BILL NUMBER: AB 1044 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 24, 2009
AMENDED IN ASSEMBLY MAY 5, 2009
AMENDED IN ASSEMBLY APRIL 23, 2009
AMENDED IN ASSEMBLY APRIL 14, 2009
INTRODUCED BY Assembly Member Jones
FEBRUARY 27, 2009
An act to amend Sections 1569.651, 1569.682, 1569.80,
1770, 1771, 1771.7, 1776.3, 1777.2, and 1788 of, to add
Section 1770.5 1771.8, 1776, 1776.2, 1776.3, 1776.6,
1777.2, 1779, 1779.4, 1779.6, 1781, 1783.3, 1785, 1788, 1788.4, 1789,
1789.4, 1790, 1792.2, 1792.3, 1792.4, 1792.5, 1792.6, 1792.7,
1792.8, 1792.10, 1793, 1793.6, 1793.7, 1793.8, 1793.13, 1793.21,
1793.23, 1793.31, 1793.50, 1793.58, 1793.60, and 1793.62 of, to add
Sections 1770.5, 1777.5, 1789.15, 1791.5, 1793.32, 1793.33, 1793.34,
1793.35, and 1793.36 to, and to repeal and add Section 1778 of,
the Health and Safety Code, and to amend Sections 14006.01 and
14139.3 of the Welfare and Institutions Code, relating to
continuing care retirement , and making an appropriation
therefor .
LEGISLATIVE COUNSEL'S DIGEST
AB 1044, as amended, Jones. Continuing care retirement
communities: contracts.
(1) Under existing law, the State Department of Social Services is
responsible for regulating 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.
This bill would transfer that responsibility, except with respect
to oversight and regulation of programs and services provided
directly to residents of the communities, to the Department of
Insurance and would make related conforming changes.
The bill would require, by not later than January 1, 2011, the
Insurance Commissioner, the State Public Health Officer,
and the Director of Social Services to jointly develop and adopt
regulations regarding standards, staff training, policies, and
procedures to ensure maximum coordination and consistency of
implementation of the transfer required by the bill.
(2) Existing law establishes the Continuing Care Provider Fee
Fund, which is continuously appropriated to the State Department of
Social Services for purposes of administering the continuing care
retirement community requirements of existing law.
This bill would, for purposes of administering the above
provisions, create 2 accounts within the fund, the Insurance Account,
which would be continuously appropriated to the Department of
Insurance, and the State Department of Social Services Account, which
would be continuously appropriated to the State Department of Social
Services. Ninety-five percent of fees collected pursuant to the
above-described provisions would be deposited into the Insurance
Account and 5% into the State Department of Social Services Account.
(3) Existing law requires insurers to comply with various
requirements.
This bill would require the Insurance Commissioner to apply
certain of those requirements to continuing care retirement
communities and contracts, including requirements related to the
disclosure of material transactions and requirements related to
provider holding company systems, as defined.
The bill would additionally revise and recast other provisions
applicable to continuing care retirement communities and contracts,
including, among other things, requirements relating to application
contents, increases in monthly care fees, dividends and
distributions, reserve requirements, disclosure of beneficial
ownership of a provider, and personal interests of officers of a
provider.
The bill would enact other related provisions.
Vote: majority. Appropriation: yes no
. Fiscal committee: yes. State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature hereby finds and declares the
following:
(a) California is home to nearly four million people over 65 years
of age; the largest older adult population in the nation. This
number is expected to more than double over the next several decades
as the baby boomers begin reaching this milestone.
(b) Continuing care retirement communities are an alternative for
the long-term residential, social, and health care needs of
California's elderly residents and seek to provide a continuum of
care, minimize transfer trauma, and allow services to be provided in
an appropriately licensed setting.
(c) Because elderly residents often both expend a significant
portion of their savings in order to purchase care in a continuing
care retirement community and expect to receive care at their
continuing care retirement community for the rest of their lives,
tragic consequences can result if a continuing care provider becomes
insolvent or unable to provide responsible care.
(d) The Legislature has recognized the importance of continuing
care provider solvency and the need for disclosure concerning the
terms of agreements made between prospective residents and the
continuing care provider, and concerning the operations of the
continuing care retirement community.
(e) The Legislature defines continuing care contracts in terms of
a promise of the future provision of services which are analogous to
insurance products.
(f) Continuing care retirement communities have long-term
obligations and may have a corporate or capital structure similar to
insurance holding company systems, as defined in the Insurance Code.
(g) Therefore, it is the intent of the Legislature to transfer
general regulatory responsibility for continuing care retirement
communities, except for oversight and regulation of programs and
services provided directly to residents of the communities, from the
Department of Social Services to the Department of Insurance.
SEC. 2. Section 1569.651 of the Health
and Safety Code is amended to read:
1569.651. (a) A licensee of a residential care facility for the
elderly shall not require any form of preadmission fee or deposit
from a recipient under the State Supplementary Program for the Aged,
Blind and Disabled (Article 5 (commencing with Section 12200) of
Chapter 3 of Part 3 of Division 9 of the Welfare and Institutions
Code) who applies for admission to the facility.
(b) If a licensee charges a preadmission fee, the licensee shall
provide the applicant or his or her representative with a written
general statement describing all costs associated with the
preadmission fee charges and stating that the preadmission fee is
refundable. The statement shall describe the conditions for the
refund as specified in subdivision (g). A licensee shall only charge
a single preadmission fee as defined in subdivision (e) per resident
admission.
(c) A licensee of a residential care facility for the elderly
shall not require, request, or accept any funds from a resident or a
resident's representative that constitutes a deposit against any
possible damages by the resident.
(d) Any fee charged by a licensee of a residential care facility
for the elderly, whether prior to or after admission, shall be
clearly specified in the admission agreement.
(e) For the purposes of this section, "preadmission fee" means an
application fee, processing fee, admission fee, entrance fee,
community fee, or other fee, however designated, that is requested or
accepted by a licensee of a residential care facility for the
elderly prior to admission.
(f) This section shall not apply to licensees of residential care
facilities for the elderly that have obtained a certificate of
authority to offer continuing care contracts, as defined in paragraph
(8) (9) of subdivision (c) of Section
1771.
(g) If the applicant decides not to enter the facility prior to
the facility's completion of a preadmission appraisal or if the
facility fails to provide full written disclosure of the preadmission
fee charges and refund conditions, the applicant or the applicant's
representative shall be entitled to a refund of 100 percent of the
preadmission fee.
(h) Unless subdivision (g) applies, preadmission fees in excess of
five hundred dollars ($500) shall be refunded according to the
following:
(1) If the applicant does not enter the facility after a
preadmission appraisal is conducted, the applicant or the applicant's
representative shall be entitled to a refund of at least 80 percent
of the preadmission fee amount in excess of five hundred dollars
($500).
(2) If the resident leaves the facility for any reason during the
first month of residency, the resident shall be entitled to a refund
of at least 80 percent of the preadmission fee amount in excess of
five hundred dollars ($500).
(3) If the resident leaves the facility for any reason during the
second month of residency, the resident shall be entitled to a refund
of at least 60 percent of the preadmission fee amount in excess of
five hundred dollars ($500).
(4) If the resident leaves the facility for any reason during the
third month of residency, the resident shall be entitled to a refund
of at least 40 percent of the preadmission fee amount in excess of
five hundred dollars ($500).
(5) The facility may, but is not required to, make a refund of the
preadmission fee for residents living in the facility for four or
more months.
(i) (1) Notwithstanding subdivision (g), if a resident is evicted
by a facility pursuant to subdivision (a) of Section 1569.682, the
resident or the resident's legal representative shall be entitled to
a refund of preadmission fees in excess of five hundred dollars
($500) in accordance with all of the following:
(A) A 100-percent refund if preadmission fees were paid within six
months of notice of eviction.
(B) A 75-percent refund if preadmission fees were paid more than
six months but not more than 12 months before notice of eviction.
(C) A 50-percent refund if preadmission fees were paid more than
12 months but not more than 18 months before notice of eviction.
(D) A 25-percent refund if preadmission fees were paid more than
18 months but less than 25 months before notice of eviction.
(2) No preadmission refund is required if preadmission fees were
paid 25 months or more before the notice of eviction.
(3) The preadmission refund required by this subdivision shall be
paid within 15 days of issuing the eviction notice.
SEC. 3. Section 1569.682 of the Health
and Safety Code is amended to read:
1569.682. (a) A licensee of a licensed residential care facility
for the elderly shall, prior to transferring a resident of the
facility to another facility or to an independent living arrangement
as a result of the forfeiture of a license, as described in
subdivision (a), (b), or (f) of Section 1569.19 or change of use of
the facility pursuant to the department's regulations, take all
reasonable steps to transfer affected residents safely and to
minimize possible transfer trauma, and shall, at a minimum, do all of
the following:
(1) Prepare, for each resident, a relocation evaluation of the
needs of that resident, which shall include both of the following:
(A) Recommendations on the type of facility that would meet the
needs of the resident based on the current service plan.
(B) A list of facilities, within a 60-mile radius of the resident'
s current facility, that meet the resident's present needs.
(2) Provide each resident or the resident's responsible person
with a written notice no later than 60 days before the intended
eviction. The notice shall include all of the following:
(A) The reason for the eviction, with specific facts to permit a
determination of the date, place, witnesses, and circumstances
concerning the reasons.
(B) A copy of the resident's current service plan.
(C) The relocation evaluation.
(D) A list of referral agencies.
(E) The right of the resident or resident's legal representative
to contact the department to investigate the reasons given for the
eviction pursuant to Section 1569.35.
(3) Discuss the relocation evaluation with the resident and his or
her legal representative within 30 days of issuing the notice of
eviction.
(4) Submit a written report of any eviction to the licensing
agency within five days.
(5) Upon issuing the written notice of eviction, a licensee shall
not accept new residents or enter into new admission agreements.
(6) (A) For paid preadmission fees in excess of five hundred
dollars ($500), the resident is entitled to a refund in accordance
with all of the following:
(i) A 100-percent refund if preadmission fees were paid within six
months of notice of eviction.
(ii) A 75-percent refund if preadmission fees were paid more than
six months but not more than 12 months before notice of eviction.
(iii) A 50-percent refund if preadmission fees were paid more than
12 months but not more than 18 months before notice of eviction.
(iv) A 25-percent refund if preadmission fees were paid more than
18 months but less than 25 months before notice of eviction.
(B) No preadmission refund is required if preadmission fees were
paid 25 months or more before the notice of eviction.
(C) The preadmission refund required by this paragraph shall be
paid within 15 days of issuing the eviction notice. In lieu of the
refund, the resident may request that the licensee provide a credit
toward the resident's monthly fee obligation in an amount equal to
the preadmission fee refund due.
(7) If the resident gives notice five days before leaving the
facility, the licensee shall refund to the resident or his or her
legal representative a proportional per diem amount of any prepaid
monthly fees at the time the resident leaves the facility and the
unit is vacated. Otherwise the licensee shall pay the refund within
seven days from the date that the resident leaves the facility and
the unit is vacated.
(8) Within 10 days of all residents having left the facility, the
licensee, based on information provided by the resident or resident's
legal representative, shall submit a final list of names and new
locations of all residents to the department and the local
ombudsperson program.
(b) If seven or more residents of a residential care facility for
the elderly will be transferred as a result of the forfeiture of a
license or change in the use of the facility pursuant to subdivision
(a), the licensee shall submit a proposed closure plan to the
department for approval. The department shall approve or disapprove
the closure plan, and monitor its implementation, in accordance with
the following requirements:
(1) Upon submission of the closure plan, the licensee shall be
prohibited from accepting new residents and entering into new
admission agreements for new residents.
(2) The closure plan shall meet the requirements described in
subdivision (a), and describe the staff available to assist in the
transfers. The department's review shall include a determination as
to whether the licensee's closure plan contains a relocation
evaluation for each resident.
(3) Within 15 working days of receipt, the department shall
approve or disapprove the closure plan prepared pursuant to this
subdivision, and, if the department approves the plan, it shall
become effective upon the date the department grants its written
approval of the plan.
(4) If the department disapproves a closure plan, the licensee may
resubmit an amended plan, which the department shall promptly either
approve or disapprove, within 10 working days of receipt by the
department of the amended plan. If the department fails to approve a
closure plan, it shall inform the licensee, in writing, of the
reasons for the disapproval of the plan.
(5) If the department fails to take action within 20 working days
of receipt of either the original or the amended closure plan, the
plan, or amended plan, as the case may be, shall be deemed approved.
(6) Until such time that the department has approved a licensee's
closure plan, the facility shall not issue a notice of transfer or
require any resident to transfer.
(7) Upon approval by the department, the licensee shall send a
copy of the closure plan to the local ombudsperson program.
(c) (1) If a licensee fails to comply with the requirements of
subdivision (a), and if the director determines that it is necessary
to protect the residents of a facility from physical or mental abuse,
abandonment, or any other substantial threat to health or safety,
the department shall take any necessary action to minimize trauma for
the residents. The department shall contact any local agency that
may have placement or advocacy responsibility for the residents, and
shall work with those agencies to locate alternative placement sites,
contact relatives or other persons responsible for the care of these
residents, provide onsite evaluation of the residents, and assist in
the transfer of residents.
(2) The participation of the department and local agencies in the
relocation of residents from a residential care facility for the
elderly shall not relieve the licensee of any responsibility under
this section. A licensee that fails to comply with the requirements
of this section shall be required to reimburse the department and
local agencies for the cost of providing the relocation services. If
the licensee fails to provide the relocation services required in
subdivisions (a) and (b), then the department may request that the
Attorney General's office, the city attorney's office, or the local
district attorney's office seek injunctive relief and damages in the
same manner as provided for in Chapter 5 (commencing with Section
17200) of Part 2 of Division 7 of the Business and Professions Code.
(d) A licensee who fails to comply with requirements of this
section shall be liable for the imposition of civil penalties in the
amount of one hundred dollars ($100) per violation per day for each
day that the licensee is in violation of this section, until such
time that the violation has been corrected. The civil penalties shall
be issued immediately following the written notice of violation.
However, if the violation does not present an immediate or
substantial threat to the health or safety of residents and the
licensee corrects the violation within three days after receiving the
notice of violation, the licensee shall not be liable for payment of
any civil penalties pursuant to this subdivision related to the
corrected violation.
(e) A resident of a residential care facility for the elderly
covered under this section, may bring a civil action against any
person, firm, partnership, or corporation who owns, operates,
establishes, manages, conducts, or maintains a residential care
facility for the elderly who violates the rights of a resident, as
set forth in this section. Any person, firm, partnership, or
corporation who owns, operates, establishes, manages, conducts, or
maintains a residential care facility for the elderly who violates
this section shall be responsible for the acts of the facility's
employees and shall be liable for costs and attorney fees. Any such
residential care facility for the elderly may also be enjoined from
permitting the violation to continue. The remedies specified in this
section shall be in addition to any other remedy provided by law.
(f) This section does not apply to a licensee that has obtained a
certificate of authority to offer continuing care contracts, as
defined in paragraph (8) (9) of
subdivision (c) of Section 1771.
SEC. 4. Section 1569.80 of the Health
and Safety Code is amended to read:
1569.80. (a) A resident of a residential care facility for the
elderly, or the resident's representative, or both, shall have the
right to participate in decisionmaking regarding the care and
services to be provided to the resident. Accordingly, prior to, or
within two weeks after, the resident's admission, the facility shall
coordinate a meeting with the resident and the resident's
representative, if any, an appropriate member or members of the
facility's staff, if the resident is receiving home health services
in the facility, a representative of the home health agency involved,
and any other appropriate parties. The facility shall ensure that
participants in the meeting prepare a written record of the care the
resident will receive in the facility, and the resident's preferences
regarding the services provided at the facility.
(b) Once prepared, the written record described in subdivision
(a) shall be used by the facility, and, if applicable pursuant to
Section 1569.725, the home health agency, to determine the care and
services provided to the resident. If the resident has a regular
physician, the written record shall be sent by the facility to that
physician.
(c) The written record described in subdivision (a) shall be
reviewed, and, if necessary, revised, at least once every 12 months,
or upon a significant change in the resident's condition, as defined
by regulations, whichever occurs first. The review shall take place
at a meeting coordinated by the facility, and attended by the
resident, the resident's representative, if any, an appropriate
member or members of the facility's staff, and, if the resident is
receiving home health services in the facility, a representative from
the home health agency involved.
(d) This section shall not preclude a residential care facility
for the elderly or home health agency from satisfying other state or
federal obligations at a meeting required by subdivision (a) or (c).
(e) If the residential care facility for the elderly is a
continuing care retirement community, as defined in paragraph
(10) (12) of subdivision (c) of Section
1771, this section shall apply only to residents who require care
and supervision, as defined in subdivision (b) of Section 1569.2.
SEC. 2. SEC. 5. Section 1770 of the
Health and Safety Code is amended to read:
1770. The Legislature finds, declares, and intends all of the
following:
(a) Continuing care retirement communities are an alternative for
the long-term residential, social, and health care needs of
California's elderly residents and seek to provide a continuum of
care, minimize transfer trauma, and allow services to be provided in
an appropriately licensed setting.
(b) Because elderly residents often both expend a significant
portion of their savings in order to purchase care in a continuing
care retirement community and expect to receive care at their
continuing care retirement community for the rest of their lives,
tragic consequences can result if a continuing care provider becomes
insolvent or unable to provide responsible care.
(c) There is a need for disclosure concerning the terms of
agreements made between prospective residents and the continuing care
provider, and concerning the operations of the continuing care
retirement community.
(d) Providers of continuing care should be required to obtain a
certificate of authority to enter into continuing care contracts and
should be monitored and regulated by the Department of Insurance.
(e) This chapter applies equally to for-profit and nonprofit
provider entities.
(f) This chapter states the minimum requirements to be imposed
upon any entity offering or providing continuing care.
(g) Because the authority to enter into continuing care contracts
granted by the Department of Insurance is neither a guarantee of
performance by the providers nor an endorsement of any continuing
care contract provisions, prospective residents must carefully
consider the risks, benefits, and costs before signing a continuing
care contract and should be encouraged to seek financial and legal
advice before doing so.
SEC. 3. SEC. 6. Section 1770.5 is
added to the Health and Safety Code, to read:
1770.5. (a) The Department of Insurance shall succeed to and be
vested with all the duties, powers, purposes, functions,
responsibilities, and jurisdiction of the State Department of Social
Services described in this chapter, except for oversight and
regulation of programs and services provided directly to residents
of the communities. The Department of Insurance shall create
a Continuing Care Contracts Branch which shall succeed to and be
vested with the duties, powers, functions, responsibilities, and
jurisdiction of the former Continuing Care Contracts Branch in the
State Department of Social Services. of continuing
care retirement communities.
(b) All regulations, orders, and guidelines adopted pursuant to
this chapter by the State Department of Social Services ,
including the former Continuing Care Contracts Branch in the State
Department of Social Services, and any of its predecessors
in effect immediately preceding the operative date of this section
shall remain in effect and shall be fully enforceable unless and
until readopted, amended, or repealed, or until they expire by their
own terms.
(c) Any action by or against the State Department of Social
Services pertaining to matters vested in the State Department of
Social Services by this chapter that are transferred to the
Department of Insurance pursuant to this section shall not
abate but shall continue in the name of the Department of Insurance,
and the Department of Insurance shall be substituted for the State
Department of Social Services and any of its predecessors by the
court wherein the action is pending. The substitution shall not in
any way affect the rights of the parties to the action. This
substitution shall not be construed to affect the continuing
responsibility of the State Department of Social Services to provide
oversight and regulation of programs and services provided directly
to residents of the communities.
(d) All books, documents, records, and property of the State
Department of Social Services pertaining to functions transferred to
the Department of Insurance pursuant to this section shall be
transferred to the Department of Insurance.
(e) All unexpended balances of appropriations and other funds
available for use in connection with any function or the
administration of any law transferred to the Department of Insurance
pursuant to this section shall be transferred to the Department of
Insurance for use for the purpose for which the appropriation was
originally made or the funds were originally available. If there is
any doubt as to where those balances and funds are transferred, the
Department of Finance shall determine where the balances and funds
are transferred.
(f) No contract, lease, license, or any other agreement to which
the State Department of Social Services is a party pursuant to this
chapter shall be void or voidable by reason of this section, but
shall continue in full force and effect, with the Department of
Insurance assuming all of the rights, obligations, and duties of the
State Department of Social Services under this chapter. That
assumption by the Department of Insurance shall not in any way affect
the rights of the parties to the contract, lease, license, or
agreement.
(g) Every officer and employee of the State Department of Social
Services who is performing a function transferred to the Department
of Insurance pursuant to this section and who is serving in the state
civil service, other than as a temporary employee, shall be
transferred to the Department of Insurance pursuant to the provisions
of Section 19050.9 of the Government Code. The status, position, and
rights of these officers and employees shall not be affected by the
transfer and shall be retained by the person as an officer or
employee of the Department of Insurance, as the case may be, pursuant
to the State Civil Service Act (Part 2 (commencing with Section
18500) of Division 5 of Title 2 of the Government Code), except as to
a position that is exempt from civil service.
(h) The commissioner shall review the requirements of this chapter
and make recommendations to the Legislature as he or she deems
necessary to improve the oversight and regulation of the financial
management of continuing care retirement communities to protect
consumers who enter into continuing care contracts.
(i) No later than January 1, 2011, the Insurance Commissioner, the
State Public Health Officer, and the Director of Social Services
shall jointly develop and adopt regulations regarding standards,
staff training, policies, and procedures to ensure maximum
coordination and consistency of implementation of the transfers
required by this section.
