BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1751|
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THIRD READING
Bill No: AB 1751
Author: Bloom (D)
Amended: 8/19/14 in Senate
Vote: 21
SENATE HUMAN SERVICES COMMITTEE : 3-1, 6/24/14
AYES: Beall, DeSaulnier, Liu
NOES: Wyland
NO VOTE RECORDED: Berryhill
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 52-23, 5/28/14 - See last page for vote
SUBJECT : Continuing care retirement communities
SOURCE : California Continuing Care Residents Association
DIGEST : This bill requires Continuing Care Retirement
Community (CCRC) providers to make specified financial
statements available to residents on a quarterly basis, rather
than semi-annually. Additionally, this bill requires CCRC
providers that have governing bodies in the state to include at
least one resident, or two residents if the facility has more
than 21 members, as voting members of the facility's governing
body. This bill requires that providers whose governing bodies
administer multiple CCRCs to provide specified information to
the residents' association of any facility that does not have
voting representation on the governing body. This bill also
provides for alternative representation options for a provider
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that is a sole proprietorship, general partnership, limited
partnership, limited liability company (LLC), or a closely held
corporation in lieu of appointing a resident as a voting member
of the provider's governing body, as specified.
Senate Floor Amendments of 8/19/14 exempt specified providers
that do not have governing bodies from the provisions requiring
a CCRC governing body to include a resident voting member.
ANALYSIS :
Existing law:
1.Provides for the licensure and regulation of CCRCs by the
Department of Social Services (DSS) to enact minimum
requirements to protect the wellbeing and financial security
of residents of CCRCs.
2.Establishes the Residential Care Facilities for the Elderly
Act, which requires DSS to license and regulate residential
care facilities for the elderly (RCFEs) as a separate category
within the existing community care licensing structure of DSS.
3.Provides for the regulation and licensure of skilled nursing
facilities (SNFs) by the Department of Public Health (DPH).
4.Requires a CCRC provider to hold a certificate of authority
from DSS permitting the provider to contract for the provision
of continuing care, including medical care, in which a
resident over the age of 60 has paid in advance for more than
one year for that care.
5.Provides that the components of care provided by the facility
must be separately licensed as otherwise required by state
law, including RCFEs and SNFs.
6.Requires CCRCs to encourage the formation of a residents'
association by interested residents who may elect a governing
body, to provide space, post notices, and provide assistance
as needed.
7.Requires the governing body of the provider, or a designated
representative, to hold semi-annual meetings with community
residents, and to hold resident meetings at least 30 days
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prior to any planned monthly care fee increase.
8.Requires a provider to make a facility financial statement of
activities available to the resident association, comparing
actual costs to budgeted costs broken down by expense
category.
9.Requires a provider to accept at least one resident to
participate as a non-voting member of the provider's governing
body, or if the provider operates multiple communities to
elect to have one non-voting resident for each community or to
allow residents to elect a representative for every three
communities it operates.
10.Requires CCRC providers to submit an annual financial report
to DSS, as specified.
This bill:
1.Increases, from semi-annually to quarterly, the frequency that
CCRC providers must make a financial statement of activities
available to residents, comparing actual costs to budgeted
costs broken down by expense category.
2.Requires providers to include a written explanation of all
significant budget variances in the financial statement of
activities.
3.Requires providers to conspicuously post annual reports on
their Internet Web sites, within 10 days after being submitted
to DSS.
4.Requires providers to include at least one resident, or two
residents if the facility has more than 21 members, as voting
members of the facilities governing body, upon the next
vacancy or next regularly scheduled selection of the governing
body occurring on or after January 1, 2015.
5.Grants an exception to providers that have no governing body
in the state from the above requirement, and requires those
providers to appoint a select committee of its governing body
members to meet with residents prior to any regularly
scheduled governing body meeting at each of its facilities and
to ensure that the opinions of residents are relayed to all
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governing body members of the provider.
6.Permits a provider that is a sole proprietorship, general
partnership, limited partnership, LLC, or a closely held
corporation, in lieu of appointing a voting member, to appoint
a select committee of its member(s) to meet in a location that
has been designated in the notice of the meeting with the
resident association or a resident-elected committee of
residents at each of its facilities semiannually and at least
60 days prior to any financial or administrative changes, as
specified, to address concerns of the residents and to ensure
that the opinions of the residents are relayed to all members
of the provider.
7.Requires, if any member of an LLC is a corporation, a
nonvoting resident representative elected to be invited to the
meetings of the governing body of that corporation that
address any proposed changes. Requires the governing body of
the corporation to provide the nonvoting resident
representative with at least 30 days' advance notice of the
meeting. Specifies that if more than one member of the LLC is
a corporation, only the corporation with the largest interest
in the LLC is required to comply with these provisions.
8.Requires providers whose governing bodies administer multiple
communities to provide the same notice of meetings, packets,
minutes and other materials to the residents association of
any facility that does not have voting representation on the
governing body.
