BILL ANALYSIS Ó
AB 1523
Page A
Date of Hearing: April 8, 2014
ASSEMBLY COMMITTEE ON HUMAN SERVICES
Mark Stone, Chair
AB 1523 (Atkins and Weber) - As Amended: April 1, 2014
SUBJECT : Residential Care Facilities for the Elderly (RCFE):
liability insurance.
SUMMARY : This measure would require all RCFEs to carry
liability insurance. Specifically, this bill :
1)Requires all RCFEs, on or after July 1, 2015, to acquire
liability insurance to cover injury to residents and guests in
the amount of at least one million dollars ($1,000,000) per
occurrence and three million dollars ($3,000,000) in total or
a bond in the amount of three million dollars ($3,000,000).
2)Provides that the liability insurance will cover injuries
sustained by acts, omission to act, or neglect of the licensee
or his or her employees.
EXISTING LAW
1)Establishes the California RCFE Act, which requires facilities
that provide personal care and supervision, protective
supervision or health related services for persons 60 years of
age or older who voluntarily choose to reside in that facility
to be licensed by the California Department of Social Services
(DSS). (H&S Code 1569 and 1569.1)
2)Prohibits any person, firm, partnership, association,
corporation or public agency from establishing, operating,
managing, conducting or maintaining a community care facility
(CCF) or a RCFE without a valid license provided by DSS. (H&S
Code 1569.10)
3)Provides that any person who violates the RCFE Act shall be
guilty of a misdemeanor and upon conviction be fined no more
than $1,000, imprisoned in county jail for up to one year, or
both. (H&S Code 1549.40)
4)Requires RCFE administrators and staff to meet specified
professional development and training requirements in order to
be certified to operate or work in a RCFE. (H&S Code
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1569.625)
5)Requires an "admission agreement" to include all documents
that a resident or his or her representative must sign at the
time of, or as a condition of admission to a RCFE. (H&S Code
1569.880)
6)Prohibits the admission agreement from including unlawful
waivers of facility liability for the health and safety or
personal property of residents. (H&S Code 1569.883)
FISCAL EFFECT : Unknown.
COMMENTS :
Background : It is the intent of the Legislature, in
establishing the RCFE Act, to help provide a system of
residential care to allow older persons be able to voluntarily
live independently in a homelike environment as opposed to being
forced to live in an institutionalized facility, such as a
nursing home, or having to move between medical and nonmedical
environments. RCFEs, commonly referred to as assisted living
facilities, are licensed retirement residential homes and board
and care homes that accommodate and provide services to meet the
varying, and at times, fluctuating health care needs of
individuals who are 60 years of age and over, and persons under
the age of 60 with compatible needs. Licensed by DSS Community
Care Licensing Division (CCLD), they can range in size from
residential homes with six or less beds to more formal
residential facilities with 100 beds or more.
There is also no uniform common care model; rather the types of
assistive services can vary widely, which can include differing
levels of personal care and protective supervision, based upon
the needs of the resident.
If a resident needs medical care in his or her residence in
order to maintain an independent lifestyle, incidental medical
services are permitted to be provided by a licensed or otherwise
approved external provider, such as a home healthcare agency
(HHA), which is licensed by the California Department of Public
Health. Additionally, some RCFEs, upon approval of DSS and
after having met specified orientation and training
requirements, may provide assistive memory care services to
individuals with dementia or Alzheimer's disease.
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Existing regulations also lay out the circumstances under which
an individual may be allowed to reside in RCFEs. Specifically,
they include persons:<1>
1) Capable of administering their own medications;
2) Receiving medical care and treatment outside the
facility or who are receiving needed medical care from a
visiting nurse;
3) Who because of forgetfulness or physical limitations
need only be reminded or to be assisted to take medication
usually prescribed for self-administration;
4) With problems including, but not limited to,
forgetfulness, wandering, confusion, irritability, and
inability to manage money;
5) With mild temporary emotional disturbance resulting from
personal loss or change in living arrangement;
6) Who are temporarily bedridden, as specified; and
7) Who are under 60 years of age whose needs are compatible
with other residents in care, if they require the same
amount of care and supervision as do the other residents in
the facility.