SEC. 4. SEC. 7. Section 1771 of the
Health and Safety Code is amended to read:
1771. Unless the context otherwise requires, the definitions in
this section govern the interpretation of this chapter.
(a) (1) "Affiliate" means any person, corporation, limited
liability company, business trust, trust, partnership, unincorporated
association, or other legal entity that directly or indirectly
controls, is controlled by, or is under common control with, a
provider or applicant.
(a) (1) An "affiliate" of, or person "affiliated" with, a specific
person, is a person that directly, or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common
control with, the person specified.
(2) "Affinity group" means a grouping of entities sharing a common
interest, philosophy, or connection (e.g., military officers,
religion).
(3) "Annual report" means the report each provider is required to
file annually with the department, as described in Section 1790.
(4) "Applicant" means any entity, or combination of entities, that
submits and has pending an application to the department for a
permit to accept deposits and a certificate of authority.
(5) "Assisted living services" includes, but is not limited to,
assistance with personal activities of daily living, including
dressing, feeding, toileting, bathing, grooming, mobility, and
associated tasks, to help provide for and maintain physical and
psychosocial comfort.
(6) "Assisted living unit" means the living area or unit within a
continuing care retirement community that is specifically designed to
provide ongoing assisted living services.
(7) "Audited financial statement" means financial statements
prepared in accordance with generally accepted accounting principles
including the opinion of an independent certified public accountant,
and notes to the financial statements considered customary or
necessary to provide full
disclosure and complete information regarding the provider's
financial statements, financial condition, and operation.
(b) (reserved)
(c) (1) "Cancel" means to destroy the force and effect of an
agreement or continuing care contract.
(2) "Cancellation period" means the 90-day period, beginning when
the resident physically moves into the continuing care retirement
community, during which the resident may cancel the continuing care
contract, as provided in Section 1788.2.
(3) "Care" means nursing, medical, or other health related
services, protection or supervision, assistance with the personal
activities of daily living, or any combination of those services.
(4) "Cash equivalent" means certificates of deposit and United
States treasury securities with a maturity of five years or less.
(5) "Certificate" or "certificate of authority" means the
certificate issued by the department, properly executed and bearing
the State Seal, authorizing a specified provider to enter into one or
more continuing care contracts at a single specified continuing care
retirement community.
(6) "Commissioner" means the Insurance Commissioner.
(7) "Condition" means a restriction, specific action, or other
requirement imposed by the department for the initial or continuing
validity of a permit to accept deposits, a provisional certificate of
authority, or a certificate of authority. A condition may limit the
circumstances under which the provider may enter into any new deposit
agreement or contract, or may be imposed as a condition precedent to
the issuance of a permit to accept deposits, a provisional
certificate of authority, or a certificate of authority.
(8) "Consideration" means some right, interest, profit, or benefit
paid, transferred, promised, or provided by one party to another as
an inducement to contract. Consideration includes some forbearance,
detriment, loss, or responsibility, that is given, suffered, or
undertaken by a party as an inducement to another party to contract.
(9) "Continuing care contract" means a contract that includes a
continuing care promise made, in exchange for an entrance fee, the
payment of periodic charges, or both types of payments. A continuing
care contract may consist of one agreement or a series of agreements
and other writings incorporated by reference.
(10) "Continuing care advisory committee" means an advisory panel
appointed pursuant to Section 1777.
(11) "Continuing care promise" means a promise, expressed or
implied, by a provider to provide one or more elements of care to an
elderly resident for the duration of his or her life or for a term in
excess of one year. Any such promise or representation, whether part
of a continuing care contract, other agreement, or series of
agreements, or contained in any advertisement, brochure, or other
material, either written or oral, is a continuing care promise.
(12) "Continuing care retirement community" means a facility
located within the State of California where services promised in a
continuing care contract are provided. A distinct phase of
development approved by the department may be considered to be the
continuing care retirement community when a project is being
developed in successive distinct phases over a period of time. When
the services are provided in residents' own homes, the homes into
which the provider takes those services are considered part of the
continuing care retirement community.
(13) "Control" means directing or causing the direction of the
financial management or the policies of another entity, including an
operator of a continuing care retirement community, whether by means
of the controlling entity's ownership interest, contract, or any
other involvement. A parent entity or sole member of an entity
controls a subsidiary entity provider for a continuing care
retirement community if its officers, directors, or agents directly
participate in the management of the subsidiary entity or in the
initiation or approval of policies that affect the continuing care
retirement community's operations, including, but not limited to,
approving budgets or the administrator for a continuing care
retirement community. Control shall be presumed to exist if any
person, directly or indirectly, owns, controls, holds with the power
to vote, or holds proxies representing, more than 10
percent of the voting securities of any other person. This
presumption may be rebutted by a showing that control does not exist
in fact. The commissioner may, after furnishing all persons in
interest notice and opportunity to be heard, determine that control
exists in fact, notwithstanding the absence of a presumption to that
effect.
(d) (1) "Department" means the Department of Insurance,
except with respect to the oversight and regulation of programs and
services provided directly to residents of the communities, in which
case "department" means State Department of Social Services.
except as otherwise specified.
(2) "Deposit" means any transfer of consideration, including a
promise to transfer money or property, made by a depositor to any
entity that promises or proposes to promise to provide continuing
care, but is not authorized to enter into a continuing care contract
with the potential depositor.
(3) "Deposit agreement" means any agreement made between any
entity accepting a deposit and a depositor. Deposit agreements for
deposits received by an applicant prior to the department's release
of funds from the deposit escrow account shall be subject to the
requirements described in Section 1780.4.
(4) "Depository" means a bank or institution that is a member of
the Federal Deposit Insurance Corporation or a comparable deposit
insurance program.
(5) "Depositor" means any prospective resident who pays a deposit.
Where any portion of the consideration transferred to an applicant
as a deposit or to a provider as consideration for a continuing care
contract is transferred by a person other than the prospective
resident or a resident, that third-party transferor shall have the
same cancellation or refund rights as the prospective resident or
resident for whose benefit the consideration was transferred.
(e) (1) "Elderly" means an individual who is 60 years of age or
older.
(2) "Entity" means an individual, partnership, corporation,
limited liability company, and any other form for doing business.
Entity includes a person, sole proprietorship, estate, trust,
association, and joint venture.
(3) "Entrance fee" means the sum of any initial, amortized, or
deferred transfer of consideration made or promised to be made by, or
on behalf of, a person entering into a continuing care contract for
the purpose of assuring care or related services pursuant to that
continuing care contract or as full or partial payment for the
promise to provide care for the term of the continuing care contract.
Entrance fee includes the purchase price of a condominium,
cooperative, or other interest sold in connection with a promise of
continuing care. An initial, amortized, or deferred transfer of
consideration that is greater in value than 12 times the monthly care
fee shall be presumed to be an entrance fee.
(4) "Equity" means the value of real property in excess of the
aggregate amount of all liabilities secured by the property.
(5) "Equity interest" means an interest held by a resident in a
continuing care retirement community that consists of either an
ownership interest in any part of the continuing care retirement
community property or a transferable membership that entitles the
holder to reside at the continuing care retirement community.
(6) "Equity project" means a continuing care retirement community
where residents receive an equity interest in the continuing care
retirement community property.
(7) "Equity securities" shall refer generally to large and
midcapitalization corporate stocks that are publicly traded and
readily liquidated for cash, and shall include shares in mutual funds
that hold portfolios consisting predominantly of these stocks and
other qualifying assets, as defined by Section 1792.2. Equity
securities shall also include other similar securities that are
specifically approved by the department.
(8) "Escrow agent" means a bank or institution, including, but not
limited to, a title insurance company, approved by the department to
hold and render accountings for deposits of cash or cash
equivalents.
(f) "Facility" means any place or accommodation where a provider
provides or will provide a resident with care or related services,
whether or not the place or accommodation is constructed, owned,
leased, rented, or otherwise contracted for by the provider.
(g) (reserved)
(h) (reserved)
(i) (1) "Inactive certificate of authority" means a certificate
that has been terminated under Section 1793.8.
(2) "Investment securities" means any of the following:
(A) Direct obligations of the United States, including obligations
issued or held in book-entry form on the books of the United States
Department of the Treasury or obligations the timely payment of the
principal of, and the interest on, which are fully guaranteed by the
United States.
(B) Obligations, debentures, notes, or other evidences of
indebtedness issued or guaranteed by any of the following:
(i) The Federal Home Loan Bank System.
(ii) The Export-Import Bank of the United States.
(iii) The Federal Financing Bank.
(iv) The Government National Mortgage Association.
(v) The Farmer's Home Administration.
(vi) The Federal Home Loan Mortgage Corporation of the Federal
Housing Administration.
(vii) Any agency, department, or other instrumentality of the
United States if the obligations are rated in one of the two highest
rating categories of each rating agency rating those obligations.
(C) Bonds of the State of California or of any county, city and
county, or city in this state, if rated in one of the two highest
rating categories of each rating agency rating those bonds.
(D) Commercial paper of finance companies and banking institutions
rated in one of the two highest categories of each rating agency
rating those instruments.
(E) Repurchase agreements fully secured by collateral security
described in subparagraph (A) or (B), as evidenced by an opinion of
counsel, if the collateral is held by the provider or a third party
during the term of the repurchase agreement, pursuant to the terms of
the agreement, subject to liens or claims of third parties, and has
a market value, which is determined at least every 14 days, at least
equal to the amount so invested.
(F) Long-term investment agreements, which have maturity dates in
excess of one year, with financial institutions, including, but not
limited to, banks and insurance companies or their affiliates, if the
financial institution's paying ability for debt obligations or
long-term claims or the paying ability of a related guarantor of the
financial institution for these obligations or claims, is rated in
one of the two highest rating categories of each rating agency rating
those instruments, or if the short-term investment agreements are
with the financial institution or the related guarantor of the
financial institution, the long-term or short-term debt obligations,
whichever is applicable, of which are rated in one of the two highest
long-term or short-term rating categories, of each rating agency
rating the bonds of the financial institution or the related
guarantor, provided that if the rating falls below the two highest
rating categories, the investment agreement shall allow the provider
the option to replace the financial institution or the related
guarantor of the financial institution or shall provide for the
investment securities to be fully collateralized by investments
described in subparagraph (A), and, provided further, if so
collateralized, that the provider has a perfected first security lien
on the collateral, as evidenced by an opinion of counsel and the
collateral is held by the provider.
(G) Banker's acceptances or certificates of deposit of, or time
deposits in, any savings and loan association that meets any of the
following criteria:
(i) The debt obligations of the savings and loan association, or
in the case of a principal bank, of the bank holding company, are
rated in one of the two highest rating categories of each rating
agency rating those instruments.
(ii) The certificates of deposit or time deposits are fully
insured by the Federal Deposit Insurance Corporation.
(iii) The certificates of deposit or time deposits are secured at
all times, in the manner and to the extent provided by law, by
collateral security described in subparagraph (A) or (B) with a
market value, valued at least quarterly, of no less than the original
amount of moneys so invested.
(H) Taxable money market government portfolios restricted to
obligations issued or guaranteed as to payment of principal and
interest by the full faith and credit of the United States.
(I) Obligations the interest on which is excluded from gross
income for federal income tax purposes and money market mutual funds
whose portfolios are restricted to these obligations, if the
obligations or mutual funds are rated in one of the two highest
rating categories by each rating agency rating those obligations.
(J) Bonds that are not issued by the United States or any federal
agency, but that are listed on a national exchange and that are rated
at least "A" by Moody's Investors Service, or the equivalent rating
by Standard and Poor's Corporation or Fitch Investors Service.
(K) Bonds not listed on a national exchange that are traded on an
over-the-counter basis, and that are rated at least "Aa" by Moody's
Investors Service or "AA" by Standard and Poor's Corporation or Fitch
Investors Service.
(j) (reserved)
(k) (reserved)
() "Life care contract" means a continuing care contract that
includes a promise, expressed or implied, by a provider to provide or
pay for routine services at all levels of care, including acute care
and the services of physicians and surgeons, to the extent not
covered by other public or private insurance benefits, to a resident
for the duration of his or her life. Care shall be provided under a
life care contract in a continuing care retirement community having a
comprehensive continuum of care, including a skilled nursing
facility, under the ownership and supervision of the provider on or
adjacent to the premises. No change may be made in the monthly fee
based on level of care. A life care contract shall also include
provisions to subsidize residents who become financially unable to
pay their monthly care fees.
(m) (1) "Monthly care fee" means the fee charged to a resident in
a continuing care contract on a monthly or other periodic basis for
current accommodations and services including care, board, or
lodging. Periodic entrance fee payments or other prepayments shall
not be monthly care fees.
(2) "Monthly fee contract" means a continuing care contract that
requires residents to pay monthly care fees.
(n) "Nonambulatory person" means a person who is unable to leave a
building unassisted under emergency conditions in the manner
described by Section 13131.
(o) (reserved)
(p) (1) "Per capita cost" means a continuing care retirement
community's operating expenses, excluding depreciation, divided by
the average number of residents.
(2) "Periodic charges" means fees paid by a resident on a periodic
basis.
(3) "Permit to accept deposits" means a written authorization by
the department permitting an applicant to enter into deposit
agreements regarding a single specified continuing care retirement
community.
(4) "Person" means an individual, a corporation, a partnership, an
association, a joint stock company, a business trust, an
unincorporated organization, or any similar entity, or any
combination thereof acting in concert.
(4)
(5) "Prepaid contract" means a continuing care contract
in which the monthly care fee, if any, may not be adjusted to cover
the actual cost of care and services.
(5)
(6) "Preferred access" means that residents who have
previously occupied a residential living unit have a right over other
persons to any assisted living or skilled nursing beds that are
available at the community.
(6)
(7) "Processing fee" means a payment to cover
administrative costs of processing the application of a depositor or
prospective resident.
(7)
(8) "Promise to provide one or more elements of care"
means any expressed or implied representation that one or more
elements of care will be provided or will be available, such as by
preferred access.
(8)
(9) "Proposes" means a representation that an applicant
or provider will or intends to make a future promise to provide
care, including a promise that is subject to a condition, such as the
construction of a continuing care retirement community or the
acquisition of a certificate of authority.
(9)
(10) "Provider" means an entity that provides
continuing care, makes a continuing care promise, or proposes to
promise to provide continuing care. "Provider" also includes any
entity that controls an entity that provides continuing care, makes a
continuing care promise, or proposes to promise to provide
continuing care. The department shall determine whether an entity
controls another entity for purposes of this article. No homeowner's
association, cooperative, or condominium association may be a
provider.
(11) "Provider holding company system" consists of two or more
affiliated persons, one or more of which is a provider.
(10)
(12) "Provisional certificate of authority" means the
certificate issued by the department, properly executed and bearing
the State Seal, under Section 1786. A provisional certificate of
authority shall be limited to the specific continuing care retirement
community and number of units identified in the applicant's
application.
(q) (reserved)
(r) (1) "Refund reserve" means the reserve a provider is required
to maintain, as provided in Section 1792.6.
(2) "Refundable contract" means a continuing care contract that
includes a promise, expressed or implied, by the provider to pay an
entrance fee refund or to repurchase the transferor's unit,
membership, stock, or other interest in the continuing care
retirement community when the promise to refund some or all of the
initial entrance fee extends beyond the resident's sixth year of
residency. Providers that enter into refundable contracts shall be
subject to the refund reserve requirements of Section 1792.6.
A continuing care contract that includes a promise to repay
all or a portion of an entrance fee that is conditioned upon
reoccupancy or resale of the unit previously occupied by the resident
shall not be considered a refundable contract for purposes of the
refund reserve requirements of Section 1792.6, provided that this
conditional promise of repayment is not referred to by the applicant
or provider as a "refund."
(3) "Resale fee" means a levy by the provider against the proceeds
from the sale of a transferor's equity interest.
(4) "Reservation fee" refers to consideration collected by an
entity that has made a continuing care promise or is proposing to
make this promise and has complied with Section 1771.4.
(5) "Resident" means a person who enters into a continuing care
contract with a provider, or who is designated in a continuing care
contract to be a person being provided or to be provided services,
including care, board, or lodging.
(6) "Residential care facility for the elderly" means a housing
arrangement as defined by Section 1569.2.
(7) "Residential living unit" means a living unit in a continuing
care retirement community that is not used exclusively for assisted
living services or nursing services.
(s) (reserved)
(t) (1) "Termination" means the ending of a continuing care
contract as provided for in the terms of the continuing care
contract.
(2) "Transfer trauma" means death, depression, or regressive
behavior, that is caused by the abrupt and involuntary transfer of an
elderly resident from one home to another and results from a loss of
familiar physical environment, loss of well-known neighbors,
attendants, nurses and medical personnel, the stress of an abrupt
break in the small routines of daily life, or the loss of visits from
friends and relatives who may be unable to reach the new facility.
(3) "Transferor" means a person who transfers, or promises to
transfer, consideration in exchange for care and related services
under a continuing care contract or proposed continuing care
contract, for the benefit of another. A transferor shall have the
same rights to cancel and obtain a refund as the depositor under the
deposit agreement or the resident under a continuing care contract.
SEC. 5. SEC. 8. Section 1771.7 of
the Health and Safety Code is amended to read:
1771.7. (a) No resident of a continuing care retirement community
shall be deprived of any civil or legal right, benefit, or privilege
guaranteed by law, by the California Constitution, or by the United
States Constitution, solely by reason of status as a resident of a
community. In addition, because of the discretely different character
of residential living unit programs that are a part of continuing
care retirement communities, this section shall augment Chapter 3.9
(commencing with Section 1599), Sections 72527 and 87572 of Title 22
of the California Code of Regulations, and other applicable state and
federal law and regulations.
(b) A prospective resident shall have the right to visit each of
the different care levels and to inspect assisted living and skilled
nursing home licensing reports including, but not limited to, the
most recent inspection reports and findings of complaint
investigations covering a period of no less than two years, prior to
signing a continuing care contract.
(c) All residents in residential living units shall have all of
the following rights:
(1) To live in an attractive, safe, and well maintained physical
environment.
(2) To live in an environment that enhances personal dignity,
maintains independence, and encourages self-determination.
(3) To participate in activities that meet individual physical,
intellectual, social, and spiritual needs.
(4) To expect effective channels of communication between
residents and staff, and between residents and the administration or
provider's governing body.
(5) To receive a clear and complete written contract that
establishes the mutual rights and obligations of the resident and the
continuing care retirement community.
(6) To manage his or her financial affairs.
(7) To be assured that all donations, contributions, gifts, or
purchases of provider-sponsored financial products shall be
voluntary, and may not be a condition of acceptance or of ongoing
eligibility for services.
(8) To maintain and establish ties to the local community.
(9) To organize and participate freely in the operation of
independent resident organizations and associations.
(d) A continuing care retirement community shall maintain an
environment that enhances the residents' self-determination and
independence. The provider shall do both of the following:
(1) Encourage the formation of a resident association by
interested residents who may elect a governing body. The provider
shall provide space and post notices for meetings, and provide
assistance in attending meetings for those residents who request it.
In order to promote a free exchange of ideas, at least part of each
meeting shall be conducted without the presence of any continuing
care retirement community personnel. The association may, among other
things, make recommendations to management regarding resident issues
that impact the residents' quality of life, quality of care,
exercise of rights, safety and quality of the physical environment,
concerns about the contract, fiscal matters, or other issues of
concern to residents. The management shall respond, in writing, to a
written request or concern of the resident association within 20
working days of receiving the written request or concern. Meetings
shall be open to all residents to attend as well as to present
issues. Executive sessions of the governing body shall be attended
only by the governing body.
(2) Establish policies and procedures that promote the sharing of
information, dialogue between residents and management, and access to
the provider's governing body. The provider shall biennially conduct
a resident satisfaction survey that shall be made available to the
resident association or its governing body, or, if neither exists, to
a committee of residents at least 14 days prior to the next
semiannual meeting of residents and the governing board of the
provider required by subdivision (c) of Section 1771.8. A copy of the
survey shall be posted in a conspicuous location at each facility.
(e) In addition to any statutory or regulatory bill of rights
required to be provided to residents of residential care facilities
for the elderly or skilled nursing facilities, the provider shall
provide a copy of the bill of rights prescribed by this section to
each resident at the time or before the resident signs a continuing
care contract, and at any time when the resident is proposed to be
moved to a different level of care.
(f) Each continuing care retirement community shall prominently
post in areas accessible to the residents and visitors a notice that
a copy of rights applicable to residents pursuant to this section and
any governing regulation issued by the Continuing Care Contracts
Branch of the department State Department of
Social Services is available upon request from the provider.
The notice shall also state that the residents have a right to file a
complaint with the Continuing Care Contracts Branch for any
violation of those rights and shall contain information explaining
how a complaint may be filed, including the telephone number and
address of the Continuing Care Contracts Branch.
(g) The resident has the right to freely exercise all rights
pursuant to this section, in addition to political rights, without
retaliation by the provider.
(h) The department State Department of
Social Services may, upon receiving a complaint of a violation
of this section, request a copy of the policies
and procedures along with documentation on
the conduct and findings of any self-evaluations and consult with the
Continuing Care Advisory Committee for determination of compliance.
The State Department of Social Services shall notify the
department of any violations of this section.
(i) Failure to comply with this section shall be grounds for the
imposition of conditions on, suspension of, or revocation of the
provisional certificate of authority or certificate of authority
by the department pursuant to Section 1793.21.
(j) Failure to comply with this section constitutes a violation of
residents' rights. Pursuant to Section 1569.49, the
department State Department of Social Services
shall impose and collect a civil penalty of not more than one hundred
fifty dollars ($150) per violation upon a continuing care retirement
community that violates a right guaranteed by this section.
