BILL ANALYSIS                                                                                                                                                                                                    





                             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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