Amended in Assembly May 24, 2013

Amended in Assembly April 25, 2013

Amended in Assembly April 8, 2013

Amended in Assembly March 21, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 975

Introduced by Assembly Members Wieckowski and Bonta

February 22, 2013

An act to amend Sections 127280, 127400, and 129050 of, to add Chapter 2.6 (commencing with Section 127470) to Part 2 of Division 107 of, and to repeal Article 2 (commencing with Section 127340) of Chapter 2 of Part 2 of Division 107 of, the Health and Safety Code, relating to health facilities.

LEGISLATIVE COUNSEL’S DIGEST

AB 975, as amended, Wieckowski. Health facilities community benefits.

Existing law makes certain findings and declarations regarding the social obligation of private nonprofit hospitals to provide community benefits in the public interest, and requires these hospitals, among other responsibilities, to adopt and update a community benefits plan for providing community benefits either alone, in conjunction with other health care providers, or through other organizational arrangements. Existing law requires each private nonprofit hospital, as defined, to complete a community needs assessment, as defined, and to thereafter update the community needs assessment at least once every 3 years. Existing law also requires the hospital to file a report on its community benefits plan and the activities undertaken to address community needs with the Office of Statewide Health Planning and Development. Existing law requires the statewide office to make the plans available to the public. Existing law requires that each hospital include in its community benefits plan measurable objectives and specific benefits.

This bill would declare the necessity of establishing uniform standards for reporting the amount of charity care and community benefits a facility provides to ensure that private nonprofit hospitals and nonprofit multispecialty clinics actually meet the social obligations for which they receive favorable tax treatment, among other findings and declarations.

This bill would require a private nonprofit hospital and nonprofit multispecialty clinic, as defined, by January 1, begin delete 2015 end delete begin insert 2016 end insert , to develop, in collaboration with the community, a community benefits statement, as specified, and a description of the process for approval of the community benefits statement by the hospital’s or clinic’s governing board, as specified. This bill would require the hospital or clinic, prior to adopting a community benefits plan, to complete a community needs assessment, as provided. The bill would authorize the hospital or clinic to create a community benefits advisory committee for the purpose of soliciting community input. This bill would require the hospital or clinic to make available to the public a copy of the assessment, file the assessment with the Office of Statewide Health Planning and Development, and update the assessment at least every 3 years.

This bill would also require a private nonprofit hospital and nonprofit multispecialty clinic, by April 1, begin delete 2015 end delete begin insert 2016 end insert , to develop a community benefits plan that includes a summary of the needs assessment and a statement of the community health care needs that will be addressed by the plan, and list the services, as provided, that the hospital or clinic intends to provide in the following year to address community health needs identified in the community health needs assessments. The bill would require the hospital or clinic to make its community health needs assessment and community benefits plan or community health plan available to the public on its Internet Web site and would require that a copy of the assessment and plan be given free of charge to any person upon request.

This bill would require a private nonprofit hospital or nonprofit multispecialty clinic, after April 1, begin delete 2015 end delete begin insert 2016 end insert , every 2 years to revise and submit its community benefits plan to the Office of Statewide Health Planning and Development, as specified, and would allow a hospital or clinic under the common control of a single corporation or other entity to file a consolidated plan, as provided. The bill would require that the governing board of each hospital or clinic adopt the community benefits plan and make it available to the public, as specified.

This bill would require the Office of Statewide Health Planning and Development to develop and adopt regulations to prescribe a standardized format for community benefits plans, as provided, to provide technical assistance to help private nonprofit hospitals and nonprofit multispecialty clinics exempt from licensure comply with the community benefits provisions, to make public each community health needs assessment and community benefits plan and any comments received regarding those assessments and plans, and to begin delete annually end delete calculate and make public the total value of community benefits provided by hospitals begin insert , as specified end insert . This bill would authorize the Office of Statewide Health Planning and Development to assess a civil penalty, as provided, against any hospital or clinic that fails to comply with these provisions. This bill would make conforming changes.

begin insert

Under existing law, patients with high medical costs who are at or below 350% of the federal poverty level are eligible to apply for participation under a hospital’s charity care policy or discount care policy. A patient with high medical costs is defined as a patient who, among other things, does not receive a discounted rate from the hospital as a result of his or her third-party coverage.

end insert begin insert

This bill would delete that limitation from the definition of a patient with a high medical costs.

end insert

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 127280 of the Health and Safety Code
is amended to read:

127280.  