SEC. 9. Section 1771.8 of the Health
and Safety Code is amended to read:
1771.8. (a) The Legislature finds and declares all of the
following:
(1) The residents of continuing care retirement communities have a
unique and valuable perspective on the operations of and services
provided in the community in which they live.
(2) Resident input into decisions made by the provider is an
important factor in creating an environment of cooperation, reducing
conflict, and ensuring timely response and resolution to issues that
may arise.
(3) Continuing care retirement communities are strengthened when
residents know that their views are heard and respected.
(b) The Legislature encourages continuing care retirement
communities to exceed the minimum resident participation requirements
established by this section by, among other things, the following:
(1) Encouraging residents to form a resident association, and
assisting the residents, the resident association, and its governing
body to keep informed about the operation of the continuing care
retirement community.
(2) Encouraging residents of a continuing care retirement
community or their elected representatives to select residents to
participate as board members of the governing body of the provider.
(3) Quickly and fairly resolving any dispute, claim, or grievance
arising between a resident and the continuing care retirement
community.
(c) The governing body of a provider, or the designated
representative of the provider, shall hold, at a minimum, semiannual
meetings with the residents of the continuing care retirement
community, or the resident association or its governing body, for the
purpose of the free discussion of subjects including, but not
limited to, income, expenditures, and financial trends and issues as
they apply to the continuing care retirement community and proposed
changes in policies, programs, and services. Nothing in this section
precludes a provider from taking action or making a decision at any
time, without regard to the meetings required under this subdivision.
(d) (1) At least 30 days prior to the
implementation of any increase in the monthly care fee, the
designated representative of the provider shall convene a meeting, to
which all residents shall be invited, for the purpose of discussing
the reasons for the increase, the basis for determining the amount of
the increase, and the data used for calculating the increase. This
meeting may coincide with the semiannual meetings provided for in
subdivision (c). At least 14 days prior to the meeting to discuss any
increase in the monthly care fee, the provider shall make available
to each resident or resident household comparative data showing the
budget for the upcoming year, the current year's budget, and actual
and projected expenses for the current year, and a copy shall be
posted in a conspicuous location at each facility.
(2) Any increase in a monthly care fee on or after January 1,
2010, shall be approved by the commissioner prior to the meeting
described in paragraph (1) and shall be subject to regulations
adopted by the commissioner. The commissioner may, in accordance with
Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3
of Title 2 of the Government Code, adopt, amend, or repeal reasonable
regulations as may be necessary or proper to implement this
paragraph and to require actuarial assessment of monthly care fees
proposed by providers.
(e) The governing body of a provider or the designated
representative of the provider shall provide residents with at least
14 days' advance notice of each meeting provided for in subdivisions
(c) and (d), and shall permit residents attending the meeting to
present issues orally and in writing. The governing body of a
provider or the designated representative of the provider shall post
the notice of, and the agenda for, the meeting in a conspicuous place
in the continuing care retirement community at least 14 days prior
to the meeting. The governing body of a provider or the designated
representative of the provider shall make available to residents of
the continuing care retirement community upon request the agenda and
accompanying materials at least seven days prior to the meeting.
(f) Any increase in the price or scope of care or other services
provided by a provider, other than changes in the monthly care fees
subject to subdivision (d), shall be approved by the commissioner
prior to implementation. The commissioner may, in accordance with
Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3
of Title 2 of the Government Code, adopt, amend, or repeal reasonable
regulations to implement this subdivision.
(f)
(g) Each provider shall make available to the resident
association or its governing body, or if neither exists, to a
committee of residents, a financial statement of activities for that
facility comparing actual costs to budgeted costs broken down by
expense category, not less than semiannually, and shall consult with
the resident association or its governing body, or, if neither
exists, with a committee of residents, during the annual budget
planning process. The effectiveness of consultations during the
annual budget planning process shall be evaluated at a minimum every
two years by the continuing care retirement community administration.
The evaluation, including any policies adopted relating to
cooperation with residents, shall be made available to the resident
association or its governing body, or, if neither exists, to a
committee of residents at least 14 days prior to the next semiannual
meeting of residents and the provider's governing body provided for
in subdivision (c), and a copy of the evaluation shall be posted in a
conspicuous location at each facility.
(g)
(h) Each provider shall, within 10 days after the
annual report required pursuant to Section 1790 is submitted to the
department, provide, at a central and conspicuous location in the
community, a copy of the annual report, including the multifacility
statement of activities, and including a copy of the annual audited
financial statement, but excluding personal confidential information.
(h)
(i) Each provider shall maintain, as public
information, available upon request to residents, prospective
residents, and the public, minutes of the board of director's
meetings and shall retain these records for at least three years from
the date the records were filed or issued.
(i)
(j) The governing body of a provider that is not part
of a multifacility organization with more than one continuing care
retirement community in the state shall accept at least one resident
of the continuing care retirement community it operates to
participate as a nonvoting resident representative to the provider's
governing body.
(j)
(k) In a multifacility organization having more than
one continuing care retirement community in the state, the governing
body of the multifacility organization shall elect either to have at
least one nonvoting resident representative to the provider's
governing body for each California-based continuing care retirement
community the provider operates or to have a resident-elected
committee composed of representatives of the residents of each
California-based continuing care retirement community that the
provider operates select or nominate at least one nonvoting resident
representative to the provider's governing body for every three
California-based continuing care retirement communities or fraction
thereof that the provider operates. If a multifacility organization
elects to have one representative for every three communities that
the provider operates, the provider shall provide to the president of
the residents association of each of the communities that do not
have a resident representative, the same notice of board meetings,
board packets, minutes, and other materials as the resident
representative. At the reasonable discretion of the provider,
information related to litigation, personnel, competitive advantage,
or confidential information that is not appropriate to disclose, may
be withheld.
(k)
(l) In order to encourage innovative and alternative
models of resident involvement, a resident selected pursuant to
subdivision (i) (j) to participate as a
resident representative to the provider's governing body may, at the
option of the resident association, be selected in any one of the
following ways:
(1) By a majority vote of the resident association of a provider
or by a majority vote of a resident-elected committee of residents of
a multifacility organization.
(2) If no resident association exists, any resident may organize a
meeting of the majority of the residents of the continuing care
retirement community to select or nominate residents to represent
them before the governing body.
(3) Any other method designated by the resident association.
()
(m) The resident association, or organizing resident,
or in the case of a multifacility organization, the resident-elected
committee of residents, shall give residents of the continuing care
retirement community at least 30 days' advance notice of the meeting
to select a resident representative and shall post the notice in a
conspicuous place at the continuing care retirement community.
(m)
(n) (1) Except as provided in subdivision (n)
(o) , the resident representative shall receive
the same notice of board meetings, board packets, minutes, and other
materials as members and shall be permitted to attend, speak, and
participate in all meetings of the board.
(2) Resident representatives may share information from board
meetings with other residents, unless the information is confidential
or doing so would violate fiduciary duties to the provider. In
addition, a resident representative shall be permitted to attend
meetings of the board committee or committees that review the annual
budget of the facility or facilities and recommend increases in
monthly care fees. The resident shall receive the same notice of
committee meetings, information packets, minutes, and other materials
as committee members, and shall be permitted to attend, speak at,
and participate in, committee meetings. Resident representatives
shall perform their duties in good faith and with such care,
including reasonable inquiry, as an ordinarily prudent person in a
like position would use under similar circumstances.
(n)
(o) Notwithstanding subdivision (m)
(n) , the governing body may exclude resident
representatives from its executive sessions and from receiving board
materials to be discussed during executive session. However, resident
representatives shall be included in executive sessions and shall
receive all board materials to be discussed during executive sessions
related to discussions of the annual budgets, increases in monthly
care fees, indebtedness, and expansion of new and existing continuing
care retirement communities.
(o)
(p) The provider shall pay all reasonable travel costs
for the resident representative.
(p)
(q) The provider shall disclose in writing the extent
of resident involvement with the board to prospective residents.
(q)
(r) Nothing in this section prohibits a provider from
exceeding the minimum resident participation requirements of this
section by, for example, having more resident meetings or more
resident representatives to the board than required or by having one
or more residents on the provider's governing body who are selected
with the active involvement of residents.
(r) On or before April 1, 2003, the department, with input from
the Continuing Care Advisory Committee of the department established
pursuant to Section 1777, shall do all of the following:
(1) Make recommendations to the Legislature as to whether any
changes in current law regarding resident representation to the board
is needed.
(2) Provide written guidelines available to residents and
providers that address issues related to board participation,
including rights and responsibilities, and that provide guidance on
the extent to which resident representatives who are not voting
members of the board have a duty of care, loyalty, and obedience to
the provider and the extent to which providers can classify
information as confidential and not subject to disclosure by resident
representatives to other residents.
SEC. 10. Section 1776 of the Health and
Safety Code is amended to read:
1776. (a) The department , in
consultation with the State Department of Social Services,
shall adopt, amend, or repeal, in accordance with Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code, reasonable regulations as may be necessary or
proper to carry out the purposes and intent of this chapter ,
with respect to the duties transferred to the department under
Section 1770.5, and to protect the rights of the elderly.
(b) The State Department of Social Services may, in consultation
with the department, adopt, amend, or repeal, in accordance with
Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3
of Title 2 of the Government Code, reasonable regulations as may be
necessary or proper to carry out its duties under Section 1770.5.
SEC. 11. Section 1776.2 of the Health
and Safety Code is amended to read:
1776.2. The department or the State Department of Social
Services may, by any duly authorized representative, inspect
and examine any continuing care retirement community, including the
books and records thereof, or the performance of any service required
by the continuing care contracts.
SEC. 6. SEC. 12. Section 1776.3 of
the Health and Safety Code is amended to read:
1776.3. (a) The Continuing Care Contracts Branch of the
department State Department of Social Services
shall enter and review each continuing care retirement community in
the state at least once every three years to augment the
branch's commissioner's assessment of the
provider's financial soundness.
(b) During its facility visits, the branch shall consider the
condition of the facility, whether the facility is operating in
compliance with applicable state law, and whether the provider is
performing the services it has specified in its continuing care
contracts.
(c) The branch shall issue guidelines that require each provider
to adopt a comprehensive disaster preparedness plan, update that plan
at least every three years, submit a copy to the department
State Department of Social Services , and make
copies available to residents in a prominent location in each
continuing care retirement community facility.
(d) (1) All residents' rights and service-related complaints by
residents shall be filed with the State Department of Social
Services, and all financially related complaints by residents shall
be filed with the commissioner. The State Department of Social
Services and the commissioner shall direct any improperly filed
complaints to the appropriate department.
(d) (1) The branch
(2) The Continuing Care Contracts
Branch of the State Department of Social Services shall respond
within 15 business days to residents' rights,
service-related, and financially related complaints
residents' rights and service-related complaints by residents,
and shall furnish to residents upon request and within 15 business
days any document or report filed with the department
State Department of Social Services by a
continuing care provider, except documents protected by privacy laws.
The commissioner shall respond within 15 business days to
financially related complaints by residents.
(2)
(3) The branch shall provide the Continuing Care
Advisory Committee with a summary of all residents' rights,
service-related, and financially related complaints by residents. The
provider shall rights and service-related complaints
by residents. The commissioner shall provide the Continuing Care
Advisory Committee with a summary of all financially related
complaints by residents.
(4) A provider shall disclose any
citation issued by the department pursuant to Section 1793.6 in its
disclosure statement to residents as updated annually, or more
frequently as the commissioner may direct, and shall post a
notice of the citation in a conspicuous location in the facility. The
notice shall include a statement indicating that residents may
obtain additional information regarding the citation from the
provider and the department.
(e) The branch shall annually review, summarize, and report to the
commissioner Director of Social Services
on the work of the Continuing Care Advisory Committee,
including any issues arising from its review of the condition of any
continuing care retirement community or any continuing care
retirement community provider, and including any recommendations for
actions by the committee, the department
State Department of Social Services , or the Legislature to
improve oversight of continuing care retirement community
communities .
SEC. 13. Section 1776.6 of the Health
and Safety Code is amended to read:
1776.6. (a) Pursuant to the California Public Records Act
(Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1
of the Government Code) and the Information Practices Act of 1977
(Chapter 1 (commencing with Section 1798) of Title 1.8 of Part 4 of
Division 3 of the Civil Code), the following documents are public
information and shall be provided by the department upon request:
actuarial reports, audited financial statements, annual
reports and accompanying documents, compliance or noncompliance with
reserve requirements, whether an application for a permit to accept
deposits and certificate of authority has been filed, whether a
permit or certificate has been granted or denied, and the type of
care offered by the provider.
(b) The department shall regard resident data used in the
calculation of reserves as confidential.
SEC. 7. SEC. 14. Section 1777.2 of
the Health and Safety Code is amended to read:
1777.2. (a) The Continuing Care Advisory Committee shall:
(1) Review the financial and managerial condition of continuing
care retirement communities operating under a certificate of
authority.
(2) Review the financial condition of any continuing care
retirement community that the committee determines is indicating
signs of financial difficulty and may be in need of close
supervision.
(3)
(1) Monitor the condition of those continuing care
retirement communities that the department
State Department of Social Services or the chair of the
committee may request.
(4)
(2) Make available consumer information on the
selection of continuing care contracts and necessary contract
protections in the purchase of continuing care contracts.
(5)
(3) Review new applications regarding
financial, actuarial, and marketing feasibility as
requested by the department State Department
of Social Services .
(b) The committee shall make recommendations to the
department State Department of Social Services
regarding needed changes in its rules and regulations and upon
request provide advice regarding the feasibility of new continuing
care retirement communities and the correction of problems relating
to the management or operation of any continuing care retirement
community. The committee shall also perform any other advisory
functions necessary to improve the management and operation of
continuing care retirement communities.
(c) The committee may report on its recommendations directly to
the commissioner Director of Social Services
.
(d) The committee may hold meetings, as deemed necessary to the
performance of its duties.
SEC. 15. Section 1777.5 is added to the
Health and Safety Code , to read:
1777.5. Where the department is required by this chapter to
consult with both the State Department of Social Services and the
Continuing Care Advisory Committee, the department shall give greater
weight to recommendations made by the State Department of Social
Services.
SEC. 8. SEC. 16. Section 1778 of the
Health and Safety Code is repealed.
SEC. 9. SEC. 17. Section 1778 is
added to the Health and Safety Code, to read:
1778. There is hereby created in the State Treasury a fund that
shall be known as the Continuing Care Provider Fee Fund. The
1778. The Continuing Care Provider Fee Fund is
continued in existence in the State Treasury. The fund shall
consist of two accounts, the Insurance Account and the State
Department of Social Services Account. Ninety-five percent of
fees moneys received pursuant to this
chapter shall be deposited into the Insurance Account and 5 percent
shall be deposited into the State Department of Social Services
Account. Notwithstanding Section 13340 of the Government Code, the
moneys in the Insurance Account are continuously appropriated to the
Department of Insurance and moneys in the State Department of Social
Services Account are continuously appropriated to the State
Department of Social Services for the purposes of this chapter.
SEC. 18. Section 1779 of the Health and
Safety Code is amended to read:
1779. (a) An entity shall file an application for a permit to
accept deposits and for a certificate of authority with the
department, as set forth in this chapter, before doing any of the
following:
(1) Accepting any deposit, reservation fee, or any other payment
that is related to a promise or proposal to promise to provide
continuing care.
(2) Entering into any reservation agreement, deposit agreement, or
continuing care contract.
(3) Commencing construction of a prospective continuing care
retirement community. If the project is to be constructed in phases,
the application shall include all planned phases.
(4) Expanding an existing continuing care retirement community
whether by converting existing buildings or by new construction.
(5) Converting an existing structure to a continuing care
retirement community.
(6) Recommencing marketing on a planned continuing care retirement
community when the applicant has previously forfeited a permit to
accept deposits pursuant to Section 1703.7.
(7) Executing new continuing care contracts after a provisional
certificate of authority or certificate of authority has been
inactivated, revoked, surrendered, or forfeited.
(8) Closing the sale or transfer of a continuing care retirement
community or assuming responsibility for continuing care contracts.
(b) For purposes of paragraph (4) of subdivision (a), an expansion
of a continuing care retirement community shall be deemed to occur
when there is an increase in the capacity stated on the residential
care facility for the elderly license issued to the continuing care
retirement community, an increase in the number of units at the
continuing care retirement community, an increase in the number of
skilled nursing beds, or additions to or replacement of existing
continuing care retirement community structures that may affect
obligations to current residents.
(c) Any provider that alters, or proposes to alter, its
organization, including by means of a change in the type of entity it
is, separation from another entity, merger, affiliation, spinoff, or
sale, shall file a new application and obtain a new certificate of
authority before the new entity may enter into any new continuing
care contracts.
(d) A new application shall not be required for an entity name
change if there is no change in the entity structure or management.
If the provider undergoes a name change, the provider shall notify
the department in writing of the name change and shall return the
previously issued certificate of authority for reissuance under the
new name.
(e) Within 10 days of submitting an application for a certificate
of authority pursuant to paragraph (3), (4), (7), or (8) of
subdivision (a), the provider shall notify residents of the provider'
s existing community or communities of its application. The provider
shall notify its resident associations of any filing with the
department to obtain new financing, additional financing for a
continuing care retirement community, the sale or transfer of a
continuing care retirement community, any change in structure, and of
any applications to the department for any expansion of a continuing
care retirement community at least 60 calendar days in advance
of making those changes . A summary of the plans and
application shall be posted in a prominent location in the continuing
care retirement community so as to be accessible to all residents
and the general public, indicating in the summary where the full
plans and application may be inspected in the continuing care
retirement community.
(f) When the
department determines that it has sufficient information on the
provider or determines that the provisions do not apply and the
protections provided by this article are not compromised, the
department may eliminate all or portions of the application contents
required under Section 1779.4 for applications filed pursuant to
paragraphs (4), (5), (6), (7), and (8) of subdivision (a) or pursuant
to subdivision (c).
SEC. 19. Section 1779.4 of the Health
and Safety Code is amended to read:
1779.4. An application shall contain all of the following:
(a) A statement signed by the applicant under penalty of perjury
certifying that to the best of the applicant's knowledge and belief,
the items submitted in the application are correct. If the applicant
is a corporation, the chief executive officer shall sign the
statement. If there are multiple applicants, these requirements shall
apply to each applicant.
(b) The name and business address of the applicant.
(c) An itemization of the total fee calculation, including sources
of figures used, and a check in the amount of 80 percent of the
total application fee.
(d) The name, address, and a description of the real property of
the continuing care retirement community.
(e) An estimate of the number of continuing care residents at the
continuing care retirement community.
(f) A description of the proposed continuing care retirement
community, including the services and care to be provided to
residents or available for residents.
(g) A statement indicating whether the application is for a
certificate of authority to enter into continuing care or life care
contracts.
(h) A license to operate the proposed continuing care retirement
community as a residential care facility for the elderly or
documentation establishing that the applicant has received a
preliminary approval for licensure from the department's
Community Care Licensing Division in the State
Department of Social Services .
(i) A license to operate the proposed skilled nursing facility or
evidence that an application has been filed with the Licensing and
Certification Division of the State Department of Public
Health Services , if applicable.
(j) A statement disclosing any revocation or other disciplinary
action taken, or in the process of being taken, against a license,
permit, or certificate held or previously held by the applicant.
(k) A description of any matter in which any interested party
involved with the proposed continuing care retirement community has
been convicted of a felony or pleaded nolo contendere to a felony
charge, or been held liable or enjoined in a civil action by final
judgment, if the felony or civil action involved fraud, embezzlement,
fraudulent conversion, or the misappropriation of property. For the
purpose of this subdivision, "interested party" includes any
representative of the developer of the proposed continuing care
retirement community or the applicant, including all general
partners, executive officers, or chief operating officers and board
members of corporations; and managing members and managers of limited
liability companies for each entity; who has significant
decisionmaking authority with respect to the proposed continuing care
retirement community.
(l) If the applicant is an entity other than an individual, the
following information shall also be submitted:
(1) A statement identifying the type of legal entity and listing
the interest and extent of the interest of each principal in the
legal entity. For the purposes of this paragraph, "principal" means
any person or entity having a financial interest in the legal entity
of 10 5 percent or more. When the
application is submitted in the name of a corporation, the parent,
sole corporate shareholder, or sole corporate member who controls the
operation of the continuing care retirement community shall be
listed as an applicant. When multiple corporate applicants exist,
they shall be listed jointly by corporate name on the application,
and the certificate of authority shall be issued in the joint names
of the corporations. When the application is submitted by a
partnership, all general partners shall be named as coapplicants and
the department shall name them as coproviders on any certificate of
authority it issues.
(2) The names of the members of the provider's governing body.
(3) A statement indicating whether the applicant was or is
affiliated with a religious, charitable, nonprofit or for-profit
organization, and the extent of any affiliation. The statement shall
also include the extent, if any, to which the affiliate organization
will be responsible for the financial and contract obligations of the
applicant and shall be signed by a responsible officer of the
affiliate organization.
(4) A statement identifying any parent entity or other affiliate
entity, the primary activities of each entity identified, the
relationship of each entity to the applicant, and the interest in the
applicant held by each entity.
(5) A description of the capital structure, general financial
condition, ownership, and management of the provider and any person
controlling the provider.
(6) A description of the identity and relationship of every member
of the entity.
(7) Information about the following agreements in force,
relationships subsisting, and transactions currently outstanding or
that have occurred during the last fiscal year between the provider
and its affiliates:
(A) Loans, extensions of credit, investments, or purchases, sales,
or exchanges of securities of the affiliates by the provider or of
the provider by its affiliates.
(B) Purchases, sales, or exchanges of assets.
(C) Transactions not in the ordinary course of business.
