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AB-1502 Freestanding skilled nursing facilities.(2021-2022)

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Date Published: 03/22/2021 09:00 PM
AB1502:v98#DOCUMENT

Amended  IN  Assembly  March 22, 2021

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 1502


Introduced by Assembly Member Muratsuchi

February 19, 2021


An act to add Section 1253.2 to the Health and Safety Code, relating to health facilities.


LEGISLATIVE COUNSEL'S DIGEST


AB 1502, as amended, Muratsuchi. Skilled Freestanding skilled nursing facilities.
Existing law requires the State Department of Public Health to license, inspect, and regulate skilled nursing facilities, as defined, and prohibits a person, firm, partnership, association, corporation, or political subdivision of the state, or other governmental agency within the state from operating, establishing, managing, conducting, or maintaining a skilled nursing facility in this state, without first obtaining a license from the department. Existing law authorizes the department to issue a temporary provisional license for a skilled nursing facility. prohibits a person from acquiring a beneficial interest of 5 percent or more in any corporation or partnership licensed to operate a skilled nursing facility, or in any management company under contract with a licensee of a skilled nursing facility, or from becoming an officer or director of, or general partner in, a corporation, partnership, or management company without the prior written approval of the department. Existing law requires a licensee for a skilled nursing facility to provide written notice of a proposed change in licensee or management company to all residents of the facility and their representatives at least 90 days prior to a finalization of the sale, transfer of operation, or other change or transfer of ownership interests, except as specified. Existing law imposes criminal penalties on a person who violates the licensing and regulatory requirements imposed on skilled nursing facilities.

This bill would specifically prohibit a person, firm, partnership, association, corporation, or political subdivision of the state, or other governmental agency within the state from operating, establishing, managing, conducting, or maintaining a skilled nursing facility in this state, without obtaining a license on its own behalf and would further prohibit in any way using a license issued to another person or entity. The bill would prohibit the department, on and after January 1, 2022, from issuing a provisional license for a skilled nursing facility.

This bill would prohibit a person, firm, entity, partnership, trust, association, corporation, or political subdivision of the state, or other governmental agency within the state from acquiring, operating, establishing, managing, conducting, or maintaining a freestanding skilled nursing facility without first obtaining a license from the department for that purpose. The bill would specify the requirements to apply for a license, including providing the department with the applicant’s Medicare and Medicaid cost reports for all nursing facilities owned or managed by the applicant for the past 5 years in this and other states, and if the applicant is part of a chain, providing a diagram indicating the relationship between the applicant and the persons or entities, as defined, that are part of the chain. The bill would require the department to post all applications for a license and its supporting documents on the internet, as specified, and allow for public comment on applications, which the department would be required to review and consider. The bill would make all applications and other documents prepared in relation to these provisions public records. The bill would require the department to automatically deny a license under specified conditions that include the applicant or any associated persons or entities has a felony conviction. The bill would require a licensee to update specific information included in their license application. By expanding the duties on licensees, this bill would expand an existing crime, thereby imposing a state-mandated local program.
The bill would prohibit squatting, described as when an applicant or associated persons or entities acquires, operates, establishes, manages, conducts, or maintains a freestanding skilled nursing facility before the department acts on its application, following the department’s denial of its application, or in any instance when a person or entity acquires, operates, establishes, manages, conducts, or maintains a freestanding skilled nursing facility without first applying to and obtaining a license from the department for that purpose. The bill would require specific actions to be immediately taken in an instance of squatting, including that the department would ban new admissions and suspend all Medi-Cal payments to the facility and conduct daily onsite monitor visits. The bill would make squatting a misdemeanor, as specified, and by creating a new crime, this bill would impose a state-mandate local program.
The bill would authorize the department to assess a civil penalty of $10,000 for a material violation of these provisions. The bill would require the department to promulgate regulations relating to criminal clearance procedures for applicants and associated persons and entities by January 1, 2023.
The bill would require the department to annually report to the Legislature on skilled nursing facility ownership and management, as specified. The bill would specify that its provisions do not apply to a skilled nursing facility operated as a distinct part of an acute care hospital or to a receiver or temporary manager appointed in accordance with other laws.
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   Local Program: NOYES  

The people of the State of California do enact as follows:


SECTION 1.