Regulations also provide specific prohibitions on individuals
who are allowed to reside in a RCFE, which includes whether the
resident has active communicable tuberculosis, requires 24-hour
skilled nursing or intermediate care, has an ongoing behavioral
or mental disorder, or has dementia, unless he or she is
otherwise permitted to be cared for in a RCFE by CCLD.
Growing demand : Over the past thirty years, the demand for
RCFEs has grown substantially. Although RCFEs have been
generally available, they experienced explosive growth in the
1990s, more than doubling the number of beds between 1990 and
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<1> Section 87455(b) of Title 22, California Code of
Regulations.
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2002,<2> and continued to grow 16 percent between 2001 and
2010.<3> Nationwide, states reported 1.2 million beds in
licensed RCFEs in 2010.<4> That same year, the national Centers
for Disease Control reported that 40% of RCFE residents needed
help with three or more activities of daily living and
three-fourths of residents had at least two of the 10 most
common chronic conditions.<5>
According to DSS, as of March 5, 2014 there are 7,589 licensed
RCFEs in California with a capacity to serve 176,317 residents.
Financial Structure : More than 90% of RCFE licenses in
California are held by for-profit providers, the majority of
which have six or fewer beds. Most residents pay privately or
with long-term care insurance since there is very little public
funding available through Medi-Cal, Supplemental Security Income
(SSI/SSP) or Medicare, and fees can range from $1,500 to more
than $8,000 per month. Very few beds are available to seniors
who use their entire SSI/SSP checks to pay rent. In 2013, the
maximum SSI/SSP grant was $866.40. Residents who rely solely on
Social Security Income may have a maximum payment of $2,642 per
month in 2014,<6> although that amount varies widely based on
the recipient's prior income while working.
As a result, low-income seniors and middle-income seniors who do
not have long term care insurance are largely unable to afford
to reside in a RCFE. Most low-income seniors may receive
services through In Home Supportive Services (IHSS) or a skilled
nursing facility if they are Medi-Cal eligible. A small number
of Medi-Cal patients who are eligible for nursing home care may
be placed in an RCFE through the state's Assisted Living Waiver,
which began in 2006. According to state data, 172 RCFEs
currently participate in the waiver program benefitting 2,200
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<2> Flores and Newcomer, "Monitoring Quality of Care in
Residential Care for the Elderly: The Information Challenge".
Journal of Aging and Social Policy, 21:225-242, 2009.
<3> SCAN Foundation. "Long Term Care Fundamentals: Residential
Care Facilities for the Elderly." March 2011.
http://thescanfoundation.org/sites/thescanfoundation.org/files/LT
C_Fundamental_7_0.pdf
<4> "Assisted Living and Residential Care in the States in
2010," Mollica, Robert, AARP Public Policy Institute
<5> "Residents Living in Residential Care Facilities: United
States, 2010, Caffrey, Christine, et al., US Centers for
Disease Control, April 2012
<6> http://www.ssa.gov/pressoffice/factsheets/colafacts2014.pdf
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residents. There are an additional 3,700 slots available.
Increasingly, complex corporate mergers and acquisitions have
meant that many RCFEs are owned by national corporate chains
that control more than one facility. Administrators employed by
these chains may also oversee multiple facilities. This
development has led to regulatory challenges since CCLD
citations and other licensing reports are facility specific, and
management problems common to multiple RCFEs with the same owner
may easily go unnoticed.
Recent events : A series of recent events has drawn attention to
questions about the adequacy of RCFEs and the CCLD's ability to
comply with existing oversight and enforcement requirements to
help ensure for the health and safety of individuals who receive
services within CCLD-licensed facilities. Over the last several
years, numerous media outlets have documented chronic
understaffing and a lack of required assessments and substandard
care. Reports in September 2013, prompted by a consumer
watchdog group that had hand-culled through stacks of documents
in San Diego, revealed that more than two dozen seniors had died
in recent years in RCFEs under questionable circumstances that
went ignored or unpunished by CCLD.<7>
The coverage reached a climax with the abandonment of the Valley
Springs Manor, a RCFE with 29 residents in the city of Castro
Valley. The facility, licensed by CCLD in March 2008, had been
frequently visited by CCLD due to numerous violations relating
to the inadequacy of care during its five year existence. In
May 2013, CCLD, taking action in response to its poor care
history, revoked Valley Springs Manor's license. The revocation
was immediately appealed by the licensee, which delayed action
by CCLD and allowed the facility to remain operational. During
this time, CCLD continued to receive and investigate additional
complaints, which culminated with the licensee physically
abandoning the facility sometime in September or October 2013,
leaving its frail seniors under the care of the facility's
administrator and support staff.
