BILL ANALYSIS                                                                                                                                                                                                    

          |SENATE RULES COMMITTEE            |                        SB 648|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |

                                   THIRD READING 

          Bill No:  SB 648
          Author:   Mendoza (D), et al.
          Amended:  1/26/16  
          Vote:     21  

           SENATE HEALTH COMMITTEE:  7-2, 4/15/15
           AYES:  Hernandez, Hall, Mitchell, Monning, Pan, Roth, Wolk
           NOES:  Nguyen, Nielsen

           SENATE JUDICIARY COMMITTEE:  5-1, 4/28/15
           AYES:  Jackson, Hertzberg, Leno, Monning, Wieckowski
           NOES:  Anderson
           NO VOTE RECORDED:  Moorlach

           AYES:  Lara, Beall, Hill, Leyva, Mendoza
           NOES:  Bates, Nielsen

           SUBJECT:   Health and care facilities:  referral agencies

          SOURCE:    Consumer Federation of California
          DIGEST:  This bill adds referrals to residential care facilities  
          for the elderly (RCFFs) to the body of law requiring anyone who  
          refers someone to a skilled nursing or intermediate care  
          facility for compensation to be licensed as a referral agency,  
          and establishes new requirements on referral agencies, including  
          written disclosure of any agreement with the facilities clients  
          are being referred to, any commissions or fees received, and a  
          requirement for liability insurance.



                                                                     SB 648  
                                                                    Page  2

          Existing law:
           1) Licenses and regulates RCFEs by the Department of Social  
             Services (DSS) as a separate category within the existing  
             community care licensing structure of DSS. RCFEs are defined  
             as 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, personal care, or health-related  
             services are provided.

           2) Licenses and regulates skilled nursing facilities (SNFs) and  
             intermediate care facilities (ICFs) by the Department of  
             Public Health (DPH). SNFs are defined as a health facility  
             that provides skilled nursing care and supportive care to  
             patients who primary need is for availability of skilled  
             nursing care on an extended basis. ICFs are defined as a  
             health facility that provides inpatient care to ambulatory or  
             non-ambulatory patients who have recurring need for skilled  
             nursing supervision and need supportive care, but who do not  
             require availability of continuous skilled nursing care.

           3) Prohibits any person, association, or corporation to  
             establish, conduct, or maintain a referral agency or to refer  
             any person for remuneration to any extended care, skilled  
             nursing home or ICF, or a distinct part of a facility  
             providing extended care, skilled nursing home care, or  
             intermediate care, without being licensed as a referral  
             agency by DPH.

           4) Prohibits a licensed referral agency from having a direct or  
             indirect financial interest in any medical facility doing  
             business with the licensee.

          This bill:

           1) Adds referrals to RCFEs to the body of existing law  
             requiring licensure as a referral agency in order to refer  
             persons for remuneration to skilled nursing or ICFs. 

           2) Requires any person, partnership, firm, corporation, or  
             association desiring to obtain a license to refer persons to  
             RCFEs to file an application with DSS, as specified.  
             Specifies that DSS is not required to conduct an onsite  


                                                                     SB 648  
                                                                    Page  3

             licensing inspection, but may require the applicant to submit  
             a copy of the disclosure statement that referral agencies are  
             required to provide pursuant to this bill.

           3) Excludes from the definition of "referral agency" all of the  

              a)    An RCFE that either provides discounts or other  
                remuneration to residents or their families for referring  
                new or prospective clients, or provides remuneration to  
                staff for marketing or sales offers; and
              b)    A resident who refers a new or prospective resident  
                and receives a discount or other remuneration from an  
                RCFE, or an RCFE staff member who receives remuneration  
                from the facility for sales or marketing efforts.

           4) Prohibits any person, association, or corporation from  
             conducting a referral agency, or referring any person for  
             remuneration to an RCFE, if that facility does not meet  
             licensing standards, as specified, and permits the referral  
             agency to satisfy this requirement by obtaining and relying  
             on the licensing status information for an RCFE that is  
             published on the Internet Web site of DSS.

           5) Prohibits any extended care facility, SNF, ICF, or RCFE,  
             from paying a commission or fee to a referral agency that  
             does not have a license from DPH or DSS, as appropriate.

           6) Requires all licensed referral agencies, prior to referring  
             a person to any facility, to provide the person with a  
             disclosure statement containing all of the following:

              a)    Whether the licensee has an agreement or contract with  
                the facility to which the person is being referred;
              b)    That a commission or fee will be received by the  
                agency from the facility as a result of the referral, if  
              c)    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; 
              d)    Any fee charged to the person or persons by the  
                referral agency, and requires this notice to include a  
                description of the services being rendered for that fee  
                and the referral agency's refund policy.


