BILL ANALYSIS Ó
SB 648
Page 1
Date of Hearing: June 28, 2016
ASSEMBLY COMMITTEE ON JUDICIARY
Mark Stone, Chair
SB
648 (Mendoza) - As Amended June 22, 2016
As Proposed to be Amended
SENATE VOTE: 27-12
SUBJECT: HEALTH AND CARE FACILITIES: REFERRAL AGENCIES
KEY ISSUE: IN ORDER TO PROTECT THE PUBLIC AND ENHANCE THE
PROFESSIONALISM OF agencIES THAT REFER SENIORS TO RESIDENTIAL
CARE FACILITIES FOR THE ELDERLY, SHOULD SUCH COMPANIES BE
SUBJECT TO A LICENSING REQUIREMENT, AND A NUMBER OF ETHICAL AND
REGULATORY RESTRICTIONS?
SYNOPSIS
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. Seniors and their families often
SB 648
Page 2
rely upon businesses that refer consumers to these facilities
when seeking an appropriate RCFE. The author of this bill
correctly points out that 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, according to the
author and sponsors, especially since seniors and their families
typically seek the assistance of a referral agency following a
decline in independence or a significant health event, often a
stressful and traumatic time. Given the significance of these
health and life decisions, the author reasonably concludes that
California should ensure that referral agencies are at least
meeting minimal standards, which is what this bill seeks to
accomplish.
As currently in print, this bill has five main provisions: 1) A
licensing requirement for "referral agencies"; 2) Restrictions
on disclosure by a referral agency of personal information about
a person seeking a referral to an RCFE from the agency; 3)
Disclosure requirements about the referral agency; 4) A
requirement for the referral agency to obtain authorization from
a person seeking a referral to allow the referral agency to
share the referred person's personal information before sharing
it; 5) A provision making an employee of a referral agency a
mandated reporter of elder or dependent abuse. As proposed to
be amended, the bill would also have the following three
additional consumer protections: 6) anti-kickback provision
(prohibiting referral agencies and other licensed professionals
from providing or accepting money or other consideration in
exchange for referring a consumer to an RCFE or a referral
agency; 7) A requirement that a referral agency, at the time it
applies for a license, to declare that the licensee will either
conduct a suitability determination of each person who seeks a
referral from the licensee and is referred to a facility or
facilities, or disclose to persons seeking referrals that it
does not conduct such suitability determinations; and 8) A
requirement that a referral agency, at the time it applies for a
SB 648
Page 3
license, certify that it trains its employees about a variety of
subjects, but allows the referral agency to determine how much
training is necessary in those subjects. The author's proposed
amendments are reflected in the analysis below. The bill,
recently heard and approved by the Aging and Long Term Care
Committee (by a vote of 4-1, with 2 abstentions), is supported
by consumer and senior advocates. It is opposed (unless
amended) by 6Beds, a coalition of small RCFE owners and
operators.
SUMMARY: Licenses and regulates agencies that refer consumers
to residential care facilities for the elderly (RCFEs).
Specifically, this bill:
1)Makes 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, without first having obtained a
written license from the State Public Health Officer.
2)Requires any person, partnership, firm, corporation, or
association desiring to obtain a license to refer persons to
RCFEs to file with the State Department of Public Health (DPH)
an application on forms furnished by the department and shall
file with the State Department of Social Services (DSS) an
application on forms furnished by DSS.
3)Requires a referral agency, before referring a person to a
facility, to provide the person with a disclosure statement
containing specific information, including the following:
a) Whether the licensee has an agreement or contract with
the facility to which the person is being referred.
SB 648
Page 4
b) That a commission or fee will be received by the
licensee from the facility as a result of the referral, if
applicable.
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
licensee. The notice shall include a description of the
services being rendered for that fee and the licensee's
refund policy.
e) The licensee's contact information, including address
and telephone number, and the licensee's privacy policy.
The privacy policy may be provided as an Internet Web site
link consistent with provisions set forth in Section 22575
of the Business and Professions Code.
4)Requires a referral agency, contemporaneous to referring a
person to a facility, to the agency to disclose the following:
a) The date of the licensee's most recent tour or visit to
the facility and verification that the facility is licensed
and in good standing, and a hyperlink to, or copy of, the
most recent evaluation report for a residential care
facility for the elderly to which the person is being
referred, prepared pursuant to Section 1569.33 and
published by the State Department of Social Services, if an
evaluation report has been prepared in the previous 24
months.