(D) Guarantees or undertakings for the benefit of an affiliate
that result in an actual contingent exposure of the provider's assets
to liability.
(E) All management agreements, service contracts, and cost-sharing
arrangements.
(F) Insurance agreements.
(G) Dividends and other distributions to shareholders.
(H) Consolidated tax allocation agreements.
(8) A pledge of the provider's stock, including stock of a
subsidiary or controlling affiliate, for a loan made to a member of
the provider holding company system.
(9) Any other matters required by the commissioner.
(5)
(10) Copies of all contracts, management agreements, or
other documents setting forth the relationships with each of the
other entities.
(6)
(11) A statement indicating whether the applicant, a
principal, a parent entity, affiliate entity, subsidiary entity, any
responsible employee, manager, or board member, or anyone who profits
from the continuing care retirement community has had applied
against it any injunctive or restrictive order of a court of record,
or any suspension or revocation of any state or federal license,
permit, or certificate, arising out of or relating to business
activity of health or nonmedical care, including, but not limited to,
actions affecting a license to operate a health care institution,
nursing home, intermediate care facility, hospital, home health
agency, residential care facility for the elderly, community care
facility, or child day care facility.
(m) A description of the business experience of the applicants in
the operation or management of similar facilities.
(n) A copy of any advertising material regarding the proposed
continuing care retirement community prepared for distribution or
publication.
(o) Evidence of the bonds required by Section 1789.8.
(p) A copy of any proposed reservation agreement.
(q) A copy of the proposed deposit agreements.
(r) The name of the proposed escrow agent and depository.
(s) Any copies of reservation and deposit escrow account
agreements.
(t) A copy of any proposed continuing care contracts.
(u) A statement of any monthly care fees to be paid by residents,
the components and services considered in determining the fees, and
the manner by which the provider may adjust these fees in the future.
If the continuing care retirement community is already in operation,
or if the provider operates one or more similar continuing care
retirement communities within this state, the statement shall include
tables showing the frequency and each percentage increase in monthly
care rates at each continuing care retirement community for the
previous five years, or any shorter period for which each continuing
care retirement community may have been operated by the provider or
his or her predecessor in interest.
(v) A statement of the actions that have been, or will be, taken
by the applicant to fund reserves as required by Section 1792 or
1792.6 and to otherwise ensure that the applicant will have adequate
finances to fully perform continuing care contract obligations. The
statement shall describe actions such as establishing restricted
accounts, sinking funds, trust accounts, or additional reserves. If
the applicant is purchasing an existing continuing care retirement
community from a selling provider, the applicant shall provide an
actuarial report to determine the liabilities of existing continuing
care contracts and demonstrate the applicant's ability to fund those
obligations.
(w) A copy of audited financial statements for the three most
recent fiscal years of the applicant or any shorter period of time
the applicant has been in existence, prepared in accordance with
generally accepted accounting principles and accompanied by an
independent auditor's report from a reputable firm of certified
public accountants. The audited financial statements shall be
accompanied by a statement signed and dated by both the chief
financial officer and chief executive officer for the applicant or,
if applicable, by each general partner, or each managing member and
manager, stating that the financial statements are complete, true,
and correct in all material matters to the best of their knowledge.
(x) Unaudited interim financial statements shall be included if
the applicant's fiscal year ended more than 90 days prior to the date
of filing. The statements shall be either quarterly or monthly, and
prepared on the same basis as the annual audited financial statements
or any other basis acceptable to the department.
(y) A financial study and a marketing study that reasonably
project the feasibility of the proposed continuing care retirement
community and are prepared by a firm or firms acceptable to the
department. These studies shall address and evaluate, at a minimum,
all of the following items:
(1) The applicant and its prior experience, qualifications, and
management, including a detailed description of the applicant's
proposed continuing care retirement community, its service package,
fee structure, and anticipated opening date.
(2) The construction plans, construction financing, and permanent
financing for the proposed continuing care retirement community,
including a description of the anticipated source, cost, terms, and
use of all funds to be used in the land acquisition, construction,
and operation of the continuing care retirement community. This
proposal shall include, at a minimum, all of the following:
(A) A description of all debt to be incurred by the applicant for
the continuing care retirement community, including the anticipated
terms and costs of the financing. The applicant's outstanding
indebtedness related to the continuing care retirement community may
not, at any time, exceed the appraised value of the continuing care
retirement community.
(B) A description of the source and amount of the equity to be
contributed by the applicant.
(C) A description of the source and amount of all other funds,
including entrance fees, that will be necessary to complete and
operate the continuing care retirement community.
(D) A statement itemizing all estimated project costs, including
the real property costs and the cost of acquiring or designing and
constructing the continuing care retirement community, and all other
similar costs that the provider expects to incur prior to the
commencement of operation. This itemization shall identify all costs
related to the continuing care retirement community or project,
including financing expenses, legal expenses, occupancy development
costs, marketing costs, and furniture and equipment.
(E) A description of the interest expense, insurance premiums, and
property taxes that will be incurred prior to opening.
(F) An estimate of any proposed continuing care retirement
community reserves required for items such as debt service, insurance
premiums, and operations.
(G) An estimate of the amount of funds, if any, that will be
necessary to fund startup losses, fund statutory and refundable
contract reserves, and to otherwise provide additional financial
resources in an amount sufficient to ensure full performance by the
provider of its continuing care contract obligations.
(3) An analysis of the potential market for the applicant's
continuing care retirement community, addressing such items as:
(A) A description of the service area, including its demographic,
economic, and growth characteristics.
(B) A forecast of the market penetration the continuing care
retirement community will achieve based on the proposed fee
structure.
(C) Existing and planned competition in and about the primary
service area.
(4) A detailed description of the sales and marketing plan,
including all of the following:
(A) Marketing projections, anticipated sales, and cancellation
rates.
(B) Month-by-month forecast of unit sales through sellout.
(C) A description of the marketing methods, staffing, and
advertising media to be used by the applicant.
(D) An estimate of the total entrance fees to be received from
residents prior to opening the continuing care retirement community.
(5) Projected move-in rates, deposit collections, and resident
profiles, including couple mix by unit type, age distribution, care
and nursing unit utilization, and unit turnover or resale rates.
(6) A description or analysis of development-period costs and
revenues throughout the development of the proposed continuing care
retirement community.
(z) Projected annual financial statements for the period
commencing on the first day of the applicant's current fiscal year
through at least the fifth year of operation.
(1) Projected annual financial statements shall be prepared on an
accrual basis using the same accounting principles and procedures as
the audited financial statements furnished pursuant to subdivision
(x).
(2) Separate projected annual cash-flow statements shall be
provided. These statements shall show projected annual cash-flows for
the duration of any debt associated with the continuing care
retirement community. If the continuing care retirement community
property is leased, the cash-flow statement shall demonstrate the
feasibility of closing the continuing care retirement community at
the end of the lease period.
(A) The projected annual cash-flow statements shall be submitted
using prevailing rates of interest, and assume no increase of
revenues and expenses due to inflation.
(B) The projected annual cash-flow statements shall include all of
the following:
(i) A detailed description and a full explanation of all
assumptions used in preparing the projections, accompanied by
supporting supplementary schedules and calculations, all to be
consistent with the financial study and marketing study furnished
pursuant to subdivision (y). The department may require such other
supplementary schedules, calculations, or projections as it
determines necessary for an adequate application.
(ii) Cash-flow from monthly operations showing projected revenues
for monthly fees received from continuing care contracts, medical
unit fees if applicable, other periodic fees, gifts and bequests used
in operations, and any other projected source of revenue from
operations less operating expenses.
(iii) Contractual cash-flow from activities showing projected
revenues from presales, deposit receipts, entrance fees, and all
other projected sources of revenue from activities, less contract
acquisition, marketing, and advertising expenditures.
(iv) Cash-flows from financing activities, including, but not
limited to, bond or loan proceeds less bond issue or loan costs and
fees, debt service including CAL Mortgage Insurance premiums, trustee
fees, principal and interest payments, leases, contracts, rental
agreements, or other long-term financing.
(v) Cash-flows from investment activities, including, but not
limited to, construction progress payments, architect and engineering
services, furnishings, and equipment not included in the
construction contract, project development, inspection and testing,
marketable securities, investment earnings, and interfund transfers.
(vi) The increase or decrease in cash during the projection
period.
(vii) The beginning cash balance, which means cash, marketable
securities, reserves, and other funds on hand, available, and
committed to the proposed continuing care retirement community.
(viii) The cash balance at the end of the period.
(ix) Details of the components of the ending cash balance shall be
provided for each period presented, including, but not limited to,
the ending cash balances for bond reserves, other reserve funds,
deposit funds, and construction funds balance.
(3) If the cash-flow statements required by paragraph (2) indicate
that the provider will have cash balances exceeding two months'
projected operating expenses of the continuing care retirement
community, a description of the manner in which the cash balances
will be invested, and the persons who will be making the investment
decisions, shall accompany the application.
(4) The department may require the applicant to furnish additional
data regarding its operating budgets, projections of cash required
for major repairs and improvements, or any other matter related to
its projections including additional information, schedules, and
calculations regarding occupancy rate projections, unit types, couple
mix, sex and age estimates for resident mix, turnover rates, refund
obligations, and sales.
(aa) (1) A declaration by the applicant acknowledging that it is
required to execute and record a Notice of Statutory Limitation on
Transfer relating to continuing care retirement community property.
(2) The notice required in this subdivision shall be acknowledged
and suitable for recordation, describe the property, declare the
applicant's intention to use all or part of the described property
for the purposes of a continuing care retirement community pursuant
to this chapter, and shall be in substantially the following form:
"NOTICE OF STATUTORY LIMITATION ON TRANSFER
Notice is hereby given that the property described below is
licensed, or proposed to be licensed, for use as a continuing care
retirement community and accordingly, the use and transfer of the
property is subject to the conditions and limitations as to use and
transfer set forth in Sections 1773 and 1789.4 of the Health and
Safety Code. This notice is recorded pursuant to subdivision (aa) of
Section 1779.4 of the Health and Safety Code.
The real property, which is legally owned by (insert the name of
the legal owner) and is the subject of the statutory limitation to
which this notice refers, is more particularly described as follows:
(Insert the legal description and the assessor's parcel number of the
real property to which this notice applies.)"
(3) The Notice of Statutory Limitation on Transfer shall remain in
effect until notice of release is given by the department. The
department shall execute and record a release of the notice upon
proof of complete performance of all obligations to residents.
(4) Unless a Notice of Statutory Limitation on Transfer has been
recorded with respect to the land on which the applicant or provider
is operating, or intends to operate a continuing care retirement
community, prior to the date of execution of any trust deed,
mortgage, or any other lien or encumbrance securing or evidencing the
payment of money and affecting land on which the applicant or
provider intends to operate a continuing care retirement community,
the applicant or provider shall give the department advance written
notice of the proposed encumbrance. Upon the giving of notice to the
department, the applicant or provider shall execute and record the
Notice of Statutory Limitation on Transfer in the office of the
county recorder in each county in which any portion of the continuing
care retirement community is located prior to encumbering the
continuing care retirement community property with the proposed
encumbrance.
(5) In the event that the applicant or provider and the owner of
record are not the same entity on the date on which execution and
recordation of the notice is required, the leasehold or other
interest in the continuing care retirement community property held by
the applicant or provider shall survive in its entirety and without
change, any transfer of the continuing care retirement community
property by the owner. In addition, the applicant or provider shall
record a memorandum of leasehold or other interest in the continuing
care retirement community property that includes a provision stating
that its interest in the property survives any transfer of the
property by the owner. The applicant or provider shall provide a copy
of the notice and the memorandum of interest to the owner of record
by certified mail and to the department.
(6) The notice shall, and, if applicable, the memorandum of
interest shall be indexed by the recorder in the grantor-grantee
index to the name of the owner of record and the name of the
applicant or provider.
(ab) A statement that the applicant will keep the department
informed of any material changes to the proposed continuing care
retirement community or its application.
(ac) Any other information that may be required by the department
for the proper administration and enforcement of this chapter.
SEC. 20. Section 1779.6 of the Health
and Safety Code is amended to read:
1779.6. (a) Within seven calendar days of receipt of an initial
application for a permit to accept deposits and a certificate of
authority, the department shall acknowledge receipt of the
application in writing.
(b) Within 30 calendar days following its receipt of an
application, the department shall determine if the application is
complete and inform the applicant of its determination. If the
department determines that the application is incomplete, its notice
to the applicant shall identify the additional forms, documents,
information, and other materials required to complete the
application. The department shall allow the applicant adequate time
to submit the requested information and materials. This review may
not determine the adequacy of the materials included in the
application.
(c) Within 120 calendar days after the department determines that
an application is complete, the department shall , in
consultation with the State Department of Social Services,
review the application for adequacy. An application shall be adequate
if it complies with all the requirements imposed by this chapter,
and both the financial study and marketing study reasonably project
the feasibility of the proposed continuing care retirement community,
as well as demonstrate the financial soundness of the applicant. The
department shall , in consultation with the State Department of
Social Services, either approve the application as adequate
under this chapter or notify the applicant that its application is
inadequate. If the application is inadequate, the department shall
identify the deficiencies in the application, provide the appropriate
code references, and give the applicant an opportunity to respond.
(d) Within 60 calendar days after receiving any additional
information or clarification required from the applicant, the
department shall , in consultation with the State
Department of Social Services, respond to the applicant's
submission in writing and state whether each specific deficiency has
been addressed sufficiently to make the application adequate. If the
department determines that the application is adequate and in
compliance with this chapter, the department shall issue the permit
to accept deposits. If the department determines that the response is
inadequate, it may request additional information or clarification
from the applicant pursuant to subdivision (c) or deny the
application pursuant to Section 1779.10.
(e) If the applicant does not provide the department with the
additional information within 90 days after the department's notice
described in subdivision (c), the application may be denied for being
inadequate. Any new application shall require an application fee.
SEC. 21. Section 1781 of the Health and
Safety Code is amended to read:
1781. (a) All deposits, excluding processing fees, shall be
placed in an escrow account. All terms governing the deposit escrow
account shall be approved in advance by the department.
(b) The deposit escrow account shall be established by an escrow
agent and all deposits shall be deposited in a depository located in
California and approved by the department. The department's approval
of the depository shall be based, in part, upon its ability to ensure
the safety of funds and properties entrusted to it and its
qualifications to perform the obligations of the depository pursuant
to the deposit escrow account agreement and this chapter. The
depository may be the same entity as the escrow agent. All deposits
shall be kept and maintained in a segregated account without any
commingling with other funds, including any funds or accounts owned
by the applicant.
(c) If the escrow agent is a title company, it shall meet the
following requirements:
(1) A Standard and Poors rating of "A" or better or a comparable
rating from a comparable rating service.
(2) Licensure in good standing with the Department of
Insurance department .
(3) Tangible net equity as required by the Department of
Insurance de partment .
(4) Reserves as required by the Department of Insurance
department .
(d) All deposits shall remain in escrow
until the department has authorized release of the deposits, as
provided in Section 1783.3.
(e) Deposits shall be invested in instruments guaranteed by the
federal government or an agency of the federal government, or in
investment funds secured by federally guaranteed instruments.
(f) No funds deposited in a deposit escrow account shall be
subject to any liens, judgments, garnishments, or creditor's claims
against the applicant or the continuing care retirement community.
The deposit agreement shall also provide that deposits may not be
subject to any liens or charges by the escrow agent except that cash
equivalent deposits may be subject to transaction fees, commissions,
prepayment penalties, and other fees incurred in connection with
those deposits.
SEC. 22. Section 1783.3 of the Health
and Safety Code is amended to read:
1783.3. (a) In order to seek a release of escrowed funds, the
applicant shall petition in writing to the department and certify to
each of the following:
(1) The construction of the proposed continuing care retirement
community or phase is at least 50 percent completed.
(2) At least 10 percent of the total of each applicable entrance
fee has been received and placed in escrow for at least 60 percent of
the total number of residential living units. Any unit for which a
refund is pending may not be counted toward that 60-percent
requirement.
(3) Deposits made with cash equivalents have been either converted
into, or substituted with, cash or held for transfer to the
provider. A cash equivalent deposit may be held for transfer to the
provider, if all of the following conditions exist:
(A) Conversion of the cash equivalent instrument would result in a
penalty or other substantial detriment to the depositor.
(B) The provider and the depositor have a written agreement
stating that the cash equivalent will be transferred to the provider,
without conversion into cash, when the deposit escrow is released to
the provider under this section.
(C) The depositor is credited the amount equal to the value of the
cash equivalent.
(4) The applicant's average performance over any six-month period
substantially equals or exceeds its financial and marketing
projections approved by the department, for that period.
(5) The applicant has received a commitment for any permanent
mortgage loan or other long-term financing.
(b) The department shall instruct the escrow agent to release to
the applicant all deposits in the deposit escrow account when all of
the following requirements have been met:
(1) The department has confirmed the information provided by the
applicant pursuant to subdivision (a).
(2) The department, in consultation with the Continuing Care
Advisory Committee and the State Department of Social Services
, has determined that there has been substantial compliance
with projected annual financial statements that served as a basis for
issuance of the permit to accept deposits.
(3) The applicant has complied with all applicable licensing
requirements in a timely manner.
(4) The applicant has obtained a commitment for any permanent
mortgage loan or other long-term financing that is satisfactory to
the department.
(5) The applicant has complied with any additional reasonable
requirements for release of funds placed in the deposit escrow
accounts, established by the department under Section 1785.
(c) The escrow agent shall release the funds held in escrow to the
applicant only when the department has instructed it to do so in
writing.
(d) When an application describes different phases of construction
that will be completed and commence operating at different times,
the department may apply the 50 percent construction completion
requirement to any one or group of phases requested by the applicant,
provided the phase or group of phases is shown in the applicant's
projections to be economically viable.
SEC. 23. Section 1785 of the Health and
Safety Code is amended to read:
1785. (a) If, at any time prior to issuance of a certificate of
authority, the applicant's average performance over any six-month
period does not substantially equal or exceed the applicant's
projections for that period, the department, after consultation and
upon consideration of the recommendations of the Continuing Care
Advisory Committee and the State Department of Social Services
, may take any of the following actions:
(1) Cancel the permit to accept deposits and require that all
funds in escrow be returned to depositors immediately.
(2) Increase the required percentages of construction completed,
units reserved, or entrance fees to be deposited as required under
Sections 1782, 1783.3, 1786, and 1786.2.
(3) Increase the reserve requirements under this chapter.
(b) Prior to taking any actions specified in subdivision (a), the
department shall give the applicant an opportunity to submit a
feasibility study from a consultant in the area of continuing care,
approved by the department, to determine whether in his or her
opinion the proposed continuing care retirement community is still
viable, and if so, to submit a plan of correction. The department, in
consultation with the committee, shall determine if the plan is
acceptable.
(c) In making its determination, the department shall take into
consideration the overall performance of the proposed continuing care
retirement community to date.
(d) If deposits have been released from escrow, the department may
further require the applicant to reopen the escrow as a condition of
receiving any further entrance fee payments from depositors or
residents.
(e) The department may require the applicant to notify all
depositors and, if applicable, all residents, of any actions required
by the department under this section.
SEC. 10. SEC. 24. Section 1788 of
the Health and Safety Code is amended to read:
1788. (a) A continuing care contract shall contain all of the
following:
(1) The legal name and address of each provider.
(2) The name and address of the continuing care retirement
community.
(3) The resident's name and the identity of the unit the resident
will occupy.
(4) If there is a transferor other than the resident, the
transferor shall be a party to the contract and the transferor's name
and address shall be specified.
(5) If the provider has used the name of any charitable or
religious or nonprofit organization in its title before January 1,
1979, and continues to use that name, and that organization is not
responsible for the financial and contractual obligations of the
provider or the obligations specified in the continuing care
contract, the provider shall include in every continuing care
contract a conspicuous statement which clearly informs the resident
that the organization is not financially responsible.
(6) The date the continuing care contract is signed by the
resident and, where applicable, any other transferor.
(7) The duration of the continuing care contract.
(8) A list of the services that will be made available to the
resident as required to provide the appropriate level of care. The
list of services shall include the services required as a condition
for licensure as a residential care facility for the elderly,
including all of the following:
(A) Regular observation of the resident's health status to ensure
that his or her dietary needs, social needs, and needs for special
services are satisfied.
(B) Safe and healthful living accommodations, including
housekeeping services and utilities.
(C) Maintenance of house rules for the protection of residents.
(D) A planned activities program, which includes social and
recreational activities appropriate to the interests and capabilities
of the resident.
(E) Three balanced, nutritious meals and snacks made available
daily, including special diets prescribed by a physician as a medical
necessity.
(F) Assisted living services.
(G) Assistance with taking medications.
(H) Central storing and distribution of medications.
(I) Arrangements to meet health needs, including arranging
transportation.
(9) An itemization of the services that are included in the
monthly fee and the services that are available at an extra charge.
The provider shall attach a current fee schedule to the continuing
care contract.
(10) The procedures and conditions under which a resident may be
voluntarily and involuntarily transferred from a designated living
unit. The transfer procedures, at a minimum, shall include provisions
addressing all of the following circumstances under which a transfer
may be authorized:
(A) A continuing care retirement community may transfer a resident
under the following conditions, taking into account the
appropriateness and necessity of the transfer and the goal of
promoting resident independence:
(i) The resident is nonambulatory. The definition of
"nonambulatory," as provided in Section 13131, shall either be stated
in full in the continuing care contract or be cited. If Section
13131 is cited, a copy of the statute shall be made available to the
resident, either as an attachment to the continuing care contract or
by specifying that it will be provided upon request. If a
nonambulatory resident occupies a room that has a fire clearance for
nonambulatory residence, transfer shall not be necessary.
