BILL ANALYSIS                                                                                                                                                                                                    

                                                                     SB 648

                                                                    Page  1

          Date of Hearing:  June 21, 2016


                                 Cheryl Brown, Chair

          648 (Mendoza) - As Amended January 26, 2016

          SENATE VOTE:  27-12

          SUBJECT:  Health and care facilities:  referral agencies.

          SUMMARY:  SB 648 adds referrals to residential care facilities  
          for the elderly (RCFEs) 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.   
          Specifically, this bill:  

          1)Adds referrals to RCFEs 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.

          2)Prohibits a referral agency from referring any person to an  


                                                                     SB 648

                                                                    Page  2

            RCFE if that RCFE does not meet state licensing standards.

          3)Prohibits any extended care facility, skilled nursing home,  
            intermediate care facility, or a residential care facility for  
            the elderly from paying a commission or fee to a referral  
            agency that is not licensed.

          4)This bill requires a referral agency to provide a disclosure  
            statement to each person receiving its services, and to  
            retain, for 3 years, a signed acknowledgment stating that the  
            disclosure statement was received.  The disclosure statement  
            among other things must include:

             a)   Whether the referral agency has an agreement or contract  
               with the facility to which the person is being referred.

             b)   If a commission or fee will be received by the referral  
               agency from the facility as a result of the referral, if  


                                                                     SB 648

                                                                    Page  3

             c)   Any gift or exchange of monetary value between the  
               facility and the referral agency 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 a notice to include a description of  
               the services being rendered for that fee and the referral  
               agency's refund policy.

          5)States that failure to provide the disclosure statement or  
            retain the acknowledgment, constitutes unfair competition  
            which includes unlawful, unfair, or fraudulent business acts  
            or practices and unfair, deceptive, untrue, or misleading  
            advertising and is subject to a civil penalty of up to $2,500.

          6)Limits the personal information of a consumer that a referral  
            agency can share with other parties or from disclosing any  
            personal information of a person receiving services, unless  
            authorized to do so. 

          7)Prohibits a referral agency from holding any power of attorney  
            for a person receiving placement referral services, or  


                                                                     SB 648

                                                                    Page  4

            receiving or holding their property in any capacity.

          8)Requires referral agencies to maintain liability insurance  
            coverage in an amount of at least one million dollars  
            ($1,000,000) per person occurrence and three million dollars  
            ($3,000,000) in the total annual aggregate, for negligent acts  
            or omissions.

          EXISTING LAW:  

          1)Licenses and regulates extended care, skilled nursing home or  
            intermediate care facilities by the Department of Public  

          2)Licenses and regulates residential care facilities for the  
            elderly (RCFEs).  

          3)Licenses and regulates referral agencies of extended care  
            facilities, skilled nursing homes, and intermediate care  


                                                                     SB 648

                                                                    Page  5


          4)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.  

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

          FISCAL EFFECT:  

          According to the 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  


                                                                     SB 648

                                                                    Page  6

            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  


          Author's statement:  According to the author, "Elder care  
          referral agencies are mostly unregulated, in spite of the fact  
          that they can be deeply involved in the decision making of a  
          senior or their family when determining care options.  Consumers  
          rely heavily on the advice and recommendations of referral  
          agencies, especially since seniors and their families typically  
          seek the assistance of a referral agency following a decline in  
          independence or a significant health event, which can be a  
          stressful and traumatic time.  Given the significance of these  
          health and life decisions, California should ensure that  
          referral agencies are at least meeting minimal standards."

          What are 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  


                                                                     SB 648

                                                                    Page  7

          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 Department of Social Services  
          (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 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.

          Arguments in Support:  Writing as the sponsor of the bill, the  
          Consumer Federation of California states, "generally, referral  
          agency services are offered at no charge to seniors.  Instead,  
          referral agencies receive a commission or finders' fee from the  
          care facility after they have successfully referred a senior for  
          care and housing.  The commission or finders' fee is typically  
          calculated as a percentage of the seniors monthly rent, creating  
          an incentive for the referral agent to place the senior in a  


                                                                     SB 648

                                                                    Page  8

          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."

          Previous Legislation:

          AB 1863 (Jones) of 2014 would have established "domestic home  
          care aide referral organizations" as a new licensure category  
          under the Home Care Services Consumer Protection Act overseen by  
          the Department of Social Services (DSS), as specified..  AB 1863  
          was held in the Senate Appropriations Committee.

          SB 398 (Romero) of 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) of 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.



                                                                     SB 648

                                                                    Page  9


          Consumer Federation of California - Sponsor

          Area Agency on Aging Advisory Council - Support with Amendment


          American Federation of State, County and Municipal Employees  
          (AFSCME), AFL-CIO

          California Alliance for Retired Americans

          California Long-Term Care Ombudsman Association

          California Public Interest Research Group (CALPIRG)

          Consumer Attorneys of California

          Elder & Dependent Adult Abuse Prevention Council of Santa  
          Barbara County - Support with


          Institute on Aging


                                                                     SB 648

                                                                    Page  10

          National Association of Social Workers-California Chapter  

          Older Women's League Sacramento Capitol


 - Oppose Unless Amended

          Analysis Prepared by:Barry Brewer / AGING & L.T.C. / (916)