Amended in Assembly March 28, 2016

Amended in Assembly March 18, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 2104

Introduced by Assembly Member Dababneh

February 17, 2016

An act to amend Section 15432 of the Government Code, and to amend Sections 129005, 129010, 129020, 129090, and 129173 of the Health and Safety Code, relating to health facilities, and making an appropriation therefor.

LEGISLATIVE COUNSEL’S DIGEST

AB 2104, as amended, Dababneh. California Health Facilities Financing Authority Act: California Health Facility Construction Loan Insurance Law.

The California Health Facilities Financing Authority Act authorizes the California Health Facilities Financing Authority to, among other things, make loans from the continuously appropriated California Health Facilities Financing Authority Fund to participating health institutions, as defined, for financing or refinancing the acquisition, construction, or remodeling of health facilities.

This bill would expand the program to include for-profit begin delete corporations or associations end delete begin insert skilled nursing facilities end insert when at least 60% of their patients are Medi-Cal beneficiaries by adding those entities to the definition of “participating health institutions.” Because this bill would expand the purposes for which a continuously appropriated fund may be used, it would make an appropriation.

Existing law establishes the California Health Facility Construction Loan Insurance Law to provide, without cost to the state, an insurance program for health facility construction, improvement, and expansion loans in order to stimulate the flow of private capital into health facilities construction, improvement, and expansion and in order to rationally meet the need for new, expanded, and modernized public and nonprofit health facilities necessary to protect the health of all the people of this state. Existing law establishes the Health Facility Construction Loan Insurance Fund in the State Treasury, to be continuously appropriated to carry out the provisions and administrative costs of the insurance program. Under existing law, political subdivisions, as defined, and nonprofit corporations are authorized to apply for state insurance of needed construction, improvement, or expansion loans for construction, remodeling, or acquisition of health facilities, as provided, and applicants are required to pay an application fee not to exceed $500, which is deposited into the fund.

This bill would expand the program to include for-profit corporations begin insert that operate skilled nursing facilities end insert when at least 60% of their patients are Medi-Cal beneficiaries by, among other things, adding those entities to the definition of “health facilities” and making those entities eligible to apply for the insurance program. Because this bill would add a new source of revenue and expand the purposes for which a continuously appropriated fund may be used, it would make an appropriation.

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

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

SECTION 1.  

Section 15432 of the Government Code is
amended to read:

15432.  

As used in this part, the following words and terms
shall have the following meanings, unless the context clearly
indicates or requires another or different meaning or intent:

(a) “Act” means the California Health Facilities Financing
Authority Act.

(b) “Authority” means the California Health Facilities Financing
Authority created by this part or any board, body, commission,
department, or officer succeeding to the principal functions thereof
or to which the powers conferred upon the authority by this part
shall be given by law.

(c) “Cost,” as applied to a project or portion of a project financed
under this part, means and includes all or any part of the cost of
construction and acquisition of all lands, structures, real or personal
property, rights, rights-of-way, franchises, easements, and interests
acquired or used for a project, the cost of demolishing or removing
any buildings or structures on land so acquired, including the cost
of acquiring any lands to which those buildings or structures may
be moved, the cost of all machinery and equipment, financing
charges, interest prior to, during, and for a period not to exceed
the later of one year or one year following completion of
construction, as determined by the authority, the cost of insurance
during construction, the cost of funding or financing noncapital
expenses, reserves for principal and interest and for extensions,
enlargements, additions, replacements, renovations and
improvements, the cost of engineering, service contracts,
reasonable financial and legal services, plans, specifications,
studies, surveys, estimates, administrative expenses, and other
expenses of funding or financing, that are necessary or incident to
determining the feasibility of constructing any project, or that are
incident to the construction, acquisition, or financing of any project.

(d) “Health facility” means a facility, place, or building that is
licensed, accredited, or certified and organized, maintained, and
operated for the diagnosis, care, prevention, and treatment of
human illness, or physical, mental, or developmental disability,
including convalescence and rehabilitation and including care
during and after pregnancy, or for any one or more of these
purposes, for one or more persons, and includes, but is not limited
to, all of the following types:

(1) A general acute care hospital that is a health facility having
a duly constituted governing body with overall administrative and
professional responsibility and an organized medical staff that
provides 24-hour inpatient care, including the following basic
services: medical, nursing, surgical, anesthesia, laboratory,
radiology, pharmacy, and dietary services.