(ii) The resident develops a physical or mental condition that
endangers the health, safety, or well-being of the resident or
another person.
(iii) The resident's condition or needs require the resident's
transfer to an assisted living care unit or skilled nursing facility,
because the level of care required by the resident exceeds that
which may be lawfully provided in the living unit.
(iv) The resident's condition or needs require the resident's
transfer to a nursing facility, hospital, or other facility, and the
provider has no facilities available to provide that level of care.
(B) Before the continuing care retirement community transfers a
resident under any of the conditions set forth in subparagraph (A),
the community shall satisfy all of the following requirements:
(i) Involve the resident and the resident's responsible person, as
defined in paragraph (6) of subdivision (r) of Section 87101 of
Title 22 of the California Code of Regulations, and upon the resident'
s or responsible person's request, family members, or the resident's
physician or other appropriate health professional, in the assessment
process that forms the basis for the level of care transfer decision
by the provider. The provider shall offer an explanation of the
assessment process. If an assessment tool or tools, including scoring
and evaluating criteria, are used in the determination of the
appropriateness of the transfer, the provider shall make copies of
the completed assessment available upon the request of the resident
or the resident's responsible person.
(ii) Prior to sending a formal notification of transfer, the
provider shall conduct a care conference with the resident and the
resident's responsible person, and upon the resident's or responsible
person's request, family members, and the resident's health care
professionals, to explain the reasons for transfer.
(iii) Notify the resident and the resident's responsible person
the reasons for the transfer in writing.
(iv) Notwithstanding any other provision of this subparagraph, if
the resident does not have impairment of cognitive abilities, the
resident may request that his or her responsible person not be
involved in the transfer process.
(v) The notice of transfer shall be made at least 30 days before
the transfer is expected to occur, except when the health or safety
of the resident or other residents is in danger, or the transfer is
required by the resident's urgent medical needs. Under those
circumstances, the written notice shall be made as soon as
practicable before the transfer.
(vi) The written notice shall contain the reasons for the
transfer, the effective date, the designated level of care or
location to which the resident will be transferred, a statement of
the resident's right to a review of the transfer decision at a care
conference, as provided for in subparagraph (C), and for disputed
transfer decisions, the right to review by the Continuing Care
Contracts Branch of the department State
Department of Social Services , as provided for in subparagraph
(D). The notice shall also contain the name, address, and telephone
number of the department's Continuing Care Contracts Branch.
Continuing Care Contracts Branch of the State
Department of Social Services.
(vii) The continuing care retirement community shall provide
sufficient preparation and orientation to the resident to ensure a
safe and orderly transfer and to minimize trauma.
(C) The resident has the right to review the transfer decision at
a subsequent care conference that shall include the resident, the
resident's responsible person, and upon the resident's or responsible
person's request, family members, the resident's physician or other
appropriate health care professional, and members of the provider's
interdisciplinary team. The local ombudsperson may also be included
in the care conference, upon the request of the resident, the
resident's responsible person, or the provider.
(D) For disputed transfer decisions, the resident or the resident'
s responsible person has the right to a prompt and timely review of
the transfer process by the Continuing Care Contracts Branch of the
department State Department of Social
Services .
(E) The decision of the department's Continuing
Care Contracts Branch of the State Department of Social
Services shall be in writing and shall determine whether the
provider failed to comply with the transfer process pursuant to
subparagraphs (A) to (C), inclusive. Pending the decision of the
Continuing Care Contracts Branch, the provider shall specify any
additional care the provider believes is necessary in order for the
resident to remain in his or her unit. The resident may be required
to pay for the extra care, as provided in the contract.
(F) Transfer of a second resident when a shared accommodation
arrangement is terminated.
(11) Provisions describing any changes in the resident's monthly
fee and any changes in the entrance fee refund payable to the
resident that will occur if the resident transfers from any unit.
(12) The provider's continuing obligations, if any, in the event a
resident is transferred from the continuing care retirement
community to another facility.
(13) The provider's obligations, if any, to resume care upon the
resident's return after a transfer from the continuing care
retirement community.
(14) The provider's obligations to provide services to the
resident while the resident is absent from the continuing care
retirement community.
(15) The conditions under which the resident must permanently
release his or her living unit.
(16) If real or personal properties are transferred in lieu of
cash, a statement specifying each item's value at the time of
transfer, and how the value was ascertained.
(A) An itemized receipt which includes the information described
above is acceptable if incorporated as a part of the continuing care
contract.
(B) When real property is or will be transferred, the continuing
care contract shall include a statement that the deed or other
instrument of conveyance shall specify that the real property is
conveyed pursuant to a continuing care contract and may be subject to
rescission by the transferor within 90 days from the date that the
resident first occupies the residential unit.
(C) The failure to comply with paragraph (16) shall not affect the
validity of title to real property transferred pursuant to this
chapter.
(17) The amount of the entrance fee.
(18) In the event two parties have jointly paid the entrance fee
or other payment which allows them to occupy the unit, the continuing
care contract shall describe how any refund of entrance fees is
allocated.
(19) The amount of any processing fee.
(20) The amount of any monthly care fee.
(21) For continuing care contracts that require a monthly care fee
or other periodic payment, the continuing care contract shall
include the following:
(A) A statement that the occupancy and use of the accommodations
by the resident is contingent upon the regular payment of the fee.
(B) The regular rate of payment agreed upon (per day, week, or
month).
(C) A provision specifying whether payment will be made in advance
or after services have been provided.
(D) A provision specifying the provider will adjust monthly care
fees for the resident's support, maintenance, board, or lodging, when
a resident requires medical attention while away from the continuing
care retirement community.
(E) A provision specifying whether a credit or allowance will be
given to a resident who is absent from the continuing care retirement
community or from meals. This provision shall also state, when
applicable, that the credit may be permitted at the discretion or by
special permission of the provider.
(F) A statement of billing practices, procedures, and timelines. A
provider shall allow a minimum of 14 days between the date a bill is
sent and the date payment is due. A charge for a late payment may
only be assessed if the amount and any condition for the penalty is
stated on the bill.
(22) All continuing care contracts that include monthly care fees
shall address changes in monthly care fees by including either of the
following provisions:
(A) For prepaid continuing care contracts, which include monthly
care fees, one of the following methods:
(i) Fees shall not be subject to change during the lifetime of the
agreement.
(ii) Fees shall not be increased by more than a specified number
of dollars in any one year and not more than a specified number of
dollars during the lifetime of the agreement.
(iii) Fees shall not be increased in excess of a specified
percentage over the preceding year and not more than a specified
percentage during the lifetime of the agreement.
(B) For monthly fee continuing care contracts, except prepaid
contracts, changes in monthly care fees shall be based on projected
costs, prior year per capita costs, and economic indicators.
(23) A provision requiring that the provider give written notice
to the resident at least 30 days in advance of any change in the
resident's monthly care fees or in the price or scope of any
component of care or other services.
(24) A provision indicating whether the resident's rights under
the continuing care contract include any proprietary interests in the
assets of the provider or in the continuing care retirement
community, or both. Any statement in a contract concerning an
ownership interest shall appear in a large-sized font or print.
(25) If the continuing care retirement community property is
encumbered by a security interest that is senior to any claims the
residents may have to enforce continuing care contracts, a provision
shall advise the residents that any claims they may have under the
continuing care contract are subordinate to the rights of the secured
lender. For equity projects, the continuing care contract shall
specify the type and extent of the equity interest and whether any
entity holds a security interest.
(26) Notice that the living units are part of a continuing care
retirement community that is licensed as a residential care facility
for the elderly and, as a result, any duly authorized agent of the
department State Department of Social
Services may, upon proper identification and upon stating the
purpose of his or her visit, enter and inspect the entire premises at
any time, without advance notice.
(27) A conspicuous statement, in at least 10-point boldface type
in immediate proximity to the space reserved for the signatures of
the resident and, if applicable, the transferor, that provides as
follows: "You, the resident or transferor, may cancel the transaction
without cause at any time within 90 days from the date you first
occupy your living unit. See the attached notice of cancellation form
for an explanation of this right."
(28) Notice that during the cancellation period, the continuing
care contract may be canceled upon 30 days' written notice by the
provider without cause, or that the provider waives this right.
(29) The terms and conditions under which the continuing care
contract may be terminated after the cancellation period by either
party, including any health or financial conditions.
(30) A statement that, after the cancellation period, a provider
may unilaterally terminate the continuing care contract only if the
provider has good and sufficient cause.
(A) Any continuing care contract containing a clause that provides
for a continuing care contract to be terminated for "just cause,"
"good cause," or other similar provision, shall also include a
provision that none of the following activities by the resident, or
on behalf of the resident, constitutes "just cause," "good cause," or
otherwise activates the termination provision:
(i) Filing or lodging a formal complaint with the
department commissioner, the State Department of
Social Services, or other appropriate authority.
(ii) Participation in an organization or affiliation of residents,
or other similar lawful activity.
(B) The provision required by this paragraph shall also state that
the provider shall not discriminate or retaliate in any manner
against any resident of a continuing care retirement community for
contacting the department commissioner or the
State Department of Social Services , or any other state,
county, or city agency, or any elected or appointed government
official to file a complaint or for any other reason, or for
participation in a residents' organization or association.
(C) Nothing in this paragraph diminishes the provider's ability to
terminate the continuing care contract for good and sufficient
cause.
(31) A statement that at least 90 days' written notice to the
resident is required for a unilateral termination of the continuing
care contract by the provider.
(32) A statement concerning the length of notice that a resident
is required to give the provider to voluntarily terminate the
continuing care contract after the cancellation period.
(33) The policy or terms for refunding any portion of the entrance
fee, in the event of cancellation, termination, or death. Every
continuing care contract that provides for a refund of all or a part
of the entrance fee shall also do all of the following:
(A) Specify the amount, if any, the resident has paid or will pay
for upgrades, special features, or modifications to the resident's
unit.
(B) State that if the continuing care contract is canceled or
terminated by the provider, the provider shall do both of the
following:
(i) Amortize the specified amount at the same rate as the resident'
s entrance fee.
(ii) Refund the unamortized balance to the resident at the same
time the provider pays the resident's entrance fee refund.
(34) The following notice at the bottom of the signatory page:
""NOTICE'' (date)
This is a continuing care contract as defined by paragraph
(8) (9) of subdivision (c), or
subdivision () of Section 1771 of the California Health and Safety
Code. This continuing care contract form has been approved by the
Department of Insurance as required by subdivision (b) of Section
1787 of the California Health and Safety Code. The basis for this
approval was a determination that (provider name) has submitted a
contract that complies with the minimum statutory requirements
applicable to continuing care contracts. The department does not
approve or disapprove any of the financial or health care coverage
provisions in this contract. Approval by the department is NOT a
guaranty of performance or an endorsement of any continuing care
contract provisions. Prospective transferors and residents are
strongly encouraged to carefully consider the benefits and risks of
this continuing care contract and to seek financial and legal advice
before signing.
(35) The provider may not attempt to absolve itself in the
continuing care contract from liability for its negligence by any
statement to that effect, and shall include the following statement
in the contract: "Nothing in this continuing care contract limits
either the provider's obligation to provide adequate care and
supervision for the resident or any liability on the part of the
provider which may result from the provider's failure to provide this
care and supervision."
(b) A life care contract shall also provide that:
(1) All levels of care, including acute care and physicians' and
surgeons' services will be provided to a resident.
(2) Care will be provided for the duration of the resident's life
unless the life care contract is canceled or terminated by the
provider during the cancellation period or after the cancellation
period for good cause.
(3) A comprehensive continuum of care will be provided to the
resident, including skilled nursing, in a facility under the
ownership and supervision of the provider on, or adjacent to, the
continuing care retirement community premises.
(4) Monthly care fees will not be changed based on the resident's
level of care or service.
(5) A resident who becomes financially unable to pay his or her
monthly care fees shall be subsidized provided the resident's
financial need does not arise from action by the resident to divest
the resident of his or her assets.
(c) Continuing care contracts may include provisions that do any
of the following:
(1) Subsidize a resident who becomes financially unable to pay for
his or her monthly care fees at some future date. If a continuing
care contract provides for subsidizing a resident, it may also
provide for any of the following:
(A) The resident shall apply for any public assistance or other
aid for which he or she is eligible and that the provider may apply
for assistance on behalf of the resident.
(B) The provider's decision shall be final and conclusive
regarding any adjustments to be made or any action to be taken
regarding any charitable consideration extended to any of its
residents.
(C) The provider is entitled to payment for the actual costs of
care out of any property acquired by the resident subsequent to any
adjustment extended to the resident under paragraph (1), or from any
other property of the
resident which the resident failed to disclose.
(D) The provider may pay the monthly premium of the resident's
health insurance coverage under Medicare to ensure that those
payments will be made.
(E) The provider may receive an assignment from the resident of
the right to apply for and to receive the benefits, for and on behalf
of the resident.
(F) The provider is not responsible for the costs of furnishing
the resident with any services, supplies, and medication, when
reimbursement is reasonably available from any governmental agency,
or any private insurance.
(G) Any refund due to the resident at the termination of the
continuing care contract may be offset by any prior subsidy to the
resident by the provider.
(2) Limit responsibility for costs associated with the treatment
or medication of an ailment or illness existing prior to the date of
admission. In these cases, the medical or surgical exceptions, as
disclosed by the medical entrance examination, shall be listed in the
continuing care contract or in a medical report attached to and made
a part of the continuing care contract.
(3) Identify legal remedies which may be available to the provider
if the resident makes any material misrepresentation or omission
pertaining to the resident's assets or health.
(4) Restrict transfer or assignments of the resident's rights and
privileges under a continuing care contract due to the personal
nature of the continuing care contract.
(5) Protect the provider's ability to waive a resident's breach of
the terms or provisions of the continuing care contract in specific
instances without relinquishing its right to insist upon full
compliance by the resident with all terms or provisions in the
contract.
(6) Provide that the resident shall reimburse the provider for any
uninsured loss or damage to the resident's unit, beyond normal wear
and tear, resulting from the resident's carelessness or negligence.
(7) Provide that the resident agrees to observe the off-limit
areas of the continuing care retirement community designated by the
provider for safety reasons. The provider may not include any
provision in a continuing care contract that absolves the provider
from liability for its negligence.
(8) Provide for the subrogation to the provider of the resident's
rights in the case of injury to a resident caused by the acts or
omissions of a third party, or for the assignment of the resident's
recovery or benefits in this case to the provider, to the extent of
the value of the goods and services furnished by the provider to or
on behalf of the resident as a result of the injury.
(9) Provide for a lien on any judgment, settlement, or recovery
for any additional expense incurred by the provider in caring for the
resident as a result of injury.
(10) Require the resident's cooperation and assistance in the
diligent prosecution of any claim or action against any third party.
(11) Provide for the appointment of a conservator or guardian by a
court with jurisdiction in the event a resident becomes unable to
handle his or her personal or financial affairs.
(12) Allow a provider, whose property is tax exempt, to charge the
resident on a pro rata basis property taxes, or in-lieu taxes, that
the provider is required to pay.
(13) Make any other provision approved by the department.
(d) A copy of the resident's rights as described in Section 1771.7
shall be attached to every continuing care contract.
(e) A copy of the current audited financial statement of the
provider shall be attached to every continuing care contract. For a
provider whose current audited financial statement does not
accurately reflect the financial ability of the provider to fulfill
the continuing care contract obligations, the financial statement
attached to the continuing care contract shall include all of the
following:
(1) A disclosure that the reserve requirement has not yet been
determined or met, and that entrance fees will not be held in escrow.
(2) A disclosure that the ability to provide the services promised
in the continuing care contract will depend on successful compliance
with the approved financial plan.
(3) A copy of the approved financial plan for meeting the reserve
requirements.
(4) Any other supplemental statements or attachments necessary to
accurately represent the provider's financial ability to fulfill its
continuing care contract obligations.
(f) A schedule of the average monthly care fees charged to
residents for each type of residential living unit for each of the
five years preceding execution of the continuing care contract shall
be attached to every continuing care contract. The provider shall
update this schedule annually at the end of each fiscal year. If the
continuing care retirement community has not been in existence for
five years, the information shall be provided for each of the years
the continuing care retirement community has been in existence.
(g) If any continuing care contract provides for a health
insurance policy for the benefit of the resident, the provider shall
attach to the continuing care contract a binder complying with
Sections 382 and 382.5 of the Insurance Code.
(h) The provider shall attach to every continuing care contract a
completed form in duplicate, captioned "Notice of Cancellation." The
notice shall be easily detachable, and shall contain, in at least
10-point boldface type, the following statement:
""NOTICE OF CANCELLATION'' (date)
Your first date of occupancy under this contract
is:
_____________________________________________
"You may cancel this transaction, without any penalty within 90
calendar days from the above date.
If you cancel, any property transferred, any payments made by you
under the contract, and any negotiable instrument executed by you
will be returned within 14 calendar days after making possession of
the living unit available to the provider. Any security interest
arising out of the transaction will be canceled.
If you cancel, you are obligated to pay a reasonable processing
fee to cover costs and to pay for the reasonable value of the
services received by you from the provider up to the date you
canceled or made available to the provider the possession of any
living unit delivered to you under this contract, whichever is later.
If you cancel, you must return possession of any living unit
delivered to you under this contract to the provider in substantially
the same condition as when you took possession.
Possession of the living unit must be made available to the
provider within 20 calendar days of your notice of cancellation. If
you fail to make the possession of any living unit available to the
provider, then you remain liable for performance of all obligations
under the contract.
To cancel this transaction, mail or deliver a signed and dated
copy of this cancellation notice, or any other written notice, or
send a telegram
to
(Name of provider)
at
(Address of provider's place of business)
not later than midnight of _____________ (date).
I hereby cancel
this _________________________
transaction
(Resident
or
Transferor's signature)''
SEC. 25. Section 1788.4 of the Health
and Safety Code is amended to read:
1788.4. (a) During the cancellation period, the provider shall
pay all refunds owed to a resident within 14 calendar days after a
resident makes possession of the living unit available to the
provider.
(b) After the cancellation period, any refunds due to a resident
under a continuing care contract shall be paid within 14 calendar
days after a resident makes possession of the living unit available
to the provider or 90 calendar days after death or receipt of notice
of termination, whichever is later.
(c) In nonequity projects, if the continuing care contract is
canceled by either party during the cancellation period or terminated
by the provider after the cancellation period, the resident shall be
refunded the difference between the total amount of entrance,
monthly, and optional fees paid and the amount used for care of the
resident.
(d) If a resident has paid additional amounts for upgrades,
special features, or modifications to the living unit and the
provider terminates the resident's continuing care contract, the
provider shall amortize those additional amounts at the same rate as
the entrance fee and shall refund the unamortized balance to the
resident.
(e) A lump-sum payment to a resident after termination of a
continuing care contract that is conditioned upon resale of a unit
shall not be considered to be a refund and may not be characterized
or advertised as a refund. The lump sum payment shall be paid to the
resident within 14 calendar days after resale of the unit.
SEC. 26. Section 1789 of the Health and
Safety Code is amended to read:
1789. (a) A provider shall notify the department and obtain its
approval before making any changes to any of the following: its name;
its business structure or form of doing business; the overall
management of its continuing care retirement community; or the terms
of its financing.
(b) The provider shall give written notice of proposed changes to
the department at least 60 calendar days in advance of making the
changes described in this section.
(c) This notice requirement does not apply to routine facility
staff changes.
(d) Within 10 calendar days of submitting notification to
the department of any proposed changes under subdivision (a), the
The provider shall notify the
resident association of the proposed changes in the manner required
by subdivision (e) of Section 1779.
SEC. 27. Section 1789.15 is added to the
Health and Safety Code , to read:
1789.15. (a) The department shall, in accordance with Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2
of the Government Code, adopt, amend, or repeal reasonable
regulations as may be necessary or proper to apply Article 3.5
(commencing with Section 1185) of Chapter 2 of Part 2 of Division 1
of the Insurance Code to require disclosure of material transactions
by providers to the commissioner in the same manner as required of
incorporated insurers.
(b) The department shall, in accordance with Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code, adopt, amend, or repeal reasonable regulations
as may be necessary or proper to apply Article 4.7 (commencing with
Section 1215) of Chapter 2 of Part 2 of Division 1 of the Insurance
Code to provider holding company systems to carry out the purposes
and intent of this chapter and to protect the rights of the elderly
by ensuring that provider holding company systems engage in fair and
reasonable financial transactions.
(c) Providers may make dividends or distributions to shareholders
or parent companies only from earned surplus.
(d) No dividends or distributions shall be declared out of earned
surplus derived from the mere net appreciation in the value of assets
not yet realized, nor shall any dividends or distributions be
declared from any part of that earned surplus derived from an
exchange of assets, unless and until the earned surplus has been
realized or unless the assets received are currently realizable in
cash.
(e) Subject to regulations adopted pursuant to subdivision (b),
each provider shall report all dividends and other distributions to
shareholders within five business days following declaration. No
dividend or other distribution to shareholders may be paid until at
least 10 business days after receipt by the commissioner, at the
office of the department prescribed by the commissioner by notice to
all providers, of a notice of the declaration of the dividend or
other distribution.
(f) A provider may declare and distribute a dividend otherwise
prohibited by this section if (1) following payment of the dividend
the provider's surplus as regards its residents is (A) reasonable in
relation to its outstanding liabilities and (B) adequate to its
financial needs as prescribed by regulations adopted pursuant to
subdivision (b), and (2) the commissioner has given approval for the
dividend prior to payment.
