BILL ANALYSIS Ó
SENATE COMMITTEE ON HUMAN SERVICES
Senator McGuire, Chair
2015 - 2016 Regular
Bill No: SB 475
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|Author: |Monning |
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|Version: |February 26, 2015 |Hearing |April 28, 2015 |
| | |Date: | |
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|Urgency: |No |Fiscal: |No |
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|Consultant|Sara Rogers |
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Subject: Continuing care contracts: cancellation: payments
SUMMARY
This bill requires that continuing care contracts which
condition lump sum contract termination payments on resale of
the unit shall instead provide the lump sum payment to the
resident, or the resident's estate, no later than 90 days after
the unit is vacated. This bill also provides that any payments
not paid to the resident within the 90 day period will be
subject to a 10 percent annual interest rate. It prohibits the
provider from making further charges for maintenance or
housekeeping to the resident, the resident's estate, or against
the lump sum payment on a vacated unit.
ABSTRACT
Existing law:
1)Provides for the licensure and regulation of Continuing Care
Retirement Communities (CCRCs) by the California Department of
Social Services (CDSS) to enact minimum requirements to
protect the wellbeing and financial security of residents of
CCRCs. (HSC 1770 et seq.)
2)Establishes the Residential Care Facilities for the Elderly
Act, which requires CDSS to license and regulate RCFEs as a
separate category within the existing community care licensing
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structure of CDSS. (HSC 1569 et seq.)
3)Provides for the regulation and licensure of skilled nursing
facilities by the California Department of Public Health
(CDPH). (HSC 1250 et seq.)
4)Requires a CCRC provider to hold a certificate of authority
from CDSS permitting the provider to contract for the
provision of continuing care, including medical care, in which
a resident over the age of 60 has paid in advance for more
than one year for that care. (HSC 1771.2)
5)Provides that the components of care provided by the facility
must be separately licensed as otherwise required by state
law, including Residential Care Facilities for the Elderly and
Skilled Nursing care. (HSC 1771.5)
6)Requires a CCRC to pay refunds owned to a resident within 14
calendar days after a resident makes possession of the living
unit available to the provider or 90 calendar days after death
or receipt of notice of termination, whichever is later. (HSC
1788.4 (a))
7)Prohibits characterizing as a refund, a lump sum payment
following termination of a continuing care contract that is
conditioned upon resale of the unit, and requires the payment
to be made within 90 days following resale of the unit. (HSC
1788.4 (e))
This bill:
1)Provides that a lump sum payment following termination of
contract that is conditioned upon resale of the unit be paid
in no event later than 90 days after the formerly occupied
unit has been vacated.
2)Provides that payments that are not paid to the resident
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within the 90 day period will accrue interest at the rate set
forth in 685.010 of the Code of Civil Procedure, pertaining to
enforcement of judgments, the rate set being 10 percent per
annum on the principal amount of a money judgment remaining
unsatisfied.
3)Prohibits a CCRC provider from making further charges to the
resident or his or her estate, or against the lump sum payment
for purposes of continued monthly payments to the provider, or
for maintenance or housekeeping of the vacated unit.
FISCAL IMPACT
This bill has been deemed non-fiscal by legislative counsel.
BACKGROUND AND DISCUSSION
Purpose of the bill:
According to the author, Continuing Care Retirement Community
(CCRC) residents and their heirs have experienced long delays in
receiving termination of contract payments from CCRC providers
after the resident terminates a contract or passes away. The
author states that providers often have little incentive the
re-occupy a unit that has an outstanding entrance fee in a
timely manner, instead preferring to first sell and occupy units
that do not have outstanding entrance fees (as in the case of
facility expansions). The author additionally states that while
the unit is unoccupied, some contracts permit the provider to
charge monthly maintenance fees that are deducted from the
entrance fees.
Further, the author cites the example of two constituents who
claim that a CCRC provider has not repaid two terminations of
contract lump sum payments of $250,000 and $562,000 to the
estates of the individuals after the apartments failed to sell
following the residents death. Additionally, a Sacramento
resident writes that one provider continued to charge his
father's estate $4,161 per month in fees after his father passed
away while the unit remained unsold. He writes that, while his
father's unit accrued monthly fees to the provider, other units
which did not accrue fees were sold first. He writes that this
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provider is empowered to "drain his father's estate down to
nothing," with no recourse.