(2) An acute psychiatric hospital that is a health facility having
a duly constituted governing body with overall administrative and
professional responsibility and an organized medical staff that
provides 24-hour inpatient care for mentally disordered,
incompetent, or other patients referred to in Division 5
(commencing with Section 5000) or Division 6 (commencing with
Section 6000) of the Welfare and Institutions Code, including the
following basic services: medical, nursing, rehabilitative,
pharmacy, and dietary services.

(3) A skilled nursing facility that is a health facility that provides
the following basic services: skilled nursing care and supportive
care to patients whose primary need is for availability or skilled
nursing care on an extended basis.

(4) An intermediate care facility that is a health facility that
provides the following basic services: inpatient care to ambulatory
or semiambulatory patients who have recurring need for skilled
nursing supervision and need supportive care, but who do not
require availability or continuous skilled nursing care.

(5) A special health care facility that is a health facility having
a duly constituted governing body with overall administrative and
professional responsibility and an organized medical or dental staff
that provides inpatient or outpatient, acute or nonacute care,
including, but not limited to, medical, nursing, rehabilitation,
dental, or maternity.

(6) A clinic that is operated by a tax-exempt nonprofit
corporation that is licensed pursuant to Section 1204 or 1204.1 of
the Health and Safety Code or a clinic exempt from licensure
pursuant to subdivision (b) or (c) of Section 1206 of the Health
and Safety Code.

(7) An adult day health center that is a facility, as defined under
subdivision (b) of Section 1570.7 of the Health and Safety Code,
that provides adult day health care, as defined under subdivision
(a) of Section 1570.7 of the Health and Safety Code.

(8) A facility owned or operated by a local jurisdiction for the
provision of county health services.

(9) A multilevel facility is an institutional arrangement where
a residential facility for the elderly is operated as a part of, or in
conjunction with, an intermediate care facility, a skilled nursing
facility, or a general acute care hospital. “Elderly,” for the purposes
of this paragraph, means a person 62 years of age or older.

(10) A child day care facility operated in conjunction with a
health facility. A child day care facility is a facility, as defined in
Section 1596.750 of the Health and Safety Code. For purposes of
this paragraph, “child” means a minor from birth to 18 years of
age.

(11) An intermediate care facility/developmentally disabled
habilitative that is a health facility, as defined under subdivision
(e) of Section 1250 of the Health and Safety Code.

(12) An intermediate care facility/developmentally
disabled-nursing that is a health facility, as defined under
subdivision (h) of Section 1250 of the Health and Safety Code.

(13) A community care facility that is a facility, as defined under
subdivision (a) of Section 1502 of the Health and Safety Code,
that provides care, habilitation, rehabilitation, or treatment services
to developmentally disabled or mentally impaired persons.

(14) A nonprofit community care facility, as defined in
subdivision (a) of Section 1502 of the Health and Safety Code,
other than a facility that, as defined in that subdivision, is a
residential facility for the elderly, a foster family agency, a foster
family home, a full service adoption agency, or a noncustodial
adoption agency.

(15) A nonprofit accredited community work activity program,
as specified in subdivision (e) of Section 4851 and Section 4856
of the Welfare and Institutions Code.

(16) A community mental health center, as defined in paragraph
(3) of subdivision (b) of Section 5667 of the Welfare and
Institutions Code.

(17) A nonprofit speech and hearing center, as defined in Section
1201.5 of the Health and Safety Code.

(18) A blood bank, as defined in Section 1600.2 of the Health
and Safety Code, licensed pursuant to Section 1602.5 of the Health
and Safety Code, and exempt from federal income taxation
pursuant to Section 501(c)(3) of the Internal Revenue Code.