 This act shall be known as the Skilled Nursing Facility Ownership and Management Reform Act of 2021.

SEC. 2.

 The Legislature finds and declares all of the following:
(a) The protection of residents in California’s skilled nursing facilities is of paramount importance to the citizens of California.
(b) Pursuant to Section 1422 of the Health and Safety Code, it is the public policy of this state to ensure that long-term health care facilities provide the highest level of care possible.
(c) No factor has more impact on the quality of care in a skilled nursing facility than its owner.
(d) A large scale national study of nursing home transactions over two decades concluded that there is tremendous churn in chain ownership, the dominance in chain ownership is growing, chains targeted the worst-quality nursing homes for acquisition, poor quality of care persisted in these facilities after they were acquired, and nursing homes owned by chains had much worse records than other facilities.
(e) California’s system for screening nursing home owners is broken. The State Department of Public Health is allowing unscrupulous nursing home operators and management companies to acquire and operate skilled nursing facilities for years without ever obtaining a license or its approval.
(f) California’s largest nursing home chain is operating 18 skilled nursing facilities it acquired through bankruptcy in 2014 without ever having obtained licenses from the State Department of Public Health to operate these facilities.
(g) California’s largest nursing home management company has never been approved by the State Department of Public Health to operate nursing homes.
(h) The State Department of Public Health is allowing nursing home operators to continue running skilled nursing facilities even after it has determined the operators are unfit. At least 15 skilled nursing facilities are being run by operators whose licensure applications were denied due to extremely dangerous conditions in their facilities.
(i) Unfit operators are continuing to expand their nursing home chains in California.
(j) The lives of thousands of skilled nursing facilities residents are endangered by the State Department of Public Health’s failure to prevent unfit owners and operators from acquiring and running skilled nursing facilities.
(k) It is, therefore, the intent of the Legislature to enact legislation that would do all of the following:
(1) Establish suitability standards for persons and entities seeking to acquire, operate, or manage skilled nursing facilities in California.
(2) Direct the State Department of Public Health to thoroughly screen all persons and entities seeking licenses to acquire, operate, or manage skilled nursing facilities.
(3) Require owners and operators, including nursing home chains, to obtain prior approval from the State Department of Public Health before acquiring, operating, or managing a skilled nursing facility.
(4) Prohibit the use of interim or longer-term management agreements to circumvent state licensure requirements.
(5) Provide sanctions to deter owners and operators from squatting, which is the act of acquiring, operating, or managing a skilled nursing facility without first obtaining a license or other approval from the State Department of Public Health.
(6) Require the State Department of Public Health to post licensing applications involving skilled nursing facilities on its internet website and to give the public an opportunity to comment on pending applications.

SEC. 3.

 Section 1253.2 is added to the Health and Safety Code, to read:

1253.2.
 (a) As used in this section, the following definition shall apply:
(1) “Applicant” means the person, agent, firm, entity, trust, partnership, association, corporation, or political subdivision of the state, or other governmental agency within the state, that has submitted an application for a license to acquire, operate, establish, manage, conduct, or maintain a freestanding skilled nursing facility.
(2) “Associated persons and entities” means persons and entities associated with the applicant who would acquire, operate, establish, manage, conduct, or maintain the facility that is the subject of the application.
(3) “Beneficial ownership interest” means the interest held by any person, including a private equity firm and real estate investment trust, that acquires an interest in any entity, including, but not limited to, any firm, association, organization, partnership, business trust, investment trust, corporation, or limited liability corporation, that is licensed to operate a freestanding skilled nursing facility, by assuming that entity’s debt.
(4) “Chain” means a group of two or more licensees that are controlled, as defined in this section, by the same persons or entities.
(5) “Control” means the ability to direct the operation or management of the applicant or licensee and includes the ability to exercise control through intermediary or subsidiary entities.
(6) “Hedge fund” means an entity that uses pooled investment funds for private investment that are open to a limited number of accredited investors allowed to trade securities that may not be registered with financial authorities.
(7) “License” has the same meaning as specified in Section 1251.
(8) “Manage” means to exercise operational control over a facility or to assume any role that impacts the delivery of care or management of employees within the facility.
(9) “Management company” means any company or entity that exercises operational control over the facility or that has assumed or been delegated any role that impacts the delivery of care, services, staffing, personnel, administrative management, or any other operational role that is the responsibility of the licensee under state and federal law, either through contract or some other arrangement.
(10) “Operate” means to own, lease, sublease, establish, maintain, conduct the affairs of, or manage a freestanding skilled nursing facility.
(11) “Parent organization” and “parent company” mean an organization in control of another organization either directly or through one or more intermediaries.
(12) “Person” has the same meaning as specified in Section 19.
(13) “Private equity” means an entity composed of funds and investors that directly invest in private companies that are not publicly traded.
(14) “Skilled nursing facility” has the same meaning as specified in subdivision (c) of Section 1250.
(15) “Squatter” means an applicant or associated person or entity that acquires, operates, establishes, manages, conducts, or maintains a freestanding skilled nursing facility before the department approves its application or following the department’s denial of its application or means a person or entity that acquires, operates, establishes, manages, conducts, or maintains a freestanding skilled nursing facility without first applying to and obtaining a license from the department for that purpose.
(16) “Suitable” means an applicant has the character, abilities, education, experience, performance history, financial resources, and other necessary qualifications to operate a freestanding skilled nursing facility in full compliance with all applicable federal, state, and local statutes and regulations.
(b) No person, firm, entity, partnership, trust, association, corporation, or political subdivision of the state, or other governmental agency within the state shall acquire, operate, establish, manage, conduct, or maintain a freestanding skilled nursing facility without first obtaining a license from the department for that purpose.
(c) An applicant for a license under this section shall submit an application to the department at least 120 days prior to acquiring, operating, establishing, managing, conducting, or maintaining a freestanding skilled nursing facility.
(d) This section applies to any form of change of ownership, operations, or management involving a freestanding skilled nursing facility, including, but not limited to, the following transactions:
(1) Establishment of interim or longer-term management agreements wherein operational control or management responsibilities are transferred from the owner or licensee to a new manager or entity.
(2) Establishment of any type of agreement with an entity or person that assumes a role impacting the delivery of care or management of employees within the facility.
(3) The transfer, purchase, or sale of ownership interest in the facility, at any level of its ownership, including, but not limited to, those involving any and all parent companies.
(4) Transactions described in Section 1267.5 or 1253 and other applicable laws and regulations.
(5) Sale or transfer of the facility’s title and property.
(6) The lease of all or part of a facility.
(7) Transactions by nursing home chains that change ownership interest or management responsibilities in facilities.
(e) An application for a license under this section shall be filed on forms established and furnished by the department, that shall require, but not be limited to, all of the following information:
(1) Evidence satisfactory to the department that the applicant and associated persons and entities meet all of the suitability requirements established in subdivision (k), and the requirements of this chapter, other applicable laws, and the department’s rules and regulations.
(2) Information required by Sections 1265 and 1267.5 of this chapter.
(3) Whether the applicant is a for-profit, not-for-profit, or governmental provider.
(4) Name and address of the applicant.
(5) Names of all prospective owners and their ownership percentages in a list format.