Another individual writes that a CCRC provider refused to
provide the 80 percent lump sum termination of contract payment
after his aunt's unit failed to sell for more than two years,
despite a desirable ocean view from a high level floor. The
individual states that this provider had recently developed a
new large tower of units and had failed to provide the older
units with any of the updates common when a unit becomes
unoccupied (such as new carpets and paint), including his
aunt's, and apparently was directing new sales toward the new
tower which required no entrance fee repayments. More than two
years later, following extensive letters and complaints, and
after reaching out the Attorney General of California, the unit
was updated and quickly purchased.
Continuing Care Retirement Contract Model
Continuing care retirement contracts (CCRCs) have been likened
to long-term care insurance, with seniors paying large entry
fees ranging from $50,000 to more than $2 million, in exchange
for access to a range of levels of care services, including
independent living, assisted living and skilled nursing care
intended to meet the care needs of residents over a specified
period of time as they age. There are a wide variety of
contractual models available across the state. Some provide for
a lump sum termination of contract payment, based on a portion
of the entrance fees (typically ranging from 90 and 50 percent)
upon the death of the resident. If the resident opts to leave
the community, repayment is conditioned upon the resale of the
unit. Other models provide for a refund of a portion of the
entrance fees, regardless of resale, at percentage rates that
decrease the longer the resident remains in the community. Some
facilities offer life care contracts through which a facility
agrees to care for the resident for the remainder of the
resident's life, regardless of whether the resident outlives his
or her financial resources.
In addition to entrance fees, residents pay monthly fees, which
may be held constant as the resident ages and needs increase, or
may increase as the resident needs increasing levels of care.
Such monthly fees range widely from $500 to $9,000 a month for
independent living, between $3,000 and $7,000 for assisted
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living, and upwards from $7,000 to $17,000 per month for skilled
nursing.
There are currently 105 facilities certified as CCRCs in
California, 75 of which are nonprofit, and frequently operated
by religious or philanthropic organizations. Thirty CCRCs are
for-profit. There are eight nonprofit multiple-facility
providers and one for-profit multiple-facility provider.
According to Leading Age, there are more than 20,000 residents
of CCRCs in California.
Regulatory Structure
The overall regulatory structure for CCRCs pertains to the
financial solvency of the facilities, in consideration of the
substantial investments made by residents, which often comprise
a resident's life savings. In addition, CCRCs that operate an
independent or assisted living level of care are required to
have those facilities licensed by CDSS as Residential Care
Facilities for the Elderly (RCFEs). Facilities operating a
skilled nursing level of care must have those facilities
licensed by the Department of Public Health. Furthermore, CDSS
is required to review and approve the overall resident contract
used by a facility with each resident, however there are few
statutory requirements placed on the content of those contracts.
Additionally, CCRCs must file an application for a "Permit to
Accept Deposits/Certificate of Authority" with the Continuing
Care Contracts Branch of CDSS.
Required Annual Reports
Providers are required to submit an annual report to CDSS
describing the facility's financial condition within four months
after their fiscal year end. The reports are required to consist
of audited financial statements and required reserve
calculations, evidence of fidelity bonds (insuring against
dishonest employee conduct) as well as additional information.
This includes a certification, if applicable, that reserves for
prepaid continuing care contracts, statutory reserves, and
refund reserves are being maintained; details on status,
description, and amount of all reserves maintained, and on per
capita operation costs; disclosure accumulated or expended funds
for identified purposes, as specified; details of any increase
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in monthly care fees, including the basis for determining the
increase, and the data used to calculate the increase; the
auditor's opinion as to compliance with applicable statutes, and
any other information CDSS may require.
Providers are also required to submit a "Key Indicators Report"
disclosing key financial ratios and other key indicators within
30 days following the submission of each annual report.
Additionally, CCRCs that have contracts promising to provide
care without substantially increasing monthly fees as needs
increase must submit an actuarial study to CDSS every five years
regarding the actuarial financial position of the facility.
