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  









          SB 475 (Monning)                                          PageP  
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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  









          SB 475 (Monning)                                          PageR  
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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  









          SB 475 (Monning)                                          PageS  
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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









          SB 475 (Monning)                                          PageU  
          of?
          
                    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
           
                                      -- END -