Soon after, however, due to lack of compensation and leadership,
the administrator and a majority of the support staff quit,
leaving only the cook and janitor, still unpaid, to provide care
for residents. In response to its inability to reach the
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<7> "Care Home Deaths Show System Failures," San Diego Union
Tribune, Sept.7, 2013
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licensee or any administrative staff, CCLD initiated its
temporary suspension order (TSO) process on October 17, 2013
whereby the license would be immediately revoked. The TSO was
delivered four days later for enactment on Thursday, October 24,
2013. After the TSO was delivered, and the licensing analyst's
inspection was concluded, the analyst delivered a $3,800 fine to
the cook for operating an unlicensed facility, even though the
fine should have been delivered either to the administrator or
licensee, and left. No less than an hour after the analyst
left, feeling overwhelmed and unsure about what to do, the cook
and janitor called 911. Immediately thereafter, emergency
services arrived and worked to remove all of the infirm and
at-risk seniors and take them to local hospital or known
relatives.
The following day, upon initial review, according to DSS, the
CCLD "made a judgment call that the facility could continue to
function for several more days while the last residents were
relocated, but that judgment was in error." DSS acknowledges,
in retrospect, that CCLD "staff should have been engaged on
Friday to address the developing crisis and make appropriate
arrangements to ensure the safety of remaining residents."<8>
Exacerbating the circumstances of the Castro Valley situation
was the discovery that its licensee also owned and operated two
other RCFEs; a smaller facility in Oakland and another larger
facility in Modesto. Concerned that similar circumstances would
occur at these two facilities, CCLD acted quickly to help
transfer the license of the Oakland facility to another
operator, however, it faced a much more difficult task of
stabilizing and transferring the Modesto facility; Sundial Palms
to another operator. Over the course of three months, CCLD and
DSS executive leadership worked to put in place an intermediate
facility administrator at Sundial Palms, which had nearly twice
the number of residents than Valley Springs Manor in Castro
Valley, and worked to identify and transfer the license to
another operator.
Need for the bill : Although the abandonment, negligence and
neglect witnessed in Castro Valley and Modesto are extreme and
rare, they are nonetheless representative of the spectrum of
challenges the state is facing with the growing demand for
assisted living environments and the ability and capacity of
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<8> Departmental (DSS) Report on the Closure of the Valley
Springs Residential Care Facility for the Elderly. Page 2
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RCFEs to meet that demand. In response, a number of legislative
measures are being pursued to strengthen, address shortcomings,
resolve legal liabilities and gaps in the provision of services,
and ultimately reform the RCFE industry. This measure is part
of those efforts.
Writing for the need of this bill, the author states:
Neither statute nor regulation requires any RCFE to carry
liability insurance as a condition of licensure. As a
result, many facilities lack even the minimum liability
insurance coverage, exposing both them and residents to
great financial risk.
Currently, the only action residents have to be compensated
for damages sustained from elder abuse or neglect is civil
litigation. Civil litigation is expensive, and typically,
the only way most families can actually seek damages from a
licensed provider is on a contingency basis. If the
licensee does not carry liability insurance, it would be
very difficult for the resident, or his/her heirs, to find
an attorney willing to litigate a wrongful death or neglect
case on contingency. And in the event the case is accepted
and successfully litigated, an uninsured facility would
have a difficult time paying from their own budget, forcing
them to consider claiming bankruptcy. This circumstance
benefits no one: the RCFE is out of business and the
victim is left with no recourse for compensation.
Additionally, liability insurance is a consumer protection
that all residents and families of residents in assisted
living deserve. As most often the case, only when there is
a belief that a resident living in assisted living was
harmed through neglect, negligence, or other criminal act
does the resident or family discover the facility does not
have liability insurance. With no guarantee of RCFE's
maintaining liability coverage, residents and their
families will continue to be at the mercy of uninsured
facilities, hoping that nothing goes wrong.