(a) Every health facility licensed pursuant to Chapter
2 (commencing with Section 1250) of Division 2, except a health
facility owned and operated by the state, shall each year be charged
a fee established by the office consistent with the requirements of
this section.

(b) Commencing in calendar year 2004, every freestanding
ambulatory surgery clinic, as defined in Section 128700, shall each
year be charged a fee established by the office consistent with the
requirements of this section.

(c) The fee structure shall be established each year by the office
to produce revenues equal to the appropriation made in the annual
Budget Act or another statute to pay for the functions required to
be performed by the office pursuant to this chapter, Chapter 2.6
(commencing with Section 127470), or Chapter 1 (commencing
with Section 128675) of Part 5, and to pay for any other
health-related programs administered by the office. The fee shall
be due on July 1 and delinquent on July 31 of each year.

(d) The fee for a health facility that is not a hospital, as defined
in subdivision (c) of Section 128700, shall be not more than 0.035
percent of the gross operating cost of the facility for the provision
of health care services for its last fiscal year that ended on or before
June 30 of the preceding calendar year.

(e) The fee for a hospital, as defined in subdivision (c) of Section
128700, shall be not more than 0.035 percent of the gross operating
cost of the facility for the provision of health care services for its
last fiscal year that ended on or before June 30 of the preceding
calendar year.

(f) The fee for a freestanding ambulatory surgery clinic shall
be established at an amount equal to the number of ambulatory
surgery data records submitted to the office pursuant to Section
128737 for encounters in the preceding calendar year multiplied
by not more than fifty cents ($0.50).

(g) There is hereby established the California Health Data and
Planning Fund within the office for the purpose of receiving and
expending fee revenues collected pursuant to this chapter.

(h) Any amounts raised by the collection of the special fees
provided for by subdivisions (d), (e), and (f) that are not required
to meet appropriations in the Budget Act for the current fiscal year
shall remain in the California Health Data and Planning Fund and
shall be available to the office in succeeding years when
appropriated by the Legislature in the annual Budget Act or another
statute, for expenditure under the provisions of this chapter,
Chapter 2.6 (commencing with Section 127470), and Chapter 1
(commencing with Section 128675) of Part 5, or for any other
health-related programs administered by the office, and shall reduce
the amount of the special fees that the office is authorized to
establish and charge.

(i) (1) No health facility liable for the payment of fees required
by this section shall be issued a license or have an existing license
renewed unless the fees are paid. A new, previously unlicensed,
health facility shall be charged a pro rata fee to be established by
the office during the first year of operation.

(2) The license of any health facility, against which the fees
required by this section are charged, shall be revoked, after notice
and hearing, if it is determined by the office that the fees required
were not paid within the time prescribed by subdivision (c).

SEC. 2.  

Article 2 (commencing with Section 127340) of
Chapter 2 of Part 2 of Division 107 of the Health and Safety Code
is repealed.

SEC. 3.  

Section 127400 of the Health and Safety Code is
amended to read:

127400.  

The following definitions apply for the purposes of
this article:

(a) “Allowance for financially qualified patient” means, with
respect to services rendered to a financially qualified patient, an
allowance that is applied after the hospital’s charges are imposed
on the patient, due to the patient’s determined financial inability
to pay the charges.

(b) (1) “Charity care” means the unreimbursed cost to a private
nonprofit hospital or nonprofit multispecialty clinic of providing
services to the uninsured or underinsured, as well as providing
funding or otherwise financially supporting any of the following:

(A) Health care services or items on an inpatient or outpatient
basis to a financially qualified patient with no expectation of
payment.

(B) Health care services or items provided to a financially
qualified patient through other nonprofit or public outpatient
clinics, hospitals, or health care organizations with no expectation
of payment.

(C) Community benefits, provided that the provision, funding,
or financial support of those benefits is demonstrated to reduce
community health care costs. For purposes of this subparagraph,
“community benefits” means any of the following: vaccination
programs and services for low-income families, begin insert school health
centers, as defined in Section 124174, end insert chronic illness prevention
programs and services, nursing and caregiver training provided
without assessment of fees or payment of tuition, home-based
health care programs for low-income families, or community-based
mental health and outreach and assessment programs for
low-income families. For purposes of this subparagraph,
“low-income families” means families or individuals with income
less than or equal to 350 percent of the federal poverty level.

