BILL ANALYSIS Ó AB 927 Page 1 Date of Hearing: January 12, 2016 ASSEMBLY COMMITTEE ON HEALTH Rob Bonta, Chair AB 927 McCarty - As Amended January 4, 2016 SUBJECT: Health facilities: nursing homes. SUMMARY: Establishes the Nursing Home Ownership Disclosure Act of 2016 within the Department of Public Health (DPH). Imposes additional transparency and suitability requirements for ownership and licensure of skilled nursing facilities (SNFs) and intermediate care facilities (ICFs). Expands disclosure requirements applicants for ownership or governance of ICFs and SNFs must provide to DPH. Specifically, this bill: 1)Requires DPH to deny the application of any ICF and SNF applicant who fails to cooperate with DPH in the completion of an application for licensure of a specified health facility. Defines "failure of an applicant to cooperate" as the inability of the applicant to provide the information required by existing law and DPH regulations, the inability to provide the information in the form requested by DPH, or both. 2)Expands the requirements DPH must investigate to determine if an applicant has demonstrated a pattern and practice of violations of state or federal laws and regulations, and if the applicant has the ability to comply with existing law, to all applicants for licensure of SNFs and ICFs. AB 927 Page 2 3)Requires DPH to confirm an applicant is in good standing with the appropriate licensing agency and obtain historical information on any disciplinary action taken against an applicant, if the applicant is a professional licensed by the State of California. 4)Requires applicants for licensure of SNFs and ICFs to disclose additional information to DPH including the following: a) Information regarding applicants who have held a direct or indirect beneficial ownership interest of 5% or more in any other SNF or ICF in California or any other state, or in any residential care facility (RCF); b) Existing relationships of an applicant's parent organizations, subsidiaries, management or parent organizations of management companies with any other SNFs or ICFs within the United States, any community care facility (CCF), or any RCF; and, c) History of compliance or noncompliance with applicable state and federal laws or regulations, as specified. 5)Clarifies that a person, as defined, is prohibited from acquiring a direct or indirect beneficial interest of 5% or more in specified business structures without prior written approval from DPH. 6)Requires DPH to deny approval of a license application for individuals who maintain 5% or greater direct or indirect AB 927 Page 3 beneficial interest in licensees, as defined, of a SNF, ICF, CCF, or RCF for the elderly at a time during the seven-year period prior to the application in which that facility committed one or more of the following violations: a) Issuance of a temporary suspension or revocation of a facility's license by DPH; b) Involuntary termination of a facility's Medicare or Medi-Cal certification; or, c) Appointment of a court-ordered receiver. 7)Deletes existing criteria for DPH's authorization to deny approval of a license application of a SNF or ICF, and establishes new conditions for denial for specified persons, if those actions have occurred within the seven-year period prior to the application. 8)Requires DPH to provide additional information on long-term care (LTC) facilities through the consumer information service system (CISS). 9)Requires DPH to make current written copies of the LTC facility profiles available to the public through its district offices. 10)Defines the following: AB 927 Page 4 a) "Beneficial interest" means the interest held by any person, including a private equity firm and real estate investment trust, that acquires an interest in any entity, including, but not limited to, any firm, association, organization, partnership, business trust, investment trust, corporation, or limited liability company, that is licensed to operate a SNF or ICF by assuming that entity's debt; b) "Indirect beneficial interest" means the interest held by any person, including a private equity firm and real estate investment trust that provides capital or assets to a SNF or ICF, in exchange for a share of 5% or more of the facility's gross income or profits; and, c) "Management company" means any company or entity that has assumed operational or managerial control over the facility or who directly or indirectly conducts the day-to-day operations of the facility either under contract or through some other arrangement. EXISTING LAW: 1)Requires an applicant for licensure or management of a health facility, including specified hospitals, SNFs, or ICFs, that has not filed an application for license to operate that facility to file an application with DPH with specified information regarding the applicant and the health facility in which the applicant seeks licensure or approval of management. 2)Requires DPH to consider any available information, as specified, regarding whether or not an applicant has demonstrated a pattern and practice of violations of state or AB 927 Page 5 federal laws and regulations, and whether the applicant has the ability to comply with existing law, when considering if an applicant is qualified for licensure of a general acute care hospital, an acute psychiatric hospital, or a special hospital. 