(19) A residential facility for persons with developmental
disabilities, as defined in Sections 4688.5 and 4688.6 of the
Welfare and Institutions Code, which includes, but is not limited
to, a community care facility licensed pursuant to Section 1502 of
the Health and Safety Code and a family teaching home as defined
in Section 4689.1 of the Welfare and Institutions Code.

(20) A nonpublic school that provides educational services in
conjunction with a health facility, as defined in paragraphs (1) to
(19), inclusive, that otherwise qualifies for financing pursuant to
this part, if the nonpublic school is certified pursuant to Sections
56366 and 56366.1 of the Education Code as meeting standards
relating to the required special education and specified related
services and facilities for individuals with physical, mental, or
developmental disabilities.

“Health facility” includes a clinic that is described in subdivision
(l) of Section 1206 of the Health and Safety Code.

“Health facility” includes information systems equipment and
the following facilities, if the equipment and facility is operated
in conjunction with or to support the services provided in one or
more of the facilities specified in paragraphs (1) to (20), inclusive,
of this subdivision: a laboratory, laundry, a nurses or interns
residence, housing for staff or employees and their families or
patients or relatives of patients, a physicians’ facility, an
administration building, a research facility, a maintenance, storage,
or utility facility, an information systems facility, all structures or
facilities related to any of the foregoing facilities or required or
useful for the operation of a health facility and the necessary and
usual attendant and related facilities and equipment, and parking
and supportive service facilities or structures required or useful
for the orderly conduct of the health facility.

“Health facility” does not include any institution, place, or
building used or to be used primarily for sectarian instruction or
study or as a place for devotional activities or religious worship.

(e) “Participating health institution” means a city, city and
county, or county, a district hospital, or a private nonprofit
corporation or association, or a limited liability company whose
sole member is a nonprofit corporation or association authorized
by the laws of this state to provide or operate a health facility or
a nonprofit corporation that controls or manages, is controlled or
managed by, is under common control or management with, or is
affiliated with any of the foregoing, or a for-profit begin delete corporation or
association end delete begin insert skilled nursing facility end insert when at least 60 percent of its
patients are Medi-Cal beneficiaries, and that, pursuant to this part,
undertakes the financing or refinancing of the construction or
acquisition of a project or of working capital as provided in this
part. “Participating health institution” also includes, for purposes
of the California Health Facilities Revenue Bonds (UCSF-Stanford
Health Care) 1998 Series A, the Regents of the University of
California.

(f) “Project” means construction, expansion, remodeling,
renovation, furnishing, or equipping, or funding, financing, or
refinancing of a health facility or acquisition of a health facility
to be financed or refinanced with funds provided in whole or in
part pursuant to this part. “Project” may include reimbursement
for the costs of construction, expansion, remodeling, renovation,
furnishing, or equipping, or funding, financing, or refinancing of
a health facility or acquisition of a health facility. “Project” may
include any combination of one or more of the foregoing
undertaken jointly by any participating health institution with one
or more other participating health institutions.

(g) “Revenue bond” or “bond” means a bond, warrant, note,
lease, or installment sale obligation that is evidenced by a
certificate of participation or other evidence of indebtedness issued
by the authority.

(h) “Working capital” means moneys to be used by, or on behalf
of, a participating health institution to pay or prepay maintenance
or operation expenses or any other costs that would be treated as
an expense item, under generally accepted accounting principles,
in connection with the ownership or operation of a health facility,
including, but not limited to, reserves for maintenance or operation
expenses, interest for not to exceed one year on any loan for
working capital made pursuant to this part, and reserves for debt
service with respect to, and any costs necessary or incidental to,
that financing.

SEC. 2.  

Section 129005 of the Health and Safety Code is
amended to read:

129005.  

The purpose of this chapter is to provide, without cost
to the state, an insurance program for health facility construction,
improvement, and expansion loans in order to stimulate the flow
of private capital into health facilities construction, improvement,
and expansion and in order to rationally meet the need for new,
expanded, and modernized public, eligible for-profit, and nonprofit
health facilities necessary to protect the health of all the people of
this state. The provisions of this chapter are to be liberally
construed to achieve this purpose.