(2) Charity care does not include any of the following:

(A) Uncollected fees or accounts written off as bad debt.

(B) Care provided to patients for which a public program or
public or private grant funds pay for any of the charges for the
care.

(C) Contractual adjustments in the provision of health care
services below the amount identified as gross charges or
“chargemaster” rates by the health care provider.

(D) Any amount over 125 percent of the Medicare rate for the
health care services or items provided on an inpatient or outpatient
basis.

(E) Any amount over 125 percent of the Medicare rate for
providing, funding, or otherwise financially supporting health care
services or items with no expectation of payment provided to
financially qualified patients through other nonprofit or public
outpatient clinics, hospitals, or health care organizations.

(F) The cost to a nonprofit hospital of paying a tax or other
governmental assessment.

(c) “Federal poverty level” means the poverty guidelines updated
periodically in the Federal Register by the United States
Department of Health and Human Services under authority of
subsection (2) of Section 9902 of Title 42 of the United States
Code.

(d) “Financially qualified patient” means a patient who is both
of the following:

(1) A patient who is a self-pay patient, as defined in subdivision
(g) or a patient with high medical costs, as defined in subdivision
(h).

(2) A patient who has a family income that does not exceed 350
percent of the federal poverty level.

(e) “Hospital” means a facility that is required to be licensed
under subdivision (a), (b), or (f) of Section 1250, except a facility
operated by the State Department of State Hospitals or the
Department of Corrections and Rehabilitation.

(f) “Office” means the Office of Statewide Health Planning and
Development.

(g) “Self-pay patient” means a patient who does not have
third-party coverage from a health insurer, health care service plan,
Medicare, or Medicaid, and whose injury is not a compensable
injury for purposes of workers’ compensation, automobile
insurance, or other insurance as determined and documented by
the hospital. Self-pay patients may include charity care patients.

(h) “A patient with high medical costs” means a person whose
family income does not exceed 350 percent of the federal poverty
level, as defined in subdivision (c), begin delete if that individual does not
receive a discounted rate from the hospital as a result of his or her
third-party coverage. For these purposes, end delete begin insert and who incurs end insert “high
medical costs begin insert , end insert ” begin delete means any of end delete begin insert which are defined as any of end insert the
following:

(1) Annual out-of-pocket costs incurred by the individual at the
hospital that exceed 10 percent of the patient’s family income in
the prior 12 months.

(2) Annual out-of-pocket expenses that exceed 10 percent of
the patient’s family income, if the patient provides documentation
of the patient’s medical expenses paid by the patient or the patient’s
family in the prior 12 months.

(3) A lower level determined by the hospital in accordance with
the hospital’s charity care policy.

(i) “Patient’s family” means the following:

(1) For persons 18 years of age and older, spouse, domestic
partner, as defined in Section 297 of the Family Code, and
dependent children under 21 years of age, whether living at home
or not.

(2) For persons under 18 years of age, parent, caretaker relatives,
and other children under 21 years of age of the parent or caretaker
relative.

SEC. 4.  

Chapter 2.6 (commencing with Section 127470) is
added to Part 2 of Division 107 of the Health and Safety Code, to
read:

 

Chapter  2.6. Community Benefits

 

Article 1.  Hospital Community Benefits

 

127470.  

(a) The Legislature finds and declares the following:

(1) Access to health care services is of vital concern to the
people of California.

(2) Health care providers play an important role in providing
essential health care services in the communities they serve.

(3) Notwithstanding public and private efforts to increase access
to health care, the people of California continue to have significant
unmet health needs. Studies indicate that as many as 6.9 million
Californians are uninsured during a year.

(4) The state has a substantial interest in ensuring that the unmet
health needs of its residents are addressed. Health care providers
can help address these needs by providing charity care and
community benefits to the uninsured and underinsured members
of their communities.

(5) Hospitals have different roles in the community depending
on their mission, governance, tax status, and articles of
incorporation. Private hospitals that are investor owned and have
for-profit tax status pay property taxes, corporate income taxes,
and other taxes, such as unemployment insurance, on a different
basis than nonprofit, district, or public hospitals. Nonprofit health
facilities, including hospitals and multispecialty clinics, as
described in subdivision (l) of Section 1206, receive favorable tax
treatment by the government and, in exchange, assume a social
obligation to provide charity care and other community benefits
in the public interest.