Required Reserves
CCRC providers are required to maintain a liquid reserve for
long-term debt obligations that must be equal to the sum of the
prior fiscal year payments for the following:
1) All regular principal and interest payments paid by the
provider for fully amortizing long-term debt. If a provider
has incurred new long-term debt during the immediately
preceding fiscal year, the required reserve is 12 times the
provider's most recent monthly payment on the debt.
2) Facility rental or leasehold payments, and any related
payments such as lease insurance.
3) Any debt that provides for a balloon payment. If the
balloon payment debt was incurred within the immediately
preceding fiscal year, the required reserve is 12 times the
provider's most recent monthly payment on the debt.
Additionally, CCRCs are required to maintain a liquid reserve
for operating expenses in an amount that equals or exceeds 75
days net operating expenses, as defined.
CCRCs offering a "refundable contract" are required to maintain
a reserve for refunds, held in a trust fund. Providers are
permitted to invest up 70 percent of the refund reserves in the
real estate that is used to provide care and housing for the
residents where they reside (limited to 50 percent of the
providers' net equity in the real estate). The required amount
of the reserve is calculated using a statutorily established
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formula based on life expectancy of the residents and the
portion of the entry fee that is refundable. Importantly, many
providers opt against a refundable contract that requires
reserves instead offering a "lump sum payment" that is
conditioned upon resale of the unit. The latter model does not
require the facility to maintain a reserve, since it is assumed
that the financial liability is only incurred once the unit has
been resold - it is this model which the author cites as having
led to long delays in returning entrance fees.
Disclosure Statements
California statute requires CDSS to issue a disclosure statement
form that facilities provide to residents, which includes the
following information:
General information such as the provider's name,
address, and telephone number, the type of ownership,
names of the continuing care retirement community's owner
and operator, the names of any affiliated facilities, and
any direct religious affiliation.
Whether the provider is accredited and by what
organization.
The year the continuing care retirement community
opened and the distance to the nearest shopping center
and hospital.
Whether the continuing care retirement community
offers life care contracts or continuing care contracts.
The number of the continuing care retirement
community's units including size and level of care and
whether the facility is single or multi-story.
The continuing care retirement community's
percentage occupancy at the provider's most recent fiscal
year end.
The form of contracts offered, the range of entrance
fees, the percentages of a resident's entrance fees that
may be refunded, and the health care benefits included in
contract.
A listing of common area amenities and other
services included with the monthly service fee, and a
listing of those amenities and services that are
available for an additional charge.
Specified financial information including income,
expenses, cash-flow, information about lenders,
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debt-to-asset ratio, and other information.
The average monthly service fees charged during the
most recent five years, and the percentage changes in the
average from year to year.
Provider concerns
Leading Age writes in opposition that repayment upon resale
provisions are an important resident protection mechanism in
CCRCs, popular with residents, and that this bill would cause
financial chaos by putting CCRC residents at risk of losing
their investments in the community. Additionally, Leading Age
writes that there are no provisions to "stop a run on the bank"
if there were multiple vacancies at one time, and that even a
small percentage of move-outs would put the CCRC and all other
residents at financial risk.
Further, Leading Age writes that the bill would cause providers
with debt to default on their bond covenants that stipulate the
CCRC's entrance fee repayment liabilities as a condition of
financing. According to Leading Age, the bill would also likely
trigger refund reserve requirements which could cause CCRCs to
fail liquidity requirements, deteriorate their credit ratings,
and affect their future ability to borrow. Finally, Leading Age
writes that this bill would have the unintended consequence of
effectively eliminating the popular repayable entrance fee
option as a choice for CCRC residents.
Related legislation:
AB 261 (Chesbro, Chapter 290, Statutes of 2013) prohibits
Residential Care Facilities for the Elderly, including most CCRC
providers from requiring advance notice for terminating an
admission agreement upon the death of a resident. Additionally
provides that no fees shall accrue once all personal property
belonging to the deceased is removed from the unit.
AB 1761 (Bloom, Chapter 699, Statutes of 2014) requires CCRC
providers to make specified financial statements available to
residents on a quarterly basis, rather than semi-annually.
Additionally, requires CCRC providers that have governing bodies
in the state to include at least one resident, or two residents
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if the facility has more than 21 members, as voting members of
the facility's governing body.