SEC. 3.  

Section 129010 of the Health and Safety Code is
amended to read:

129010.  

Unless the context otherwise requires, the definitions
in this section govern the construction of this chapter and of Section
32127.2.

(a) “Bondholder” means the legal owner of a bond or other
evidence of indebtedness issued by a political subdivision or a
nonprofit corporation.

(b) “Borrower” means a political subdivision or nonprofit
corporation that has secured or intends to secure a loan for the
construction of a health facility.

(c) “Construction, improvement, or expansion” or “construction,
improvement, and expansion” includes construction of new
buildings, expansion, modernization, renovation, remodeling and
alteration of existing buildings, acquisition of existing buildings
or health facilities, and initial or additional equipping of any of
these buildings.

In connection therewith, “construction, improvement, or
expansion” or “construction, improvement, and expansion”
includes the cost of construction or acquisition of all structures,
including parking facilities, real or personal property, rights,
rights-of-way, the cost of demolishing or removing any buildings
or structures on land so acquired, including the cost of acquiring
any land where the buildings or structures may be moved, the cost
of all machinery and equipment, financing charges, interest (prior
to, during, and for a period after completion of the construction),
provisions for working capital, reserves for principal and interest
and for extensions, enlargements, additions, replacements,
renovations and improvements, cost of engineering, financial and
legal services, plans, specifications, studies, surveys, estimates of
cost and of revenues, administrative expenses, expenses necessary
or incident to determining the feasibility or practicability of
constructing or incident to the construction; or the financing of the
construction or acquisition.

(d) “Committee” means the Advisory Loan Insurance
Committee.

(e) “Debenture” means any form of written evidence of
indebtedness issued by the State Treasurer pursuant to this chapter,
as authorized by Section 4 of Article XVI of the California
Constitution.

(f) “Fund” means the Health Facility Construction Loan
Insurance Fund.

(g) “Health facility” means any facility providing or designed
to provide services for the acute, convalescent, and chronically ill
and impaired, including, but not limited to, public health centers,
community mental health centers, facilities for the developmentally
disabled, nonprofit community care facilities that provide care,
habilitation, rehabilitation or treatment to developmentally disabled
persons, facilities for the treatment of chemical dependency,
including a community care facility, licensed pursuant to Chapter
3 (commencing with Section 1500) of Division 2, a clinic, as
defined pursuant to Chapter 1 (commencing with Section 1200)
of Division 2, an alcoholism recovery facility, defined pursuant
to former Section 11834.11, and a structure located adjacent or
attached to another type of health facility and that is used for
storage of materials used in the treatment of chemical dependency,
and general tuberculosis, mental, and other types of hospitals and
related facilities, such as laboratories, outpatient departments,
extended care, nurses’ home and training facilities, offices and
central service facilities operated in connection with hospitals,
diagnostic or treatment centers, extended care facilities, nursing
homes, and rehabilitation facilities. “Health facility” also means
an adult day health center and a multilevel facility. Except for
facilities for the developmentally disabled, facilities for the
treatment of chemical dependency, or a multilevel facility, or as
otherwise provided in this subdivision, “health facility” does not
include any institution furnishing primarily domiciliary care.

“Health facility” also means accredited nonprofit work activity
programs as defined in subdivision (e) of Section 4851 of the
Welfare and Institutions Code, and nonprofit community care
facilities as defined in Section 1502, excluding foster family homes,
foster family agencies, adoption agencies, and residential care
facilities for the elderly.

Unless the context dictates otherwise, “health facility” includes
a political subdivision of the state or nonprofit corporation that
operates a facility included within the definition set forth in this
subdivision.

Unless the context dictates otherwise, “health facility” includes
a for-profit corporation begin insert that operates a skilled nursing facility end insert
when at least 60 percent of its patients are Medi-Cal begin delete beneficiaries
and that operates a facility included within the definition set forth
in this subdivision. end delete begin insert beneficiaries. end insert

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

(i) “Lender” means the provider of a loan and its successors and
assigns.