SB 648
Page 5
b) Information regarding the type of facility and the
services offered by the facility.
c) The following statements, written on the disclosure
form, or read aloud, verbatim:
i) "State law does not require that we determine
whether the facility or facilities to which we refer you
is appropriate for you, or can offer the services you
need for your care. Unless we tell you otherwise, we
have not made such a determination about whether a
facility is appropriate for you."
ii) "State law does not require that we determine
whether the facility or facilities to which we refer you
has an opening. Unless we tell you otherwise, we have
not determined whether a facility has an opening."
1)Requires the disclosures to be signed or otherwise
acknowledged by the person being referred, or his or her
conservator, guardian, authorized family member, or agent
under a power of attorney, stating that the disclosure
statement required by this section was received. The
acknowledgment shall be executed in a number of ways,
including the following:
a) The signature of the person being referred, or his or
her conservator, guardian, authorized family member, or
agent under a power of attorney on the exact disclosure
statement.
b) An electronic signature.
SB 648
Page 6
c) A telephonic, oral acknowledgment of the person being
referred, or his or her conservator, guardian, authorized
family member, or agent under power of attorney, which
shall be recorded, with that person's consent, consistent
with other provisions of existing law.
2)Makes it unlawful for any medical professional or employee of
any government agency, hospital or other healthcare
institution, including but not limited to, physicians, nurses,
social workers, discharge planners, therapists, and geriatric
care managers to offer, provide, or accept any payment,
rebate, refund, commission, preference, discount, whether in
the form of money or other consideration, as compensation or
inducement for referring patients, clients or customers to any
licensee.
3)Requires a referral agency, at the time it applies for a
license to declare that the licensee will either conduct a
suitability determination of each person who seeks a referral
from the licensee and is referred to a facility or facilities,
or disclose to persons seeking referrals that it does not
conduct such suitability determinations.
4)Requires a referral agency to certify that it trains its
employees about a variety of subjects, but allows the referral
agency to determine how much training is necessary in those
subjects.
SB 648
Page 7
5)Provides that it is 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.
6)Clarifies that for purposes of compliance with the provisions
of this bill, a referral agency is not required to have a
physical place of business within the state.
7)Makes owners, operators, and employees of a referring agency
mandated reporters of elder or dependent abuse.
EXISTING LAW:
1)Provides for the licensing and regulation of extended care,
skilled nursing home or intermediate care facilities by DPH.
(Health and Safety Code (HSC) Section 1250 et seq.)
2)Provides for the licensing and regulation of RCFEs. (HSC
Section 1569 et seq.)
3)Provides for the licensing and regulation of referral agencies
of extended care facilities, skilled nursing homes, and
intermediate care facilities. (HSC Section 1400 et seq.)
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,
SB 648
Page 8
or intermediate care. (HSC Section 1401.)
5)Prohibits a referral agency from having a direct or indirect
financial interest in any medical facility doing business with
the licensee. (HSC Section 1404.)
6)Creates a presumption against the validity of a donative
transfer to a caregiver and the person who drafted the
instrument. (Probate Code Sec 21360 et seq.)
7)Defines "attorney-in-fact" as "a person granted authority to
act for the principal in a power of attorney, regardless of
whether the person is known as an attorney-in-fact or agent,
or by some other term." (Probate Code Section 4014 (a).)
8)Defines "power of attorney" as "a written instrument, however
denominated, that is executed by a natural person having the
capacity to contract and that grants authority to an
attorney-in-fact. A power of attorney may be durable or
nondurable."
FISCAL EFFECT: As currently in print this bill is keyed fiscal.
COMMENTS: This bill licenses and regulates agencies that refer
consumers to residential care facilities for the elderly
(RCFEs). According to the author, this bill will provide
critical oversight of these agencies:
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
SB 648
Page 9
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.
RCFEs - What services they provide. 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 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
SB 648
Page 10
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.
Author's statement about referral agencies, the services they
provide, and why regulation of such agencies is necessary.
