BILL NUMBER: SB 408 AMENDED
BILL TEXT
AMENDED IN SENATE MAY 31, 2011
AMENDED IN SENATE APRIL 12, 2011
INTRODUCED BY Senator Hernandez
FEBRUARY 16, 2011
An act to amend Section 1265 of add
Section 1265.9 to the Health and Safety Code, relating to
health facilities.
LEGISLATIVE COUNSEL'S DIGEST
SB 408, as amended, Hernandez. Health facilities: licensure.
Existing law provides for the licensure and regulation of health
facilities administered by the State Department of Public Health. A
violation of these provisions is a crime.
Existing law requires those desiring a license for a health
facility, approval for a specified special service, or approval to
manage a specified type of licensed health facility, that have not
filed an application for a license to operate that facility, to file
with the department a verified application on forms prescribed and
furnished by the department, containing specified information.
Existing law provides that any requirement placed upon, or
reference to, a corporation in the provisions regulating health
facilities shall also apply to a limited liability company.
This bill would require a new license application to be filed
when the holder of an existing license for a
health facility, as defined, changes ownership
when there is a change of ownership, as defined, or a change in
ownership, as defined . This bill would provide that a
change of ownership occurs whenever the current holder of the
license sells, transfers, leases, exchanges, options, conveys, or
otherwise disposes of, a material amount of its assets or operations,
as provided, to another individual or entity. This bill would
provide that a change of ownership also occurs whenever the current
holder of the license transfers control, responsibility, or
governance, as prescribed, of a material amount of its assets or
operations, as provided, to another individual or entity
This bill would also require a prescribed notice to be filed
with the department prior to a change in ownership change of
ownership, or change in control interest, as defined, or certain
health facilities .
Because this bill expands the definition of a crime, it would
impose a state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1265.9 is added to the
Health and Safety Code , to read:
1265.9. (a) For purposes of this section, the following
definitions shall apply:
(1) "Change of ownership" means any of the following:
(A) For a partnership, the removal, addition, or substitution of a
partner.
(B) For an unincorporated sole proprietorship, the transfer of
title and property to another person.
(C) For a corporation, the merger of the applicant's or provider's
corporation into another corporation, or the consolidation of two or
more corporations, resulting in the creation of a new corporation.
The transfer of corporate stock or the merger of another corporation
into the applicant's or provider's corporation does not constitute a
change of ownership.
(D) For a lease, the lease of all or part of an applicant's or
provider's facility constitutes a change of ownership of the leased
portion.
(2) "Change in ownership" means a transaction where there is a
change of ownership and any of the following occurs:
(A) A sale, transfer, lease, exchange, conveyance, or other
disposal of a limited partnership interest, corporate shares, or
limited liability company interest representing at least 20 percent
of all ownership interests in a health facility that is described in
subdivision (a), (b), or (f) of Section 1250 or in the current
licenseholder.
(B) The merger of an entity that owns or operates a health
facility described in subdivision (a), (b), or (f) of Section 1250
that does not result in a change in the taxpayer identification
number of the licenseholder.
(C) A substitution of a new corporate member or member of the
governing body, or any arrangement, written or oral, that would
transfer voting control of, or responsibility for, or governance of,
a health facility described in subdivision (a), (b), or (f) of
Section 1250.
(3) "Change in control interest" means a transaction where any of
the following, except a change of ownership or change in ownership,
occurs:
(A) A sale, transfer, lease, exchange, conveyance, or other
disposal of a limited partnership interest, corporate shares, or
limited liability company interest representing at least 10 percent
of all ownership interests in a health facility described in
subdivision (a), (b), or (f) of Section 1250, or in the license
holder, but that represents less than 20 percent of the ownership
interests in the health facility or license holder.
(B) A change in any member of the governing body or principal
officers of a health facility described in subdivision (a), (b), or
(f) of Section 1250 that does not transfer voting control of, or
responsibility for, the health facility.
(b) A new license application for a health facility described in
subdivision (a), (b), (c), (d), or (f) of Section 1250 shall be filed
when there is a change of ownership in the health facility.
(c) At least 45 days prior to a change of ownership, change in
ownership, or change in control interest in a health facility that is
described in subdivision (a), (b), or (f) of Section 1250, a notice
of the change shall be filed with the department. If the transaction
is a change in ownership, a new license application shall be filed
with the notice. If the transaction is a change of control interest,
a State Department of Public Health form HS 215A shall be filed with
the notice.
(d) Notwithstanding the rulemaking provisions of Chapter 3.5
(commencing with Section 11340) of Part 1 of Title 2 of the
Government Code, the department may implement this section by means
of all facility letters, or similar instructions, without taking
further regulatory action.
