BILL ANALYSIS Ó
AB 2104
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Date of Hearing: April 19, 2016
ASSEMBLY COMMITTEE ON HEALTH
Jim Wood, Chair
AB 2104
(Dababneh) - As Amended March 28, 2016
SUBJECT: California Health Facilities Financing Authority Act:
California Health Facility Construction Loan Insurance Law.
SUMMARY: Permits a for-profit skilled nursing facility (SNF)
when at least 60% of its patients are Medi-Cal beneficiaries to
access funding under the California Health Facilities Financing
Authority (CHFFA) Act and insurance under the California Health
Facility Construction Loan Insurance Program (Loan Insurance
Program) administered by the Cal-Mortgage Loan Insurance
Division (Cal-Mortgage).
EXISTING LAW:
1)Establishes CHFFA in the Office of the State Treasurer,
consisting of nine members, including the Treasurer who serves
as Chairman.
2)Permits CHFFA to make loans from the continuously appropriated
CHFFA Fund to public or nonprofit health institutions for
financing or refinancing the acquisition, construction, or
remodeling of health facilities.
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3)Requires, for the purposes of CHFFA's loans, a nonprofit
health institution to include, but not be limited to: general
acute care hospital; acute psychiatric hospital; SNF;
intermediate care facility (ICF); special health care facility
that provides medical, nursing, rehabilitation, dental, or
maternity services; clinic; adult day health center;
county-operated health facility; residential facility for the
elderly that is operated as a part of, or in conjunction with,
an ICF, SNF, or general acute care hospital; child day care
facility operated in conjunction with a health facility; ICF
for the developmentally disabled/habilitative, that is a
health facility; community care facility; accredited community
work-activity program; community mental health center; speech
and hearing center; or, blood bank.
4)Establishes Cal-Mortgage as a Division of the Office of
Statewide Health Planning and Development. Cal-Mortgage
administers the Loan Insurance Program. Cal-Mortgage provides
credit enhancement for eligible health care facilities when
they borrow money for capital needs. Cal-Mortgage insured
loans are guaranteed by the "full faith and credit" of the
State of California. This guarantee permits borrowers to
obtain lower interest rates, similar to the rates received by
the State of California.
5)Requires that health facilities eligible for the Loan
Insurance Program be owned and operated by private nonprofit
public benefit corporations or political subdivisions such as
cities, counties, health care districts, or joint powers
authorities.
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FISCAL EFFECT: This bill has not yet been analyzed by a fiscal
committee.
COMMENTS:
1)PURPOSE OF THIS BILL. According to the author, California
continues to see 1,100 residents turn 65 years-old every day
and must appropriately plan and provide for this "Silver
Tsunami." Meanwhile, one in three Californians are on
Medi-Cal and approximately two-thirds of patients in SNFs are
Medi-Cal beneficiaries. California SNFs are a needed
safety-net to provide quality and ever-changing long-term care
and rehabilitation services for this population.
Unfortunately, the state has seen less than 10 SNFs built in the
past 10 years and our SNF bed capacity has remained stagnant.
Currently, the bed occupancy rate for California SNFs is about
88%. The California HealthCare Foundation (CHCF) predicts the
demand for SNF beds in California will exceed supply by 2020.
This bill helps California prepare for this increased demand.
2)BACKGROUND. CHFFA was created in 1979 to be the state's
vehicle for providing financial assistance to public and
nonprofit health care providers through loans funded by the
issuance of tax-exempt bonds. CHFFA's mission is to help
eligible and creditworthy non-profit and public health
facilities reduce their cost of capital, and promote important
California health access, healthcare improvement and cost
containment objectives by providing cost-effective tax-exempt
bond, low-cost loan, and direct grant programs. To this end,
CHFFA administers the Bond Financing Program and the
Tax-Exempt Equipment Financing Program. CHFFA also provides
direct loans to small and rural health facilities through the
Healthcare Expansion Loan Program II Financing Program and the
Medi-Cal Bridge Loan Program. Additionally, CHFFA administers
two grant programs, the Community Clinic Grant Program and the
Children's Hospital Program, to provide funding to community
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clinics and 13 of the state's children's hospitals.
