AN ACT CONCERNING THE FINANCIAL CONDITION OF NURSING HOMES.

This bill makes numerous changes in the law related to the financial oversight, management, operation, and licensure of nursing homes. It:

1. establishes new financial reporting requirements for nursing homes and nursing facility management services agencies and allows the state comptroller to conduct financial audits;

2. allows the court to appoint a receiver of a nursing home upon a finding of “gross financial mismanagement”;

3. makes changes to the Department of Public Health's (DPH) certification process for management companies operating nursing homes;

4. requires nursing home property or building owners to comply with Public Health Code requirements concerning property maintenance and repair;

5. establishes minimum liability insurance coverage requirements for nursing homes;

6. changes certificate of need (CON) and licensure requirements when a nursing home changes ownership;

7. places certain restrictions on a nursing home operator's ability to acquire a nursing home if they violate nursing home laws in Connecticut or in another state or have nursing home problems related to Medicare and Medicaid;

8. changes the membership of the Nursing Home Financial Advisory Committee; and

9. places restrictions on nursing home rental payments, loan payments, and management fees.

The bill applies to “nursing home facilities” (hereafter referred to as “nursing homes”), which the law defines as nursing homes, residential care homes, and rest homes with 24-hour nursing supervision (CGS § 19a-521).

Although residential care homes are included in the definition of nursing home facilities, they do not provide nursing care. Thus, it appears that the bill does not apply to these facilities.

EFFECTIVE DATE: October 1, 2008, except for the provisions pertaining to CON, financial reporting requirements, the Nursing Home Financial Advisory Committee, definitions, and the repeal of DPH regulations, which take effect upon passage.

The bill establishes new financial reporting requirements for nursing homes. It requires every home to report quarterly to the Department of Social Services (DSS) commissioner on its accounts payable by vendor and days outstanding. If the report indicates a home is experiencing financial distress, the commissioner (1) must obtain its annual audited financial statements and (2) may require the home to report additional financial information, including debt agreements and interim financial statements. If a nursing home is owned by an entity with multiple homes, the commissioner may require the entity to report financial information on any of its homes. The bill also requires him to report to the Nursing Home Financial Advisory Committee (see below) if he finds that a home is in financial distress and may not meet its operating costs.

If, after reviewing the financial information, the DSS commissioner determines that a home's financial condition has changed for the worse, he must notify the DPH commissioner and require the nursing home to report monthly on its cash availability, vendor payment status, and employee payrolls. The DSS commissioner may ask a home to submit additional financial information to make that determination.

The bill establishes criteria for the DSS commissioner to use to evaluate whether a nursing home's financial situation has changed, including:

1. the frequency of Medicaid advances granted in accordance with PA 7-01 JSS;

2. unfavorable ratios of working capital assets to liabilities;

3. a high proportion of accounts receivable or payable for more than 90 days;

4. significant increases in accounts payable, unpaid state or local taxes, state user fees, or payroll related costs;

5. minimal or decreasing equity or reserves;

6. high levels or significant increases in debt and borrowing costs; and

7. significant operating losses for two or more consecutive years.

The bill also requires the DSS commissioner to promptly provide the state comptroller with copies of all information received from these homes and any notices sent to the DPH commissioner.

Currently, nursing homes annually submit financial information to DSS for the purpose of per-diem rate setting. The information they submit includes expenditures, revenue, and balance sheet data. DSS audits this information but does not use it to determine the home's financial viability.

The bill also requires nursing facility management services agencies whose rates DSS sets to report their fiscal year costs to DSS annually by December 31.

The bill allows the comptroller, or her designee, to examine and audit financial and other related records of nursing homes and nursing facility management services agencies. It requires these entities to maintain their records on site and make them available to the comptroller, or her designee, at all reasonable times.

The comptroller may (1) summon witnesses; (2) obtain necessary books, papers, or documents; and (3) administer oaths to witnesses. She may also ask the attorney general to petition the Superior Court to obtain any court orders necessary to conduct an examination or audit.

Upon completing an audit or examination, the comptroller must report her findings and recommendations, which may include that DSS apply for the court to appoint a receiver.

Under the bill, anyone who knows of any state law or regulation violations, mismanagement or gross waste of funds, or resulting danger to patient safety occurring in any nursing home or nursing facility management services agency may inform the comptroller, or her employee or designee. The comptroller must investigate the matter and, when necessary, report her findings to the DSS and DPH commissioners. If the matter involves a crime, she must report it to the chief state's attorney. The comptroller may not reveal the informant's name without consent, except where it is unavoidable during an investigation. While an investigation is pending, the comptroller may withhold investigation records.