(b) It is the intent of the Legislature in enacting this chapter to
provide uniform standards for reporting the amount of charity care
and community benefits provided to ensure that private nonprofit
hospitals and multispecialty clinics operated by nonprofit
corporations, as described in subdivision (l) of Section 1206,
actually meet the social obligations for which they receive
favorable tax treatment.

127472.  

The following definitions apply for the purposes of
this chapter:

(a) “Community” means the service area or patient population
for which a private nonprofit hospital or nonprofit multispecialty
clinic provides health care services.

(b) “Community benefits” means the unreimbursed goods,
services, and resources provided by a private nonprofit hospital
or nonprofit multispecialty clinic that addresses
community-identified health needs and concerns, particularly for
people who are uninsured, underserved, or members of a vulnerable
population. Community benefits include, but are not limited to,
charity care, as defined in Section 127400, the cost of community
health improvement services and community benefit operations,
begin insert the cost of school health centers, as defined in Section 124174, end insert
and the cost of health professions education, subsidized health
services for vulnerable populations, research, contributions to
community groups, and community building activities.

(c) “Community benefits plan” means the written document
prepared for annual submission to the office that includes, but is
not limited to, a description of the activities that the private
nonprofit hospital or nonprofit multispecialty clinic has undertaken
to address identified community needs within its mission and
financial capacity, and the process by which the hospital or clinic
develops the plan in consultation with the community.

(d) “Community health needs assessment” means the process
by which the private nonprofit hospital or nonprofit multispecialty
clinic identifies, for its primary service area as determined by the
hospital or clinic, unmet community needs.

(e) “Discounted care” means the cost for medical care provided
consistent with Article 1 (commencing with Section 127400) of
Chapter 2.5.

(f) “Free care” means the unreimbursed cost for medical care
for a patient who cannot afford to pay for care provided consistent
with Article 1 (commencing with Section 127400) of Chapter 2.5.

(g) “Nonprofit multispecialty clinic” means a clinic as described
in subdivision (l) of Section 1206.

(h) “Office” means the Office of Statewide Health Planning and
Development.

(i) “Private nonprofit hospital” means a private nonprofit acute
care hospital operated or controlled by a nonprofit corporation, as
defined in Section 5046 of the Corporations Code, that has been
determined to be exempt from taxation under the Internal Revenue
Code. For purposes of this chapter, “private nonprofit hospital”
does not include any of the following:

(1) A district hospital organized and governed pursuant to the
Local Health Care District Law (Division 23 (commencing with
Section 32000)).

(2) A rural general acute care hospital, as defined in subdivision
(a) of Section 1250.

(3) A children’s hospital, as defined in Section 10727 of the
Welfare and Institutions Code.

begin insert

(4) A multispecialty clinic operated by a for-profit hospital,
regardless of its net revenue.

end insert

(j) “Underserved and vulnerable population” means a population
that has disproportionate unmet health-related needs, such as a
high prevalence of one or more health conditions or concerns, and
that has limited access to timely, quality health care.

127473.  

A private nonprofit hospital or a nonprofit
multispecialty clinic that reports community benefits to the
community shall report on those community benefits in a consistent
and comparable manner to all other private nonprofit hospitals and
nonprofit multispecialty clinics.

127474.  

A private nonprofit hospital or a nonprofit
multispecialty clinic shall make its community health needs
assessment and community benefits plan or community health
plan available to the public on its Internet Web site. A copy of the
assessment and plan shall be given free of charge to any person
upon request.

 

Article 2.  Community Benefits Statement, Community Needs
Assessment, and Community Benefits Plan

 

127475.  

(a) Private nonprofit hospitals and nonprofit
multispecialty clinics shall provide community benefits to the
community.

(b) By January 1, begin delete 2015 end delete begin insert 2016 end insert , each private nonprofit hospital
and each nonprofit multispecialty clinic shall develop, in
collaboration with the community, all of the following:

(1) A community benefits statement that describes the hospital’s
or clinic’s commitment to developing, adopting, and implementing
a community benefits program. The hospital’s or clinic’s governing
board shall document that it has reviewed the clinic’s
organizational mission statement and considered amendments to
it that would better align that organizational mission statement
with the community benefits statement.

(2) A description of the process for approval of the community
benefits statement by the hospital’s or clinic’s governing board,
including a declaration that the board and administrators of the
hospital or clinic shall be responsible for oversight and
implementation of the community benefits plan. The board may
establish a community benefits implementation committee that
shall include members of the board, senior administrators, and
community stakeholders.