(6) Names of all prospective directors, board members, and managers in a list format.
(7) Name and address of any and all parent organizations.
(8) Names and addresses of all directors, board members, and managers of any and all parent organizations in a list format and copies of all contracts and financial agreements with the applicant.
(9) Names of all private equity and hedge fund investors in a list format.
(10) If applicable, all of the following information:
(A) The name, address, license number, and licensing agency name of other skilled nursing, health, residential, or community care facilities owned, managed, or operated by the same applicant or by any parent organization of the applicant.
(B) The name and business address of any person or entity that controls the applicant.
(C) If part of a chain, a diagram indicating the relationship between the applicant and the persons or entities that are part of the chain, including those that are controlled by the same parties, and all associated or related-party entities that provide services to the chain, and in a separate list, the name, address, and license number, if applicable, for each person or entity in the diagram.
(D) The name and address of any persons, organizations, or entities that own the real property on which the facility seeking licensure and the licensed facilities described in subparagraph (A) are located along with copies of any existing or proposed property or lease agreements.
(E) The name and address of the prospective property owner if the real property is being transferred or sold.
(F) The name and address of any management company that would manage the facility and the same information required of applicants in subparagraphs (B) and (C) for the management company and copies of any existing or proposed management agreements or contracts.
(G) The Medicare and Medicaid cost reports for all nursing facilities owned or managed by the applicant for the past five years in California and other states.
(H) The quarterly payroll-based journal staffing reports for all nursing facilities owned or managed by the applicant for the past five years in California and other states.
(11) The name of the person with operational control of the applicant, including the chief executive officer, general partner, owner, or like party, and state that person’s prior or present service as an administrator, chief executive officer, general partner, director, like role of, or as a person who has held or holds a beneficial ownership interest of 5 percent or more in, any skilled nursing facility, intermediate care facility, residential care facility for the elderly, community care facility, health facility, or a similarly licensed facility in California or any other state within the past 10 years.
(12) The following information regarding the applicant and each individual or entity identified pursuant to paragraph (10):
(A) Any revocation, suspension, probation, exclusion order, termination of Medicare or Medicaid certification, receivership, appointment of a temporary manager, designation as a special focus facility or special focus facility candidate by the Centers for Medicare and Medicaid Services, or other similar administrative enforcement or disciplinary action that was initiated in California or any other state or by the federal government, or is in the process of being adjudicated, against a facility associated with the applicant or a person identified pursuant to paragraph (10), by any authority responsible for the licensing of health, residential, or community care facilities.
(B) Copies of final findings, orders, or both, issued by any health, residential, or community care licensing agency, certification agency, or any court relevant to the actions described in subparagraph (A).
(C) Any injunctions, corporate integrity agreements, damages, or settlements resulting from actions filed by the Attorney General, the Department of Justice, a district attorney’s office, or other federal, state or local law enforcement agency against the applicant, associated persons or entities, or any facilities that they have owned, operated, or managed.
(D) Any petition for bankruptcy relief involving operation or closure of a health, residential, or community care facility licensed in California or any other state, the court, date, and case number of the filing, and whether a discharge was granted. If a discharge was not granted, the applicant shall provide copies of any court findings supporting denial of discharge.
(E) The identity of any facility that has been subject to foreclosures, judgment liens, utility cutoffs, or disruptions in staffing, services, or supplies due to failures to meet payroll or pay bills.
(13) Any other information as may be required by the department for the proper administration and enforcement of this chapter.
(f) The information required by this section shall be provided to the department upon initial application for licensure, and any change in the information shall be provided to the department within 30 calendar days of that change unless a shorter timeframe is required by the department. A licensee of multiple facilities may provide a single notice of changes to the department on behalf of all licensed facilities within the chain. Information pertaining to facilities operated in other states may be updated on an annual basis, except for the following information:
(1) Information specified in paragraph (12) of subdivision (e) shall be updated within 30 calendar days of the change.
(2) Information specified in subparagraph (A) of paragraph (10) of subdivision (e) shall be updated within six months after the change.
(g) (1) The department shall post all applications and supporting documents submitted pursuant to this section to its internet website within 72 hours of receipt and shall provide the public an opportunity to comment on pending applications while they are under review. The department shall additionally post each application and supporting documents to the subject facility’s page on its Cal Health Find internet website with an alert that a change in ownership or management is pending, post a link to each of the applicant’s currently licensed facilities and their associated information, and send an email message to members of the public who have subscribed to ownership change alerts.