SECTION 1. Section 1265 of the Health and
Safety Code is amended to read:
1265. (a) Any person, political subdivision of the state, or
governmental agency desiring a license for a health facility,
approval for a special service under this chapter, or approval to
manage a health facility currently licensed as a health facility, as
defined in subdivision (a), (b), (c), (d), or (f) of Section 1250,
that has not filed an application for a license to operate that
facility shall file with the department a verified application on
forms prescribed and furnished by the department, containing all of
the following:
(1) The name of the applicant and, if an individual, whether the
applicant has attained the age of 18 years.
(2) The type of facility or health facility.
(3) The location thereof.
(4) The name of the person in charge thereof.
(5) Evidence satisfactory to the department that the applicant is
of reputable and responsible character. If the applicant is a firm,
association, organization, partnership, business trust, corporation,
or company, like evidence shall be submitted as to the members or
shareholders thereof, and the person in charge of the health facility
for which application for license is made. If the applicant is a
political subdivision of the state or other governmental agency, like
evidence shall be submitted as to the person in charge of the health
facility for which application for license is made.
(6) Evidence satisfactory to the department of the ability of the
applicant to comply with this chapter and of rules and regulations
promulgated under this chapter by the department.
(7) Evidence satisfactory to the department that the applicant to
operate a skilled nursing facility or intermediate care facility
possesses financial resources sufficient to operate the facility for
a period of at least 45 days. A management company shall not be
required to submit this information.
(8) Each applicant for a license to operate a skilled nursing
facility or intermediate care facility shall disclose to the
department evidence of the right to possession of the facility at the
time the application will be granted, which may be satisfied by the
submission of a copy of applicable portions of a lease agreement or
deed of trust. The names and addresses of any persons or
organizations listed as owner of record in the real estate, including
the buildings and the grounds appurtenant to the buildings, shall be
disclosed to the department.
(9) Any other information as may be required by the department for
the proper administration and enforcement of this chapter.
(10) Upon submission of an application to the department by an
intermediate care facility/developmentally disabled habilitative or
an intermediate care facility/developmentally disabled-nursing, the
application shall include a statement of need signed by the
chairperson of the area board pursuant to Chapter 4 (commencing with
Section 4570) of Division 4.5 of the Welfare and Institutions Code.
In the event the area board has not provided the statement of need
within 30 days of receipt of the request from the applicant, the
department may process the application for license without the
statement.
(11) The information required pursuant to this section, other than
individuals' social security numbers, shall be made available to the
public upon request, and shall be included in the department's
public file regarding the facility.
(12) With respect to a facility licensed as a health facility, as
defined in subdivision (a), (b), or (f) of Section 1250, for purposes
of this section, "manage" means to assume operational control of the
facility.
(b) A new license application shall be filed when the holder of an
existing license for a health facility, as defined in subdivision
(a), (b), or (f) of Section 1250, changes ownership. A change of
ownership occurs whenever the current holder of the license:
(1) Sells, transfers, leases, exchanges, options, conveys, or
otherwise disposes of, a material amount of its assets or operations
to another individual or entity.
(2) Transfers control, responsibility, or governance of a material
amount of the assets or operations of the current licenseholder to
another individual or entity.
(c) An agreement or transaction involves a "material amount of the
assets or operations" pursuant to paragraph (1) of subdivision (b)
if either:
(1) The agreement or transaction directly affects more than 10
percent of the value of the health facility, as defined in
subdivision (a), (b), or (f) of Section 1250, that provide similar
health care that are operated or controlled by the current
licenseholder, or
(2) The agreement or transaction involves the sale, transfer,
exchange, change in control, governance, or otherwise disposes of any
health facility, as defined in subdivision (a), (b), or (f) of
Section 1250, that provides similar health care and that is
controlled, operated, or managed by the current licenseholder and
that has a fair market value that exceeds three million dollars
($3,000,000).
(d) An agreement or transaction will "transfer control,
responsibility, or governance" pursuant to paragraph (2) of
subdivision (b) if any of the following occurs:
(1) There is a transfer, assignment, or disposition of 10 percent
or more of the membership interests or voting rights of a limited
liability company or partnership which operates or manages a licensed
health facility, as defined in subdivision (a), (b), or (f) of
Section 1250, to a new partner or member that did not hold 10 percent
or more of the membership interests or voting rights at the time the
existing license was issued to the limited liability company or
partnership.
(2) There is a transfer, assignment, or disposition of 10 percent
or more of the stock or voting rights of a corporation which operates
or manages a licensed health facility, or which is a member of a
limited liability company that operates or manages a licensed health
facility, as defined in subdivision (a), (b), or (f) of Section 1250,
to a new stockholder that did not hold 10 percent or more of the
stock or voting rights at the time the existing license was issued to
the corporation.
(3) There is a substitution of a new corporate member or members
that transfers the control of, responsibility for, or governance of,
the current licenseholder.
(4) There is a substitution of one or more members of the
governing body, or any arrangement, written or oral, that would
transfer voting control of the members of the governing body.
SEC. 2. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.