COMMENTS
1.As drafted, there is disagreement regarding whether federal
contract law permits the provisions of this bill to affect
existing contracts. Moreover, if the author seeks to apply the
provisions of this bill to the existing 20,000 CCRC contracts,
the fiscal implications for facilities that have not budgeted
for a mandatory 90-day repayment of entrance fees are
substantially different than if the provisions only apply
prospectively to new contracts. Staff recommends the bill make
clear the author's intent to apply the provisions of this bill
to existing contracts, or to limit the scope to future
contracts.
2.The bill as drafted requires repayment of an entrance fee no
later than 90 days after the unit has been vacated, regardless
of whether the unit has been re-occupied, which has the
practical effect of disallowing contracts where repayments are
truly conditioned upon re-occupation of the unit.
Staff notes that consumers may, in a determination of their
best interests, wish to enter into such contracts for the
purpose of safeguarding their long term care as they age, and
that this option for financing long term care may be
particularly attractive for middle income Californians not
eligible for safety net programs.
Staff further notes that contracts providing for a guaranteed
100 percent repayment within 90 days would imply the need for
the facility to establish a reserve account - in order to be
financially prepared to make such a payment (or multiple
payments) without jeopardizing the fiscal solvency of the
facility. This may impose significant financial costs to
CCRCs, the majority of which are non-profit organizations.
Furthermore, should any repayment obligations apply to
existing contracts, this may pose a financial threat to many
CCRCs in which many consumers have invested their life
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savings.
3.As drafted, the bill first requires that "in no event" shall
entrance fee repayments occur later than 90 days, but the next
paragraph provides that entrance fee repayments delayed longer
than 90 days shall accrue interest payments. Additionally,
staff notes, that in setting the interest rates applying to
delayed repayments, the bill imposes an interest rate applying
to enforcement of judgments - a 10 percent rate that is
significantly above market interest rates.
4.Staff notes that similar instances have been litigated in
other states. In one similar case last year in Michigan
(Mildred A Steward v Henry Ford Village Inc.), the court
stated:
"It appears in any event that defendant [the facility]
maintains complete control, under the Agreement, of when
and how the unit comes to be re-occupied, and therefore of
when and how the condition precedent to defendant's
obligation to refund plaintiff's entrance deposit is
satisfied. Such broad discretion implies a duty to exercise
good faith. Burkhardt, 57 Mich App at 652; Ferrell 137 Mich
App at 243."
The concept of good faith is a common legal standard that
applies generally to all contracts under the Uniform
Commercial Code Section 1304. This law also states that,
"[e]very contract imposes upon each party a duty of good faith
and fair dealing in the performance of the contract such that
neither party can do anything that will have the effect of
destroying or injuring the right of the other party to receive
the fruits of the contract." (1 Witkin Sum. Cal. Law Contracts
Sec. 797(a).) <1>
Many residents of CCRCs are dependent on the good faith of the
--------------------------
<1> Senate Judiciary Committee
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facility to obtain their conditional lump-sum payment. Staff
notes that CDSS may have existing regulatory authority to
intervene on behalf of the residents cited by the author, if
the facility is not acting to occupy a unit in good faith, or
alternatively, the author may wish to consider defining the
specific good faith responsibilities of facilities and provide
CDSS authority to enforce them.
5.Staff recommends the author additionally consider adding to
the disclosure requirements for facilities to ensure that
residents are fully aware of the longest and median length of
time that a lump sum payment conditioned upon resale has been
delayed in that facility. Additionally, the author may wish
to consider amending the marketing and promotional materials
requirements that facilities are accountable to in advertising
this model of contract.
6.Staff notes the author has proposed the following amendments
in response to the above comments raised by the committee:
Page 2, Line 24-33:
(e) (1) A lump-sum payment to a resident after termination of a
continuing care contract
that is conditioned upon resale of a unit shall not be
considered to be a refund and may not be characterized or
advertised as a refund. The full lump-sum payment shall be paid
to the resident within 14 calendar days after resale of the
unit , but in no event later than 90 days after the formerly
occupied unit has been vacated . Contracts signed after January
1, 2016 shall require that no later than 90 days after a
formerly occupied unit has been vacated, at least 20% of the
full lump-sum payment shall be paid to the resident.