According to the author:
Seniors and their families have a right to know whether an
elder care referral agency is recommending a care facility
based on the client's needs or another reason. 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.
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
SB 648
Page 11
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.
Referral agencies rely predominantly on commissions or
finder's fees paid by care facilities for each patient they
refer. This can create a conflict of interest where
referral agencies will only refer patients to facilities
where they have existing fee arrangements, as opposed to
facilities that best meet the needs of their clients.
Consumers will be better equipped to evaluate the care
facilities recommended by referral agencies if they know a
commission or fee agreement exists.
Indeed, abuses by these agencies are well-documented. According
to a 2010 article in the Seattle Times:
Placement companies, which rely on commission-only sales
people, funnel the aged only to facilities that have agreed
to pay thousands of dollars in finders' fees.
In addition, most placement companies do not screen homes
for past violations. As a result, many have referred
SB 648
Page 12
seniors to facilities with documented histories of
substandard care, including fatal neglect.
In 143 cases over the past three years, seniors were
victimized after companies placed them in adult family
homes, or other long-term- care facilities, that had a
record of serious violations, a Times analysis of
Department of Social and Health Services documents reveals.
(http://www.seattletimes.com/seattle-news/senior-care-placem
ent-companies-scramble-to-cash-in/)
In order to protect consumers from such abuses, this bill
proposes a number of changes to existing law to license and
regulate agencies that refer consumers to RCFEs.
Summary of the bill's provisions. As currently in print, this
bill has five main provisions: 1) A licensing requirement for
"referral agencies"; 2) Restrictions on disclosure by a referral
agency of personal information about a person seeking a referral
to an RCFE from the agency; 3) Disclosure requirements about the
referral agency; 4) A requirement for the referral agency to
obtain authorization from a person seeking a referral to allow
the referral agency to share the referred person's personal
information before sharing it; 5) A provision making an employee
of a referral agency a mandated reporter of elder or dependent
abuse.
SB 648
Page 13
As proposed to be amended, the bill would also have the
following three additional consumer protections: 6)
anti-kickback provision (prohibiting referral agencies and other
licensed professionals from providing or accepting money or
other consideration in exchange for referring a consumer to an
RCFE or a referral agency; 7) A requirement that a referral
agency, at the time it applies for a license, to declare that
the licensee will either conduct a suitability determination of
each person who seeks a referral from the licensee and is
referred to a facility or facilities, or disclose to persons
seeking referrals that it does not conduct such suitability
determinations; and 8) A requirement that a referral agency, at
the time it applies for a license, certify that it trains its
employees about a variety of subjects, but allows the referral
agency to determine how much training is necessary in those
subjects.
Penalty for violation of the bill's provisions? Until its most
recent amendments on June 22nd, the bill provided a civil
penalty for the violation of its provisions "with the intent to
directly or indirectly mislead the public on the nature of
services provided by the referral agency." The bill also
provided that such a violation would "constitute unfair
competition which includes unlawful, unfair, or fraudulent
business acts or practices and unfair, deceptive, untrue, or
misleading advertising." Finally, it provided that any person
who violates the provisions in a manner that constitutes unfair
competition is "liable for a civil penalty not to exceed two
thousand five hundred dollars ($2,500) for each violation."
Unfair competition laws are generally subject to enforcement by
SB 648
Page 14
the Attorney General, the district attorney, and other public
prosecutors.
As currently in print, the bill no longer includes the above
provision. As a result, even an intentional violation, is not
subject to a civil penalty by any entity other than the
licensing department. The bill provides as follows:
The licensing department may suspend or revoke a license
issued under this chapter for violation of any provisions
of this chapter or rules and regulations promulgated
hereunder. In addition, the licensing department shall
assess a civil penalty in the amount of fees received by a
licensee as a result of a violation line of any provisions
of this chapter or rules and regulations promulgated
hereunder.
Therefore, enforcement depends upon one of the state agencies
that licenses RCFEs - either DSS or DPH - taking regulatory
action against a referring agency. Given the other priorities
of these departments, which are arguably far more important in
terms of public protection, the Committee may wish to consider
whether the enforcement mechanisms for violations of this bill
are adequate.