3)Authorizes DPH to require an applicant for licensure of a general acute care hospital, an acute psychiatric hospital, or a special hospital to provide any documentation or information DPH deems necessary for the proper administration and enforcement of existing laws regarding licensure. 4)Requires each applicant seeking licensure to operate a SNF or ICF to disclose to DPH information regarding ownership, management, and governance of other SNFs, ICFs, or CCFs, as specified. 5)On and after January 1, 1990, prohibits a person, as defined, from acquiring a beneficial interest of 5% or more in any corporation or partnership licensed to operate a SNF or ICF, or in any management company under contract with a licensee of a SNF or ICF, without prior written approval of DPH. 6)Authorizes DPH to deny the license application of a person, as defined, with a beneficial interest of 5% or more in a licensee of, or in a management company under contract with a licensee of, a SNF, ICF, CCF, or RCF for the elderly for any of the following reasons, unless otherwise specified: a) Its license was suspended or revoked due to violations of existing law; b) A court-ordered receiver was appointed; or, c) A final Medi-Cal decertification action was taken by the federal Centers for Medicare and Medicaid Services (CMS); 7)Prohibits DPH from denying an application for licensure of a SNF or ICF without first providing the applicant with a AB 927 Page 6 written notice of grounds for the proposed denial of application, and an opportunity to submit additional evidence in opposition to the proposed denial. 8)Exempts banks, trust companies, financial institutions, title insurers, controlled escrow companies, underwritten title companies to which a license is issued in a fiduciary capacity, and the directors of specified nonprofit corporations from specified disclosure requirements and denial criteria when applying for licensure of a SNF or ICF. 9)Requires DPH to develop and establish a CISS to provide updated and accurate information to the general public and consumers regarding LTC facilities in their communities. 10)Requires DPH to interface the CISS with its Automated Certification and Licensure Information Management System, wherever feasible. 11)Declares the intent of the Legislature that DPH, in the establishment and development of the CISS, to maximize the use of available federal funds. 12)Requires DPH to ensure the confidentiality of personal and identifying information of residents and employees and prohibits the disclosure of such information through the CISS. FISCAL EFFECT: This bill has not yet been analyzed by a fiscal committee. COMMENTS: 1)PURPOSE OF THIS BILL. According to the author, as owners of LTC facilities use increasingly complex forms of ownership, it AB 927 Page 7 has become virtually impossible to determine if the owner of one particular home has significant complaints against them at a different facility, despite many efforts to highlight the problem and uncover the information. The author asserts it is incumbent upon the Legislature to ensure the protection of California's seniors, who are often in their most fragile and vulnerable state in nursing home settings. The author contends it is in the best interest of the state to protect consumers and prevent existing owners with poor track records from opening new LTC facilities, and that there is currently a lack of transparency from DPH. The author concludes this bill will help establish additional oversight and transparency for nursing home ownership by strengthening suitability requirements of owners, clarifying DPH's duty to review and approve ownership changes, and make ownership information more transparent to the public. 2)BACKGROUND. According to the Department of Finance, the fasting growing cohort in California's population is 65 to 74-year olds due to baby boomers reaching that milestone. This group is expected to grow by 25% by 2019. With this rapid growth rate and a quickly changing healthcare and social services system, the regulatory challenges for the state are anticipated to grow in complexity. a) DPH's Licensing and Certification (L&C) Program. DPH's L&C Program is the DPH's largest program and is responsible for the regulatory oversight of over 7,500 licensed health care facilities, 2,500 of which are LTC facilities such as SNFs and ICFs. Additionally, the federal CMS contracts with L&C to evaluate facilities accepting payments from Medicare and Medi-Cal, the state's Medicaid program, to ensure that they meet federal requirements. The L&C Program evaluates health care facilities for compliance with state and federal laws and regulations through a variety of required tasks, including initial and re-licensure surveys, federal certification surveys, and investigations of complaints and entity-reported incidents (ERIs). AB 927 Page 8 b) SNF and ICF Licenses and Ownership. According to the Office of Statewide Health Planning and Development, most SNF and ICF facilities are run as for-profit enterprises; about 13% are not-for-profit. According to DPH, there is an average of 34 individuals associated with SNF licensing application, including owners, board members, the director of nursing, and the administrator. As of May 2015, DPH stated that since 2008, one SNF or ICF license has been suspended, 61 decertification actions have been taken, and six certification termination acts were initiated where the facility was able to return to compliance. Between July 1, 2007 and March 15, 2015, a total of 549 ICF or SNF facilities have been