(2) Any payments payment balance that are not has not been paid
to the resident within the 90-day period pursuant to paragraph
(1) 90 days will accrue interest at a rate calculated pursuant
to paragraph (3). Any payment balance that has not been paid to
the resident within 180 days will accrue interest at a rate
calculated pursuant to paragraph (4) . Interest shall continue to
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accrue until the date the full lump-sum payment is paid to the
resident. Subparagraph (2) shall apply to existing and
prospective continuing care contracts.
Page 3, Lines 1-5:
(3) Interest rates and calculations pursuant to paragraph (2)
are identical to interest rates and calculations set forth in
Section 685.010 of the Code of Civil Procedure. Any payment
balance that is not paid to the resident within the 90-day
period pursuant to paragraph (2) will accrue interest at a rate
no lower than 2.0 percent plus the United States prime lending
rate.
(4) Any payments that are not paid to the resident within the
180-day period pursuant to paragraph (2) will accrue interest at
a rate no lower than 5.0 percent plus the United States prime
lending rate.
Page 3, Lines 10-15:
(g) Once the unit has been vacated and made available to
the provider, the provider shall not make any further
charges to the resident or his or her estate or charges
against the lump-sum payment that is due to the resident
for purposes of continued monthly payments to the provider
or for maintenance or housekeeping on the vacated unit.
This subparagraph shall apply to existing and prospective
continuing care contracts.
New Bill Section to Amend Section 1788:
(a) A continuing care contract shall contain all of the
following:
(1) The legal name and address of each provider.
(2) The name and address of the continuing care retirement
community.
(3) The resident's name and the identity of the unit the
resident will occupy.
(4) If there is a transferor other than the resident, the
transferor shall be a party to the contract and the transferor's
name and address shall be specified.
(5) If the provider has used the name of any charitable or
religious or nonprofit organization in its title before January
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1, 1979, and continues to use that name, and that organization
is not responsible for the financial and contractual obligations
of the provider or the obligations specified in the continuing
care contract, the provider shall include in every continuing
care contract a conspicuous statement that clearly informs the
resident that the organization is not financially responsible.
(6) The date the continuing care contract is signed by the
resident and, where applicable, any other transferor.
(7) The duration of the continuing care contract.
(8) A list of the services that will be made available to the
resident as required to provide the appropriate level of care.
The list of services shall include the services required as a
condition for licensure as a residential care facility for the
elderly, including all of the following:
(A) Regular observation of the resident's health status to
ensure that his or her dietary needs, social needs, and needs
for special services are satisfied.
(B) Safe and healthful living accommodations, including
housekeeping services and utilities.
(C) Maintenance of house rules for the protection of residents.
(D) A planned activities program, which includes social and
recreational activities appropriate to the interests and
capabilities of the resident.
(E) Three balanced, nutritious meals and snacks made available
daily, including special diets prescribed by a physician as a
medical necessity.
(F) Assisted living services.
(G) Assistance with taking medications.
(H) Central storing and distribution of medications.
(I) Arrangements to meet health needs, including arranging
transportation.
(9) An itemization of the services that are included in the
monthly fee and the services that are available at an extra
charge. The provider shall attach a current fee schedule to the
continuing care contract. The schedule shall state that a
provider is prohibited from charging the resident or descendants
a monthly fee once a unit has been permanently vacated by the
resident.
(10) The procedures and conditions under which a resident may be
voluntarily and involuntarily transferred from a designated
living unit. The transfer procedures, at a minimum, shall
include provisions addressing all of the following circumstances
under which a transfer may be authorized:
(A) A continuing care retirement community may transfer a
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resident under the following conditions, taking into account the
appropriateness and necessity of the transfer and the goal of
promoting resident independence:
(i) The resident is nonambulatory. The definition of
"nonambulatory," as provided in Section 13131, shall either be
stated in full in the continuing care contract or be cited. If
Section 13131 is cited, a copy of the statute shall be made
available to the resident, either as an attachment to the
continuing care contract or by specifying that it will be
provided upon request. If a nonambulatory resident occupies a
room that has a fire clearance for nonambulatory residents,
transfer shall not be necessary.
(ii) The resident develops a physical or mental condition that
endangers the health, safety, or well-being of the resident or
another person.
(iii) The resident's condition or needs require the resident's
transfer to an assisted living care unit or skilled nursing
facility, because the level of care required by the resident
exceeds that which may be lawfully provided in the living unit.