SB 648
Page 15
Regarding the new anti-kickback provision, proposed to be added
to the bill by the author and described below, the provision
does not specify a penalty for violation. However, there may be
some other penalties available to regulators and law
enforcement. The provision is modeled on Section 650 of the
Business and Professions Code, which provides stiff penalties
(up to 3 years in prison and a $50,000 fine, to medical care
professionals who accept "unearned rebates, refunds and
discounts.") To the extent that a medical professional is
subject to the prohibition in Business and Professions Code
Section 650, a violation of the new anti-kickback provision in
this bill by such a professional may also constitute a violation
of Section 650 and therefore be subject to the penalties set
forth in existing law penalties. To the extent that a violation
is committed by a referral agency (or its employee), the
referral agency would be subject to the administration
penalties, including loss of licensure, under the bill's new
provision described above. Finally, given the fact that the
Attorney General has plenary authority under the California
Constitution to enforce the laws of this state as the "chief law
officer of the State" with the duty "to see that the laws of the
state are uniformly and adequately enforced" (See Cal. Const.,
art. V, sec. 13), the Attorney General would be empowered to at
least obtain an injunction to stop illegal kick-backs that are
prohibited in the bill, as it is proposed to be amended.
Nevertheless, the author may wish to consider specifying a
penalty for violation of this provision as the bill moves
forward.
Proposed author's amendments improve consumer protection and
transparency in the RCFE referral process. The author proposes
a number of additional amendments. Some of them are
non-substantive and merely clarifying. Other proposed
SB 648
Page 16
amendments improve consumer protection and transparency in a
number of ways, as described below. All of these amendments
have been approved, at least in concept, by the various
stakeholders interested in the bill who are working with the
author. Additional minor changes may be needed in the language
of these amendments as the bill moves forward.
Anti-kickback provisions. As proposed to be amended, the bill
includes the following new provision:
It is unlawful for any medical professional or employee of
any government agency, hospital or other healthcare
institution, including but not limited to, physicians,
nurses, social workers, discharge planners, therapists, and
geriatric care managers to offer, provide, or accept any
payment, rebate, refund, commission, preference, or
discount, whether in the form of money or other
consideration, as payment, compensation or inducement for
referring patients, clients or customers to any facility.
This provision is appropriately focused on ending the practice
of kick-backs for referrals to specific RCFEs and referral
agencies between agencies, facilities, medical professionals,
treatment facilities, and others who may be involved in
assisting senior consumers make decisions about their care and
housing and referrals to agencies or facilities to meet those
needs. Instead, such referral decisions should focus on the
SB 648
Page 17
best interests of the consumer and should not be driven by a
desire for personal enrichment in the form of money, gifts,
discounts or other consideration. This provision is intended to
remove the conflict of interest when there is a financial motive
for such recommendations.
Declaration that the referral agency conducts suitability
determinations, or provides a specific advisory informing
prospective clients that it does not. As proposed to be
amended, the bill would require the referral agency, when
applying for a license, to make the following:
A declaration that the licensee will either conduct a
suitability determination of each person who seeks a
referral from the licensee and is referred to a facility or
facilities, or will comply with the requirements of
paragraph (3) of subdivision (b) of Section 1409.4. For
purposes of this subdivision, "a suitability determination"
means a determination made by the licensee that the
facility offers services to meet the needs of the person
seeking a referral.
The language goes on to describe a number of factors about both
the person seeking the referral and the facility to which a
referral is made that the referral agency is required to
consider, including for example, the level of care needed by the
person seeking a referral.
SB 648
Page 18
As proposed to be amended, the bill would not require the
referral agency to make these determinations regarding the
suitability of proposed placements. But if an agency chooses
not to do so, the agency would be required to disclose that fact
to the public.
Declaration that the referral agency conducts training of its
employees. 6 Beds, Inc. argues that all employees of referral
agencies who make referrals should be trained on a variety of
issues related to seniors, the continuum of care for seniors,
and the laws and regulations governing facilities that provide
care for seniors and others requiring out of home assistance and
housing. Specifically, they advocate for a requirement that all
employees of referral agencies take a 40-hour class certified by
either DSS/DPH that is designed for employees who work in
facilities, such as RCFEs and assisted living centers. While it
seems reasonable to require employees to have some level of
training, it may be excessive to require this amount of training
for each employee of a referral agency given that the employees
are not providing care for seniors and are just providing
information, albeit important information. As proposed to be
amended by the author, the bill would require a referral agency
to certify that it trains its employees about a variety of
subjects. However, it would be left to the referral agency to
determine how much training is necessary in those subjects.
