BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015 - 2016 Regular Session
SB 648 (Mendoza)
Version: April 20, 2015
Hearing Date: April 28, 2015
Fiscal: Yes
Urgency: No
TMW
SUBJECT
Health and care facilities: referral agencies
DESCRIPTION
Existing law regulates the licensing of referral agencies of
extended care and nursing home facilities. This bill would
extend those requirements to residential care facilities for the
elderly (RCFEs). This bill would also require referral agency
to provide disclosures to potential customers that include
whether the licensee has an agreement or contract with the
facility for client referrals, that a commission will be
received by the licensee from the facility, and licensee contact
information. This bill would also require the licensee to
retain for four years a signed acknowledgement by the customer
of receipt of the disclosures. This bill would also require
these referral agencies to maintain liability insurance of at
least $1 million per referred person and $3 million in the total
annual aggregate for negligent acts or omissions.
(This analysis reflects author's amendments to be offered in
Committee.)
BACKGROUND
According to the United States Census Bureau, more than 38
million people reside in California, making it the nation's most
populous state. One of every eight United States residents
lives in California, and by 2050, California's population is
projected to reach 50 million people. (Pub. Policy Inst. of
Cal. [as
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of Apr. 21, 2015].) Californians grow older, locating
appropriate and quality housing to provide personal and medical
care will become more important. In the search for assisted
living facilities, elders and their families may seek help from
referral agencies, which provide information on extended care
facilities, skilled nursing homes, intermediate care facilities,
and residential care facilities for the elderly (RCFEs).
In 2011, the State of Washington enacted legislation (H.B. 1494,
2011 Reg. Sess.) to regulate elder placement referral agencies
in response to an investigative report conducted by the Seattle
Times, which found that some adult care referral agencies did
not disclose that they received a commission from facilities
upon referral. (M. Berens, State gets tough on referrals for
elder care, Seattle Times (Apr. 20, 2011) [as of Apr. 21, 2015].) That article noted that the
elder-care referral business was exploding in growth, and those
businesses were "raking in profits, sometimes deceptively, by
promising to help families find long-term care for [elders]."
(Id.) The Seattle Times found that many placement agencies
failed to screen adult care facilities for violations, which
resulted in hundreds of seniors being referred to state-licensed
homes with documented histories of substandard care, including
fatal neglect. (Id.)
California currently requires referral agencies for extended
care facilities, skilled nursing homes, and intermediate care
facilities to be licensed and subject to specified regulations
in order to protect the individuals who are seeking placement in
assisted living facilities. However, current law does not
provide licensing requirements for RCFE referral agencies. This
bill would extend the current referral agency licensing
requirements to RCFE referral agencies. This bill would also
require referral agencies to provide specified disclosure
statements to protect consumers utilizing those referral
agencies.
This bill was heard by the Senate Health Committee on April 15,
2015, and passed out on a vote of 7-2.
CHANGES TO EXISTING LAW
Existing law licenses and regulates extended care, skilled
nursing home or intermediate care facilities by the Department
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of Public Health (DPH). (Health & Saf. Code Sec. 1250 et seq.)
Existing law also licenses and regulates residential care
facilities for the elderly (RCFEs). (Health & Saf. Code Sec.
1569 et seq.)
Existing law licenses and regulates referral agencies of
extended care facilities, skilled nursing homes, and
intermediate care facilities. (Health & Saf. Code Sec. 1400 et
seq.)
Existing law defines "referral agency" to mean a private, profit
or nonprofit agency which is engaged in the business of
referring persons for remuneration to any extended care, skilled
nursing home or intermediate care facility or a distinct part of
a facility providing extended care, skilled nursing home care,
or intermediate care. (Health & Saf. Code Sec. 1401.)
Existing law prohibits a licensee from having a direct or
indirect financial interest in any medical facility doing
business with the licensee. (Health & Saf. Code Sec. 1404.)
This bill would add referral agency services of RCFEs to the
referral agency licensing requirements.
This bill would make it unlawful for any person, association, or
corporation to establish, conduct, or maintain a referral agency
or to refer any person for remuneration to any residential care
facility for the elderly for professional services if that
facility does not meet the required licensing standards.