The bill prohibits an officer or employee of a nursing home or nursing home facility management agency from threatening or taking any negative, retaliatory personnel action against an employee for disclosing information to the comptroller. It also prohibits holding an employee liable for any civil damages resulting from such a disclosure.

Whistleblowers who believe they are subjected to, or threatened with, retaliation for their action can notify the comptroller, who must investigate. Employees can bring a civil suit in Superior Court within 30 days of learning of the action or threatened action, but they must first exhaust all available administrative remedies (e. g. , employee appeals process). If the court finds for the employee, it may order back pay, restoration of benefits, reasonable attorneys' fees, and any other damages.

The bill creates a rebuttable presumption that any negative personnel action taken or threatened against an employee who discloses information to the comptroller is retaliatory if it occurs within one year of the disclosure.

Finally, it requires nursing homes and nursing facility management services agencies to post whistleblower protection provisions in the facility so that they are readily accessible to employees.

Current law prohibits an employer from taking negative personnel action against an employee for disclosing to a public body a violation or suspected violation of federal or state laws and regulations or municipal ordinances or regulations. Any employee subject to such retaliation may, after exhausting all administrative remedies, bring a civil suit in Superior Court within 90 days of the violation or final administrative decision, whichever is later. The court may (1) order the employer to reinstate the employee, pay back wages, or reestablish benefits, as the case may be, and (2) award the prevailing party costs and reasonable attorneys' fees. Employers may discipline employees who knowingly make a false report (CGS § 31-51m).

The bill allows the DPH commissioner when conducting an inquiry, investigation, or hearing involving any healthcare institution to (1) issue subpoenas and (2) order the production of books, records, and documents. The law already allows the commissioner to inspect facilities, administer oaths, and take testimony under oath.

The bill also allows the DSS commissioner, or his designee, to examine or audit the financial records of a nursing facility management services agency when the commissioner believes it is necessary or the Office of Health Care Access requests it. It requires nursing homes to maintain all financial information, data, and records of the operation of a nursing facility management services agency for at least 10 years. Current law requires this only for the nursing home itself. The bill does not establish record retention requirements for nursing facility management services agencies.

Finally, when conducting an inquiry, examination, or investigation of a nursing home or nursing facility management services agency, the bill allows the DSS commissioner, or his agent, to (1) issue subpoenas; (2) order the production of books, records, or documents; (3) administer oaths; and (4) take testimony under oath. The commissioner may also ask the attorney general to petition the Superior Court to enforce any subpoena or order.

The bill adds “gross financial mismanagement” as a ground on which the court can appoint a receiver for a nursing home. It defines “gross financial mismanagement” as:

1. having more than 35% of the facility's vendor accounts overdue by more than 120 days,

2. having payment of required employee pension and health insurance contributions that are more than 60 days overdue,

3. maintaining an unfavorable ratio of working capital assets to liability for more than one fiscal year,

4. incurring significant operating losses or maintaining minimal equity or reserves for more than one fiscal year, and

5. any other criteria DSS defines in regulations.

Currently, a court may appoint a receiver for a nursing home if the home (1) is operating without a license or its license has been suspended or revoked; (2) intends to close and has not made adequate arrangements to relocate its residents at least 30 days before closing; (3) experienced or is likely to experience a serious financial loss or failure that jeopardizes the health and safety of its residents; or (4) substantially violates the Public Health Code, other state laws, or Medicaid or Medicare rules.

In addition to appointing a receiver for the home, the bill also allows the court to appoint a receiver for (1) the home's nursing facility management services agency, (2) any owner of the property on which the home is located or the buildings it uses, or (3) any legal entity owned or managed by a related party to the nursing home owner. The bill defines “related party” as an individual or organization related to a nursing home owner through an ability to control, ownership, family relationship or business association that includes individuals related through marriage.

It allows the court to issue any necessary orders to a person or entity that controls or possesses assets necessary for the receiver to fulfill his or her responsibilities.

Current law requires a court, in appointing a receiver for a nursing home, to choose a responsible individual who (1) the DSS and DPH commissioners propose and (2) is a Connecticut-licensed nursing home administrator with substantial experience in operating Connecticut nursing homes. The bill allows the court to appoint an unlicensed person if the individual has other experience and education the court deems satisfactory.

By law, a court may require the DPH commissioner to pay a nursing home receiver's fees if it determines that the home's assets are insufficient and no other payment source is available. The state has a claim on the home's assets for these payments. The bill gives the state a claim for any advance payments the state makes after the receiver's appointment. It adds these costs to the requirement that the claims for receiver's fees have priority over all other creditors' claims, but removes the limitation that these claims have priority to the extent allowed by state or federal law.