issued at least one Class AA or A citation. A class AA citation is a violation that DPH has determined to have been a direct proximate cause of death of a patient or resident of a LTC facility. A class A citation is a violation that DPH has determined presents either imminent danger that death or serious harm to the patients or residents, or that there is substantial probability that death or serious physical harm to patients or residents. c) Nursing Homes in the Media. In the summer of 2013, The Sacramento Bee published a three-part series of articles entitled "Nursing Homes Unmasked," highlighting the challenges in determining ownership of nursing home facilities in California, and the varying records of performance of those facilities. The Sacramento Bee reported that approximately half of California's 120,000 licensed beds are controlled by 25 for-profit nursing home chains; 10 of them performed below statewide averages in 2013 in more than half of the examined quality-of-care categories, which measure frequency of incidences such as falls and infections. Furthermore, the articles stated that 20 of the top 25 chains fell below state averages in at least three out of five staffing measures. d) DPH Complaints and Investigations. Investigations of AB 927 Page 9 nursing home complaints and ERIs are carried out pursuant to both federal and state mandates. Current law requires DPH to make an onsite investigation of a complaint against a nursing home within 10 working days of receipt. If the complaint is an immediate jeopardy complaint, meaning that it involves a threat of imminent danger of death or serious bodily harm, DPH is required to make an onsite investigation within 24 hours of receipt. However, current law does not specify the length of time required to complete complaint investigations. Longstanding concerns and complaints about the manner in which the L&C program managed complaint and ERI investigations have persisted for many years. In 2006, the Legislative Analyst's Office reported that only one-half of all complaints not classified as immediate jeopardy were investigated within the required 10-day timeframe. Further, in 2007, the California State Auditor issued a report finding that the Department of Health Services (now referred to as DPH) struggled to initiate and close complaint investigations and communicate with complainants in a timely manner. In July 2012, CMS sent a letter to DPH expressing concern with its ability to meet many of its L&C responsibilities, including timely complaint investigations. The state was in jeopardy of losing $1 million in federal funds if certain benchmarks were not met. Ultimately, $138,123 in federal funding was withheld. e) State Auditor Report. In October 2014, the California State Auditor released a report regarding the L&C Program citing ineffective management of nursing home complaint investigations. The key findings of that report included: i) As of April 2014, there were more than 11,000 open complaints and ERIs backlogged, many of which had relatively high priorities, and had remained open for an average of nearly a year; ii) Despite backlogs and lengthy investigations, L&C AB 927 Page 10 does not have any policies or procedures to ensure prompt completion of complaint/ERI investigations and in many cases did not meet statutory timeframes for initiating complaint investigations; iii) There was no staffing analysis for any of its district offices to determine how much staff is needed to complete workload. Most of the L&C district offices visited by audit staff reported not having the resources needed to investigate complaints properly, and having to work overtime in order to try to keep pace with workload; and, iv) DPH failed to report all statutorily required information to the Legislature in certain years by omitting information related to the timeliness of complaint investigations in their 2012 and 2013 reports to the Legislature. DPH responded that it agreed with the majority of the recommendations in the State Auditor's report. However, DPH disagreed with the suggested implementation of various timelines, such as establishing timeframes in which to process and complete complaint and ERI investigations. According to the State Auditor's most recent update, out of 18 recommendations suggested by the State Auditor in the report, only four have been fully implemented to date. 3)SUPPORT. The California Advocates for Nursing Home Reform, a cosponsor of this bill, states this bill makes necessary reforms that are critically needed to protect nursing home residents from abuse, including mistreatment and death due to neglect by operators. The Office of the San Diego County District Attorney, also a co-sponsor of this bill, contends the lapse of oversight at DPH and the lack of accountability by nursing home owners and operators have left many California elders in grave danger. The sponsors state it is time for California to take strong steps to begin monitoring nursing home chains operating in the state to keep those unfit from AB 927 Page 11 acquiring nursing homes or expanding their operations, and to provide increased transparency to consumers and patients. The California Long-Term Care Ombudsman Association supports this bill, stating this bill is a meaningful step toward improving transparency and consumer protections for SNF residents; local ombudsman representatives are often unable to identify the owners of SNFs are frequently discouraged to learn after working to assist a resident in transferring from a facility because of "consistently unsatisfactory care issues" only to discover later the resident has been transferred to another facility by the same operators but under a different corporate name. Supporters of this bill assert that under the current system, a family member can unknowingly transfer a loved one from one troubled nursing home facility to another without even knowing that the facilities are part of the same chain. Supporters also state that this bill will strengthen California law governing acquisition of nursing homes, suitability requirements for operators, and disclosure to the public on who owns nursing homes. 