This bill would exempt an RCFE from the referral agency
licensing requirements if the RCFE provides discounts or other
remuneration to residents or their families for referring new or
prospective residents, or provides remuneration to staff for
marketing or sales efforts.
This bill would define "residential care facility for the
elderly" to mean a housing arrangement chosen voluntarily by
persons 60 years of age or over, or their authorized
representative, where varying levels and intensities of care and
supervision, protective supervision, or personal care are
provided, based upon their varying needs, as determined in order
to be admitted and to remain in the facility. Persons under 60
years of age with compatible needs may be allowed to be admitted
or retained in a residential care facility for the elderly, as
specified.
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This bill , prior to any referral, would require the licensee to
provide each person receiving services from the licensee with a
disclosure statement, as specified.
This bill would require the disclosure statement to be dated,
contain the name of the person being referred, and would provide
that:
if the disclosure is provided in written form, the disclosure
must be in 16-point bold type; or
if the disclosure is provided electronically, the disclosure
must be consistent with laws relating to electronic records,
as specified, and the disclosure would be required to be
displayed on the Web site in larger type than the surrounding
text.
This bill would require the licensee to provide the disclosure
statement in the same language in which the licensee negotiates
any referral services with the person receiving services.
This bill , prior to any referral, would require the licensee to
retain a signed acknowledgment from the person being referred,
or his or her conservator, guardian, family member, or agent
under a power of attorney, stating that the disclosure statement
was received.
This bill would authorize the signed acknowledgment to be
executed as follows:
in the signature of the person being referred, or his or her
conservator, guardian, family member, or agent under a power
of attorney on the exact disclosure statement;
an electronic signature that includes the date, time, internet
provider address, and displays the exact disclosure statement
document; or
a faxed confirmation that includes the date, time, and fax
number and displays the exact disclosure statement document.
This bill would provide that a violation of the disclosure
requirements with the intent to directly or indirectly mislead
the public on the nature of services provided by the referral
agency would constitute unfair competition, as specified, and
would authorize a civil penalty for each violation in the amount
of $2,500.
This bill would require the signed acknowledgement to be
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retained for a period of no less than four years.
This bill would provide that if the disclosure statement, or any
other referral-related document, is provided electronically, the
licensee shall provide a written copy, in 16-point bold type, to
the person being referred, or his or her conservator, guardian,
family member, or agent under power of attorney following any
referral, and the written copy may be provided by fax, if
applicable.
This bill would make it unlawful for a licensee to share any
personal information, including, but not limited to, the name,
address, age, gender, or medical information of the person
receiving services from the licensee, with any unauthorized
person or third-party affiliate of the licensee, unless
expressly authorized as follows:
the person being referred, or his or her conservator,
guardian, family member, or agent under power of attorney may
expressly authorize the licensee to share his or her name and
contact phone number, or email address, with the facility, or
facilities being referred, and the express authorization shall
be separate from the disclosure statement and include:
o a disclosure, as specified, which clearly and
conspicuously states the name, location, and contact
information of the facility, or facilities, who will
receive the contact information, and the format in which
the facility will receive the contact information; and
o the signature of the person giving authorization, as
specified; and
the licensee shall only share the name and contact information
of the individual who has provided express authorization, as
specified.
This bill would make it unlawful for a licensee to hold any
power of attorney for a person receiving placement referral
services from that licensee, or to receive or hold a client's
property in any capacity.
This bill , on and after July 1, 2016, would require all persons,
associations, or corporations licensed as referral agencies to
maintain liability insurance coverage in an amount of at least
$1,000,000 per referred person and $3,000,000 in the total
annual aggregate, for negligent acts or omissions by the
licensee.
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This bill would make various technical and non-substantive
corrections.
COMMENT
1. Stated need for the bill
The author writes:
Seniors and families have a right to know whether an elder
care referral agency is recommending a care facility based on
the client's needs or if they are recommending a care facility
because they are receiving a commission or finder's fee. When
faced with the difficult decision to find long-term care for
themselves or their loved ones, consumers must be put on
notice to conflicts of interest. SB 648 will make sure that
all elder care referral agencies, which perform a useful and
important service for consumers, are licensed, and that they
disclose any financial interest they may have in a facility
they recommend.