(2) The department shall review and consider all comments received on pending applications.
(3) Within 72 hours of making a determination on an application submitted pursuant to this section, the department shall post the determination to its internet website.
(h) The applicant shall provide complete and accurate information to the department.
(i) (1) An applicant’s failure to cooperate with the department in the submission of complete and accurate information shall result in the denial of the application.
(2) For purposes of this section, “failure to cooperate” means that the information and evidence required by this section, other applicable statutes, and the department’s regulations either has not been provided, is not complete, is not accurate, or has not been provided in the form requested by the department.
(j) (1) The department may deny an application for licensure or may subsequently revoke a license under this chapter if the applicant knowingly withheld material information or made a false statement of material fact with regard to information that was required by the application for licensure.
(2) The department may deny an application for licensure or may subsequently revoke a license under this chapter if the applicant did not disclose administrative disciplinary and enforcement actions on the application as required by paragraph (12) of subdivision (e).
(3) In addition to the remedies provided under this chapter, the department may, subsequent to licensure, assess a civil penalty of ten thousand dollars ($10,000) for a material violation of this section.
(k) (1) An applicant shall affirmatively establish that it and all associated persons and entities have the character, abilities, education, experience, performance history, financial resources, and other necessary qualifications to operate the facility in full compliance with all applicable statutes and regulations governing the operations of skilled nursing facilities.
(2) The applicant shall submit evidence satisfactory to the department that it and all associated persons and entities are suitable, including, but not limited to, the following:
(A) Evidence that the applicant and all associated persons and entities are able to and will fully comply with federal, state, and local requirements governing skilled nursing facilities. The evidence shall include, but not be limited to, their performance histories in providing skilled nursing facility care and other types of long-term care in this state and other states, measured by compliance with applicable statutes and regulations.
(B) Evidence that the applicant and all associated persons and entities are of reputable and responsible character. The evidence shall include, but not be limited to, criminal record clearances, employment histories, and character references. If the applicant is a firm, association, organization, partnership, business trust, corporation, or company, like evidence shall be submitted as to the individuals or entities holding a beneficial ownership interest of five percent or more, and the person who has operational control of the skilled nursing facility for which the application for issuance of license is made. The applicant’s evidence shall establish that the applicant is trustworthy, responsible, and dedicated to providing high quality of care to each resident of the facility that is the subject of the application.
(C) Evidence that the applicant and all associated persons and entities have the financial capacity to operate the facility and to provide services required by state and federal laws and regulations. The applicant shall submit a detailed projected budget for the first 12 months of operation, prepared in accordance with generally accepted accounting principles and certified by the principal officer of the applicant, accompanied by evidence of access to sufficient amount of working capital required to operate the skilled nursing facility in accordance with the budget for 12 months, in the form of cash on deposit, a line of credit, applicant’s equity, or any combination thereof.
(D) Evidence that the applicant and all associated persons and entities have the necessary education, experience, and abilities to provide high quality care to residents of the facility. The evidence shall include, but not be limited to, education credentials, professional licenses, employment histories, ownership and management histories of long-term care facilities, and other relevant qualifications.
(E) Evidence that the applicant and all associated persons and entities have a history of full compliance with applicable employment laws and regulations.
(3) The department shall deny an application if the applicant fails to establish through the evidence submitted pursuant to paragraph (1) that it and associated persons and entities have the character, abilities, education, experience, performance history, financial resources, and other necessary qualifications to operate the facility in full compliance with all applicable statutes and regulations governing the operations of skilled nursing facilities.
(4) The applicant shall provide or cause to be provided, at the department’s request, any additional information related to consideration of the application regarding the suitability of the applicant and associated persons and entities.
(5) The department shall examine all factors required by other applicable federal, state, and local statutes and regulations in making its determination on whether the applicant and associated persons and entities are suitable for licensure.
(6) The department shall cross-check all information and evidence submitted by the applicant concerning its suitability, including, but not limited to, by verifying ownership and compliance histories through its own records, cross-checking with other licensing agencies in this state, other states, and territories, and confirming criminal history clearances.