(iv) The resident's condition or needs require the resident's
transfer to a nursing facility, hospital, or other facility, and
the provider has no facilities available to provide that level
of care.
(B) Before the continuing care retirement community transfers a
resident under any of the conditions set forth in subparagraph
(A), the community shall satisfy all of the following
requirements:
(i) Involve the resident and the resident's responsible person,
as defined in paragraph (6) of subdivision (r) of Section 87101
of Title 22 of the California Code of Regulations, and upon the
resident's or responsible person's request, family members, or
the resident's physician or other appropriate health
professional, in the assessment process that forms the basis for
the level of care transfer decision by the provider. The
provider shall offer an explanation of the assessment process.
If an assessment tool or tools, including scoring and evaluating
criteria, are used in the determination of the appropriateness
of the transfer, the provider shall make copies of the completed
assessment available upon the request of the resident or the
resident's responsible person.
(ii) Prior to sending a formal notification of transfer, the
provider shall conduct a care conference with the resident and
the resident's responsible person, and upon the resident's or
responsible person's request, family members, and the resident's
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health care professionals, to explain the reasons for transfer.
(iii) Notify the resident and the resident's responsible person
of the reasons for the transfer in writing.
(iv) Notwithstanding any other provision of this subparagraph,
if the resident does not have impairment of cognitive abilities,
the resident may request that his or her responsible person not
be involved in the transfer process.
(v) The notice of transfer shall be made at least 30 days before
the transfer is expected to occur, except when the health or
safety of the resident or other residents is in danger, or the
transfer is required by the resident's urgent medical needs.
Under those circumstances, the written notice shall be made as
soon as practicable before the transfer.
(vi) The written notice shall contain the reasons for the
transfer, the effective date, the designated level of care or
location to which the resident will be transferred, a statement
of the resident's right to a review of the transfer decision at
a care conference, as provided for in subparagraph (C), and for
disputed transfer decisions, the right to review by the
Continuing Care Contracts Branch of the State Department of
Social Services, as provided for in subparagraph (D). The notice
shall also contain the name, address, and telephone number of
the department's Continuing Care Contracts Branch.
(vii) The continuing care retirement community shall provide
sufficient preparation and orientation to the resident to ensure
a safe and orderly transfer and to minimize trauma.
(C) The resident has the right to review the transfer decision
at a subsequent care conference that shall include the resident,
the resident's responsible person, and upon the resident's or
responsible person's request, family members, the resident's
physician or other appropriate health care professional, and
members of the provider's interdisciplinary team. The local
ombudsperson may also be included in the care conference, upon
the request of the resident, the resident's responsible person,
or the provider.
(D) For disputed transfer decisions, the resident or the
resident's responsible person has the right to a prompt and
timely review of the transfer process by the Continuing Care
Contracts Branch of the State Department of Social Services.
(E) The decision of the department's Continuing Care Contracts
Branch shall be in writing and shall determine whether the
provider failed to comply with the transfer process pursuant to
subparagraphs (A) to (C), inclusive. Pending the decision of the
Continuing Care Contracts Branch, the provider shall specify any
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additional care the provider believes is necessary in order for
the resident to remain in his or her unit. The resident may be
required to pay for the extra care, as provided in the contract.
(F) Transfer of a second resident when a shared accommodation
arrangement is terminated.
(11) Provisions describing any changes in the resident's monthly
fee and any changes in the entrance fee refund payable to the
resident that will occur if the resident transfers from any
unit, including, but not limited to, terminating his or her
contract after 18 months of residential temporary relocation, as
defined in paragraph (8) of subdivision (r) of Section 1771, and
that a provider is prohibited from charging the resident or
descendants a monthly fee once a unit has been permanently
vacated by the resident.
(12) The provider's continuing obligations, if any, in the event
a resident is transferred from the continuing care retirement
community to another facility.
(13) The provider's obligations, if any, to resume care upon the
resident's return after a transfer from the continuing care
retirement community.
(14) The provider's obligations to provide services to the
resident while the resident is absent from the continuing care
retirement community.
(15) The conditions under which the resident must permanently
release his or her living unit.