(3) A community health needs assessment pursuant to Section
127476 that evaluates the health needs and resources of the
community it serves.

(c) By April 1, begin delete 2015 end delete begin insert 2016 end insert , a private nonprofit hospital or
nonprofit multispecialty clinic shall develop, in collaboration with
the community, a community benefits plan pursuant to Section
127477 designed to achieve all of the following outcomes:

(1) Access to health care for members of underserved and
vulnerable populations.

(2) The addressing of essential health care needs of the
community, with particular attention to the needs of members of
underserved and vulnerable populations.

(3) The creation of measurable improvements in the health of
the community, with particular attention to the needs of members
of underserved and vulnerable populations.

127476.  

(a) Prior to adopting a community benefits plan, a
private nonprofit hospital or nonprofit multispecialty clinic shall
complete a community needs assessment that evaluates the health
needs and resources of the community served by the hospital or
clinic that is designed to achieve the outcomes specified in
subdivision (c) of Section 127475.

(b) In conducting its community health needs assessment, a
private nonprofit hospital or nonprofit multispecialty clinic shall
solicit comments from and meet with local government officials,
including representatives of local public health departments. A
private nonprofit hospital or nonprofit multispecialty clinic shall
also solicit comments from and meet with health care providers,
registered nurses, community groups representing, among others,
patients, labor, seniors, and consumers, and other health-related
organizations. Particular attention shall be given to persons who
are themselves underserved and who work with underserved and
vulnerable populations. Particular attention shall also be given to
identifying local needs to address racial and ethnic disparities in
health outcomes. A private nonprofit hospital or nonprofit
multispecialty clinic may create a community benefits advisory
committee for the purpose of soliciting community input.

(c) In preparing its community health needs assessment, a private
nonprofit hospital or nonprofit multispecialty clinic shall use
available public health data. A private nonprofit hospital or
nonprofit multispecialty clinic may collaborate with other facilities
and health care institutions in conducting community health needs
assessments and may make use of existing studies in completing
their own needs assessments.

(d) Prior to completing a community health needs assessment,
a private nonprofit hospital or nonprofit multispecialty clinic shall
make available to the public a copy of the assessment for review
and comment.

(e) A community health needs assessment shall be filed with
the office. A private nonprofit hospital or a nonprofit multispecialty
clinic shall update its community needs assessment at least every
three years.

127477.  

(a) By April 1, begin delete 2015 end delete begin insert 2016 end insert , a private nonprofit hospital
or nonprofit multispecialty clinic shall develop a community
benefits plan that conforms with this chapter.

(b) In developing a community benefits plan, a private nonprofit
hospital or nonprofit multispecialty clinic shall solicit comments
from and meet with local government officials, including
representatives of local public health departments. A private
nonprofit hospital or nonprofit multispecialty clinic shall also
solicit comments from and meet with health care providers,
community groups representing, among others, patients, labor,
seniors, and consumers, and other health-related organizations.
Particular attention shall be given to persons who are themselves
underserved, who work with underserved and vulnerable
populations, and who work with populations at risk for racial and
ethnic disparities in health outcomes.

(c) A community benefits plan shall include, at a minimum, all
of the following:

(1) A summary of the needs assessment and a statement of the
community health care needs that will be addressed by the plan.

(2) A list of the services the private nonprofit hospital or
nonprofit multispecialty clinic intends to provide in the following
year to address community health needs identified in the
community health needs assessments. The list of services shall be
categorized under the following:

(A) Charity care, as defined in subdivision (b) of Section
127400.

(B) Other community benefits, including community health
improvement services and community benefit operations, health
professions education, subsidized health services, research, and
contributions to community groups.

(C) Community building activities targeting underserved and
vulnerable populations.

(3) A description of the target community or communities that
the plan is intended to benefit.

(4) An estimate of the economic value of the community benefits
that the private nonprofit hospital or nonprofit multispecialty clinic
intends to provide.

(5) A summary of the process used to elicit community
participation in the community health needs assessment and
community benefits plan design, and a description of the process
for ongoing participation of community members in plan
implementation and oversight, and a description of how the
assessment and plan respond to the comments received by the
private nonprofit hospital or nonprofit multispecialty clinic from
the community.

(6) A list of individuals, organizations, and government officials
consulted during the development of the plan.

