California Gov. Jerry Brown on Friday signed a bill that requires skilled nursing owners and leaders to disclose certain business ties, some months after a report by the state auditor that found California “has not adequately addressed ongoing deficiencies related to the quality of care that nursing facilities provide.”

The bill, introduced by Democratic Assemblyman Jim Wood, requires any organization that operates, owns, or maintains a SNF — as well as any of the SNF’s officers — to disclose to California’s office of Statewide Health Planning and Development whether “the licensee, or a general partner, director, or officer of the licensee, has an ownership or control interest of 5% or more in a related party, as defined, that provides any service to the skilled nursing facility.”

Under those circumstances, the licensee has to disclose all the services provided to the SNFs, the number of people who provide the service at the SNF, and any other information the office requests. If the SNF receives goods, fees, and services worth $10,000 or more per year from the related party, the bill requires the disclosure to include both the profit and loss statement of the affiliate, and the payroll-based journal public use data for the SNF’s direct caregivers for the previous quarter.

The law will take effect January 1, 2020.

The bill was inspired by Brius Healthcare Services, according to the Eureka Times-Standard. Financial problems nearly forced the chain to close “several” facilities last year, though only one eventually ended up shutting its doors. During a government investigation into Brius’s operations, Wood and other lawmakers discovered that several of the company’s vendors were also under the Brius umbrella — a situation that, Wood said, could lead providers to bilk the state’s Medicaid program through sweetheart deals with its own affiliates.

The Times-Standard emphasized that an audit cleared Brius and CEO Shlomo Rechnitz of using his affiliated businesses to boost reimbursements from California’s Medicaid program, known as Medi-Cal, and that the connections did not violate state law in effect prior to the new bill.

“Although there was nothing technically illegal with using ‘related-party companies,’ my bill AB 1953 will now ensure transparency and reporting that will allow us to make sure that these companies are not being used to generate excessive profits for the owners of these facilities on the backs of the residents,” Wood told the publication.

The company is one of the three largest private operators of nursing facilities in the state of California, according to the state auditor’s report in May.

Written by Maggie Flynn