(16) If real or personal properties are transferred in lieu of
cash, a statement specifying each item's value at the time of
transfer, and how the value was ascertained.
(A) An itemized receipt that includes the information described
above is acceptable if incorporated as a part of the continuing
care contract.
(B) When real property is or will be transferred, the continuing
care contract shall include a statement that the deed or other
instrument of conveyance shall specify that the real property is
conveyed pursuant to a continuing care contract and may be
subject to rescission by the transferor within 90 days from the
date that the resident first occupies the residential unit.
(C) The failure to comply with this paragraph shall not affect
the validity of title to real property transferred pursuant to
this chapter.
(17) The amount of the entrance fee.
(18) In the event two parties have jointly paid the entrance fee
or other payment that allows them to occupy the unit, the
continuing care contract shall describe how any refund of
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entrance fees is allocated.
(19) The amount of any processing fee.
(20) The amount of any monthly care fee.
(21) For continuing care contracts that require a monthly care
fee or other periodic payment, the continuing care contract
shall include the following:
(A) A statement that the occupancy and use of the accommodations
by the resident is contingent upon the regular payment of the
fee.
(B) The regular rate of payment agreed upon (per day, week, or
month).
(C) A provision specifying whether payment will be made in
advance or after services have been provided.
(D) A provision specifying the provider will adjust monthly care
fees for the resident's support, maintenance, board, or lodging,
when a resident requires medical attention while away from the
continuing care retirement community.
(E) A provision specifying whether a credit or allowance will be
given to a resident who is absent from the continuing care
retirement community or from meals. This provision shall also
state, when applicable, that the credit may be permitted at the
discretion or by special permission of the provider.
(F) A statement of billing practices, procedures, and timelines.
A provider shall allow a minimum of 14 days between the date a
bill is sent and the date payment is due. A charge for a late
payment may only be assessed if the amount and any condition for
the penalty is stated on the bill.
(G) A statement that the provider is prohibited from charging
the resident or descendants a monthly fee once a unit has been
permanently vacated by the resident.
(22) All continuing care contracts that include monthly care
fees shall address changes in monthly care fees by including
either of the following provisions:
(A) For prepaid continuing care contracts, which include monthly
care fees, one of the following methods:
(i) Fees shall not be subject to change during the lifetime of
the agreement.
(ii) Fees shall not be increased by more than a specified number
of dollars in any one year and not more than a specified number
of dollars during the lifetime of the agreement.
(iii) Fees shall not be increased in excess of a specified
percentage over the preceding year and not more than a specified
percentage during the lifetime of the agreement.
(B) For monthly fee continuing care contracts, except prepaid
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contracts, changes in monthly care fees shall be based on
projected costs, prior year per capita costs, and economic
indicators.
(23) A provision requiring that the provider give written notice
to the resident at least 30 days in advance of any change in the
resident's monthly care fees or in the price or scope of any
component of care or other services.
(24) A provision indicating whether the resident's rights under
the continuing care contract include any proprietary interests
in the assets of the provider or in the continuing care
retirement community, or both. Any statement in a contract
concerning an ownership interest shall appear in a large-sized
font or print.
(25) If the continuing care retirement community property is
encumbered by a security interest that is senior to any claims
the residents may have to enforce continuing care contracts, a
provision shall advise the residents that any claims they may
have under the continuing care contract are subordinate to the
rights of the secured lender. For equity projects, the
continuing care contract shall specify the type and extent of
the equity interest and whether any entity holds a security
interest.
(26) Notice that the living units are part of a continuing care
retirement community that is licensed as a residential care
facility for the elderly and, as a result, any duly authorized
agent of the department may, upon proper identification and upon
stating the purpose of his or her visit, enter and inspect the
entire premises at any time, without advance notice.
(27) A conspicuous statement, in at least 10-point boldface type
in immediate proximity to the space reserved for the signatures
of the resident and, if applicable, the transferor, that
provides as follows: "You, the resident or transferor, may
cancel the transaction without cause at any time within 90 days
from the date you first occupy your living unit. See the
attached notice of cancellation form for an explanation of this
right."
(28) Notice that during the cancellation period, the continuing
care contract may be canceled upon 30 days' written notice by
the provider without cause, or that the provider waives this
right.