4)OPPOSE UNLESS AMENDED. LeadingAge California opposes this bill unless it is amended, arguing that DPH should maintain the discretion to deny an application, and that mandating the denial of an application based solely on specific enforcement actions would limit DPH's ability to determine the extent to which an individual was actually culpable for a deficient practice in the facility's operations. LeadingAge California further contends some provisions of this bill are too broad and would leave potential applicants who own or manage even high-performing facilities at risk for denial. The California Association of Health Facilities (CAHF) also opposes this bill unless amended, stating that removing DPH's discretion on license applications, and requiring mandatory denial of experienced operators under certain conditions will have a negative impact on California. CAHF further argues that AB 927 Page 12 California should not prohibit experienced operators from applying to own and operate new facilities, when the specifics of both the purchasing company and the company being acquired are very likely unique and should be looked at in isolation, an option that DPH currently has the authority to take action on. CAHF contends that consolidation is a current reality within the healthcare system, and because California is not increasing its bed supply in LTC facilities, ensuring the state can maintain the supply with experienced and skilled operators when facilities close is critical to dealing with consolidation. 5)CONCERNS. The California Hospital Association submitted a letter of concern to the Committee regarding a previous version of this bill, stating that it supports transparency and the appropriate oversight of applications for SNF ownership and operation, however that the provisions in the previous version of this bill may discourage quality providers, including hospitals, health systems, and others, to acquire and establish SNFs to meet the need of the individuals and communities they serve. 6)POLICY COMMENTS. This bill imposes a number of requirements on DPH regarding the collection and publication of information on SNFs and ICFs. In order to increase efficiency and ensure the timeliness of these requirements, the author may wish to consider the following amendments in the future. a) Searchable database. In an effort to increase transparency of information to the public regarding LTC facilities, this bill expands the data required to be posted on the statewide CISS. The author points to the current difficulty of obtaining ownership information for licensed LTC facilities, however the language does not explicitly dictate that the CISS be created in a user or AB 927 Page 13 consumer-friendly manner. To further the original intent of the bill, and to allow DPH staff to more easily access the compliance history of a particular individual or group, the author may wish to consider mandating that the CISS be created in a manner such that the information is able to be searched via the name of an individual who has an indirect or direct beneficial interest in an LTC facility. b) Deadlines for DPH. As stated, this bill increases the data required to be collected by DPH for publication on the statewide CISS. However, the bill language does not specify a deadline by which DPH must collect and publish the information. The 2014 State Auditor Report on DPH, discussed previously, highlights DPH's poor history of timely implementation of the State Auditor's recommendations and completion of certain tasks, such as final resolution of complaints at LTC facilities. To help establish oversight and ensure consumers and patients have access to LTC information in a timely manner, the author may wish to consider imposing a deadline on DPH to collect and publish all new information required for the statewide CISS under this bill. 7)SUGGESTED AMENDMENTS. This bill establishes a number of additional disclosure and suitability requirements for licensure of SNFs and ICFs. Furthermore, this bill requires DPH to increase the transparency of information regarding ownership of such facilities. In order to ensure state resources are used more efficiently, and to better meet the original intent of the legislation, the Committee may wish to consider the following amendments: a) Establish stronger definitions to further intent. This bill includes additional requirements for applicants who have a direct and indirect beneficial interest in a healthcare facility when applying for additional facility licensure with DPH. The author contends it is in the best AB 927 Page 14 interest of the State to protect consumers and prevent existing owners with poor track records from opening new LTC facilities. However, not