2. Disclosure requirements
Existing law licenses and regulates assisted living facility
referral agencies. This bill would also require assisted living
facility referral agencies to provide to individuals seeking
referral assistance from the agency a disclosure statement
containing all of the following:
whether the licensee has an agreement or contract with the
facility to which the person is being referred;
that a commission or fee will be received by the licensee from
the facility as a result of the referral, if applicable;
any gift or exchange of monetary value between the facility
and the licensee that is in addition to, or in lieu of, a
commission or fee;
any fee charged to the person or persons by the licensee, and
the notice would be required to include a description of the
services being rendered for that fee and the licensee's refund
policy;
the licensee's contact information, including address and
telephone number, and the licensee's privacy policy, which may
be provided as a Web site link, as specified;
the date of the licensee's most recent tour or visit to the
facility and, as appropriate, a report of any violations as
identified by the most recent evaluation report for a
residential care facility for the elderly;
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information regarding the services the referred facility
offers, including, but not limited to, intermittent skilled
nursing care, memory care, assistance with and distribution of
medication, and other services, if applicable; and
the contact information, including address and telephone phone
number, of the State Department of Social Services or State
Department of Public Health, as appropriate, and the contact
information for filing consumer complaints, including contact
information for the local long-term care ombudsman.
The Consumer Federation of California (CFC), sponsor, states
that "[g]enerally, referral agency services are offered at no
charge to seniors. Instead, referral agencies receive a
commission or finder's fee from the care facility after they
have successfully referred a senior for care and housing. The
commission or finder's fee is typically calculated as a
percentage of the senior's monthly rent, creating an incentive
for the referral agent to place the senior in a specific
facility or one where the agency has an exclusive referral
contract. Oftentimes these are more expensive for the senior,
even if the senior doesn't need a high level of care or may have
difficulty affording it. Referral agencies are largely
influenced by the amount of money they receive when a customer
is placed in a facility, and these agreements between the agency
and care facility play a significant role in the recommendations
agents give seniors."
The author argues that seniors and their families rely heavily
on referral agencies for advice and recommendations of living
facilities. However, referral agencies predominately rely on
commissions or finder's fees paid by the facilities for each
patient referred to the facility. This bill would provide
better consumer protection through the use of licensing
requirements for RCFE referral agencies and conflict of interest
disclosures.
3. Conflict-of-interest and consumer protection provisions
Existing law requires a referral agency to disclose whether the
referral agency is a nonpublic corporation, and if so, the name
and business address of each stockholder owning 10 percent or
more of the stock and the name and business address of any
corporation member who has responsibility in the operation of
the facility. (Health & Saf. Code Sec. 1405(e).) The referral
agency is also required to notify the Department of Health
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within 10 days in writing when a change of stockholder owning 10
percent or more of the nonpublic corporate stock occurs.
(Health & Saf. Code Sec. 1409.3.) These provisions provide
important conflict-of-interest protections for consumers by
requiring the referral agencies to disclose their financial
interests in an assisted living facility.
This bill seeks to build on those consumer protections by
requiring referral agencies to disclose their agreements or
contracts with the facilities, whether a commission or fee will
be paid by the facility to the referral agency as a result of
the referral, and whether any gifts are received or exchanged in
addition to or in lieu of a commission or fee. In support of
these provisions, the Institute on Aging states that "[s]eniors
and their families have a right to know when they are dealing
with salespeople who may have ulterior motives when researching
the best care options for themselves or their loved ones."
This bill would also prohibit a referral agency from holding any
power of attorney for a person receiving placement referral
services from that licensee, or receiving or holding a client's
property in any capacity. According to the CFC, "[i]n the Los
Angeles area, an elderly blind woman was visited in her hospital
room by a referral agent and solicited to use its services. The
woman ended up giving power of attorney to an associate of the
referral agency who drained the woman's bank account and coerced
her and her husband to give away their house and possessions to
a third-part conspirator." By adding conflict-of-interest
disclosures and prohibiting a referral agency from taking legal
or physical possession of an elder's property, this bill would
provide better protection for individuals in need of assisted
living.
