BILL ANALYSIS
AB 407
Page 1
ASSEMBLY THIRD READING
AB 407 (Beall and Eng)
As Amended April 21, 2009
Majority vote
HUMAN SERVICES 6-0 APPROPRIATIONS 16-0
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|Ayes:|Beall, Ammiano, Tom |Ayes:|De Leon, Nielsen, |
| |Berryhill, Logue, | |Ammiano, |
| |Portantino, Torres | |Charles Calderon, |
| | | |Krekorian, Duvall, |
| | | |Fuentes, Monning, Harkey, |
| | | |Miller, John A. Perez, |
| | | |Price, Skinner, Solorio, |
| | | |Audra Strickland, |
| | | |Torlakson |
|-----+--------------------------+-----+--------------------------|
| | | | |
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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 the voluntary or involuntary
termination or forfeiture 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.
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
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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. 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.
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EXISTING LAW :
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
$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 $200 per day for
violations.
FISCAL EFFECT : According to the Assembly Appropriations Committee,
minor and absorbable costs of less than $75,000 General Fund for DSS
to receive closure plans, monitor facility closures, and impose
penalties on providers when necessary.
COMMENTS : A CCRC is a facility where services promised in a
continuing care contract are provided. CCRCs can be apartment-type
dwellings, high-rise buildings, a subdivision setting, or any other
housing design. Most CCRCs have three levels of care: independent
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 this bill : The author notes that, while current law
regulates the establishment and operation of CCRCs, there are
minimal regulations governing what happens when a facility must
close. According to California Advocates for Nursing Home Reform
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(CANHR), one of the this bill's sponsors, "[t]here are limited legal
protections for consumers when facilities close. Since thousands of
CCRC residents have collectively entrusted 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 this bill) report
that they and the author worked closely with facility 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, Governor
Schwarzenegger 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
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facilities."
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. This
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. 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. The author of AB 1433 is now a joint author of this
bill and has agreed that he will not move AB 1433 this year but
will, instead, make it available as the vehicle for a temporary
closure bill in 2010.
Analysis Prepared by : Eric Gelber / HUM. S. / (916) 319-2089 FN:
0000479