all LTC facilities are operated by management companies; federal law requires ICFs to have a governing body which meets specified criteria, but does not require a management company. And although it is an entity that should be held accountable, the owner or owners of LTC facilities may not be active in the daily operations of the facility. As such, the Committee may wish to amend this bill to instead apply the requirements to those who control the direction of the management or policies of a licensed facility, whether through ownership, contract, or otherwise. b) Conserve state staffing resources. This bill requires DPH to update the online profile of each LTC facility on the CISS, on a regular and timely basis, with current information regarding any appeal resolution pertaining to a citation or complaint. As discussed previously, DPH has a history of complaints with how it manages complaint investigations at LTC facilities, particularly the length of time in which it addresses complaints. As such, it is unknown if DPH would be able to accurately and regularly update the CISS. The Committee may wish to consider amending this bill to instead require DPH to update the online profiles of LTC facilities with the final disposition of a citation or complaint. c) Option to confirm with other state agencies. This bill requires applicants to disclose any history of compliance and noncompliance with any applicable state or federal law or regulation regarding specified facilities. It also requires applicants to disclose their relationships with other SNFs and ICFs. Although the language specifies certain circumstances by which to confirm information provided by an applicant, in order to ensure completeness and provide DPH with additional information, the Committee AB 927 Page 15 may wish to consider amending this bill to authorize DPH to contact other state agencies and departments to obtain information regarding an applicant's compliance history. d) Establish consistency with existing law. This bill authorizes DPH to deny an application for licensure of a SNF or ICF if the applicant, within the past seven years, has prevented or attempted to impede the work of any authorized representative of DPH. Existing law under Health and Safety Code Section 1431 states it is a misdemeanor to willfully prevent, interfere with, or attempt to impede in any way, the work of, examination of records by, or preservation of evidence by, a duly authorized DPH representative who is enforcing current law. The current bill language is not fully consistent with current statute. The Committee may wish to consider aligning this bill with Health and Safety Code Section 1431. The current language of this bill allows for DPH to deny an application for licensure after one occurrence of specified infractions. Some of these infractions may occur due to factors outside of the control of the facility, and may also be possible for a facility to remedy within 24 hours. Existing law also authorizes many state authorities to deny licensure to applicants upon a finding of a pattern of non-compliance with certain criteria rather than one occurrence, which protects those individuals who are impacted by events outside of their control. The Committee may wish to consider amending this bill to authorize DPH to deny applications for licensure if an applicant has demonstrated a pattern of non-compliance involving specified infractions. The Committee may also wish to consider excluding those infractions that can be remedied within 24 hours by a facility, and providing limited AB 927 Page 16 protection for those applicants who have unintentionally committed certain infractions, due to factors outside of their control. e) Eliminate provisions difficult to define. This bill authorizes DPH to deny an application if the applicant, within the past seven years, has failed to demonstrate competence in operating a facility. There are currently no standards by which DPH is required to assess one's competence in operating a facility in statute; in addition, this bill does not provide guidance as to how this would be measured. This bill already addresses circumstances in which an applicant would be denied licensure due to a lack of compliance during operation of a facility, thus an additional criteria regarding competence may be unnecessary. As such, the Committee may wish to consider striking this provision. f) Modify mandatory denials to create accountability and consistency with current law. This bill requires DPH to deny an application for licensure of an SNF or ICF if the applicant owned, governed, or managed a LTC facility at a time during the seven-year period prior to the application in which that facility had an appointment of a court-ordered receiver, involuntary termination of federal certification, or issuance of a temporary suspension order or revocation of a facility's license by DPH. In order to create accountability by the applicants, and to be consistent with current law, the Committee may wish to consider amending the provisions of this bill related to the automatic denial as follows: i) Optional leniency for appointments of court-ordered receivers. Existing law allows for certain state agencies to have some discretion in review of license AB 927 Page 17 applications under these circumstances, if an applicant demonstrates that the applicant took all reasonable actions to either prevent or correct violations that led to the