9.Provides that the residents association or a committee of
residents shall nominate prospective residents for the
governing body's approval, as specified.
10.Strikes statutory references to the fulfilled requirement
that DSS provide specified recommendations and written
guidelines available to residents and providers by 2003.
Background
CCRC model . CCRCs have been likened to long-term care
insurance, with seniors paying large entry fees ranging from
$50,000 to more than $2 million, in exchange for access to a
range of levels of care services, including independent living,
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assisted living and skilled nursing care intended to meet the
care needs of residents over a specified period of time as they
age. A portion of the entrance fees, between 90% and 50%
typically are subject to refund upon the death of the resident,
or if the resident opts to leave the community. Some facilities
offer life care contracts through which a facility agrees to
care for the resident for the remainder of the resident's life,
regardless of whether the resident outlives his/her financial
resources.
Required Annual Reports . Providers are required to submit an
annual report to DSS describing the facility's financial
condition within four months after their fiscal year end. The
reports are required to consist of audited financial statements
and required reserve calculations, evidence of fidelity bonds
(insuring against dishonest employee conduct) as well as
additional information. This includes a certification, if
applicable, that reserves for prepaid continuing care contracts,
statutory reserves, and refund reserves are being maintained;
details on status, description, and amount of all reserves
maintained, and on per capita operation costs; disclosure
accumulated or expended funds for identified purposes, as
specified; details of any increase in monthly care fees,
including the basis for determining the increase, and the data
used to calculate the increase; the auditor's opinion as to
compliance with applicable statutes; and any other information
DSS may require.
Required Reserves . CCRC providers are required to maintain a
liquid reserve a reserve for long-term debt obligations that
must be equal to the sum of the prior fiscal year payments for
the following:
All regular principal and interest payments paid by the
provider for fully amortizing long-term debt. If a provider
has incurred new long-term debt during the immediately
preceding fiscal year, the required reserve is 12 times the
provider's most recent monthly payment on the debt.
Facility rental or leasehold payments, and any related
payments such as lease insurance.
Any debt that provides for a balloon payment. If the balloon
payment debt was incurred within the immediately preceding
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fiscal year, the required reserve is 12 times the provider's
most recent monthly payment on the debt.
Financial Stability of CCRCs . Earlier this year, residents of a
Palo Alto CCRC (Vi at Palo Alto) filed a class action lawsuit
against the provider and its parent company which states that
the facility maintained no financial reserve intended to pay for
expected refunds (in violation of state law) and that nearly
$200 million had been passed to a parent corporation in Chicago
that has no liability to pay for refunds if the provider is
unable to refund entrance fees. Additionally, the lawsuit
alleges that the provider improperly included charges in the
resident's increasing monthly fees that include certain taxes,
earthquake insurance and marketing costs that are not
attributable to the residents.
Comments
According to the author's office, seniors opting to reside in
CCRCs pay hundreds-of-thousands of dollars to buy into CCRCs,
often selling their homes and using their life savings to pay
entry fees in exchange for a lifetime of residency and care.
Additionally, the author's office states that financial
difficulties at CCRCs can lead to the postponing or abandonment
of repairs or maintenance, unexpected increase in monthly fees,
loss of the resident's refundable entry fee, or unexpected
charges for previously free services. The author's office
states that this bill will ensure residents are represented on
provider boards, allowing such boards to better serve the
interests of each CCRC and its residents.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 8/20/14)
California Continuing Care Residents Association (source)
California Advocates for Nursing Home Reform
California Senior Legislature
California State Retirees
Consumer Federation of California
National Association of Social Workers
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ARGUMENTS IN SUPPORT : The sponsor of this bill, the
California Continuing Care Residents Association, writes this
bill ensures fair and equal representation on provider boards
and requires providers to make financial information available
to residents to help ensure that the resident continues to make
informed, healthy decisions about their investment in the CCRC.
ASSEMBLY FLOOR : 52-23, 5/28/14
AYES: Alejo, Ammiano, Bloom, Bocanegra, Bonilla, Bonta,
Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau,
Chesbro, Dababneh, Daly, Dickinson, Eggman, Fong, Fox,
Frazier, Garcia, Gatto, Gomez, Gonzalez, Gray, Hall, Roger
Hern�ndez, Holden, Jones-Sawyer, Levine, Lowenthal, Medina,
Mullin, Muratsuchi, Nazarian, Perea, John A. P�rez, V. Manuel
P�rez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez,
Salas, Skinner, Stone, Ting, Weber, Wieckowski, Williams,
Yamada, Atkins
NOES: Achadjian, Allen, Bigelow, Ch�vez, Conway, Dahle, Beth
Gaines, Gorell, Grove, Hagman, Harkey, Jones, Linder, Logue,
Maienschein, Mansoor, Melendez, Nestande, Olsen, Patterson,
Wagner, Waldron, Wilk
NO VOTE RECORDED: Cooley, Donnelly, Gordon, Pan, Vacancy
JL:e 8/20/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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