BILL ANALYSIS                                                                                                                                                                                                    Ó

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


          Bill No:  SB 648
          Author:   Mendoza (D), et al.
          Amended:  8/19/16  
          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

           SENATE FLOOR:  27-12, 1/27/16
           AYES:  Allen, Beall, Block, Cannella, De León, Galgiani,  
            Glazer, Hall, Hancock, Hernandez, Hertzberg, Hill, Hueso,  
            Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell,  
            Monning, Pan, Pavley, Roth, Wieckowski, Wolk
           NOES:  Anderson, Bates, Fuller, Gaines, Huff, Moorlach,  
            Morrell, Nguyen, Nielsen, Runner, Stone, Vidak
           NO VOTE RECORDED:  Berryhill

           SENATE FLOOR:  27-12, 8/29/16
           AYES:  Allen, Beall, Block, Cannella, De León, Galgiani,  
            Glazer, Hall, Hancock, Hernandez, Hertzberg, Hill, Hueso,  
            Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell,  
            Monning, Pan, Pavley, Roth, Wieckowski, Wolk
           NOES:  Anderson, Bates, Berryhill, Fuller, Gaines, Huff,  
            Moorlach, Morrell, Nguyen, Nielsen, Stone, Vidak


                                                                     SB 648  
                                                                    Page  2

           ASSEMBLY FLOOR:  59-19, 8/24/16 - See last page for vote

           SUBJECT:   Health and care facilities:  referral agencies

          SOURCE:    Consumer Federation of California
          DIGEST:  This bill 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, including  
          disclosure of any agreement with the facilities that clients are  
          being referred to, any commissions or fees received, and a  
          requirement for liability insurance.

          Existing law:

           1) Licenses and regulates RCFEs by the 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). 

           3) Prohibits any person, association, or corporation to  
             establish, conduct, or maintain a referral agency or to refer  
             any person for remuneration to any SNF or ICF, 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:


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           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  
             licensing inspection, but may require the applicant to submit  
             a copy of the disclosures that referral agencies are required  
             to provide pursuant to this bill. Requires DSS to set the  
             annual licensing fee at an amount no greater than the amount  
             required to cover the reasonable and actual costs of  
             administering the program.

           3) Excludes from the definition of "referral agency," 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 a resident who refers a new or prospective  
             resident to an RCFE and receives a discount or other  
             remuneration from the RCFE, or an RCFE staff member who  
             receives remuneration from the facility for professional  
             services, including sales and marketing efforts for that  

           4) Requires applications for a license to refer persons to  
             RCFEs to include a declaration that the licensee will either  
             conduct a suitability determination of each person who seeks  
             a referral, or will provide a disclosure, as specified, that  
             informs the person being referred that state law does not  
             require that the referral agency determine whether facilities  
             are suitable for the person.

           5) Defines "suitability determination" as a determination made  
             by the licensee that the facility offers services to meet the  
             needs of the person seeking a referral because of specified  
             considerations, including the level of care, the cost of the  
             facility, the social needs and preferences of the person, and  
             the geographic location of the facility.


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           6) Requires applications for a license to refer persons to  
             RCFEs to include a declaration that the licensee trains all  
             employees who make referrals regarding all of the provisions  
             of this bill, state governance and administra5tive functions  
             of agency operations, the psychosocial and physical needs of  
             the elderly, and community supports, cultural competency and  
             sensitivity to resident's needs.

           7) 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.

           8) 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.

           9) Prohibits an employee, independent contractor, or other  
             person who is acting on behalf of a government agency,  
             hospital, or other health care institution, including medical  
             professionals, to offer, provide, or accept a payment or  
             other form of compensation for referring patients, clients,  
             or customers to an RCFE or a licensed referral agency.

           10)Requires all licensed referral agencies, prior to referring  
             a person to any facility, to disclose all of the following:

              a)    Whether the licensee has an agreement or contract with  
                the facility to which the person is being referred;
              b)    Whether a commission or fee will be received by the  
                agency from the facility as a result of the referral;
              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;
              e)    The referral agency's contact information, including  


                                                                     SB 648  
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                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; and,
              f)    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.