                                                                     SB 648  
                                                                    Page  4

              e)    The referral agency's contact information, including  
                address and telephone number, and the referral agency's  
                privacy policy. Requires the privacy policy to be provided  
                as an Internet Web site link consistent with specified  
                provisions of existing law;
              f)    The date of the referral agency's most recent tour or  
                visit to the facility and, as appropriate, a hyperlink to,  
                or a copy of, the most recent DSS evaluation report for an  
                RCFE to which the person is being referred, prepared  
                pursuant to specified existing law that requires annual  
                unannounced DSS inspections for certain RCFEs, and random  
                inspections each year on 20 percent of the RCFEs not  
                subject to annual inspections.
              g)    Information regarding the type of facility and the  
                services offered by the facility;
              h)    The contact information, including address and  
                telephone number, of DSS or DPH, as appropriate, and the  
                contact information for filing consumer complaints,  
                including contact information for the local long-term care  
                ombudsman; Permits the contact information, if the  
                disclosure statement is provided electronically, to be  
                provided as a hyperlink.

           7) Requires the above disclosure statement to be dated and to  
             contain the name of the person being referred.

           8) Requires the disclosure statement, if provided in written  
             form, to be printed in 16-point bold type, and if provided  
             electronically, to be consistent with specified provisions of  
             existing law regarding electronic records, and to be  
             displayed on a secured Internet Web site in a larger type  
             than the surrounding text.

           9) Requires a referral agency to provide the written disclosure  
             statement required by this bill in the same language in which  
             the referral agency negotiates any referral services with the  
             person receiving services.

           10)Requires the disclosure statement to be signed or otherwise  
             acknowledged by the person being referred, or his or her  
             conservator, guardian, family member, or agency under a power  
             of attorney, stating that the disclosure statement required  
             by this bill was received. Requires this acknowledgement to  
             be executed with one of the following:


                                                                     SB 648  
                                                                    Page  5

              a)    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;
              b)    An electronic signature that is consistent with  
                specified provisions of existing law, and that includes  
                the date, time, and Internet provider address and displays  
                the exact disclosure statement document; or,
              c)    A faxed confirmation that includes the date, time, and  
                fax number and displays the exact disclosure statement  

           11)Requires the above signed acknowledgement to be retained for  
             a period of no less than three years.

           12)Requires a referral agency, if the disclosure statement or  
             any other referral-related document is provided  
             electronically, to provide a written copy, in a 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. Permits this written copy  
             to be provided by fax, email, or other means of electronic  
             communication, if appropriate.

           13)Specifies that any violation of the provisions of this bill  
             relating to the disclosure statement with the intent to  
             directly or indirectly mislead the public on the nature of  
             services provided by the referral agency will constitute  
             unfair competition which includes unlawful, unfair, or  
             fraudulent business acts or practices and unfair, deceptive,  
             untrue, or misleading advertising. Specifies that any person  
             or entity that engages in unfair competition is liable for a  
             civil penalty not to exceed $2500 for each violation.

           14)Prohibits 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 with any unauthorized person or  
             third-party affiliate of the referral agency, unless  
             expressly authorized, as specified.

           15)Permits the person being referred, or his or her  
             conservator, guardian, family member, or agent under power of  
             attorney, before making a referral to any facility, to  


                                                                     SB 648  
                                                                    Page  6

             authorize the referral agency to share his or her personal  
             information, as well as the name and a description of the  
             care or services needed by the individual being referred,  
             with a facility or facilities, for purposes of the referral.  
             Limits the personal information, or other information shared,  
             to only that information which is necessary to complete the  
             referral process.

           16)Requires the above authorization for sharing information to  
             be obtained in either of the following ways: 

              a)    As a separate authorization form that clearly  
                discloses that the individual is consenting to the  
                disclosure of his or her personal information to a  
                facility or facilities to which they are being referred,  
                and requires this acknowledgement to include the name and  
                location of the facilities that will receive the personal  
                information and the format in which the personal  
                information will be shared; or,
              b)    As part of the disclosure statement required by this  
                bill, if it clearly indicates that the individual is  
                consenting to the referral agency's disclosure of his or  
                her personal information to facilities for which he or she  
                is being referred. Requires this authorization to include  
                the name and location information of the facilities that  
                will receive the personal information and the format in  
                which the personal information will be shared.

           17)Prohibits a referral agency from holding any power of  
             attorney for a person receiving placement referral services  
             from that agency, or to receive or hold a client's property  
             in any capacity.

           18)Requires, on and after July 1, 2016, all licensed referral  
             agencies to maintain liability insurance coverage in an  
             amount of at least $1 million per person occurrence and $3  
             million in the total annual aggregate, for negligent acts or  
             omissions by the referral agency.