4. Insurance requirements
This bill would require a licensed referral agency to maintain
liability insurance coverage in an amount of at least $1,000,000
per referred person and $3,000,000 in the total annual
aggregate, for negligent acts or omissions by the licensee.
The California Long-Term Care Ombudsman Association, in support,
notes that its members "often work with residents and their
loved ones on complaints where the resident is harmed because of
a bad or inappropriate placement and there is no recourse
because the referral agent does not have adequate insurance."
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Notably, this bill would also require the referral agency to
visit the facility and, for RCFEs, would require the referral
agency to report to the client any violations identified by the
most recent evaluation report. Given the grave consequences for
a vulnerable elder placed in a substandard facility due to the
referral relied upon by an elder or his or her family, this bill
would provide an appropriate consumer protection. Further, this
insurance requirement may act as a preventive measure by making
referral agencies aware of the monetary significance in
providing substandard referrals. This bill may also provide
third-party monitoring of referral agencies who incur frequent
or significant insurance payouts that make insurers unable to
continue coverage for the referral agency.
5. Personal information protections
This bill would prohibit a referral agency from sharing any
personal information, including, but not limited to, the name,
address, age, gender, or medical information of the person
receiving services from the licensee, with any unauthorized
person or third-party affiliate of the licensee, unless
expressly authorized by the person receiving services or his or
her agent, as specified. The author argues that, "during the
consultation process, sensitive client medical information may
be discussed or reviewed before a placement is made. Referral
agencies should be required to take care of such information and
ensure it is secured." This bill would also require the
referral agencies to disclose their privacy policies. As a
matter of public policy, elders are at high risk of financial
abuse due to possible diminished mental and physical health,
making it all the more necessary to protect their personal
information from third-parties.
6. Author's amendments
In order to address concerns raised by opponents, the author
offers amendments in Committee that would clarify:
the practices under which an RCFE would not be considered a
referral agency;
the method of providing the referral agency's privacy policy
online;
the methods for providing written and electronic disclosure
statements;
acceptable forms of signed acknowledgment; and
express authorization requirements for the release of personal
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information.
The amendments also remove the post-placement visitation
requirement proposed in the April 7, 2015, version of the bill,
and provide for civil penalty enforcement of disclosure
violations.
7. Opposition's concerns
A Place for Mom provided concerns with various aspects of the
disclosure, facility visitation, personal information, and
insurance liability requirements. Caring.com also argues that
the tour and visitation requirements in this bill are
discriminatory against Internet referral agencies and should be
removed. This bill was subsequently amended, and the author is
offering additional amendments in Committee to attempt to
resolve concerns.
Support : 6Beds, Inc.; California Alliance for Retired
Americans; California Long-Term Care Ombudsman Association;
CALPIRG; Coalition of Responsible Senior Placement Agencies;
Consumer Attorneys of California; Institute on Aging; National
Association of Social Workers, California Chapter
Opposition : A Place for Mom; Caring.com; Realpage, Inc.
HISTORY
Source : Consumer Federation of California
Related Pending Legislation : AB 782 (Dababneh, 2015), among
other things, would make the provisions of the Home Care
Services Consumer Protection Act applicable to home care aide
domestic referral agencies, as defined, including licensure,
fees, enforcement and fines, and regulation of registered home
care aides having agreements with those agencies. AB 782 is set
for hearing on April 28, 2015, in the Assembly Human Services
Committee.
Prior Legislation :
AB 1863 (Jones, 2014) would have made the Home Care Services
Consumer Protection Act domestic home care aide referral
organizations, as defined, including licensure, fees,
enforcement and fines, and regulation of registered home care
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aides having agreements with those organizations. AB 1863 was
held in the Senate Appropriations Committee.
SB 398 (Romero, 2003) would have, among other things, made the
licensing and regulation provisions of the Employment Agency,
Employment Counseling, and Job Listing Services Act applicable
to health care employment agencies, as defined. SB 398 was held
in the Senate Appropriations Committee.
SB 70 (Murray, 1999) would have established licensing and
regulations for residential care facilities for the elderly
referral agencies. SB 70 was held in the Assembly
Appropriations Committee.
Prior Vote : Senate Health Committee (Ayes 7, Noes 2)
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