(7) A description of the intended impact on health outcomes
attributable to the plan, including short- and long-term measurable
goals and objectives.

(8) Mechanisms to evaluate the plan’s effectiveness.

(9) The name and title of the individual responsible for
implementing the plan.

(10) The names of individuals on the private nonprofit hospital’s
or nonprofit multispecialty clinic’s governing board.

(11) If applicable, a report on the community benefits efforts
of the preceding year, including the amounts and types of
community benefits provided, in a manner to be prescribed by the
office; a statement of the plan’s impact on health outcomes,
including a description of the private nonprofit hospital’s or
nonprofit multispecialty clinic’s progress toward meeting its short-
and long-term goals and objectives; and an evaluation of the plan’s
effectiveness.

(d) A private nonprofit hospital or nonprofit multispecialty clinic
may also report on bad debts and Medicare shortfalls, although
these shall not be calculated or reported as community benefits.

(e) The governing board of a private nonprofit hospital or
nonprofit multispecialty clinic shall adopt the community benefits
plan. A private nonprofit hospital or nonprofit multispecialty clinic
shall make its draft community benefits plan available to the public,
in hard copy and on its Internet Web site, no later than 30 days
prior to its adoption by the governing board of the private nonprofit
hospital or nonprofit multispecialty clinic.

(f) After April 1, begin delete 2015 end delete begin insert 2016 end insert , a private nonprofit hospital or
nonprofit multispecialty clinic shall, every two years, revise and
submit its community benefits plan to the office, no later than 120
days after the end of the hospital’s or clinic’s fiscal year.

(g) A person or entity may file comments on a private nonprofit
hospital’s or nonprofit multispecialty clinic’s community benefits
plan with the office.

(h) A private nonprofit hospital or nonprofit multispecialty
clinic, under the common control of a single corporation or another
entity, may file a consolidated plan if the plan addresses services
in all of the categories listed in paragraph (2) of subdivision (c) to
be provided by each hospital or clinic under common control of
the corporation or entity.

 

Article 3.  Duties of the Office of Statewide Health Planning
and Development

 

127487.  

(a) (1) The office shall develop and adopt regulations
to prescribe a standardized format for community benefits plans
pursuant to this chapter.

(2) The office shall develop a standardized methodology for
estimating the economic value of community benefits.

(3) In developing standards of reporting on community benefits,
the office shall, to the maximum extent possible, conform to
Internal Revenue Service reporting standards for those data
elements reported to the Internal Revenue Service, but shall also
include those data elements required under this chapter or other
state law, including charity care, as defined in Section 127400.

(4) A private nonprofit hospital or nonprofit multispecialty clinic
shall annually file with the office its IRS Form 990, or its successor
form, and the office shall post the form on its Internet Web site.

(b) The office shall provide technical assistance to help private
nonprofit hospitals and nonprofit multispecialty clinics comply
with this chapter.

(c) The office shall make public a community health needs
assessment and community benefits plan and any comments
received regarding those assessments and plans. The office shall
make these documents available on its Internet Web site.

(d)  begin delete The end delete begin insert For each year that a community benefits plan is
submitted pursuant to subdivision (f) of Section 127477, the end insert office
shall annually calculate and make public the total value of
community benefits provided by begin insert each end insert private nonprofit begin delete hospitals end delete
begin insert hospital end insert and nonprofit multispecialty begin delete clinics end delete begin insert clinic end insert that begin delete report end delete
begin insert reports end insert pursuant to this chapter.

127488.  

The office may assess a civil penalty against any
private nonprofit hospital or nonprofit multispecialty clinic that
fails to comply with this article in the same manner as specified
in Section 128770.

SEC. 5.  

Section 129050 of the Health and Safety Code is
amended to read:

129050.  

A loan shall be eligible for insurance under this chapter
if all of the following conditions are met:

(a) The loan shall be secured by a first mortgage, first deed of
trust, or other first priority lien on a fee interest of the borrower
or by a leasehold interest of the borrower having a term of at least
20 years, including options to renew for that duration, longer than
the term of the insured loan. The security for the loan shall be
subject only to those conditions, covenants and restrictions,
easements, taxes, and assessments of record approved by the office,
and other liens securing debt insured under this chapter. The office
may require additional agreements in security of the loan.