(29) The terms and conditions under which the continuing care
contract may be terminated after the cancellation period by
either party, including any health or financial conditions.
(30) A statement that, after the cancellation period, a provider
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may unilaterally terminate the continuing care contract only if
the provider has good and sufficient cause.
(A) Any continuing care contract containing a clause that
provides for a continuing care contract to be terminated for
"just cause," "good cause," or other similar provision, shall
also include a provision that none of the following activities
by the resident, or on behalf of the resident, constitutes "just
cause," "good cause," or otherwise activates the termination
provision:
(i) Filing or lodging a formal complaint with the department or
other appropriate authority.
(ii) Participation in an organization or affiliation of
residents, or other similar lawful activity.
(B) The provision required by this paragraph shall also state
that the provider shall not discriminate or retaliate in any
manner against any resident of a continuing care retirement
community for contacting the department, or any other state,
county, or city agency, or any elected or appointed government
official to file a complaint or for any other reason, or for
participation in a residents' organization or association.
(C) Nothing in this paragraph diminishes the provider's ability
to terminate the continuing care contract for good and
sufficient cause.
(31) A statement that at least 90 days' written notice to the
resident is required for a unilateral termination of the
continuing care contract by the provider.
(32) A statement concerning the length of notice that a resident
is required to give the provider to voluntarily terminate the
continuing care contract after the cancellation period.
(33) The policy or terms for refunding or repaying a lump-sum of
any portion of the entrance fee, in the event of cancellation,
termination, or death. Every continuing care contract that
provides for a refund or repaying a lump-sum of of all or a part
of the entrance fee shall also do all of the following:
(A) Specify the amount, if any, the resident has paid or will
pay for upgrades, special features, or modifications to the
resident's unit.
(B) State that if the continuing care contract is canceled or
terminated by the provider, the provider shall do both of the
following:
(i) Amortize the specified amount at the same rate as the
resident's entrance fee.
(ii) Refund the unamortized balance to the resident at the same
time the provider pays the resident's entrance fee refund.
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(C) State that the resident has a right to terminate his or her
contract after 18 months of residential temporary relocation, as
defined in paragraph (8) of subdivision (r) of Section 1771.
Provisions for refunds due to cancellation pursuant to this
subparagraph shall be set forth in the contract.
(D) State the provider shall make a good faith effort to
reoccupy or resell a unit for which a lump-sum payment is
conditioned upon resale of the unit. No later than July 1, 2016,
a provider shall provide notice to all current residents with
contracts applicable to this subparagraph regarding the above
statement as a clarification of the resident's existing
contract.
7.With regard to one individual referenced by the author, who
was charged $4,161 a month against his deceased father's
estate for an indefinite amount of time pending resale of the
unit, staff notes that existing law pursuant to AB 261
(Chesbro, Chapter 290, Statutes of 2013) prohibits RCFE's from
assessing monthly fees once all personal property belonging to
a deceased resident is removed from the unit.
However, the bill exempted RCFE's operated by CCRCs, which is
inconsistent with the provisions of this bill. Staff
recommends the author consider amending HSC 1569.652 to
eliminate the exemption provided to continuing care equity
projects.
POSITIONS
Support:
Cardinal Point Residents Association
Consumer Federation of California
National Association of Social Workers, California
Chapter
Eskaton Village, Carmichael Chapter of CALCRA
162 individulas
Opposition:
American Baptist Home of the West
Atherton Baptist Homes
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Atterdag Village of Solvang
be.group
be.royal oaks
California Association of Continuing Care Retirement
Communities
Casa de las Campanas
Channing House
Continuing Life
Episcopal Communities & Services
Episcopal Senior Communities
Eskaton
Front Porch Communities and Services
Forest Hill
Fountaingrove Lodge
Grand Lake Gardens Retirement Community
Hillcrest
La Costa Glen, Carlsbad
Lake Park, Community Care Retirement Community
Leading Age
Meadows of Napa valley
O'Connor Woods
Palm Village Retirement Community
Plymouth Village
Pacific Retirement Services
Rosewood Senior Living
Terraces of Los Gatos
The Tamalpais, Marin
Saratoga Retirement Community
Sierra View Homes
Spring Lake Village
St. John's Retirement Village, Inc.
Stoneridge Creek Pleasanton
58 individuals
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