BILL ANALYSIS
AB 407
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Date of Hearing: April 14, 2009
ASSEMBLY COMMITTEE ON HUMAN SERVICES
Jim Beall, Jr., Chair
AB 407 (Beall, Jr) - As Amended: April 13, 2009
SUBJECT : Continuing care contracts: retirement communities:
closures.
SUMMARY : Imposes requirements on continuing care retirement
communities (CCRCs) in the event of their permanent closure.
Specifically, this bill :
1)Defines "permanent closure" to mean any of the following that
will result in the relocation of residents, except in the case
of a natural disaster or other act of God that is out of the
provider's control:
a) Voluntary or involuntary termination, including
forfeiture, of a provider's certificate of authority or
license.
b) Permanent closure of one or more residential units,
wings, floors, or buildings due to change of use or major
repairs or renovations that result in the relocation of one
or more residents without the possibility of return to the
same units, wings, floors, or buildings.
2)Requires written notice to the Department of Social Services
(DSS) and to the affected residents or designated
representatives of the affected residents 120 days prior to
the intended date of closure or temporary closure of a CCRC.
3)Prescribes the content of the closure notice, including
intended date of closure and the requirement of a relocation
plan.
4)Prohibits the provider from accepting new residents or
entering into new continuing care contracts once the closure
notice has been served when closure is planned for all units.
5)Requires the provider to offer a resident a choice of four
placement options, the terms of which shall not be less than
the terms of the continuing care contract between the resident
and the provider as if that contract had been fully performed.
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The options are:
a) Relocation to another CCRC, owned or operated by the
provider, if available;
b) Relocation to a CCRC operated by another provider;
c) Monetary compensation equal to the value of the
remainder of the contract as if the contract had been fully
performed; or,
d) An alternative arrangement mutually agreed upon by the
provider and the resident or his or her representative.
6)In the event of relocation, requires that the offered housing
must be, overall, comparable in cost, size, services,
features, and amenities to the unit being vacated.
7)Requires the provider, within 30 days of submitting the
relocation plan for a permanent closure, to fund a reserve,
set up a trust fund, or secure a performance bond to ensure
fulfillment of costs associated with the relocation, in an
amount equal to or greater than the estimated costs of
relocating residents and relocation options, funded with
qualifying assets not subject to any liens, judgments,
garnishments or creditor's claims.
8)Requires the provider to submit monthly progress reports to
DSS detailing the progress and problems associated with the
closure until all affected residents are relocated and all
required payments are made.
9)Requires DSS to monitor the implementation of the closure and
to impose penalties if DSS determines that a provider is
closing a facility in violation of the requirements
established by this bill or is doing so in a manner that
endangers the health or safety of residents.
10)Prohibits the provider from displacing any resident or to
close the facility until the relocation plan has been prepared
and submitted to DSS and provided to the affected residents,
the affected residents' representatives, and the local
long-term care ombudsman program.
EXISTING LAW
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1)Provides for the regulation by DSS of activities relating to
continuing care contracts that govern care provided to an
elderly resident in a continuing care retirement community for
the duration of the resident's life or a term in excess of one
year.
2)Requires that continuing care retirement communities maintain
an environment that enhances residents' independence and
self-determination.
3)Deems guilty of a misdemeanor, punishable by a fine not to
exceed ten thousand dollars ($10,000) or imprisonment in the
county jail for a period not to exceed one year, or both, any
entity that abandons a continuing care retirement community or
its obligations under a continuing care contract.
4)Gives the authority to DSS to issue citations for violations
of requirements of continuing care retirement communities and
to assess civil penalties in the amount of two hundred dollars
($200) per day for violations.
FISCAL EFFECT : Unknown
COMMENTS : A continuing care retirement community is a facility
where services promised in a continuing care contract are
provided. Continuing care retirement communities can be
apartment-type dwellings, high-rise buildings, a subdivision
setting, or any other housing design. Most continuing care
communities have three levels of care: indpendent living,
assisted living and skilled nursing care. As a resident's needs
increase, he or she moves to a higher level of care within the
facility. California has 79 CCRCs, which are home to about
20,000 seniors.
The need for the bill : The author notes that, while current law
regulates the estalblishment and operation of CCRCs, there are
minimal regulations governing what happens when a facility must
close. According to California Advocates for Nursing Home
Reform (CANHR), one of the AB 407's sponsors, "[t]here are
limited legal protections for consumers when facilities close.