receivership. The Committee may wish to consider amending this bill to provide DPH this discretion. ii) Accountability after seven-year probationary period. The seven-year probationary period in this measure appears to be arbitrary, and the language is silent as to what occurs following this timeframe. The provisions also do not allow for applicants to prove that they are qualified to own a facility prior to the end of that seven-year period. Owners, administrators, and managers of LTC facilities are responsible for the well-being and health of many of our more fragile Californians. In order to ensure the safety of the state's LTC residents and patients, the Committee may wish to consider amending this bill to require an applicant to prove to DPH that the applicant is qualified enough, following the seven-year period, to own, govern, or manage a licensed SNF or ICF, despite the previous violations. To provide more fairness to potential applicants during the timeframe of automatic denial, the Committee may wish allow an applicant to prove qualifications to own, govern, or manage a SNF or ICF to DPH, prior to the end of the seven-year period, under specified extenuating circumstances. iii) Establish an appeals process for certain denials. Existing law allows applicants who have been denied approval for other licenses, permits, or similar authorization by a state department or agency to be able to appeal the decision of that department. The Committee may wish to consider amending this bill to be consistent with other areas of the law, and include the opportunity for an applicant to appeal a denial. AB 927 Page 18 8)TECHNICAL AMENDMENT. In order to ensure consistency and clarity within this bill, the Committee may wish to consider amending this bill to further clarify the meaning of a single entity, consistent with existing law. 9)PREVIOUS LEGISLATION. a) AB 348 (Brown) of 2015 would have established a timeframe under which DPH would be required to complete an investigation into a complaint about a LTC facility. AB 348 was held in the Senate Appropriations Committee. b) AB 1710 (Yamada), Chapter 672, Statutes of 2012, revises how nursing home administrator licensing fees are to be adjusted so that fee revenue is sufficient to cover the regulatory costs to DPH, and revises and increases DPH reporting requirements regarding the Nursing Home Administrator Program. c) SB 799 (Negrete-McLeod) of 2011 would have required DPH to complete LTC facility complaint investigations within a 90-working day period. SB 799 was held on suspense in Senate Appropriations. d) SB 535 (Kuehl) of 2008 would have directed DPH to establish a Website offering specified on-line information regarding LTC facilities. SB 535 was vetoed by the Governor. AB 927 Page 19 e) AB 399 (Feuer) of 2007 would have established a 40 day timeframe for DPH to complete a LTC facility complaint investigation. AB 399 was vetoed by the Governor. f) AB 1807 (Committee on Budget), Chapter 74, Statutes of 2006, was the health trailer bill for the Budget Act of 2006. Among other changes, AB 1807 establishes a new fee structure for health facilities that are licensed and/or certified by L&C: fees must be calculated based on: i) specified workload data provided by DPH to the Legislature and made available to the public on their Website; ii) any General Fund support appropriated by the Legislature; iii) any federal grant funds received for this purpose; and, iv) any policy adjustments as proposed by the Administration and as adopted by the Legislature. States intent that L&C become entirely supported by fees and federal funds by no later than July 1, 2009. g) SB 1312 (Alquist) Chapter 895, Statutes of 2006, requires inspections and investigations of LTC facilities certified by the Medicare or Medicaid program to determine compliance with federal standards and California statutes and regulations. h) AB 1731 (Shelley), Chapter 451, Statutes of 2000, enacts major reforms for SNFs and ICFs, including the expansion of citations and penalties, an increase in disclosure requirements and inspections, requires DPH to provide specified notice to complainants within specified timeframes, and requires initial onsite investigations within 24 hours in response to complaints where there is a serious threat of imminent danger of death or serious bodily harm. AB 927 Page 20 REGISTERED SUPPORT / OPPOSITION: Support California Advocates for Nursing Home Reform (cosponsor) Office of the San Diego County District Attorney (cosponsor) AARP American Federation of State, County and Municipal Employees (previous version) The Arc and United Cerebral Palsy California Collaboration Area 3 Agency on Aging Advisory Council Asian Law Alliance (previous version) California Commission on Aging (previous version) California Long-Term Care Ombudsman Association California Retired Teachers Association (previous version) Coalition of California Welfare Rights Organizations, Inc. (previous version) Congress of California Seniors (previous version) Consumer Attorneys of California Consumer Federation of California Disability Rights California National Association of Social Workers - California Chapter Office of the District Attorney of Alameda County Office of the State Long-Term Care Ombudsman Several individuals Several law firms Opposition California Association of Health Facilities AB 927 Page 21 LeadingAge California Analysis Prepared by:An-Chi Tsou / HEALTH / (916) 319-2097