The bill adds to the required information an applicant must submit to DPH in order to obtain a nursing facility management services certificate. It defines a “nursing facility management services agency” as an individual or entity that provides services to a nursing facility to manage the operations of the facility, including the provision of care and services.

It requires an applicant to provide the names of (1) its officers, directors, trustees or managing and general partners and (2) anyone having 10% or more beneficial ownership interest in the applicant and a description of their relationship to the applicant. If the applicant is an out-of state corporation, it must also provide a certificate of good standing from the agency in that state that oversees corporations.

Current law requires an applicant to provide only its name and business address and indicate whether it is an individual, partnership, corporation, or other legal entity.

The bill requires that each individual listed above, instead of just the applicants, sign the affidavits that current law requires applicants to submit disclosing the following:

1. any matter in which the person was convicted of or pleaded nolo contendere to a felony charge, or was held liable or enjoined in a civil action, if the felony or civil action involved fraud, embezzlement, fraudulent conversion, or misappropriation of property or

2. whether the person (a) has, within the past five years, had any state or federal license or permit suspended or revoked as a result of a government action related to heath care or business activity, including actions affecting the operation of a nursing, continuing care, or residential care home in Connecticut or elsewhere or (b) is subject to a current injunction, restrictive, or remedial court order at the time of the application.

The bill requires an applicant to disclose the location and description of any out-of-state nursing home in which it provides management services currently or provided such services in the past five years.

The bill adds two conditions under which DPH may wholly or partially refuse to issue or renew a certificate. It can deny certification to an applicant that provided services in an out-of-state nursing home that showed substantial noncompliance with that state's applicable laws and regulations. And it can deny an applicant certification to provide services at specific nursing homes that show substantial noncompliance with state laws and regulations other than the Public Health Code. The law already permits such denial for substantial noncompliance with the code. The bill requires agencies to submit information in their renewal applications showing that the homes they serve comply with these requirements.

The bill allows DPH to conduct an inquiry or investigation concerning the issuance or renewal of a nursing facility management services certificate.

It also permits DPH, when the attorney general advises it, to conduct an investigation and seek an injunction or other action against an uncertified nursing facility management services agency. Current law allows this for unlicensed health care institutions.

Under current law, if DPH finds substantial noncompliance with the certification requirements, the commissioner can initiate disciplinary action against an agency. The bill permits DPH to take disciplinary action if it finds that an out-of-state nursing home for which the agency has provided services has substantially failed to comply with that state's applicable laws and regulations.

The bill also allows the commissioner to impose a civil penalty on the management services agency of up to $ 15,000 per violation for any class A or class B violation that occurs at a nursing home at which it provides management services. (A class A violation is one that presents an immediate danger of death or serious harm to a nursing home patient; a class B violation is one that presents a probability of death or serious harm. ) If the fine is not paid within 15 days, or 15 days after a final Superior Court judgment on an appeal, the DPH commissioner must notify the DSS commissioner, who may immediately withhold the amount of the civil penalty from the nursing home's next Medicaid payment.

The bill also allows the DPH commissioner to impose a civil penalty of up to $ 1,000 per day against an individual or entity operating without a certificate.

The bill establishes the following restrictions on rent, loans, and management fees a nursing home pays. It:

1. prohibits a property owner related to a nursing home from setting payments for rent or property improvements that exceed the fair rental allowance DSS sets for the home;

2. requires a nursing home owner to use the proceeds of a loan guaranteed with nursing home assets solely for the home's operation and improvement; and

3. prohibits a certified nursing facility management services agency related to a nursing home owner from being paid fees, including expenses from a facility for which it provides services, that exceeds the management fee DSS sets for the home.

The bill defines “related party” as an individual or organization related to a nursing home owner through an ability to control, ownership, family relationship, business association, including individuals related through marriage.

The bill allows the DPH commissioner to take certain enforcement actions for violations, including revoking or suspending the home's license, restricting its acquisition of other facilities, and imposing a civil penalty of up to $ 25,000 for loan and rental payment violations and $ 15,000 for management fee violations.

The bill requires a nursing home to apply to DSS for a CON whenever a transfer of its ownership or control is proposed, not just when this occurs before the home is first licensed. Because of the current moratorium on new nursing home beds, entities can assume ownership of existing beds only through such a transfer. Therefore, DSS is not currently issuing CONs for such transfers.

The bill applies to all proposed transfers the current requirement that a CON applicant submit a letter of intent to DSS before submitting the CON application. It consequently extends to any home proposing an ownership or control transfer the current requirement that it notify the Office of the Long Term Care Ombudsman that it has submitted a letter of intent. It exempts all proposed transfers from the requirement that the letter of intent include the capital costs, location, and project description.