(7) If the applicant or associated persons and entities are professionals licensed by the state, the department shall contact the appropriate licensing agencies to obtain information about disciplinary actions taken against the licensees and to confirm that their licenses are in good standing.
(8) To the extent not prohibited by federal or state law, the department may obtain any information deemed necessary to make a determination on the suitability of the applicant and associated persons and entities for licensure.
(9) In making a determination on whether an applicant is suitable, the department shall thoroughly examine the compliance histories of facilities that are or have been owned, operated, or managed by the applicant and associated persons and entities, and shall review the performance history of any nursing home chain that is associated with the applicant. The department’s review shall consider compliance histories during the 10-year period before the date of the application, and the department shall have the discretion to consider events and actions that occurred at any time.
(10) The department shall review and consider any available information and evidence concerning the applicant’s suitability, including, but not limited to, inspection findings, violations, complaint histories, citations, enforcement actions, appointments of a temporary manager, criminal and civil charges, prosecutions, elder abuse litigation, adequacy of staffing levels, labor actions, unfair labor practices, financial instability, special focus facility status, patterns of abuse and neglect, failures to report abuse and neglect, actions and investigations by law enforcement agencies, findings of professional licensure boards, media reports, and any other information or evidence that is material to its determination.
(11) Any of the following actions, sanctions, or findings shall automatically disqualify an applicant from being determined suitable for licensure:
(A) The applicant or any associated persons or entities has owned, operated, or managed a skilled nursing facility, nursing facility, intermediate care facility, assisted living facility, community care facility, or other type of long term care facility in this state or any other state or territory that was terminated from the federal Medicare program or the Medi-Cal program due to noncompliance, had its license suspended or revoked, or was subjected to receivership or temporary management.
(B) The applicant or any associated persons or entities have engaged in the act of squatting, as prohibited by this section.
(C) The applicant or any associated persons or entities are on the List of Excluded Individuals/Entities of the United States Department of Health and Human Services Office of Inspector General.
(D) The applicant or any associated persons or entities are under a corporate integrity agreement established by the United States Department of Health and Human Services.
(E) The applicant or any associated persons or entities has had a felony conviction.
(F) The applicant or any associated persons or entities has petitioned for bankruptcy relief involving the operation or closure of a health, nursing, assisted living, or community care facility in this state or any other state in the past 10 years.
(G) The applicant fails to meet the financial capacity requirements with sufficient funds for the first 12 months of operation.
(H) The applicant or any associated persons or entities has owned, operated, or managed a skilled nursing facility or intermediate care facility that has received a second or subsequent class “AA” citation from the department within a 24-month period.
(I) The applicant or any associated persons or entities has owned, operated, or managed a skilled nursing facility or intermediate care facility that has received three or more of any combination of a class “AA” citation, a class “A” citation, or a deficiency constituting an “immediate jeopardy” violation in the preceding five years.
(J) The applicant or any associated persons or entities has owned, operated, or managed a skilled nursing facility or nursing facility that the Center for Medicare and Medicaid Services has designated as a special focus facility or special focus facility candidate within the preceding five years.
(K) The applicant or any associated persons or entities has owned, operated, or managed skilled nursing facilities, nursing facilities, intermediate care facilities, assisted living facilities, community care facilities, or other type of long term care facilities in this state or any other state or territory that have demonstrated a pattern and practice of violations of state or federal standards during the last 10 years.
(l) The department shall review and make a determination within 120 days of an applicant’s submission of a complete application.
(1) The department may extend the 120-day time period by up to an additional 60 days if it cannot complete its determination due to extenuating circumstances. The department shall notify the applicant in writing of the extension and the estimated date of its determination.
(2) The applicant and associated persons and entities shall not acquire, operate, establish, manage, conduct, or maintain a freestanding skilled nursing facility prior to obtaining a favorable determination from the department on a licensure application. A transfer of ownership, operations, or management of the facility shall not take place prior to the department’s approval, whether interim, long term, or permanent.
(m) The department shall approve the application and notify the applicant in writing if it determines that the applicant and associated persons and entities are suitable and have complied with all requirements of this section and other applicable statutory and regulatory requirements.