(j) “Loan” means money or credit advanced for the costs of
construction or expansion of the health facility, and includes both
initial loans and loans secured upon refinancing and may include
both interim, or short-term loans, and long-term loans. A duly
authorized bond or bond issue, or an installment sale agreement,
may constitute a “loan.”

(k) “Maturity date” means the date that the loan indebtedness
would be extinguished if paid in accordance with periodic
payments provided for by the terms of the loan.

(l) “Mortgage” means a first mortgage on real estate. “Mortgage”
includes a first deed of trust.

(m) “Mortgagee” includes a lender whose loan is secured by a
mortgage. “Mortgagee” includes a beneficiary of a deed of trust.

(n) “Mortgagor” includes a borrower, a loan to whom is secured
by a mortgage, and the trustor of a deed of trust.

(o) “Nonprofit corporation” means any corporation formed
under or subject to the Nonprofit Public Benefit Corporation Law
(Part 2 (commencing with Section 5110) of Division 2 of Title 1
of the Corporations Code) that is organized for the purpose of
owning and operating a health facility and that also meets the
requirements of Section 501(c)(3) of the Internal Revenue Code.

(p) “Political subdivision” means any city, county, joint powers
entity, local hospital district, or the California Health Facilities
Authority.

(q) “Project property” means the real property where the health
facility is, or is to be, constructed, improved, or expanded, and
also means the health facility and the initial equipment in that
health facility.

(r) “Public health facility” means any health facility that is or
will be constructed for and operated and maintained by any city,
county, or local hospital district.

(s) “Adult day health center” means a facility defined under
subdivision (b) of Section 1570.7, that provides adult day health
care, as defined under subdivision (a) of Section 1570.7.

(t) “Multilevel facility” means an institutional arrangement
where a residential facility for the elderly is operated as a part of,
or in conjunction with, an intermediate care facility, a skilled
nursing facility, or a general acute care hospital. “Elderly,” for the
purposes of this subdivision, means a person 60 years of age or
older.

(u) “State plan” means the plan described in Section 129020.

SEC. 4.  

Section 129020 of the Health and Safety Code is
amended to read:

129020.  

(a) The office shall implement the loan insurance
program for the construction, improvement, and expansion of
public, eligible for-profit, and nonprofit corporation health facilities
so that, in conjunction with all other existing facilities, the
necessary physical facilities for furnishing adequate health facility
services will be available to all the people of the state.

(b) Every odd-numbered year the office shall develop a state
plan for use under this chapter. The plan shall include an overview
of the changes in the health care industry, an overview of the
financial status of the fund and the loan insurance program
implemented by the office, a statement of the guiding principles
of the loan insurance program, an evaluation of the program’s
success in meeting its mission as outlined in Section 129005, a
discussion of administrative, procedural, or statutory changes that
may be needed to improve management of program risks or to
ensure the program effectively addresses the health needs of
Californians, and the priority needs to be addressed by the loan
insurance program.

(c) The health facility construction loan insurance program shall
provide for health facility distribution throughout the state in a
manner that will make all types of health facility services
reasonably accessible to all persons in the state according to the
state plan.

SEC. 5.  

Section 129090 of the Health and Safety Code is
amended to read:

129090.  

(a) Pursuant to this chapter, political subdivisions,
eligible for-profit corporations, and nonprofit corporations may
apply for state insurance of needed construction, improvement, or
expansion loans for construction, remodeling, or acquisition of
health facilities to be or already owned, established, and operated
by them as provided in this chapter. Applications shall be submitted
to the office by the nonprofit corporation, eligible for-profit
corporation, or political subdivision authorized to construct and
operate a health facility.

(b) Each application shall conform to the requirements of the
office, shall be submitted in the manner and form prescribed by
the office, and shall be accompanied by an application fee of
one-half of 1 percent of the amount of the loan applied for, but in
no case shall the application fee exceed five hundred dollars ($500).
The fees shall be deposited by the office in the fund and used to
defray the office’s expenditures in the administration of this
chapter.

SEC. 6.  

Section 129173 of the Health and Safety Code is
amended to read:

129173.  