This appears to be a reasonable compromise, requiring at least
some amount of training of employees of referral agencies.
SB 648
Page 19
Authorizing third parties to assist seniors in the referral
process, including in the acknowledgment of receipt of the
disclosure statement and authorization to share personal
information with potential RCFEs placements. 6Beds, Inc.
expresses concerns that the bill currently requires written
acknowledgment of receipt of disclosures and consent to the
sharing of personal identifying information by a person seeking
a referral. According to 6Beds, this may not be possible
because the person may not be competent and may not have the
assistance of an "authorized family member." 6Beds, Inc.
proposes to allow oral acknowledgement at the time of disclosure
and consent to sharing with the ability to "get those things in
writing later," writing, "We expressed concern for the situation
where there is no authorized representative or family member,
only a social worker, and the individual is not competent." As
proposed to be amended, the bill allows a number of persons to
assist the senior and provide consent on his or her behalf.
Those persons are not only individuals with formal legal
authority, such as an agent with power or attorney and an
"attorney in fact," but also persons who are authorized in less
formal or official ways, such as an "authorized family member"
and an "authorized representative" [of a person seeking a
referral who may not have a family member to assist him or her].
Given the narrow scope of the authority granted under the bill
- only to consent to release of personal information to a
potential RCFE placement and to acknowledge receipt of various
disclosures - such flexibility seems reasonable, appropriate,
and helpful.
Additional amendments to the bill that the author may wish to
consider in the future as the bill moves forward. 6Beds, Inc.,
which operates small RCFEs (with six-beds or fewer) writes in
opposition to the bill, unless it is amended, to point out the
SB 648
Page 20
following additional changes and amendments that should be made
to the bill, specifically the following:
Mandatory criminal background checks for employees. 6Beds, Inc.
supports an amendment to the bill that would require background
checks of all employees of referral agencies. As currently in
print, the bill clarifies that for purposes of compliance with
the provisions of this bill, a referral agency is not required
to have a physical place of business within the state.
Furthermore, many of the provisions are written in a way to
acknowledge the business model of many referral agencies to
provide services over the telephone and the Internet. For
example, disclosures can be made orally and acknowledgement of
such disclosures can be made by electronic signature. Under
these conditions, where the employee of the referral agency does
not have direct contact with the senior, the risk of abuse or
exploitation of the senior seeking a referral seems minimal.
According to some supporters of the bill, many referral agencies
now require background checks of employees. Of course they
could continue to do so, even if the bill did not mandate that
employers obtain background checks of employees. Because of the
variation in business models, it may not be appropriate to
mandate background checks of employees for all RCFE agencies.
Requiring a referral agency to provide specific information
about the specific facility, including even information about
the cost and services provided by the facility, to which the
consumer is referred. It seems perfectly reasonable to require a
referral agency to provide a minimal amount of information about
a facility to which it refers a consumer. This bill requires
the referral agency to disclose "information about the
facility," but does not specify what the information is.
According to the author, it is not feasible to specify which
types of information about a facility must be provided to a
person seeking a referral. However, the provision in the bill,
SB 648
Page 21
as it is proposed to be amended, requiring a referral agency to
either certify that it makes suitable referrals (based upon
specified factors) unless it informs consumers that it does not
do so, should effectively result in consumers receiving more
information about the facility or facilities to which they are
referred.
ARGUMENTS IN SUPPORT: Writing as the sponsor of the bill, the
Consumer Federation of California states the following:
[G]enerally, 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 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.
REGISTERED SUPPORT / OPPOSITION:
SB 648
Page 22
Support
Consumer Federation of California (sponsor)
AARP
AFSCME
California Alliance for Retired Americans
California Chapter National Association of Social Workers
California Long-Term Care Ombudsman Association
CALPIRG
Consumer Attorneys of California
Institute on Aging
Older Women's League of Sacramento Capitol
Opposition
6Beds, Inc. (Unless amended)
SB 648
Page 23
Analysis Prepared by:Alison Merrilees / JUD. / (916)
319-2334