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