(g) For purposes of this section, "earned surplus" means
unrestricted assets in excess of liabilities, as required to be
reported on the provider's annual statement.
SEC. 28. Section 1789.4 of the Health
and Safety Code is amended to read:
1789.4. (a) A provider for a continuing care retirement community
shall obtain approval from the department before consummating any
sale or transfer of the continuing care retirement community or any
interest in that community, other than sale of an equity interest in
a unit to a resident or other transferor.
(b) The provider shall provide written notice to the department at
least 120 calendar days prior to consummating the proposed
transaction.
(c) The notice required by this section shall include all of the
following:
(1) The identity of the purchaser.
(2) A description of the terms of the transfer or sale, including
the sales price.
(3) A plan for ensuring performance of the existing continuing
care contract obligations.
(4) Any other applicable disclosures required under Section 1215.2
of the Insurance Code. The commissioner shall adopt regulations
specifying the additional disclosures required under this paragraph.
(d) The provider shall give written notice to all continuing care
contract residents and depositors 120 calendar days prior to the sale
or transfer. The notice shall do all of the following:
(1) Describe the parties.
(2) Describe the proposed sale or transfer.
(3) Describe the arrangements for fulfilling continuing care
contract obligations.
(4) Describe options available to any depositor or resident who
does not wish to have his or her contract assumed by a new provider.
(5) Include an acknowledgment of receipt of the notice to be
signed by the resident.
(e) Unless a new provider assumes all of the continuing care
obligations of the selling provider at the close of the sale or
transfer, the selling provider shall set up a trust fund or secure a
performance bond to ensure the fulfillment of all its continuing care
contract obligations.
(f) The purchaser shall make applications for, and obtain, the
appropriate licenses and a certificate of authority before executing
any continuing care contracts or assuming the selling provider's
continuing care contract obligations.
(g) Every person who is directly or indirectly the beneficial
owner of more than 10 percent of any class of stock of a provider or
who is a director or officer of a provider shall file in the office
of the commissioner on or before January 10, 2010, or within 10 days
after he or she becomes that beneficial owner, director, or officer,
a statement, in a form prescribed by the commissioner, of the amount
of all stock of the provider of which he or she is the beneficial
owner and, within 10 days after the close of each calendar month
thereafter, if there has been a change in that ownership during that
month, shall file in the office of the commissioner a statement, in a
form prescribed by the commissioner, indicating his or her ownership
at the close of the calendar month and the changes in his or her
ownership as have occurred during that calendar month.
(h) The department, in accordance with Chapter 3.5 (commencing
with Section 11340) of Part 1 of Division 3 of Title 2 of the
Government Code, shall adopt, amend, or repeal reasonable regulations
as may be necessary or proper to apply Sections 1104.3 to 1107.1,
inclusive, of the Insurance Code to prevent the unfair use of
information that may have been obtained by any beneficial owner of a
provider, or principal, director, or officer thereof, and to protect
the rights of the elderly.
(i) In addition to the regulations adopted, amended, or repealed
under subdivision (b) of Section 1789.15, the department, in
accordance with Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of Title 2 of the Government Code, shall adopt, amend,
or repeal reasonable regulations as may be necessary or proper to
apply Article 4.7 (commencing with Sections 1215) of Chapter 2 of
Part 2 of Division 1 of the Insurance Code in order to require
approval by the commissioner of the sale or transfer of a continuing
care retirement community or any interest in that community, other
than the sale of an equity interest in a unit to a resident or other
transferor, in the same manner as required of an incorporated
insurer.
SEC. 29. Section 1790 of the Health and
Safety Code is amended to read:
1790. (a) Each provider that has obtained a provisional or final
certificate of authority and each provider that possesses an inactive
certificate of authority shall , by March 1 of each year,
submit an annual report of its financial condition as of the
previous December 31. If the first day of March falls on a day other
than a business day, the filing shall be due to the department by the
first business day preceding March 1 . The report shall
consist of audited financial statements and required reserve
calculations, with accompanying certified public accountants'
opinions thereon, the reserve information required by paragraph (2),
Continuing Care Provider Fee and Calculation Sheet, evidence of
fidelity bond as required by Section 1789.8, and certification that
the continuing care contract in use for new residents has been
approved by the department , in consultation with the State
Department of Social Services , all in a format provided by the
department , in consultation with the State Department of
Social Services , and shall include all of the following
information:
(1) A certification, if applicable, that the entity is maintaining
reserves for prepaid continuing care contracts, statutory reserves,
and refund reserves.
(2) Full details on the status, description, and amount of all
reserves that the provider currently designates and maintains, and on
per capita costs of operation for each continuing care retirement
community operated.
(3) Disclosure of any funds accumulated for identified projects or
purposes and any funds maintained or designated for specific
contingencies. Nothing in this subdivision
paragraph shall be construed to require the accumulation of
funds or funding of contingencies, nor shall it be interpreted to
alter existing law regarding the reserves that are required to be
maintained.
(4) Full details on any increase in monthly care fees, the basis
for determining the increase, and the data used to calculate the
increase.
(5) The required reserve calculation schedules shall be
accompanied by the auditor's opinion as to compliance with applicable
statutes.
(6) Any other information as the department may require.
(b) Each provider shall file the annual report with the department
within four months after the provider's fiscal yearend. If the
complete annual report is not received by the due date, a one
thousand dollar ($1,000) late fee shall accompany submission of the
reports. If the reports are more than 30 days past due, an additional
fee of thirty-three dollars ($33) for each day over the first 30
days shall accompany submission of the report. The department may, at
its discretion, waive the late fee for good cause.
(c) The annual report and any amendments thereto shall be signed
and certified by the chief executive officer of the provider, stating
that, to the best of his or her knowledge and belief, the items are
correct.
(d) A copy of the most recent annual audited financial statement
shall be transmitted by the provider to each transferor requesting
the statement.
(e) A provider shall amend its annual report on file with the
department at any time, without the payment of any additional fee, if
an amendment is necessary to prevent the report from containing a
material misstatement of fact or omitting a material fact.
(f) If a provider is no longer entering into continuing care
contracts, and currently is caring for 10 or fewer continuing care
residents, the provider may request permission from the department,
in lieu of filing the annual report, to establish a trust fund or to
secure a performance bond to ensure fulfillment of continuing care
contract obligations. The request shall be made each year within 30
days after the provider's fiscal yearend. The request shall include
the amount of the trust fund or performance bond determined by
calculating the projected life costs, less the projected life
revenue, for the remaining continuing care residents in the year the
provider requests the waiver. If the department approves the request,
the following shall be submitted to the department annually:
(1) Evidence of trust fund or performance bond and its amount.
(2) A list of continuing care residents. If the number of
continuing care residents exceeds 10 at any time, the provider shall
comply with the requirements of this section.
(3) A provider fee as required by subdivision (c) of Section 1791.
(g) If the department determines a provider's annual audited
report needs further analysis and investigation, as a result of
incomplete and inaccurate financial statements, significant financial
deficiencies, development of work out plans to stabilize financial
solvency, or for any other reason, the provider shall reimburse the
department for reasonable actual costs incurred by the department or
its representative. The reimbursed funds shall be deposited in the
Continuing Care Contract Provider Fee Fund.
(h) The department may decline to grant or renew or may suspend or
revoke a certificate of authority of a provider that knowingly files
with the department a false financial statement.
(i) Any officer, director, employee, or agent of any provider who
willfully signs or files a false or untrue report or statement of the
business, affairs, or condition of the provider with intent to
deceive any public officer, office, or board to which the provider is
required by law to report, or which has authority by law to examine
into its affairs or transactions, is guilty of a felony.
(j) The commissioner shall require statements and reports filed
with the department to be verified as follows:
(1) If made by a domestic corporation, by the oaths of any two of
the executive officers thereof.
(2) If made by an individual or firm, by the oath of that
individual or a member of the firm.
(3) If made by a foreign provider, by the oath of the principal
executive officer thereof, or manager, residing within the United
States.
(k) In any case where a provider is required by law to file with
the department statements or reports respecting its financial
condition, income, or disbursements, verified or signed by its
designated officers, agents, or employees, the department may accept
and file the statement or report verified by affidavit of the
president or vice president and the treasurer or secretary of the
provider, in lieu of the verification or signature otherwise
prescribed by law.
(l) In addition to the annual statement required to be filed
pursuant to subdivision (a), each provider shall file an
authorization for disclosure to the commissioner of financial records
pertaining to such funds pursuant to Section 7473 of the Government
Code, to be effective until the next such annual filing.
SEC. 30. Section 1791.5 is added to the
Health and Safety Code , to read:
1791.5. (a) A provider shall maintain at all times reserves in an
amount estimated in the aggregate to provide for the payment of all
services and debts for which the provider may be liable, and to
provide for the expense of adjustment or settlement of losses and
claims.
(b) The reserves shall be computed in accordance with regulations
made from time to time by the commissioner. The commissioner shall
model these regulations on the regulations adopted pursuant to
Section 923.5 of the Insurance Code.
(c) The reserves required by this section shall include, but not
be limited to, the liquid reserve required under Sections 1792 and
1792.2 and the refund reserve required under Sections 1792.6 and
1793, if applicable.
SEC. 31. Section 1792.2 of the Health
and Safety Code is amended to read:
1792.2. (a) A provider shall satisfy its liquid reserve
obligation with qualifying assets. Qualifying assets are:
(1) Cash.
(2) Cash equivalents as defined in paragraph (4) of subdivision
(c) of Section 1771.
(3) Investment securities, as defined in paragraph (2) of
subdivision (i) of Section 1771.
(4) Equity securities, including mutual funds, as defined in
paragraph (7) of subdivision (e) of Section 1771.
(5) Lines of credit and letters of credit that meet the
requirements of this paragraph. The line of credit or letter of
credit shall be issued by a state or federally chartered financial
institution approved by the department or whose long-term debt is
rated in the top three long-term debt
rating categories by either Moody's Investors Service,
Standard and Poor's Corporation, or a recognized securities rating
agency acceptable to the department. The line of credit or letter of
credit shall obligate the financial institution to furnish credit to
the provider.
(A) The terms of the line of credit or letter of credit shall at
a minimum provide both of the following:
(i) The department's approval shall be obtained by the provider
and communicated in writing to the financial institution before any
modification.
(ii) The financial institution shall fund the line of credit or
letter of credit and pay the proceeds to the provider no later than
four business days following written instructions from the department
that, in the sole judgment of the department, funding of the
provider's minimum liquid reserve is required.
(B) The provider shall provide written notice to the department
at least 14 days before the expiration of the line of credit or
letter of credit if the term has not been extended or renewed by that
time. The notice shall describe the qualifying assets the provider
will use to satisfy the liquid reserve requirement when the line of
credit or letter of credit expires.
(C) A provider may satisfy all or a portion of its liquid reserve
requirement with the available and unused portion of a qualifying
line of credit or letter of credit.
(6)
(5) For purposes of satisfying all or a portion of a
provider's debt service reserve requirement described in Section
1792.3, restricted assets that are segregated or held in a separate
account or escrow as a debt service reserve under the terms of the
provider's long-term debt instruments are qualifying assets, subject
to all of the following conditions:
(A) The assets are restricted by the debt instrument so that they
may be used only to pay principal, interest, and credit enhancement
premiums.
(B) The provider furnishes to the department a copy of the
agreement under which the restricted assets are held and certifies
that it is a correct and complete copy. The provider, escrow holder,
or other entity holding the assets must agree to provide to the
department any information the department may request concerning the
debt service reserve it holds.
(C) The market value, or guaranteed value, if applicable, of the
restricted assets, up to the amount the provider must hold as a debt
reserve under Section 1792.3, will be included as part of the
provider's liquid reserve.
(D) The restricted assets described in this paragraph will not
reduce or count towards the amount the provider must hold in its
liquid reserve for operating expenses.
(7)
(6) For purposes of satisfying all or a portion of a
provider's operating expense reserve requirement described in Section
1792.4, restricted assets that are segregated or held in a separate
account or escrow as a reserve for operating expenses, are qualifying
assets subject to all of the following conditions:
(A) The governing instrument restricts the assets so that they may
be used only to pay operating costs when operating funds are
insufficient.
(B) The provider furnishes to the department a copy of the
agreement under which the assets are held, certified by the provider
to be a correct and complete copy. The provider, escrow holder, or
other entity holding the assets shall agree to provide to the
department any information the department may request concerning the
account.
(C) The market value, or the guaranteed value, if applicable, of
the restricted assets, up to the amount the provider is required to
hold as an operating expense reserve under Section 1792.4, will be
included as part of the provider's liquid reserve.
(D) The restricted assets described in this paragraph shall not
reduce or count towards the amount the provider is required to hold
in its liquid reserve for long-term debt.
(b) Except as otherwise provided in this subdivision, the assets
held by the provider as its liquid reserve may not be subject to any
liens, charges, judgments, garnishments, or creditors' claims and may
not be hypothecated, pledged as collateral, or otherwise encumbered
in any manner. A provider may encumber assets held in its liquid
reserve as part of a general security pledge of assets or similar
collateralization that is part of the provider's long-term capital
debt covenants and is included in the provider's long-term debt
indenture or similar instrument.
SEC. 32. Section 1792.3 of the Health
and Safety Code is amended to read:
1792.3. (a) Each provider shall include in its liquid reserve a
reserve for its long-term debt obligations in an amount equal to the
sum of all of the following:
(1) All regular principal and interest payments, as well as credit
enhancement premiums, due to be paid by the provider
during the immediately preceding fiscal year on account of
any fully amortizing long-term debt owed by the provider. If a
provider has incurred new long-term debt during the immediately
preceding fiscal year, the amount required by this paragraph for that
debt is 12 times the provider's most recent monthly payment on the
debt following 12 months .
(2) Facility rental or leasehold payments, and any related
payments such as lease insurance, due to be paid by the
provider during the immediately preceding fiscal year
following 12 months .
(3) All payments due to be paid by the provider during
the immediately preceding fiscal year
following 12 months on account of any debt that provides for a
balloon payment. If the balloon payment debt was incurred
within the immediately preceding fiscal year, the amount required by
this paragraph for that debt is 12 times the provider's most recent
monthly payment on the debt made during the fiscal year.
(b) If any balloon payment debt matures within the next 24 months,
the provider shall submit to the department and file with
its annual report a plan for refinancing the debt or repaying the
debt with existing assets.
(c) When principal and interest payments on long-term debt are
paid to a trust whose beneficial interests are held by the residents,
the department may waive all or any portion of the debt service
reserve required by this section. The department shall not waive any
debt service reserve requirement unless the department finds that the
waiver is consistent with the financial protections imposed by this
chapter.
SEC. 33 . Section 1792.4 of the
Health and Safety Code is amended to read:
1792.4. (a) Each provider
shall include in its liquid reserve a reserve for its operating
expenses in an amount that equals or exceeds 75 days' net
operating expenses. For purposes of this section: that
is sufficient to provide for the continued operation of its
continuing care retirement communities. The commissioner shall, in
accordance with Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of Title 2 of the Government Code, adopt regulations
specifying the reserves required to be maintained for
purposes of this section and shall model those regulations on the
regulations applicable to insurers under Article 3.5 (commencing with
Section 2310) of Subchapter 3 of Chapter 5 of Title 10 of the
California Code of Regulations.
(1) Seventy-five days net operating expenses shall be calculated
by dividing the provider's operating expenses during the immediately
preceding fiscal year by 365, and multiplying that quotient by 75.
(2) "Net operating expenses" includes all expenses except the
following:
(A) The interest and credit enhancement expenses factored into the
provider's calculation of its long-term debt reserve obligation
described in Section 1792.3.
(B) Depreciation or amortization expenses.
(C) An amount equal to the reimbursement paid to the provider
during the past 12 months for services to residents other than
residents holding continuing care contracts.
(D) Extraordinary expenses that the department determines may be
excluded by the provider. A provider shall apply in writing for a
determination by the department and shall provide supporting
documentation prepared in accordance with generally accepted
accounting principles.
(b) A provider that has been in operation for less than 12 months
shall calculate its net operating expenses by using its actual
expenses for the months it has operated and, for the remaining
months, the projected net operating expense amounts it submitted to
the department as part of its application for a certificate of
authority.
SEC. 34. Section 1792.5 of the Health
and Safety Code is amended to read:
1792.5. (a) The provider shall compute its liquid reserve
requirement as of the end of the provider's most recent fiscal
yearend based on its audited financial statements for that period
and, at the time it files its annual report, shall file a form
acceptable to the department certifying all of the following:
(1) The amount the provider is required to hold as a liquid
reserve, including the amounts required for the debt service reserve
and the operating expense reserve.
(2) The qualifying assets, and their respective values, the
provider has designated for its debt service reserve and for its
operating expense reserve.
(3) The amount of any deficiency or surplus for the provider's
debt service reserve and the provider's operating expense reserve.
(b) For the purpose of calculating the amount held by the provider
to satisfy its liquid reserve requirement, all qualifying assets
used to satisfy the liquid reserve requirements shall be valued at
their fair market value as of the end of the provider's most recently
completed fiscal year. Restricted assets that have guaranteed values
and are designated as qualifying assets under paragraph (5) or
(6) or (7) of subdivision (a) of Section
1792.2 may be valued at their guaranteed values.
SEC. 35. Section 1792.6 of the Health
and Safety Code is amended to read:
1792.6. (a) Any provider offering a refundable contract, or other
entity assuming responsibility for refundable contracts, shall
maintain a refund reserve in trust for the residents
that, as specified by the commissioner by regulation,
is actuarially sound and sufficient to pay refund liabilities as they
become due. The refund liability shall be paid solely out of this
reserve . The amount of the refund reserve shall be
revised annually by the provider and the provider shall submit its
calculation of the refund reserve amount to the department in
conjunction with the annual report required by Section 1790. This
reserve shall accumulate interest and earnings and shall be invested
in any of the following:
(b) A provider that entered into a refundable contract prior to
January 1, 2010, or other entity assuming responsibility for a
refundable contract issued prior to January 1, 2010, shall submit a
plan of reorganization to the commissioner by April 1, 2010, for the
purposes of complying with this section. The commissioner shall, by
written notice, accept or direct the amendment of a plan of
reorganization submitted pursuant to this section.
(c) A refundable contract entered into on or after January 1,
2010, shall not condition a promise to repay all or any portion of an
entrance fee on reoccupancy or resale of the unit previously
occupied by the resident.
(1) Qualifying assets as defined in Section 1792.2.
(2) Real estate, subject to all of the following conditions:
(A) To the extent approved by the department, the trust account
may invest up to 70 percent of the refund reserves in real estate
that is both used to provide care and housing for the holders of the
refundable continuing care contracts and is located on the same
campus where these continuing care contractholders reside.
(B) Investments in real estate shall be limited to 50 percent of
the providers' net equity in the real estate. The net equity shall be
the book value, assessed value, or current appraised value within 12
months prior to the end of the fiscal year, less any depreciation,
and encumbrances, all according to audited financial statements
acceptable to the department.
(b) Each refund reserve trust shall be established at an
institution qualified to be an escrow agent. The escrow agreement
between the provider and the institution shall be in writing and
include the terms and conditions described in this section. The
escrow agreement shall be submitted to and approved by the department
before it becomes effective.
(c) The amount to be held in the reserve shall be the total of the
amounts calculated with respect to each individual resident holding
a refundable contract as follows:
(1) Determine the age in years and the portion of the entry fee
for the resident refundable for the seventh year of residency and
thereafter.
(2) Determine life expectancy of that individual based on all of
the following rules:
(A) The following life expectancy table shall be used in
connection with all continuing care contracts:
Age Females Males Age Females Males
55 26.323 23.635 83 7.952 6.269
56 25.526 22.863 84 7.438 5.854
57 24.740 22.101 85 6.956 5.475
58 23.964 21.350 86 6.494 5.124
59 23.199 20.609 87 6.054 4.806
60 22.446 19.880 88 5.613 4.513
61 21.703 19.163 89 5.200 4.236
62 20.972 18.457 90 4.838 3.957
63 20.253 17.764 91 4.501 3.670
64 19.545 17.083 92 4.175 3.388
65 18.849 16.414 93 3.862 3.129
66 18.165 15.759 94 3.579 2.903
67 17.493 15.116 95 3.329 2.705
68 16.832 14.486 96 3.109 2.533
69 16.182 13.869 97 2.914 2.384
70 15.553 13.268 98 2.741 2.254
71 14.965 12.676 99 2.584 2.137
72 14.367 12.073 100 2.433 2.026
73 13.761 11.445 101 2.289 1.919
74 13.189 10.830 102 2.152 1.818
75 12.607 10.243 103 2.022 1.723
76 12.011 9.673 104 1.899 1.637
77 11.394 9.139 105 1.784 1.563
78 10.779 8.641 106 1.679 1.510
79 10.184 8.159 107 1.588 1.500
80 9.620 7.672 108 1.522 1.500
81 9.060 7.188 109 1.500 1.500
82 8.501 6.719 110 1.500 1.500
(B) If there is a couple, the life expectancy for the person with
the longer life expectancy shall be used.
(C) The life expectancy table set forth in this paragraph shall be
used until expressly provided to the contrary through the amendment
of this section.
(D) For residents over 110 years of age, 1.500 years shall be used
in computing life expectancy.
(E) If a continuing care retirement community has contracted with
a resident under 55 years of age, the continuing care retirement
community shall provide the department with the methodology used to
determine that resident's life expectancy.
(3) For that resident, use an interest rate of 6 percent or lower
to determine from compound interest tables the factor that, when
multiplied by one dollar ($1), represents the amount, at the time the
computation is made, that will grow at the assumed compound interest
rate to one dollar ($1) at the end of the period of the life
expectancy of the resident.