Intentional versus unintentional acts : The author is correct
that currently, under state law, RCFEs are not required to have
liability insurance. Although it is considered a best practice
and a statewide business industry standard, many RCFEs do not
have liability insurance for a variety of reasons, but most
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predominantly because of its costs. In stating the need for the
bill, the author states that it will help residents of RCFEs "to
be compensated for damages sustained from elder abuse or
neglect." However, it is unclear whether the bill, as currently
written, will achieve this goal because it is unclear whether
the required liability insurance will cover both general
liability and intentional acts, such as abuse and neglect.
This bill requires all RCFEs to maintain either liability
insurance in the amount of at least one million dollars per
occurrence (incident) and three million dollars in the total
annual aggregate, or at least a three million dollar bond, to
cover injuries to residents and guests "sustained on account of
the acts, omissions to act, or negligence of the licensee or its
employees." At minimum, this required coverage could cover up
to three incidents for up to three million dollars per year for
accidents that may occur as a result of unintentional actions,
such as accidents or negligence, that result in physical harm to
a resident.
Yet, the language does not specifically require coverage of
intentional acts, such as abuse, neglect, or molestation, and
could be interpreted to only require RCFEs to carry general
liability insurance to cover unintentional acts. Should the
author wish to address whether this bill requires RCFEs to also
have liability insurance that covers intentional acts, such as
abuse, neglect or molestation, the author may wish to amend the
bill to further clarify that the required liability insurance
does or does not cover intentional acts.
Adequacy, proportionality and cost of coverage : It is also
unclear whether the measure requires adequate or inadequate
levels of liability insurance coverage. Because the requirement
for RCFEs to carry liability insurance coverage is not a
statewide industry standard, it is difficult to ascertain
whether a three million dollar liability insurance policy is
sufficient to cover accidental injury within a RCFE.
Additionally, RCFEs range in size from small three to six bed
residential homes to larger facilities with 75 beds or more with
commercial kitchens, common areas, and recreational programs.
Given that RCFEs range widely in size, required liability
insurance should be scaled proportionately to the number of
residents housed by the RCFE in order to adequately provide
liability compensation for coverable incidences.
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Lastly, according to the author, "anecdotally, the range of
premiums appears to be $2,000 to $4,000 annually." However, it
is unclear whether this range of premiums is reflective of the
proposed three million dollar minimum coverage. Further, it is
unclear how these additional costs will be borne by RCFEs, which
could ultimately be passed on to residents. This could place
additional financial burdens on seniors with limited resources,
and potentially reduce options for those who live on fixed
incomes, such as seniors whose only income is SSI/SSP.
POLICY CONSIDERATIONS
Should the committee choose to pass this bill, it should
encourage the author to:
1)Clarify whether the bill requires RCFEs to carry liability
insurance to cover unintentional or intentional actions, such
as abuse, neglect, and molestation, or both.
2)Work with DSS, RCFEs, RCFE advocacy organizations, consumer
advocacy organizations, insurance companies and other
stakeholders to determine adequate minimum liability insurance
coverage amounts scaled to the number of residents in a RCFE.
3)Continue to work with DSS, RCFEs, RCFE resident advocacy
organizations, consumer advocacy organizations and other
stakeholders to address ways to limit the impact required
liability insurance coverage costs would have on residents,
especially seniors on fixed incomes.
REGISTERED SUPPORT / OPPOSITION :
Support
Berman & Riedel, LLP
California Advocates for Nursing Home Reform (CANHR)
California Assisted Living Association (CALA)
California Continuing Care Residents Association (CALCRA)
California Long Term Care Ombudsman Services of San Luis Obispo
County
California Long-Term Care Ombudsman Association (CLTCOA)
California School employees Association (CSEA)
California School Employees Association, AFL-CIO (CSEA)
Consumer Advocates for RCFE Reform (CARR)
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Consumer Attorneys of California
Country Garden Terrace
County of San Diego
Elder Care Guides
LeadingAge California
National Senior Citizens Law Center
San Diego Elder Law Center, Philip Lindsley, CELA
SDSU School of Social Work
53 Individuals
Opposition
Community Residential Care Association of California
Analysis Prepared by : Chris Reefe / HUM. S. / (916) 319-2089