California Bill Seeks More State Authority on Nursing Home Ownership

Nursing home operators looking to purchase more facilities in California may need to get approval from the state Department of Public Health (CDPH) and meet certain qualifications, according to proposed guidelines introduced in a bill poised this week to move ahead in the state legislature.

The state assembly is expected to vote on the bill as early as Monday, according to a report from the Times of San Diego, before sending the legislation to the Senate later in the week.

The Skilled Nursing Facility Ownership and Management Reform Act, or Assembly Bill 1502, would allow CDPH to prohibit “unqualified” entities from owning and operating facilities.

Notably absent from the proposed bill text are acute care hospitals operating a SNF as a “distinct part” of the hospital system, or a “receiver or temporary manager” appointed to run a facility “in accordance with other laws.”

Currently, the department of public health has no authority to disqualify nursing home operators from purchasing more nursing homes in the state if they already operate facilities, despite what kind of quality track record they have.

License applicants would need to provide Medicare and Medicaid cost reports for all facilities owned or managed by the applicant for the past five years in California as well as other states, according to the bill.

Applicants that are part of a nursing home chain would need to provide a “diagram indicating the relationship between the applicant and the persons or entities, as defined, that are part of the chain,” the bill states.

CDPH would then post all applications – and supporting documentation – for public comment. The agency could deny an application or revoke a license under certain circumstances, according to the bill.

Entities that continue to operate without a state-approved license could have new admissions banned, Medi-Cal payments suspended and be subject to a $10,000 civil penalty for violating license requirements.

The CDPH would establish regulations and procedures for license applicants, associated persons and entities by Jan. 1, 2024.

The California Association of Health Facilities (CAHF) opposes the bill in its current form, Deb Pacyna, director of public affairs for CAHF, told Skilled Nursing News.

“Bottom line is that if it goes into effect, it’s going to prohibit most people from running nursing homes in the state because there are so many restrictions as written,” noted Pacyna.

The California Advocates for Nursing Home Reform (CANHR) sponsored the bill. The organization sees it as a way to combat what it calls “zombie licenses.”

Tony Chicotel, senior staff attorney for CANHR, said the term refers to ownership or operations that are transferred, but the license stays in the name of the seller who, in some instances, exits the industry completely or declares bankruptcy.

“The entity or person to whom the license is issued no longer really exists or has anything to do with the facility or the building,” Chicotel. “It’s being run by someone who has no state approval and in some cases hasn’t even applied for approval or has been denied approval, but they keep operating regardless.”

The bill closes this “loophole,” CANHR said in a December press release; the loophole allows most nursing homes in the state to change hands without mandated state approval.

“Entire nursing home chains can be bought and sold without state approval due to CDPH’s position that it has no authority to review ownership changes at the chain level,” CANHR said in a December editorial.

CAHF agreed in a December letter to Assemblymember Jim Wood (D-Santa Rosa) that the state change of ownership process for SNFs must be reformed, but the state also has the “most unworkable and lengthy licensure process in the nation.”

AB 1502 was originally introduced in February 2021 by Wood and Al Muratsuchi (D-Torrance).

“[Licensure] requires nursing facility ownership transactions and interim managers to occur prior to an application being processed by the Department of Public Health. Nursing facilities did not create this backwards process. It has been perpetuated by the state – and it needs to end,” CAHF said in the letter.

Potential action on AB 1502 follows five of six nursing home PROTECT Plan Reform Bills signed into law by Gov. Gavin Newsom in October.

The bill package includes the Corporate Transparency in Elder Care Act (SB 650), which requires nursing homes to submit annual consolidated financial reports for public view.

“We felt like, especially this year, that the political climate was such that people might actually listen to our story, because the spotlight was on skilled nursing facilities and nursing homes, and maybe we could get a little political traction,” said Democratic Senator Henry Stern of Los Angeles, who introduced the measure in February.

Skilled Nursing News interviewed Stern after SB 650 passed last year.

“Typically, this stuff tends to fizzle out as a kind of tough go in years past — we’ve got momentum on our side; we have to go big here,” Stern said.

Four other PROTECT bills were signed by Newsom: AB 849, which restores nursing home liability up to $500 per violation; AB 323, which increases nursing home citation penalties to account for inflation and updates Class AA citations for violations contributing to a resident’s death; AB 1042, establishing shared liability for nursing home entities that share ownership or control of a facility; and AB 749, requiring nursing home medical directors to be certified by the American Board of Post-Acute and Long-Term Care Medicine within five years of the date of hire.

At the time, AB 1502 was turned into a two-year bill to be heard by the Assembly Health Committee in the new year, CANHR noted in an October statement.