           11)Requires a referral agency, contemporaneous with a referral,  
             to provide the person with the date of the referral agency's  
             most recent visit to the facility and, as appropriate, a  
             hyperlink to, or a copy of, the most recent DSS evaluation  
             report for the facility.

           12)Requires the disclosures 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 disclosures required by this  
             bill were received. Requires this acknowledgement to be  
             evidenced in one of several specified ways.

           13)Requires a referral agency that refers a person to a  
             facility to obtain authorization, as specified, allowing the  
             referral agency to share 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.

           14)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.

           15)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  


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             million in the total annual aggregate, for negligent acts or  
             omissions by the referral agency.

           16)Adds owners, operators or employees of a referral agency to  
             the list of mandated reporters of elder or dependent adult  


          1)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 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  

          2)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  


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            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 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.:          Yes            Local:         No

          According to the Assembly Committee on Appropriations:

          Significant one-time costs to DSS, potentially exceeding $1  
          million GF to establish the licensure program, as well as  
          significant ongoing costs in the range of $1.5 million or  
          higher.  Estimates of ongoing costs are subject to significant  
          uncertainty due to the varying size and complexity of referral  
          agencies, uncertainty about complaint volume, and number of  
          licensees.  If complaint volume is high or significant  
          enforcement resources are necessary, costs could be higher.

          SUPPORT:  (Verified 8/24/16)

          Consumer Federation of California (source)


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          California Alliance for Retired Americans
          California Chapter National Association of Social Workers
          California Commission on Aging
          Consumer Attorneys of California
          Institute on Aging
          Kern County
          Office of the State Long-Term Care Ombudsman
          Older Women's League of Sacramento Capitol
          6Beds, Inc.

          OPPOSITION: (Verified 8/24/16)

          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  


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                                                                    Page  9

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

          ARGUMENTS IN OPPOSITION: is opposed, stating that  
          while it supports a number of consumer protection provision in  
          this bill, it has been over-loaded with burdensome requirements  
          at a prohibitive cost of $7 million per year for the state to  
          monitor compliance without a showing of a need in the first  
          place, or that the protections and remedies currently in place  
          are insufficient to redress any potential problems should they  
          arise., supports disclosure of any commissions, and  
          other individual provisions, but states that proponents have  
          offered no evidence to support that consumer protection will be  
          served with the creation of an elaborate licensing and  
          regulatory scheme. Moreover, states that DSS has no  
          expertise regulating referral agencies, and it would distract  
          DSS from their main mission to regulate facilities.  
          states that the fee provision is a concern as well as it is  
          unknown how much it will be and what method will be used to  
          allocate the fee to referral agencies.

          GOVERNOR'S VETO MESSAGE: I am returning Senate Bill 648 without  
          my signature.

               This bill creates an expansive and costly licensing scheme  
               for agencies that make referrals to residential care  
               facilities for the elderly.

               The proponents of this measure have not made a convincing  
               case for this new licensing structure.


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          ASSEMBLY FLOOR:  59-19, 8/24/16
          AYES:  Alejo, Arambula, Atkins, Baker, Bloom, Bonilla, Bonta,  
            Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chiu,  
            Chu, Cooley, Cooper, Dababneh, Dodd, Eggman, Frazier,  
            Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,  
            Gomez, Gonzalez, Gordon, Gray, Roger Hernández, Holden, Irwin,  
            Jones-Sawyer, Lackey, Levine, Linder, Lopez, Low, Maienschein,  
            McCarty, Medina, Mullin, Nazarian, O'Donnell, Quirk,  
            Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone,  
            Thurmond, Ting, Wagner, Weber, Williams, Wood, Rendon
          NOES:  Achadjian, Travis Allen, Bigelow, Chávez, Dahle, Beth  
            Gaines, Grove, Hadley, Harper, Jones, Mathis, Mayes, Melendez,  
            Obernolte, Olsen, Patterson, Steinorth, Waldron, Wilk
          NO VOTE RECORDED:  Daly, Kim

          Prepared by:Vince Marchand / HEALTH / (916) 651-4111
          10/25/16 14:29:22

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