(4) Multiply the refundable portion of the resident's entry fee
amount by the factor obtained in paragraph (3) to determine the
amount of reserve required to be maintained.
(5) The sum of these amounts with respect to each resident shall
constitute the reserve for refundable contracts.
(6) The reserve for refundable contracts shall be revised annually
as provided for in subdivision (a), using the interest rate, refund
obligation amount, and individual life expectancies current at that
time.
(d) Withdrawals may be made from the trust to pay refunds when due
under the terms of the refundable entrance fee contracts and when
the balance in the trust exceeds the required refund reserve amount
determined in accordance with subdivision (c).
(e) Deposits shall be made to the trust with respect to new
residents when the entrance fee is received and in the amount
determined with respect to that resident in accordance with
subdivision (c).
(f) Additional deposits shall be made to the trust fund within 30
days of any annual reporting date on which the trust fund balance
falls below the required reserve in accordance with subdivision (c)
and the deposits shall be in an amount sufficient to bring the trust
balance into compliance with this section.
(g) Providers who have used a method previously allowed by
statute to satisfy their refund reserve requirement may continue to
use that method.
SEC. 36. Section 1792.7 of the Health
and Safety Code is amended to read:
1792.7. (a) The Legislature finds and declares all of the
following:
(1) In continuing care contracts, providers offer a wide variety
of living accommodations and care programs for an indefinite or
extended number of years in exchange for substantial payments by
residents.
(2) The annual reporting and reserve requirements for each
continuing care provider should include a report that summarizes the
provider's recent and projected performance in a form useful to
residents, prospective residents, the department, and the
department State Department of Social
Services .
(3) Certain providers enter into "life care contracts" or
similar contracts with their residents. Periodic actuarial
studies that examine the actuarial financial condition of
these providers will help to assure their long-term
financial soundness.
(b) Each provider shall annually file with the department a report
that shows certain key financial indicators for the provider's past
five years, based on the provider's actual experience, and for the
upcoming five years, based on the provider's projections. Providers
shall file their key indicator reports in the manner required by
Section 1792.9 and in a form prescribed by the department.
(c) Each provider that has entered into Type A contracts
shall file with the department an a
qualified actuary's opinion as to the actuarial financial
condition of the provider's continuing care operations in the manner
required by Section 1792.10.
SEC. 37. Section 1792.8 of the Health
and Safety Code is amended to read:
1792.8. (a) For purposes of this article, "actuarial study" means
an analysis that addresses the current actuarial financial condition
of a provider that is performed by an a
qualified actuary in accordance with accepted actuarial
principles and the standards of practice adopted by the Actuarial
Standards Board. An actuarial study shall include all of the
following:
(1) An actuarial report.
(2) A statement of actuarial the
opinion of the qualified actuary as to whether the reserves and
related actuarial items held in support of the continuing care
contracts and all provider liabilities and debt obligations specified
by the commissioner by regulation are computed appropriately, are
based on assumptions that satisfy contractual provisions, are
consistent with prior reported amounts, and comply with applicable
laws of this state. The commissioner, by regulation, shall define the
specifics of this opinion and add any other items deemed to be
necessary to its scope.
(A) Unless exempted by regulation, every provider shall include in
the statement required by this paragraph a statement of the opinion
of the same qualified actuary as to whether the reserves and related
actuarial items held in support of the continuing care contracts
specified by the commissioner by regulation, when considered in light
of the assets held by the provider with respect to the reserves and
related actuarial items, make adequate provision for the provider's
liabilities and obligations.
(B) The commissioner may provide by regulation for a transition
period for establishing any higher reserves that the qualified
actuary may deem necessary in order to render the opinion required by
this section.
(C) The opinion required by this paragraph shall be based on
standards adopted from time to time by the Actuarial Standards Board
and on any additional standards that the commissioner may by
regulation prescribe.
(D) In the case of an opinion required to be submitted by a
foreign or alien provider, the commissioner may accept the opinion
filed by that provider with the applicable supervisory official of
another state if the commissioner determines that the opinion
reasonably meets the requirements applicable to a provider domiciled
in this state.
(3) An actuarial balance sheet.
(4) A cohort pricing analysis.
(5) A cashflow projection.
(6) A description of the actuarial methodology, formulae, and
assumptions.
(b) The qualified actuary performing the actuarial study shall be
liable for his or her negligence or other tortious conduct.
(c) Disciplinary action by the commissioner against the provider
or the qualified actuary shall be defined in regulations by the
commissioner.
(b)
(d) "Actuary" "Qualified
actuary" means a member in good standing of the American
Academy of Actuaries who is qualified to sign a statement of
actuarial opinion and who meets the requirements set forth in
regulations of the commissioner .
(c) "Type A contract" means a continuing care contract that has
an up-front entrance fee and includes provision for housing,
residential services, amenities, and unlimited specific
health-related services with little or no substantial increases in
monthly charges, except for normal operating costs and inflation
adjustments.
SEC. 38. Section 1792.10 of the Health
and Safety Code is amended to read:
1792.10. (a) Each provider that has entered into Type A
contracts shall submit to the department, at least once
every five three years, an
a qualified actuary's opinion as to the provider'
s actuarial financial condition. The qualified actuary's
opinion shall be based on an actuarial study completed by the opining
qualified actuary in a manner that meets the requirements
described in Section 1792.8. The qualified actuary's
opinion, and supporting actuarial study, shall examine, refer to, and
opine on the provider's actuarial financial condition as of a
specified date that is within four months of the date the opinion is
provided to the department.
(b) Each provider required to file an actuary's opinion under
subdivision (a) that held a certificate of authority on December 31,
2003, shall file its actuary's opinion before the expiration of five
years following the date it last filed an actuarial study or opinion
with the department. Thereafter, the provider shall file its required
actuary's opinion before the expiration of five years following the
date it last filed an actuary's opinion with the department.
(c) Each provider required to file an actuary's opinion under
subdivision (a) that did not hold a certificate of authority on
December 31, 2003, shall file its first actuary's opinion within 45
days following the due date for the provider's annual report for the
fiscal year in which the provider obtained its certificate of
authority. Thereafter, the provider shall file its required actuary's
opinion before the expiration of five years following the date it
last filed an actuary's opinion with the department.
(b) (1) A provider holding a certificate of authority as of
January 1, 2010, whose most recent submission of an actuary's opinion
pursuant to this section occurred on or after January 1, 2008, and
prior to January 1, 2010, shall submit the opinion required by this
section within three years from the date of that most recent
submission, and at least once every three years thereafter.
(2) A provider holding a certificate of authority prior to
January 1, 2010, that has not submitted an actuary's opinion pursuant
to this section or whose most recent submission of an actuary's
opinion occurred prior to January 1, 2008, shall submit the opinion
required by this section by January 15, 2010, and at least once every
three years thereafter.
(3) A provider that obtains a certificate of authority on or after
January 1, 2010, shall submit the qualified actuary's opinion
required by this section within 45 days of the date the provider is
required to submit an annual report under Section 1790, and at least
once every three years thereafter.
(d)
(c) The qualified actuary's opinion required
by subdivision (a) shall comply with generally accepted actuarial
principles and the standards of practice adopted by the Actuarial
Standards Board. The qualified actuary's opinion shall
also include statements that the data and assumptions used in the
underlying actuarial study are appropriate and that the methods
employed in the actuarial study are consistent with sound actuarial
principles and practices. The qualified actuary's opinion
must state whether the provider has adequate resources to meet all
its actuarial liabilities and related statement items, including an
appropriate surplus, and whether the provider's financial condition
is actuarially sound.
SEC. 39. Section 1793 of the Health and
Safety Code is amended to read:
1793. (a) Any provider offering a refundable contract, or other
entity assuming responsibility for refundable contracts, shall
maintain a refund reserve fund in trust for the residents. This trust
fund shall remain intact to accumulate interest earnings
resulting from investments of liquid reserves in accordance with
paragraph (1) of subdivision (e) and subparagraphs (A) through (E),
inclusive, of paragraph (3) of subdivision (e) of Section 1792.2
. The amount of the refund reserve shall be revised
annually by the provider and submitted to the department in
conjunction with the annual report required by Section 1790.
(b) Any providers or other entity assuming responsibility for
refundable contracts, which has not executed refundable contracts in
a continuing care retirement community prior to January 1, 1996, and
proposes to execute these contracts in that continuing care
retirement community after that date, shall maintain a refund reserve
fund in trust for the residents holding such contracts.
(1) Except as noted in paragraph (2), this trust fund shall remain
intact as specified in subdivision (a).
(2) To the extent approved by the department, the trust account
may invest up to 70 percent of the refund reserves in real estate
that is used to provide care and housing for the holders of the
refundable continuing care contracts and is located on the same
campus where these continuing care contract holders reside.
These investments in real estate shall be limited to 50 percent of
the providers' net equity in the real estate. The net equity shall
be the book value, assessed value, or current appraised value within
12 months prior to the end of the fiscal year, less any depreciation,
encumbrances, and the amount required for statutory reserves under
Section 1792.2, all according to audited financial statements
acceptable to the department. This paragraph shall apply to
applications, and for those phases of the project that were
identified as part of applications, submitted after May 31, 1995.
(3) Any provider who submitted an application on or before May 31,
1995, may provide for the refund obligation of this section with a
trust account that invests up to 85 percent of the refund reserves in
the continuing care retirement community's real estate and the
remaining 15 percent in the form of either cash or an unconditional,
irrevocable letter of credit to be phased in over a two-year period
beginning with initial occupancy in the facility.
(4) Each refund reserve trust fund shall be established at an
institution qualified to be an escrow agent pursuant to an agreement
between the provider and the institution based on this section and
approved in advance by the department.
(5) The amount to be held in the reserve fund shall be
the total of the amounts calculated with respect to each individual
resident as follows: actuarially sound and sufficient
to pay refund liabilities as they become due, as specified by the
commissioner by regulation.
(A) Determine the age in years and the portion of the entry fee
for the resident refundable for the seventh year of residency and
thereafter.
(B) Determine life expectancy of that individual from the life
expectancy table in paragraph (1) of subdivision (b) of Section
1792.2. If there is a couple, use the life expectancy for the
individual with the longer life expectancy.
(C) For that resident, use an interest rate of 6 percent or lower
to determine from compound interest tables the factor which
represents the amount required today to grow at compound interest to
one dollar ($1) at the end of the period of the life expectancy of
the resident.
(D) Multiply the refundable portion of the resident's entry fee
amount by the factor obtained in subparagraph (C) to determine the
amount of reserve required to be maintained.
(E) The sum of these amounts with respect to each resident shall
constitute the reserve for refundable contracts.
(F) The reserve for refundable contracts will be revised annually
as provided for in subdivision (a), using the interest rate, refund
obligation amount, and individual life expectancies current at that
time.
(6) Withdrawals may be made from the trust fund to pay refunds
when due under the terms of the refundable entry fee contracts and
when the balance in the trust fund exceeds the required refund
reserve amount determined in accordance with paragraph (5) of
subdivision (b).
(7) Deposits shall be made to the trust fund with respect to new
residents when the entry fee is received and in the amount determined
with respect to that resident in accordance with paragraph (5) of
subdivision (b).
(8) Additional deposits shall be made to the trust fund within 30
days of any annual reporting date on which the trust fund balance
falls below the required reserve in accordance with paragraph (5) of
subdivision (b) and such deposits shall be in an amount sufficient to
bring the trust fund balance into compliance with this section.
(c) Any provider which has executed refundable contracts in a
continuing care retirement community prior to January 1, 1996, and
which has not executed refundable contracts in a continuing care
retirement community prior to January 1, 1991, shall submit, for the
department's approval, a method of determining a refund reserve to be
held in trust for the residents. Approved methods include any of the
following:
(1) The establishment, at the time continuing care contracts are
signed, of a reserve fund in trust for the full amount of the refunds
promised.
(2) The purchase from an insurance company, authorized to do
business in the State of California, of fully paid life insurance
policies for the full amount of the refunds promised.
(3) A method approved by the American Academy of Actuaries in
their Actuarial Standards of Practice Relating to Continuing Care
Retirement Communities, which method provides for fully funding the
refund obligations in a separate trust fund as provided in
subdivision (b).
(d) Any provider offering a refundable contract, or other entity
assuming responsibility for refundable contracts prior to January 1,
1991, shall maintain a refund reserve bank account in trust for the
residents as described in subdivision (b) except that the amount of
refund reserves shall be calculated based on the following
assumptions and methods of calculation:
(1) The continuing care retirement community will no longer
receive entry fee income after a period of 40 years following the
commencement of operation.
(2) Approved long-term investments, such as treasury notes, will
earn 3 percent more than the rate of inflation.
(3) Entrance fees will increase at the rate of inflation.
(4) Land values will increase at the rate of inflation.
(5) Investments in the refund reserve trust will increase at the
rate for approved long-term investments.
(6) Calculate the number of units to be resold each year at the
approved rate of turnover.
(7) Determine the mean entrance fee, as of the current date.
(8) Determine the factor for inflating the mean entrance fee at
the rate of 3 percent below the interest rate on new 30-year treasury
bonds, for each year from the current date to the 40th year of
operation, or until all units have been turned over.
(9) Calculate the inflated mean entrance fees for the 40th year
and for each preceding year, until all units have been turned over.
(10) Multiply the inflated mean entrance fee for the 40th year,
and each preceding year, as specified in paragraph (9), by the annual
turnover, as specified in paragraph (6), until the total of the
annual turnovers used in the calculations equals the total number of
units in the continuing care retirement community.
(11) The projected refund liability shall be the sum of the
products obtained pursuant to paragraph (10), multiplied by the rate
of refund for the seventh year of residency, specified by current
continuing care contracts, multiplied by the percentage of current
continuing care contracts which specify this rate of refund. The
projected refund liability amount shall be calculated for each rate,
if existing continuing care contracts specify several rates.
(12) The projected refund liability, or the aggregate of these
liabilities, if several rates are obtained pursuant to paragraph
(11), may be reduced by the value of the land used for the continuing
care retirement community, inflated to the 40th year of operation,
as determined pursuant to paragraph (4), if the provider agrees to a
lien pursuant to Section 1793.15 to secure this commitment.
(13) Calculate the present value of the projected refund liability
at the current rate of interest for new 30-year treasury bonds. The
result is the required refund reserve.
(e) Any entity which holds a certificate of authority, provisional
certificate of authority, or permit to sell deposit subscriptions on
or before September 23, 1986, shall be exempted from the refund
reserve requirement established by this section, if the entity has an
equity balance of five times the amount of the refund reserves
calculated pursuant to subdivision (c).
(1) The equity balance shall be verified by one or more of the
following means:
(A) The "stockholders' equity," or equivalent amount, as reflected
on the most recent Form 10K (which may be on a consolidated basis or
on a consolidated and combined basis) filed with the Securities and
Exchange Commission.
(B) The "total fund balance of net worth," or equivalent amount,
as reflected on Form 990 or Form 990-PF filed with the Internal
Revenue Service.
(C) The "total net worth," or equivalent amount, as reflected on
the most recent Form 109 filed with the Franchise Tax Board.
(2) The amount of the requirement for the equity balance shall be
revised annually pursuant to this section.
(3) Compliance shall be based on review, by the department, of
financial statements prepared in accordance with generally accepted
accounting principles, accompanied by an unqualified opinion by a
certified public accountant.
(4) If the equity balance is determined by the department to be
less than the required amount, the provider or other entity assuming
responsibility shall deposit, in a form satisfactory to the
department, an amount equal to the refund reserve required within 60
days.
(f) All continuing care retirement communities offering refundable
entrance fees that are not secured by cash reserves, except those
facilities that were issued a certificate of authority prior to May
31, 1995, shall clearly disclose this fact in all marketing materials
and continuing care contracts.
SEC. 40. Section 1793.6 of the Health
and Safety Code is amended to read:
1793.6. (a) The department may issue citations pursuant to this
section containing orders of abatement and assessing civil penalties
against any entity that violates Section 1771.2 or 1793.5.
(b)
(1) If upon inspection or investigation, the department
has probable cause to believe that an entity is violating Section
1771.2 or 1793.5, the department may issue a citation to that entity.
Each citation shall be in writing and shall describe with
particularity the basis of the citation. Each citation shall contain
an order of abatement. In addition to the administrative fines
imposed pursuant to Section 1793.27, an entity that violates the
abatement order shall be liable for a civil penalty in the amount of
two hundred dollars ($200) per day for violation of the abatement
order.
(c)
(2) The civil penalty authorized in
subdivision (b) paragraph (1) shall be imposed
if a continuing care retirement community is operated without a
provisional certificate of authority or certificate of authority and
the operator refuses to seek a certificate of authority or the
operator seeks a certificate of authority and the application is
denied and the operator continues to operate the continuing care
retirement community without a provisional certificate of authority
or certificate of authority, unless other remedies available to the
department, including prosecution, are deemed more appropriate by the
department.
(b) The State Department of Social Services may recommend that the
department issue a citation against a provider based on a violation
of any of the provisions of this chapter administered by the State
Department of Social Services.
(1) The department may issue a citation against a provider that is
recommended by the State Department of Social Services pursuant to
this subdivision.
(2) Each citation issued pursuant to this subdivision shall be in
writing and shall describe with particularity the basis of the
citation. Each citation shall contain an order of abatement. In
addition to the administrative fines imposed pursuant to Section
1793.27, an entity that violates the abatement order shall be liable
for a civil penalty in the amount of two hundred dollars ($200) per
day for violation of the abatement order.
(d)
(c) Service of a citation issued under this section may
be made by certified mail at the last known business address or
residence address of the entity cited.
(e)
(d) Within 15 days after service of a citation under
this section, an entity may appeal in writing to the department with
respect to the violations alleged, the scope of the order of
abatement, or the amount of civil penalty assessed.
(f)
(e) If the entity cited fails without good cause to
appeal in writing to the department within 15 business days after
service of the citation, the citation shall become a final order of
the department. The department may extend the 15-day period for good
cause, to a maximum of 15 additional days.
(g)
(f) If the entity cited under this section makes a
timely appeal of the citation, the department shall provide an
opportunity for a hearing. The department shall thereafter issue a
decision, based on findings of fact, affirming, modifying, or
vacating the citation or directing other appropriate relief. The
proceedings under this section shall be conducted in accordance with
the provisions of Chapter 5 (commencing with Section 11500) of Part 1
of Division 3 of Title 2 of the Government Code, and the department
shall have all the powers granted therein.
(h)
(g) After exhaustion of the review procedures specified
in this section, the department may apply to the appropriate
superior court for a judgment in the amount of the civil penalty and
an order compelling the cited entity to comply with the order of
abatement. The application, which shall include a certified copy of
the final order of the department shall be served upon the cited
entity who shall have five business days to file that entity's
response in writing in the superior court. This period may be
extended for good cause. Failure on the part of the cited entity to
respond shall constitute grounds for entry of a default judgment
against that entity. In the event a response is timely filed in
superior court, the action shall have priority for trial over all
other civil matters.
(i)
(h) Notwithstanding any other provision of law, the
department may waive part or all of the civil penalty if the entity
against whom the civil penalty is assessed satisfactorily completes
all the requirements for, and is issued, a provisional certificate of
authority or certificate of authority.
(j)
(i) Civil penalties recovered pursuant to this section
shall be deposited into the Continuing Care Provider Fee Fund.
SEC. 41. Section 1793.7 of the Health
and Safety Code is amended to read:
1793.7. A permit to accept deposits, a provisional certificate of
authority, or a certificate of authority shall be forfeited by
operation of law when any one of the following occurs:
(a) The applicant terminates marketing for the proposed continuing
care retirement community.
(b) The applicant or provider surrenders to the department its
residential care facility for the elderly license, the
permit to accept deposits, provisional certificate of
authority, or certificate of authority for a continuing care
retirement community.
(c) The applicant or provider surrenders to the State Department
of Social Services its residential care facility for the elderly
license.
(c)
(d) The applicant or provider sells or otherwise
transfers all or part of the continuing care retirement community.
(d)
(e) A change occurs in the majority ownership of the
continuing care retirement community or the certificate of authority
holder.
(e)
(f) The applicant or provider merges with another
entity.
(f)
(g) The applicant or entity makes a material change in
a pending application which requires a new application pursuant to
subdivision (c) of Section 1779.8.
(g)
(h) The applicant or provider moves the continuing care
retirement community from one location to another without the
department's prior approval.
(h)
(i) The applicant or provider abandons the continuing
care retirement community or its obligations under the continuing
care contracts.
(i)
(j) The applicant or provider is evicted from the
continuing care retirement community premises.
SEC. 42. Section 1793.8 of the Health
and Safety Code is amended to read:
1793.8. A Certificate of Authority shall be automatically
inactivated when a provider voluntarily ceases to enter into
continuing care contracts with new residents. The provider shall
notify the department and the State Department of Social
Services of its intention to cease entering into continuing
care contracts and shall continue to comply with all provisions of
this chapter until all continuing care contract obligations have been
fulfilled.
SEC. 43. Section 1793.13 of the Health
and Safety Code is amended to read:
1793.13. (a) The department may require a provider to submit a
financial plan, if either of the following applies:
(1) A provider fails to file a complete annual report as required
by Section 1790.
(2) The department has reason to believe that the provider is
insolvent, is in imminent danger of becoming insolvent, is in a
financially unsound or unsafe condition, or that its condition is
such that it may otherwise be unable to fully perform its obligations
pursuant to continuing care contracts.
(b) A provider shall submit its financial plan to the department
within 60 days following the date of the department's request. The
financial plan shall explain how and when the provider will rectify
the problems and deficiencies identified by the department.
(c) The department shall approve or disapprove the plan within 30
days of its receipt.