The bill adds the following factors for DSS to consider when it reviews a CON application: the applicant's financial viability, the impact of the transfer on the home's payment rate, and the applicant's financial condition. The law already requires DSS to consider the applicant's financial responsibility and business interests and whether it is able to continue to provide needed services.

The law prohibits a nursing home operator who has violated the nursing home laws or had nursing home problems related to Medicare and Medicaid from acquiring a nursing home for five years. It applies to an operator with any civil penalties for nursing home violations imposed by DPH or another state over two years. The prohibition against such acquisition also applies to operators who have received sanctions imposed by Medicare or Medicaid or had their provider agreements for these programs terminated or not renewed.

Under the bill, an application to acquire a nursing home must include whether the potential owner or licensee has had (1) any civil penalties imposed by DPH or another state during the two years before submitting the application, rather than any two-year period or (2) in any state, sanctions, other than civil penalties under $ 10,000, imposed by Medicare or Medicaid. (Current law requires the inclusion of any intermediate sanctions imposed by Medicare or Medicaid. ) The application must also include any additional information the DPH commissioner deems necessary. Under the bill, it appears that if any of these conditions is present, the five-year prohibition on further acquisition continues to apply.

Notwithstanding these limitations, the bill specifies that the DPH commissioner, for good cause, may approve an application to acquire a nursing home by a potential licensee or owner before the five-year period expires.

Current law requires DPH to give its prior approval if a change occurs in ownership or beneficial ownership of 10% or more of the stock of a corporation that owns, operates, or maintains a nursing home. The bill specifies that beneficial ownership includes ownership through any level or relationship of parent and subsidiary corporations and partnerships.

It also requires the owner to provide to DPH the identities of, and any additional required information regarding, individual shareholders, partners or members that have a beneficial interest in the facility.

Under current law, nursing home property or building owners that are not the home's license holder must submit a copy of the lease agreement to DPH indicating the person or entity responsible for maintenance and repair. The lease must be submitted whenever the institution's license is renewed and whenever the property owner changes.

Instead of submitting the lease agreement, the bill requires property or building owners to obtain, biennially, a DPH certificate indicating that the property or building complies with the Public Health Code requirements governing property maintenance and repair. It also requires the nursing home's licensee to comply with the code or any related consent order as a condition of DPH licensure.

The bill prohibits DPH from issuing a certificate unless the owner submits the required information and passes a facility inspection. If its investigation reveals any code violation, DPH may require the owner to sign a consent order. The order must include provisions for a civil penalty of up to $ 1,000 per day that may be assessed against any owner who violates the consent order. And it may include the appointment of a temporary manager to complete any required improvements or repairs. The temporary manager may ask DSS for advanced Medicaid payments to pay for these. The bill allows the attorney general, at the request of the DPH commissioner, to petition the Superior Court for injunctive relief to ensure compliance with the consent order.

The bill requires a nursing home owner to submit an insurance certificate to DPH proving compliance with the following minimum liability insurance requirements:

It requires the commissioner to adopt regulations to establish additional insurance requirements and authorizes him to increase minimum coverage amounts if he determines this is necessary to protect public safety and welfare.

By law, nursing home owners must submit certificates of malpractice and public liability insurance coverage to DPH as a condition of licensure; the law does not specify minimum coverage amounts.

The bill removes three members from the Nursing Home Financial Advisory Committee: the director of the Office of Fiscal Analysis or his designee and one representative each from the nonprofit and for-profit nursing home industries. The DSS and DPH commissioners or their designees, the secretary of OPM or his designee, and the executive director of the Connecticut Health and Educational Facilities Authority (CHEFA) or his designee remain committee members.

The bill requires the committee to recommend appropriate action to the DPH commissioner, as it must currently do for the DSS commissioner, when it receives a report relating to nursing homes' financial solvency and quality of care. And, starting January 1, 2010, it requires the committee to report annually on its activities to the Appropriations Committee, as well as the Human Services, Public Health, and Aging committees.

The Nursing Home Financial Advisory Committee examines nursing homes' financial solvency, supports DSS and DPH's oversight mission, and recommends appropriate action for improving the financial condition of any home in financial distress.

The bill repeals DSS' authority, in conjunction with DPH, to adopt regulations to establish reporting requirements regarding nursing homes' financial solvency and quality of care. These reports are submitted to the Nursing Home Financial Advisory Committee to help determine the financial viability of nursing homes and identify those experiencing financial distress (CGS §17b-4 (c)).

Senate Bill 577 (File 601), reported by the Public Health and Appropriations committees, makes changes to the membership of the Nursing Home Financial Advisory Committee and expands its authority concerning the financial solvency of nursing homes.

Senate Bill 5864, reported by the Public Health and Appropriations committees, makes changes to the CON process for nursing homes.