BILL ANALYSIS Ó SENATE COMMITTEE ON HUMAN SERVICES Senator McGuire, Chair 2015 - 2016 Regular Bill No: SB 475 ----------------------------------------------------------------- |Author: |Monning | ----------------------------------------------------------------- |----------+-----------------------+-----------+-----------------| |Version: |February 26, 2015 |Hearing |April 28, 2015 | | | |Date: | | |----------+-----------------------+-----------+-----------------| |Urgency: |No |Fiscal: |No | ---------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Sara Rogers | |: | | ----------------------------------------------------------------- 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 SB 475 (Monning) PageB of? 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 SB 475 (Monning) PageC of? 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 SB 475 (Monning) PageD of? 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 SB 475 (Monning) PageE of? 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 SB 475 (Monning) PageF of? 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 SB 475 (Monning) PageG of? 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, SB 475 (Monning) PageH of? 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 SB 475 (Monning) PageI of? 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 SB 475 (Monning) PageJ of? 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 SB 475 (Monning) PageK of? 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) Anypaymentspayment balance thatare nothas not been paid to the resident withinthe 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 SB 475 (Monning) PageL of? 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 SB 475 (Monning) PageM of? 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 SB 475 (Monning) PageN of? 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 SB 475 (Monning) PageO of? 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 of? 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 SB 475 (Monning) PageQ of? 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 of? 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 of? 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. SB 475 (Monning) PageT of? (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 -