(n) The department shall deny the application and notify the applicant in writing if it determines that the applicant or associated persons and entities are not suitable or have not complied with the requirements of this section or other applicable statutory and regulatory requirements.
(1) Upon written request, the applicant may request an administrative hearing to appeal the determination.
(2) During the pendency of the appeal, the applicant and associated persons and entities shall not acquire, operate, establish, manage, conduct, or maintain the facility that is the subject of the appeal.
(o) (1) The following actions shall immediately be taken in any instance when an applicant or associated persons or entities acquires, operates, establishes, manages, conducts, or maintains a freestanding skilled nursing facility before the department acts on its application, following the department’s denial of its application, or in any instance when a person or entity acquires, operates, establishes, manages, conducts, or maintains a freestanding skilled nursing facility without first applying to and obtaining a license from the department for that purpose:
(A) The department shall ban all new admissions to the facility and, if the facility is part of a chain, shall ban all admissions to each and every facility in the chain.
(B) The Department of Health Care Services shall suspend all Medi-Cal payments to the facility.
(C) The department shall notify the Attorney General and the Centers for Medicare and Medicaid Services that the facility is being operated by a person or entity without an approved license.
(D) The department shall conduct daily onsite monitor visits at the facility until the situation is resolved.
(E) The department shall assess the need to appoint a temporary manager to operate the facility or to seek appointment of a receiver for the same purpose pursuant to its authority under Article 8 (commencing with Section 1325).
(F) The department shall advise all residents, their representatives, and the state and local long-term care ombudsperson offices of the circumstances, and inform them of the sanctions that are being imposed and of the residents’ right to remain at the facility while corrective actions are taken.
(2) A suspension of Medi-Cal payments to the facility under subparagraph (B) of paragraph (1) shall not constitute failure to pay or non-payment for any resident of the facility nor shall it be the basis for the basis for the transfer or discharge of any resident.
(3) The act of acquiring, operating, establishing, managing, conducting or maintaining a freestanding skilled nursing facility without a license in any of the manners described in paragraph (1) shall be known as “squatting.”
(4) Squatting is a separate and distinct offense of this section and is punishable as a misdemeanor. A squatter shall be subject to a summons to appear in court.
(5) A misdemeanor may be prosecuted regardless of any concurrent enforcement of civil penalties or administrative remedies available to the department.
(6) Any person who, individually or through an entity, is licensed to operate or approved by the department to manage a freestanding skilled nursing facility, shall be guilty of a misdemeanor if the facility is being operated or managed by a squatter.
(7) Notwithstanding any other provision of this chapter, a “squatter” as defined in subdivision (a) of this section is guilty of a misdemeanor and upon conviction thereof shall be punishable by a fine not exceeding two thousand five hundred dollars ($2,500), by imprisonment in the county jail for a period not to exceed one year, or by both the fine and imprisonment.
(p) All applications, determinations, written public comments, appeals, and other documents received or prepared pursuant to this section shall be considered public records.
(q) The department shall establish regulations governing criminal clearance procedures for applicants and associated persons and entities by January 1, 2023.
(r) (1) The department shall ensure that the staff members assigned to implement this section have expertise in nursing home quality, regulations, staffing, ownership, management, and financial accountability.
(2) The department shall prepare an annual report and submit it to the Legislature by December 31 of each year on skilled nursing facility ownership and management applications and of determinations made subject to this section.
(s) This section does not apply to a skilled nursing facility that is operated as a distinct part of an acute care hospital or to receivers or temporary managers that are appointed in accordance with state or federal laws.

SEC. 4.

 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.
SECTION 1.

The Legislature finds and declares all of the following:

(a)Protection of the residents in California’s skilled nursing facilities is of paramount importance to all Californians.

(b)Evidence demonstrates that some owners or operators of skilled nursing homes are able to circumvent existing licensing and regulatory requirements through the sale or other transfers of these licensed facilities.

(c)Licensing and regulatory reform is required to prevent circumvention of these protections and ensure that skilled nursing home owners or operators meet all of the required standards before providing services to residents of skilled nursing facilities.

SEC. 2.Section 1253.2 is added to the Health and Safety Code, to read:
1253.2.

(a)A person, firm, partnership, association, corporation, or political subdivision of the state, or other governmental agency within the state shall not operate, establish, manage, conduct, or maintain a skilled nursing facility in this state, without obtaining a license on its own behalf and shall not in any way use a license issued to another person or entity.

(b)Notwithstanding Section 1268.5 or any other law, on and after January 1, 2022, the department shall not issue a provisional license for a skilled nursing facility.

(c)For purposes of this section, skilled nursing facility has the same meaning as set forth in subdivision (c) of Section 1250.