(b) The borrower obtains an American Land Title Association
title insurance policy with the office designated as beneficiary,
with liability equal to the amount of the loan insured under this
chapter, and with additional endorsements that the office may
reasonably require.

(c) The proceeds of the loan shall be used exclusively for the
construction, improvement, or expansion of the health facility, as
approved by the office under Section 129020. However, loans
insured pursuant to this chapter may include loans to refinance
another prior loan, whether or not state insured and without regard
to the date of the prior loan, if the office determines that the amount
refinanced does not exceed 90 percent of the original total
construction costs and is otherwise eligible for insurance under
this chapter. The office may not insure a loan for a health facility
that the office determines is not needed pursuant to subdivision
(k).

(d) The loan shall have a maturity date not exceeding 30 years
from the date of the beginning of amortization of the loan, except
as authorized by subdivision (e), or 75 percent of the office’s
estimate of the economic life of the health facility, whichever is
the lesser.

(e) The loan shall contain complete amortization provisions
requiring periodic payments by the borrower not in excess of its
reasonable ability to pay as determined by the office. The office
shall permit a reasonable period of time during which the first
payment to amortization may be waived on agreement by the lender
and borrower. The office may, however, waive the amortization
requirements of this subdivision and of subdivision (g) of this
section when a term loan would be in the borrower’s best interest.

(f) The loan shall bear interest on the amount of the principal
obligation outstanding at any time at a rate, as negotiated by the
borrower and lender, as the office finds necessary to meet the loan
money market. As used in this chapter, “interest” does not include
premium charges for insurance and service charges if any. Where
a loan is evidenced by a bond issue of a political subdivision, the
interest thereon may be at any rate the bonds may legally bear.

(g) The loan shall provide for the application of the borrower’s
periodic payments to amortization of the principal of the loan.

(h) The loan shall contain those terms and provisions with
respect to insurance, repairs, alterations, payment of taxes and
assessments, foreclosure proceedings, anticipation of maturity,
additional and secondary liens, and other matters the office may
in its discretion prescribe.

(i) The loan shall have a principal obligation not in excess of
an amount equal to 90 percent of the total construction cost.

(j) The borrower shall offer reasonable assurance that the
services of the health facility will be made available to all persons
residing or employed in the area served by the facility.

(k) The office has determined that the facility is needed by the
community to provide the specified services. In making this
determination, the office shall do all of the following:

(1) Require the applicant to describe the community needs the
facility will meet and provide data and information to substantiate
the stated needs.

(2) Require the applicant, if appropriate, to demonstrate
participation in the community needs assessment required by
Section 127476.

(3) Survey appropriate local officials and organizations to
measure perceived needs and verify the applicant’s needs
assessment.

(4) Use any additional available data relating to existing facilities
in the community and their capacity.

(5) Contact other state and federal departments that provide
funding for the programs proposed by the applicant to obtain those
departments’ perspectives regarding the need for the facility.
Additionally, the office shall evaluate the potential effect of
proposed health care reimbursement changes on the facility’s
financial feasibility.

(6) Consider the facility’s consistency with the Cal-Mortgage
state plan.

(l) In the case of acquisitions, a project loan shall be guaranteed
only for transactions not in excess of the fair market value of the
acquisition.

Fair market value shall be determined, for purposes of this
subdivision, pursuant to the following procedure, that shall be
utilized during the office’s review of a loan guarantee application:

(1) Completion of a property appraisal by an appraisal firm
qualified to make appraisals, as determined by the office, before
closing a loan on the project.

(2) Evaluation of the appraisal in conjunction with the book
value of the acquisition by the office. When acquisitions involve
additional construction, the office shall evaluate the proposed
construction to determine that the costs are reasonable for the type
of construction proposed. In those cases where this procedure
reveals that the cost of acquisition exceeds the current value of a
facility, including improvements, then the acquisition cost shall
be deemed in excess of fair market value.

(m) Notwithstanding subdivision (i), any loan in the amount of
ten million dollars ($10,000,000) or less may be insured up to 95
percent of the total construction cost.

In determining financial feasibility of projects of counties
pursuant to this section, the office shall take into consideration
any assistance for the project to be provided under Section 14085.5
of the Welfare and Institutions Code or from other sources. It is
the intent of the Legislature that the office endeavor to assist
counties in whatever ways are possible to arrange loans that will
meet the requirements for insurance prescribed by this section.

(n) The project’s level of financial risk meets the criteria in
Section 129051.