(a) In fulfilling the purposes of this article, as set forth
in Section 129005, and upon making a determination that the
financial status of a borrower may jeopardize a borrower’s ability
to fulfill its obligations under any insured loan transaction so as
to threaten the economic interest of the office in the borrower or
to jeopardize the borrower’s ability to continue to provide needed
health care services in its community, including, but not limited
to, a declaration of default under any contract related to the
transaction, the borrower missing any payment to its lender, or the
borrower’s accounts payable exceeding three months, the office
may assume or direct managerial or financial control of the
borrower in any or all of the following ways:

(1) The office may supervise and prescribe the activities of the
borrower in the manner and under the terms and conditions as the
office may stipulate in any contract with the borrower.

(2) Notwithstanding the provisions of the articles of
incorporation or other documents of organization of a nonprofit
corporation borrower, this control may be exercised through the
removal and appointment by the office of members of the
governing body of the borrower sufficient so that the new members
constitute a voting majority of the governing body.

(3) In the event the borrower is a nonprofit corporation, an
eligible for-profit corporation, or a political subdivision, the office
may request the Secretary of the California Health and Human
Services Agency to appoint a trustee. The trustee shall have full
and complete authority of the borrower over the insured project,
including all property on which the office holds a security interest.
A trustee shall not be appointed unless approved by the office. A
trustee appointed by the secretary pursuant to this subdivision may
exercise all the powers of the officers and directors of the borrower,
including the filing of a petition for bankruptcy. An action at law
or in equity shall not be maintained by any party against the office
or a trustee by reason of their exercising the powers of the officers
and directors of a borrower pursuant to the direction of, or with
the approval of, the secretary.

(4) The office may institute any action or proceeding, or the
office may request the Attorney General to institute any action or
proceeding against any borrower, to obtain injunctive or other
equitable relief, including the appointment of a receiver for the
borrower or the borrower’s assets, in the superior court in and for
the county in which the assets or a substantial portion of the assets
are located. The proceeding under this section for injunctive relief
shall conform with the requirements of Chapter 3 (commencing
with Section 525) of Title 7 of Part 2 of the Code of Civil
Procedure, except that the office shall not be required to allege
facts necessary to show lack of adequate remedy at law, or to show
irreparable loss or damage. Injunctive relief may compel the
borrower, its officers, agents, or employees to perform each and
every provision contained in any regulatory agreement, contract
of insurance, or any other loan closing document to which the
borrower is a party, or any obligation imposed on the borrower by
law, and require the carrying out of any and all covenants and
agreements and the fulfillment of all duties imposed on the
borrower by law or those documents.

A receiver may be appointed pursuant to Chapter 5 (commencing
with Section 564) of Title 7 of Part 2 of the Code of Civil
Procedure. In cooperation with the Attorney General, the office
shall develop and maintain a list of receivers who have
demonstrated experience both in the health care field and as a
receiver. Upon a proper showing, the court shall grant the relief
provided by law and requested by the office or the Attorney
General. No receiver shall be appointed unless approved by the
office. The office shall establish reporting requirements for
receivers to ensure that the office is fully apprised of all costs
incurred and progress made by the receiver. A receiver appointed
by the superior court pursuant to this subdivision and Section 564
of the Code of Civil Procedure may, with the approval of the court,
exercise all of the powers of the officers and directors of the
borrower, including the filing of a petition for bankruptcy. An
action at law or in equity shall not be maintained by any party
against the office, the Attorney General, or a receiver by reason
of their exercising the powers of the officers and directors of a
borrower pursuant to the order of, or with the approval of, the
superior court.

(5) The borrower shall inform the office in advance of all
meetings of its governing body. The borrower shall not exclude
the office from attending any meeting of the borrower’s governing
body.

(b) Other than the loan insured under this chapter, the office
shall not be liable for any debt of a borrower, or to a borrower, as
a result of the office asserting its legal remedies against a borrower
insured under this chapter.

(c) It is the intent of the Legislature that this section is remedial
in nature, and is applicable retroactively to any health facility
construction loans in existence at the time of its enactment, to the
extent that the application of this section does not unlawfully impair
existing contract rights.