          Author's statement.  According to the author, a gap in licensing  
          requirements has allowed RCFE referral agencies to operate  
          without oversight in California. Current licensing requirements  


                                                                     SB 648  
                                                                    Page  7

          do not include agencies that make referrals to RCFE's. This bill  
          requires all referral agencies in California to be licensed and  
          subject to oversight by DPH, or DSS, as appropriate. This bill  
          also expands consumer protections by requiring referral agencies  
          to provide written notification to the senior, or their  
          families, when the agency has a motivated interest in a referral  
          to a specific care facility. For example, the agency receives a  
          commission or finder's fee from the specific care facility.  
          Seniors and their families have a right to know whether a  
          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.  SB 648  
          will require all elder care referral agencies, which perform a  
          useful and important service for seniors, to be licensed and  
          therefore subject to oversight, that they disclose the financial  
          interest they may have in a facility they recommend, and that  
          they provide adequate privacy protections for the information of  
          their client.

          RCFEs. There are approximately 8,000 Assisted Living, Board and  
          Care, and Continuing Care Retirement homes that are licensed as  
          RCFEs in California. These residences are designed to provide  
          home-like housing options to residents who need some help with  
          activities of daily living, such as cooking, bathing, or getting  
          dressed, but otherwise do not need continuous, 24-hour  
          assistance or nursing care. The RCFE licensure category includes  
          facilities with as few as six beds to those with hundreds of  
          residents, whose needs may vary widely. More than 90 percent of  
          RCFEs in California are for-profit homes, the majority of which  
          are small facilities.  Most residents pay privately or with  
          long-term care insurance, and fees can range from $1,500 to more  
          than $8,000 per month. 

          In recent years, there have been several high-profile incidents  
          and investigative articles that have drawn attention to  
          questions about the adequacy of DSS oversight of RCFEs. In July  
          2013, ProPublica and Frontline reporters wrote and produced a  
          series of stories on Emeritus, the nation's largest RCFE  
          provider.  Featured in the stories was a woman who died after  
          receiving poor care at a facility in Auburn, California.  The  
          series documented chronic understaffing and a lack of required  
          assessments and substandard care. In late October 2013, 19 frail  
          seniors were abandoned at Valley Springs Manor in Castro Valley  
          by the licensee and all but two staff after the state began  


                                                                     SB 648  
                                                                    Page  8

          license revocation proceedings for the facility.  DSS  
          inspectors, noting the facility had been abandoned, left the two  
          unpaid service staff to care for the abandoned residents with  
          insufficient food and medication, handing them a $3,800 citation  
          before leaving for the weekend.  The next day sheriff's deputies  
          and paramedics sent the patients to local hospitals.

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No
          According to Senate Appropriations Committee, minor, one-time  
          costs to update existing regulations by the Department of Social  
          Services (special fund).  One-time costs of about $2.5 million  
          over two years for initial licensure of additional referral  
          agencies by the Department of Social Services (special fund).  
          The total number of referral agencies that are referring  
          consumers to residential care facilities for the elderly is not  
          known, as there are not current licensing requirements for this  
          segment of the referral agency market. It is estimated that  
          there are about 2,000 such agencies statewide. Under this  
          assumption, it will require about $2.5 million in staff costs  
          over two years to complete the initial licensing process. After  
          that, ongoing licensing and enforcement costs are anticipated to  
          be minor.

          SUPPORT:   (Verified 1/26/16)

          Consumer Federation of California (source)
          California Alliance for Retired Americans
          California Chapter National Association of Social Workers
          California Long-Term Care Ombudsman Association
          Institute on Aging
          Older Women's League of Sacramento Capitol
          6Beds, Inc.

          OPPOSITION: (Verified 1/26/16)


                                                                     SB 648  
                                                                    Page  9

          None received

          ARGUMENTS IN SUPPORT:      This bill is sponsored by the  
          Consumer Federation of California (CFC), which states that this  
          bill would require all referral agencies that assist seniors and  
          their families in finding the right elder care options to obtain  
          a license, and to provide their client with disclosure of the  
          commissions they will receive for the referral. CFC states that  
          the referral agencies that make referrals to RCFEs operate  
          without oversight, and that this is a significant gap in current  
          law as the number of RCFEs has grown exponentially in  
          California. According to CFC, referral agency services are  
          generally offered at no charge to seniors, and that instead, the  
          agencies receive a commission or finders' fee from the care  
          facility after they have successfully referred a senior for care  
          and housing. CFC states that the commission is typically  
          calculated as a percentage of the seniors' 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, even if it is more expensive for the senior. 

          The California Long-Term Care Ombudsman Association states in  
          support 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 that this bill's  
          requirement for referral agencies to maintain liability  
          insurance would provide recourse for these residents. 

          The Institute on Aging states in support that it has experienced  
          problems with referral agencies and agents misrepresenting  
          themselves to its organization's intake and fiduciary  
          departments, and asserts that seniors and families have a right  
          to know when they are dealing with salespeople who may have  
          ulterior motives. 

          6Beds.Inc, an association representing 1,100 RCFEs, states in  


                                                                     SB 648  
                                                                    Page  10

          support that the practice of referral agencies in senior  
          placement is inherently flawed and seniors and their families  
          are being misled by the current practices of some of the larger  
          agencies that dominate this space. 

          Prepared by:Vince Marchand / HEALTH / 
          1/26/16 16:39:34

                                   ****  END  ****