(d) If the plan is approved, the provider shall immediately
implement the plan.
(e) If the plan is disapproved, or if it is determined that the
plan is not being fully implemented, the department may, after
consultation with and upon consideration of the recommendations of
the Continuing Care Advisory Committee State
Department of Social Services , consult with its
financial consultants to develop a corrective action plan
at the provider's expense, or require the provider to obtain new or
additional management capability approved by the department to solve
its difficulties. A reasonable period, as determined by the
department, shall be allowed for the reorganized management to
develop a plan which, subject to the approval of the department
and after review by the committee , will
reasonably assure that the provider will meet its responsibilities
under the law.
SEC. 44. Section 1793.21 of the Health
and Safety Code is amended to read:
1793.21. The department, in its discretion, may condition,
suspend, or revoke any permit to accept deposits, provisional
certificate of authority, or certificate of authority issued under
this chapter if it finds , in consultation with the State
Department of Social Services where appropriate, that the
applicant or provider has done any of the following:
(a) Violated this chapter or the rules and regulations adopted
under this chapter.
(b) Aided, abetted, or permitted the violation of this chapter or
the rules and regulations adopted under this chapter.
(c) Had a license suspended or revoked pursuant to the licensing
provisions of Chapter 2 (commencing with Section 1250) or Chapter 3.2
(commencing with Section 1569).
(d) Made a material misstatement, misrepresentation, or fraud in
obtaining the permit to accept deposits, provisional certificate of
authority, or certificate of authority.
(e) Demonstrated a lack of fitness or trustworthiness.
(f) Engaged in any fraudulent or dishonest practices of management
in the conduct of business.
(g) Misappropriated, converted, or withheld moneys.
(h) After request by the department or the State Department
of Social Services for an examination, access to records, or
information, refused to be examined or to produce its accounts,
records, and files for examination, or refused to give information
with respect to its affairs, or refused to perform any other legal
obligations related to an examination.
(i) Manifested an unsound financial condition.
(j) Used methods and practices in the conduct of business so as to
render further transactions by the provider or applicant hazardous
or injurious to the public.
(k) Failed to maintain at least the minimum statutory reserves
required by Section 1792.2.
(l) Failed to maintain the reserve fund escrow account for prepaid
continuing care contracts required by Section 1792.
(m) Failed to comply with the refund reserve requirements stated
in Section 1793.
(n) Failed to comply with the requirements of this chapter for
maintaining escrow accounts for funds.
(o) Failed to file the annual report described in Section 1790.
(p) Violated a condition on its permit to accept deposits,
provisional certificate of authority, or certificate of authority.
(q) Failed to comply with its approved financial and marketing
plan or to secure approval of a modified plan.
(r) Materially changed or deviated from an approved plan of
operation without the prior consent of the department.
(s) Failed to fulfill his or her obligations under continuing care
contracts.
(t) Made material misrepresentations to depositors, prospective
residents, or residents of a continuing care retirement community.
(u) Failed to submit proposed changes to continuing care contracts
prior to use, or using a continuing care contract that has not been
previously approved by the department.
(v) Failed to diligently submit materials requested by the
department or the State Department of Social Services or
required by the statute.
SEC. 45. Section 1793.23 of the Health
and Safety Code is amended to read:
1793.23. (a) The department shall consult with and consider the
recommendations of the Continuing Care Advisory Committee prior to
conditioning, suspending, or revoking any permit to accept deposits,
provisional certificate of authority, or certificate of authority.
(b) The
1793.23. (a) A
provider shall have a right of to
appeal a suspension, condition, or revocation imposed pursuant
to Section 1793.21 to the department. The proceedings shall be
conducted in accordance with Chapter 5 (commencing with Section
11500) of Part 1 of Division 3 of Title 2 of the Government Code, and
the department shall have all of the powers granted therein. A
suspension, condition, or revocation shall remain in effect until
completion of the proceedings in favor of the provider. In all
proceedings conducted in accordance with this section, the standard
of proof to be applied shall be by a preponderance of the evidence.
(c)
(b) The department may, upon finding of changed
circumstances , in consultation with the State Department of
Social Services where appropriate , remove a suspension or
condition.
SEC. 46. Section 1793.31 of the Health
and Safety Code is amended to read:
1793.31. (a) The district attorney of every county may, upon
application by the department , the State Department of Social
Services, or its the authorized
representative of either of those departments , institute
and conduct the prosecution of any action for violation of this
chapter within his or her county.
(b) This
chapter shall not limit or qualify the powers of the district
attorney to institute and conduct the prosecution of any action
brought for the violation within his or her county of this chapter or
any other provision of law, including, but not limited to, actions
for fraud or misrepresentation.
(c) The department or the State Department of Social Services
shall provide access to any records in its control on request
of a district attorney and shall cooperate in any investigation by a
district attorney.
SEC. 47. Section 1793.32 is added to the
Health and Safety Code , to read:
1793.32. (a) A provider's officers, directors, trustees and any
persons who have authority in the management of the provider's funds,
shall not do any of the following, unless otherwise provided in this
chapter:
(1) Receive any money or valuable thing for negotiating,
procuring, recommending or aiding in, any purchase by or sale to the
provider of any property, or any loan from the provider.
(2) Be pecuniarily interested as principal, coprincipal, agent,
attorney, or beneficiary in any purchase, sale, or loan described in
paragraph (1).
(3) Directly or indirectly purchase, or be interested in the
purchase of, any of the assets of the provider.
(b) This section shall not apply to:
(1) The purchase or exchange of stock of a provider by a provider
or between providers nor to any merger, consolidation or corporate
reorganization of those providers, nor to the officers, directors,
trustees or any persons having authority in the management of the
providers' funds in respect to that transaction, if all of the
following requirements are met:
(A) The transaction is just and reasonable as to the providers
involved at the time it is authorized or approved.
(B) No officer, director, trustee, or other person having
authority in the management of the providers' funds receives any
money or other valuable thing, other than his or her usual
compensation for his or her regular duties, for negotiating,
procuring, recommending, or aiding in the transaction.
(C) One of the following requirements are met:
(i) Any interest in the transaction on the part of any officers,
directors, trustees, or persons who have authority in the management
of the provider's funds is disclosed or known to its board of
directors or committee, authorizing, approving, or ratifying the
transaction, and noted in the minutes thereof, and the board or
committee authorizes, approves, or ratifies the transaction in good
faith by a vote sufficient for the purpose without counting the vote
or votes of any interested officers, directors, trustees, or persons
who have authority in the management of the funds of the provider.
(ii) The fact of the interest in the transaction is disclosed or
known to the shareholders in the case of a corporation, and in the
case of an equity project to the residents holding an equity
interest, and they approve or ratify the transaction in good faith by
a vote or written consent of a majority of the shares and residents
entitled to vote, unless the consent or vote of more than a majority
is otherwise required, in which event the vote or written consent
shall be that so otherwise required.
Any officer, director, trustee, or other person who has an
interest in the transaction may be counted in determining the
presence of a quorum at any meeting that authorizes, approves, or
ratifies the transaction.
(2) Any transaction relating to a provider if the transaction
meets the other requirements of subdivision (b) and the officers,
directors, and trustees of the provider do not in the aggregate own
more than 5 percent of the stock of any corporation with which the
provider is entering into a transaction.
(3) Any transaction if prior to its consummation the provider has
applied for and obtained from the commissioner a certificate of
exemption in respect to the specific transaction therein described
and that transaction is consummated in conformity with the
certificate and the representations and disclosures made in or in
connection with the application therefor. To obtain the certificate
of exemption, the provider shall file with the commissioner a written
application, accompanied by a filing fee of two hundred ninety-five
dollars ($295). This application shall be verified as provided in
Section 834 of the Insurance Code, be in a form that the commissioner
requires, and shall contain all of the following:
(i) A specific description of the particular transaction for which
the certificate is sought.
(ii) Copies of all contracts and other legal documents involved or
to be involved in the transaction.
(iii) A description of all assets involved in the transaction.
(iv) The names, titles, capacities and business relationships of
all persons in any way involved in the transaction who are connected
with the provider or any of its affiliates, officers, directors,
managers, or controlling persons or entities in any of the capacities
described in this section.
(v) A description of any and all considerations on either or any
side of the transaction.
(vi) Evidence that its governing board has specifically authorized
the filing of the application.
(vii) Any other information, opinions, or matters that the
commissioner may require.
The commissioner may issue the certificate of exemption if he or
she finds, with or without a hearing, that the transaction is fair,
just, and equitable and not hazardous to residents, stockholders, or
creditors. The commissioner may impose conditions, including, but not
limited to, disclosure of the circumstances and terms of the
transaction either before or after its consummation either publicly
or to persons and entities that he or she designates and the approval
of the transaction by the persons or entities he or she designates.
He or she may also require that a report of the transaction be filed
with him or her subsequent to its consummation in a form and
containing information that he or she prescribes.
The certificate of exemption issued pursuant to this paragraph
shall only exempt the transaction from the prohibitions of this
section and shall not affect the rights or remedies of any persons
under any other law.
(c) Whenever it appears to the commissioner that any provider, or
any director, officer, employee, or agent thereof, has committed or
is about to commit a violation of this section, the commissioner may
apply to the superior court for the county in which the principal
office of the provider is located, or if the provider does not have
an office in this state, then to the Superior Court for the County of
Los Angeles, or for the City and County of San Francisco, for an
order enjoining the provider, or the director, officer, employee, or
agent thereof, from violating or continuing to violate this section,
and for such other equitable relief as the nature of the case and the
interests of the provider's residents, creditors, and shareholders
or the public may require.
SEC. 48. Section 1793.33 is added to the
Health and Safety Code , to read:
1793.33. The financial obligation of any officer, director,
trustee, or other person having authority in the management of a
provider's funds shall not be guaranteed by the provider in any
capacity, and any such guarantee shall be void.
SEC. 49. Section 1793.34 is added to the
Health and Safety Code , to read:
1793.34. Whenever a provider is injured or made to suffer loss by
reason of any violation of the provisions of Section 1793.32,
1793.33, or 1793.35, the provider may recover from the guilty
officer, director, trustee or other person, or any one or more of
them jointly or severally damages sufficient to compensate the
provider for that loss.
SEC. 50. Section 1793.35 is added to the
Health and Safety Code , to read:
1793.35. A provider shall not make any loan to any officer,
director, trustee, or other person having authority in the management
of its funds, nor shall that officer, director, trustee, or other
person accept that loan.
SEC. 51. Section 1793.36 is added to the
Health and Safety Code , to read:
1793.36. The commissioner may from time to time require any
domestic provider to report to him or her, in such detail as he or
she may prescribe, the moneys and securities owned by it, the place
where those moneys and securities are deposited and, in the case of
moneys and securities deposited outside the state, the reason for
maintaining each deposit outside the state.
Whenever the commissioner, after hearing following notice, finds
that those moneys or securities are maintained on deposit outside the
state in excess of legal requirements and of the reasonable needs of
the business of the provider, he or she may order the provider to
transfer to, and maintain in, this state money and securities to the
extent of such excess and to cease, pending such transfer, from
unnecessary transfers of moneys and securities from this state to any
place outside this state.
SEC. 52. Section 1793.50 of the Health
and Safety Code is amended to read:
1793.50. (a) The department, after consultation with the
Continuing Care Advisory Committee and the State Department of
Social Services , may petition the superior court for an order
appointing a qualified administrator to operate a continuing care
retirement community, and thereby mitigate imminent crisis situations
where elderly residents could lose support services or be moved
without proper preparation, in any of the following circumstances:
(1) The provider is insolvent or in imminent danger of becoming
insolvent.
(2) The provider is in a financially unsound or unsafe condition.
(3) The provider has failed to establish or has substantially
depleted the reserves required by this chapter.
(4) The provider has failed to submit a plan, as specified in
Section 1793.13, the department has not approved the plan submitted
by the provider, the provider has not fully implemented the plan, or
the plan has not been successful.
(5) The provider is unable to fully perform its obligations
pursuant to continuing care contracts.
(6) The residents are otherwise placed in serious jeopardy.
(b) The administrator may only assume the operation of the
continuing care retirement community in order to accomplish one or
more of the following: rehabilitate the provider to enable it fully
to perform its continuing care contract obligations; implement a plan
of reorganization acceptable to the department; facilitate the
transition where another provider assumes continuing care contract
obligations; or facilitate an orderly liquidation of the provider.
(c) With each petition, the department shall include a request for
a temporary restraining order to prevent the provider from disposing
of or transferring assets pending the hearing on the petition.
(d) The provider shall be served with a copy of the petition,
together with an order to appear and show cause why management and
possession of the provider's continuing care retirement community or
assets should not be vested in an administrator.
(e) The order to show cause shall specify a hearing date, which
shall be not less than five nor more than 10 days following service
of the petition and order to show cause on the provider.
(f) Petitions to appoint an administrator shall have precedence
over all matters, except criminal matters, in the court.
(g) At the time of the hearing, the department shall advise the
provider and the court of the name of the proposed administrator.
(h) If, at the conclusion of the hearing, including such oral
evidence as the court may consider, the court finds that any of the
circumstances specified in subdivision (a) exist, the court shall
issue an order appointing an administrator to take possession of the
property of the provider and to conduct the business thereof,
enjoining the provider from interfering with the administrator in the
conduct of the rehabilitation, and directing the administrator to
take steps toward removal of the causes and conditions which have
made rehabilitation necessary, as the court may direct.
(i) The order shall include a provision directing the issuance of
a notice of the rehabilitation proceedings to the residents at the
continuing care retirement community and to other interested persons
as the court may direct.
(j) The court may permit the provider to participate in the
continued operation of the continuing care retirement community
during the pendency of any appointments ordered pursuant to this
section and shall specify in the order the nature and scope of the
participation.
(k) The court shall retain jurisdiction throughout the
rehabilitation proceeding and may issue further orders as it deems
necessary to accomplish the rehabilitation or orderly liquidation of
the continuing care retirement community in order to protect the
residents of the continuing care retirement community.
SEC. 53. Section 1793.58 of the Health
and Safety Code is amended to read:
1793.58. (a) The department , State Department of Social
Services , administrator, or any interested person, upon due
notice to the administrator, at any time, may apply to the court for
an order terminating the rehabilitation proceedings and permitting
the provider to resume possession of the provider's property and the
conduct of the provider's business.
(b) The court shall not issue the order requested pursuant to
subdivision (a) unless, after a full hearing, the court has
determined that the purposes of the proceeding have been fully and
successfully accomplished and that the continuing care retirement
community can be returned to the provider's management without
further jeopardy to the residents of the continuing care retirement
community, creditors, owners of the continuing care retirement
community, and to the public.
(c) Before issuing any order terminating the rehabilitation
proceeding the court shall consider a full report and accounting by
the administrator regarding the provider's affairs, including the
conduct of the provider's officers, employees, and business during
the rehabilitation and the provider's current financial condition.
(d) Upon issuance of an order terminating the rehabilitation, the
department shall reinstate the provisional certificate of authority
or certificate of authority. The department may condition, suspend,
or revoke the reinstated certificate only upon a change in the
conditions existing at the time of the order or upon the discovery of
facts which the department determines would have resulted in a
denial of the request for an order terminating the rehabilitation had
the court been aware of these facts.
SEC. 54. Section 1793.60 of the Health
and Safety Code is amended to read:
1793.60. (a) If at any time the department determines that
further efforts to rehabilitate the provider would not be in the best
interest of the residents or prospective residents, or would not be
economically feasible, the department may , with the
approval of the Continuing Care Advisory Committee, apply
to the court for an order of liquidation and dissolution or may apply
for other appropriate relief for dissolving the property and
bringing to conclusion its business affairs.
(b) Upon issuance of an order directing the liquidation or
dissolution of the provider, the department shall revoke the provider'
s provisional certificate of authority or certificate of authority.
SEC. 55. Section 1793.62 of the Health
and Safety Code is amended to read:
1793.62. (a) The department, State Department of Social
Services, administrator, or any interested person, upon due
notice to the parties, may petition the court for an order
terminating the rehabilitation proceedings when the rehabilitation
efforts have not been successful, the continuing care retirement
community has been sold at foreclosure sale, the provider has been
declared bankrupt, or the provider has otherwise been shown to be
unable to perform its obligations under the continuing care
contracts.
(b) The court shall not issue the order requested pursuant to
subdivision (a) unless all of the following have occurred:
(1) There has been a full hearing and the court has determined
that the provider is unable to perform its contractual obligations.
(2) The administrator has given the court a full and complete
report and financial accounting signed by the administrator as being
a full and complete report and accounting.
(3) The court has determined that the residents of the continuing
care retirement community have been protected to the extent possible
and has made such orders in this regard as the court deems proper.
SEC. 56. Section 14006.01 of the
Welfare and Institutions Code is amended to read:
14006.01. (a) This section applies to any individual who is
residing in a continuing care retirement community, as defined in
paragraph (11) (12) of subdivision (c)
of Section 1771 of the Health and Safety Code, pursuant to a
continuing care contract, as defined in paragraph (8)
(9) of subdivision (c) of Section 1771 of the
Health and Safety Code, or pursuant to a life care contract, as
defined in subdivision (l) of Section 1771 of the Health and Safety
Code, that collects an entrance fee from its residents upon
admission.
(b) In determining an individual's eligibility for Medi-Cal
benefits, the individual's entrance fee shall be considered a
resource available to the individual if all of the following apply:
(1) The individual has the ability to use the entrance fee, or the
contract provides that the entrance fee may be used, to pay for care
if other resources or income of the individual are insufficient to
pay for care.
(2) The individual is eligible for a refund of any remaining
entrance fee when he or she dies or terminates his or her contract
with, and leaves, the continuing care retirement community.
(3) The entrance fee does not confer an ownership interest in the
continuing care retirement community.
(c) This section shall be implemented pursuant to the requirements
of Title XIX of the federal Social Security Act (42 U.S.C. Sec. 1396
et seq.), and any regulations adopted pursuant to that act, and only
to the extent required by federal law, and only to the extent that
federal financial participation is available.
(d) To the extent that regulations are necessary to implement this
section, the department shall promulgate regulations using the
nonemergency regulatory process described in Article 5 (commencing
with Section 11346) of Chapter 3.5 of Part 1 of Division 3 of the
Government Code.
(e) It is the intent of the Legislature that the provisions of
this section shall apply prospectively to any individual to whom the
act applies commencing from the date regulations adopted pursuant to
this act are filed with the Secretary of State.
SEC. 57. Section 14139.3 of the Welfare
and Institutions Code is amended to read:
14139.3. (a) Pilot project sites may be comprised of a single
county, a multicounty unit, or a subcounty unit.
(b) Each selected site shall do all of the following:
(1) Establish a consolidated long-term care services fund that
shall accommodate state and federal fiscal and auditing requirements,
shall be used solely for the purposes described in this article, and
shall not be used for any county pooled investment fund.
(2) Identify a local entity, that may be either a governmental
entity or a not-for-profit private agency, to administer the fund.
The local entity may be one that already exists, or may be
established for the express purpose of administering the fund. This
agency shall be designated as the long-term care services agency and
shall contract with the department to carry out this article.
(3) Develop and provide to the department an administrative action
plan that shall include, but is not limited to:
(A) A complete description of the covered scope of services and
programs to be integrated.
(B) A complete description of the proposed long-term care delivery
system and how it will improve system efficiency and enhance service
quality.
(C) Demonstration of a willingness and commitment by the long-term
care services agency to work with local community groups, providers,
and consumers to obtain their input.
(D) Proposed measurable performance outcomes that the pilot
program is designed to achieve.
(E) A description of the expected impact on current program
services to Medi-Cal eligible beneficiaries and consumers of
non-Medi-Cal services included in the integrated system.
(F) Assurance of minimal disruption to current recipients of
long-term care services during the phase-in of the pilot project.
(G) Reasonable assurance that services provided will be responsive
to the religious, cultural, and language needs of beneficiaries.
(H) Assurances that providers who serve the needs of special
populations such as religious and cultural groups or residents of
multilevel facilities as defined in paragraph (9) of subdivision (d)
of Section 15432 of the Government Code and community
continuing care retirement communities as
defined in subdivision (u) (c) of
Section 1771 of the Health and Safety Code, will be able to continue
to serve those persons when willing to contract under the same terms
and conditions as similar providers.
(I) Specific alternative concepts, requirements, staffing
patterns, or methods for providing services under the pilot project.
(J) A process to assure that Medi-Cal dollars are appropriately
expended in accordance with federal requirements.
(K) A description of how the pilot project site will maintain
adequate fiscal control and ensure quality of care for beneficiaries.
(L) A description of how the pilot project site will coordinate,
relate to, or integrate with Medi-Cal managed care plans, local
managed care plans, and other organizations which provide services
not part of the pilot project.
(M) A proposed timeline for planning and startup of the pilot
project.
(N) An estimate of costs and savings.
(O) Demonstration of the financial viability of the plan.
(c) The administrative action plan shall reflect a planning
process that includes long-term care consumers, their families, and
organizations that represent them, organizations that provide
long-term care services, and representatives of employees who deliver
direct long-term care services. The planning process may include,
but is not limited to, the members of the local advisory committee
required pursuant to Section 14139.31.
(d) The administrative action plan shall receive the approval of
the county board of supervisors before it is submitted to the
department for final state approval. The board of supervisors shall
present evidence of the commitment to the administrative action plan
of all publicly funded agencies that currently serve consumers who
will be eligible under the pilot project, and all publicly and
nonpublicly funded agencies that will be responsible for providing
services under the pilot project. This evidence may include
resolutions adopted by agency governing bodies, memoranda of
understanding, or other agreements pertinent to the implementation of
the plan.