Since thousands of CCRC residents have collectively entrusted
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providers with well over $1 billion in entrance fees in return
for life-long care, a facility closure translates into serious
investment loss for residents. Moreover, vulnerable displaced
residents face severe physical and psychological harm, such as
transfer trauma."
In April of 2006, Marguerite Terrace, a 73-bed CCRC in San Jose
that had only 50% occupancy, announced to its residents that it
would be closing. Three residents died soon after being
transferred to other facilities, prompting an investigation by
the state licensing agency, which resulted in a $20,000 citation
for failure to have an adequate team assess the residents'
medical and psychological conditions before they were
transferred. The failure to adequately plan for the medical
needs of residents when they moved from Marguerite Terrace, the
limited relocation choices offered, and the residents'
dissatisfaction with the facility's buy-out terms, illustrated
the need for legislation to govern CCRC closures.
The author reports that, while there have been few closures of
CCRCs to date, there are an increasing number of such facilities
that are aging and have low occupancy rates. Many will require
major renovations to enable them to meet current and future
market demands and others will likely close.
Prior bill : SB 489 (Steinberg) was introduced in 2007 to
establish procedures and protections governing both permanent
and temporary closures of CCRCs. The sponsors of SB 489 (and AB
407) report that they and the author worked closely with faclity
providers. They note that SB 489 was substantially amended to
address the providers' concerns and that the primary opposition
was withdrawn as a result of these amendments. In vetoing SB
489, the Governor expressed concerns over the oversight role of
DSS under the bill. The Governor concluded that "[t]here are
many good consumer protections in this bill and I would
encourage the author and stakeholders to work with my
Administration next year to find the appropriate balance of
government oversight for these types of facilities."
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This bill, as introduced, was virtually identical to the final,
enrolled, version of SB 489. To address concerns expressed by
the administration with DSS's role, the amended version of this
bill deletes language implying DSS acceptance of closure plans.
The bill now clarifies that the plan is merely provided to DSS.
In addition, as discussed below, this bill has been amended to
address only permanent closures.
Related bill : The amendments to limit this bill to permanent
closures resulted from agreement between the author and sponsors
of this bill and the author and sponsors of another bill
introduced this session: AB 1433 (Eng). AB 1433 is sponsored
by CCRC providers, including Aging Services of California, the
major provider organization that had opposed SB 489 prior to its
being amended to address their concerns. AB 1433 is also
similar to SB 489 but applies only to permanent closures. The
sponsors of AB 1433 believe that, in the current economic
climate, a temporary closure bill will adversely impact
providers due to limited access to commercial credit. In
exchange for an agreement by the author and sponsors of this
bill to limit the bill to permanent closures, the sponsors of AB
1433 have agreed to work with the sponsors of this bill on a
temporary closure bill in 2010 when, they believe, current
economic conditions will be more favorable. As part of that
compromise, the author of AB 1433 has agreed that he will not
move that bill this year and will make it available as the
vehicle for a temporary closure bill in 2010.
PROPOSED AMENDMENT : As an additional component of the agreement
reached to reconcile the conflict between this bill and AB 1433,
the author has agreed to amend this bill to modify the
definition of permanent closure to read as follows:
"Permanent closure" means the voluntary or involuntary
termination or forfeiture, as specified in Sections
1793.7(a), 1793.7(b), 1793.7(g), 1793.7(h) and 1793.7(i) of
a provider's certificate of authority or license, or any
other action that results in the permanent relocation of
residents. Permanent closure does not apply in the case of
a natural disaster or other event that is out of the
provider's control.
REGISTERED SUPPORT / OPPOSITION :
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Support
AARP
American Federation of State, County and Municipal Employees
(AFSCME)
California Advocates for Nursing Home Reform (CANHR) (sponsor)
California Continuing Care Residents Association (CALCRA)
(sponsor)
Disability Rights California
National Association of Social Workers, CA Chapter (NASW-CA)
Front Porch (if amended)
Opposition
Masonic Homes of California's Union City (unless amended)
San Francisco Towers (unless amended)
Eskaton Senior Residences and Services (unless amended)
Hollenbeck Palms (unless amended)
Plymouth Village (unless amended)
Palm Village (unless amended)
The Sequoias
Villa Gardens
Analysis Prepared by : Eric Gelber / HUM. S. / (916) 319-2089