Legislature (cosponsor) Congress of California Seniors County Welfare Directors Association (CWDA) Ombudsman Services of Northern California Ombudsman Services of San Mateo County The Arc and United Cerebral Palsy in California Opposition None on file. Analysis Prepared by : Eric Gelber / HUM. S. / (916) 319-2089