By borrowing through CHFFA, health facilities can likely obtain
lower interest rates than they would through conventional
bonds. Generally, nonprofit, licensed health facilities in
California, including adult day health centers, community
clinics, SNFs, developmentally disabled centers, hospitals,
and drug and alcohol rehabilitation centers are eligible for
CHFFA financing. Proceeds from CHFFA financings may be used
for project-related costs, including: construction; remodeling
and renovation; land acquisition (as part of the proposed
project); acquisition of existing health facilities; purchase
or lease of equipment; refinancing or refunding of prior debt;
working capital for start-up facilities; costs of bond
issuance; feasibility studies; and, reimbursement of prior
expenses. Under statute, savings resulting from issuance of
tax-exempt bonds for borrowers must be transferred to the
consuming public through lower or contained costs for delivery
of health services. Since its inception, CHFFA has issued
over $31 billion in bonds. In 2014, $894,100,000 in bonds
were issued.
According to the State Treasurer, there is no limit on the
total amount of bonds that CHFFA can issue. However, OSHPD
reports that there is a $3 billion dollar ceiling on the total
amount of loans that can be insured by Cal-Mortgage. Of the
$3 billion limit, Cal-Mortgage currently insures loans
totaling $1.76 billion, leaving $1.24 billion in available
capacity. In response to questions regarding Cal-Mortgage
capacity, OSHPD states the following: "While the available
capacity isn't currently spoken for, the amount varies based
on the demand in the market for construction financing through
the program versus repayments by existing insured borrowers.
Changes in the financial markets such as a rise in interest
rates could possibly make the Program a popular financing
option. If for-profit SNFs became eligible for the Program,
this could eventually result in reduced capacity for other
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entities."
3)SUPPORT. The California Association of Health Facilities
(CAHF), the sponsor of this bill, argues this bill is needed
to meet the demand of an aging population and the increased
reliance on Medi-Cal for SNF care. The rapidly aging
population has created a tremendous need for the California's
long-term care providers, both for profit and nonprofit, to
remodel and renovate existing facilities, and build new ones
in order to expand bed capacity and meet the increasing demand
for long-term care services. This bill utilizes existing
financing and insurance programs and expands those programs to
for profit SNFs that serve primarily Medi-Cal patients.
Medi-Cal beneficiaries utilize approximately two-thirds of
patient days in for profit SNFs which are a critical safety
net to provide patients quality long-term care. CHCF predicts
demand for skilled nursing facility beds in California will
exceed supply by 2020. It is crucial that California
appropriately plan and provide for this "silver tsunami".
Less than 10 skilled nursing facilities have been built in
California in the past 10 years and SNF bed capacity has
remained stagnant. Reimbursement under the Medi-Cal program
does not provide the amount of excess dollars needed for SNFs
to afford to remodel or renovate their buildings using
conventional financing. According to CAHF, this bill will not
negatively impact access by nonprofit and public health care
facilities to either CHFFA loan money or Cal-Mortgage loan
insurance.
4)OPPOSITION. California Advocates for Nursing Home Reform
(CANHR) argues that expanding CHFFA and the Cal-Mortgage
programs to for-profit SNFs will do nothing to promote the
mission of these programs which includes promoting health
access, healthcare improvement, and cost containment. CANHR
states that this bill will not accomplish any of those
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objectives. CAHNR argues that it will instead expand the
profits of already profitable entities.
5)PREVIOUS LEGISLATION.
a) SB 315 (Monning and Hernández) of 2015 would have
authorized CHFFA to transfer up to $3 million from its
Hospital Equipment Loan Program Fund for use in a second
California Health Access Model Program competitive grant
selection process. SB 315 died on the Assembly floor.
b) AB 272 (Monning) of 2012 would have permitted CHFFA to
award grants that in the aggregate did not exceed $1.5
million to projects designed to demonstrate new or
cost-effective methods of delivering health care services
to improve access to quality health care for vulnerable
populations or communities that are effective at enhancing
health outcomes, and improving access to quality health
care. AB 272 died on the Senate floor.
6)COMMENTS AND QUESTIONS.
a) This bill should have a sunset date and a requirement
that information on the bill's effectiveness and its impact
on nonprofit and public entities currently eligible for
CHFFA and Cal-Mortgage be tracked through existing
reporting requirements of both agencies.
b) To encourage increased SNF bed capacity, should this
bill be limited to new construction and remodeling that
includes an increased number of beds?
REGISTERED SUPPORT / OPPOSITION:
AB 2104
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Support
California Association of Health Facilities (sponsor)
Opposition
California Advocates for Nursing Home Reform
Analysis Prepared by:John Gilman / HEALTH / (916) 319-2097