Topic:
LICENSING; CORPORATIONS; CERTIFICATE OF NEED; NURSING HOMES;
Location:
NURSING HOMES;

OLR Research Report


January 31, 2008

 

2008-R-0084

NURSING HOMES OPERATED BY OUT-OF-STATE CORPORATIONS

By: Nicole Dube, Legislative Analyst II

You asked what statutory requirements an out-of-state corporation must meet in order to operate a nursing home in Connecticut.

The Office of Legislative Research is not authorized to render legal opinions, and this memorandum should not be regarded as one.

SUMMARY

Because a moratorium on additional nursing home beds in the state runs until June 30, 2012, an out-of-state corporation seeking to operate a nursing home in Connecticut could probably do so only by purchasing an existing home. To do so it would have to meet Department of Public Health (DPH) licensure requirements. To acquire an existing nursing home, the corporation must receive prior approval from DPH. To receive approval, the corporation must:

1. submit a written letter of intent to DPH at least 90 days before the transfer in ownership;

2. submit a completed application for licensure, including a certificate of good standing from the secretary of the state in which the corporation is based;

3. submit to a state and federal background check of all its officers and directors;

4. sign a consent order to assure compliance with the Public Health Code;

5. register with the secretary of the state; and

6. pass a facility inspection.

Once it is approved, the corporation completes the purchase and must send DPH a copy of the closing documents.

State law requires a corporation purchasing an existing nursing home to obtain a certificate of need (CON) from the Department of Social Services (DSS) when a transfer of ownership occurs before the facility's initial licensure. The current moratorium on new nursing home beds appears to render this statute moot. Consequently, an out-of-state corporation assuming ownership of an already licensed nursing home would not need to obtain a CON (CGS 17b-354).

If a person previously has not operated a nursing home in Connecticut, DPH can institute an “evaluation period” of up to five years from the time of initial licensure in order to assess the standard of care the home provides. During this evaluation period, the corporation cannot acquire any additional nursing homes (CGS 19a-493a).

DPH LICENSURE REQUIREMENTS

By law, DPH must give its prior approval if a nursing home changes ownership (CGS 19a-493 (2)). An out-of-state corporation seeking to purchase an existing nursing home must submit a letter of intent to DPH at least 90 days before the ownership transfer. In addition, the corporation must apply for a license, submit to a criminal background check of its officers and directors, provide additional information, and formally agree to comply with the Public Health Code. And the home must pass a DPH inspection.

DPH Application for Licensure

A nursing home must be licensed by DPH in order to operate in the state. DPH licenses two types of nursing homes: chronic and convalescent care nursing homes (CCNHS), which provide skilled nursing care, and rest homes with nursing supervision (RHNSs), which provide intermediate care. Nursing homes can be licensed in one or both of these categories. A corporation or other person seeking a nursing home license must provide DPH with the following information (see enclosed application):

1. the owner's name and business address and other related information;

2. if the owner is an out-of-state corporation, a certificate of good standing from the secretary of the state in which it is incorporated;

3. a description of the relevant business experience of the home's owner and administrator and evidence that the administrator has a state license as required under CGS 19a-514;

4. affidavits signed by the owner, the administrator, assistant administrator, medical director, and nursing director disclosing any matter in which the person has been convicted of or has pleaded nolo contendere to a felony charge, or has been held liable or enjoined in a civil action, if the felony or civil action involved fraud, embezzlement, fraudulent conversion, or misappropriation of property;

5. affidavits disclosing whether the owner or others listed above have, within the past five years, had any state or federal license or permit suspended or revoked as a result of an action brought by the government related to heath care business activity, including actions affecting the operation of a nursing, retirement, or residential care home or other related facilities;

6. a statement as to whether the owner is affiliated with a religious, charitable, or other nonprofit organization;

7. the location and description of other existing or proposed health care facilities of the owner;

8. a statement of the anticipated source and application of the funds used to purchase or construct the home, including an estimate of financing and legal expenses and land, marketing and other similar costs which the owner expects to incur; and

9. a description of any mortgage loan or any other financing intended to be used to finance the nursing home (CGS 19a-491a).

DPH may require applicants to submit additional information, including financial statements of the owner. (CGS 19a-491a)

Additional Requirements for Out-of-State Corporations

If an out-of-state corporation applies for a nursing home license, it must supply DPH with the following information in addition to the licensure requirements above:

1. the name and contact information of each stakeholder with a 10% or greater ownership interest in the corporation;

2. a certificate of good standing from the secretary of state of the state of incorporation; and

3. a certificate of authority from the Connecticut Secretary of the State to conduct business in Connecticut.

State and National Background Checks

As part of the licensure application process, all officers and directors of the corporation must complete state and national criminal background checks (CGS 19a-491b).

Nursing Home Inspection

After the completed licensure application is received, DPH conducts a scheduled inspection and investigation to ensure that the facility meets state and federal requirements. DPH must renew nursing home licenses every two years after an unscheduled inspection and the home's submission of required information (CGS 19a-493(b)(1), 19a-498).

Consent Order

As a condition of licensure, applicants seeking to purchase an existing nursing home must sign a consent order providing reasonable assurances of compliance with the Public Health Code (CGS 19a-491).

Approval Order

Once the above steps have been successfully completed, DPH issues the corporation an approval order and the corporation completes the purchase of the nursing home. The corporation must send DPH a copy of the closing documents from the nursing home's sale.

CERTIFICATE OF NEED

Certificate of need is a regulatory tool used to limit expansion of unnecessary technology and health care facility capacity. A CON is a formal statement by a state regulatory agency that a health care facility, medical equipment purchase, or new medical service is needed. The Office of Health Care Access (OHCA) is responsible for most CON reviews in the state. But for nursing homes, DSS is the agency responsible for CON review. (Responsibility for nursing home-related CONs was transferred from OHCA to DSS in l993.)

A moratorium on new nursing home beds was originally instituted in l991 and has been continually extended by the legislature since that time. The current deadline is June 30, 2012. (CGS 17b-354) OLR Report 2007-R-0657 (enclosed) describes the CON moratorium in greater detail.

Transfer of Ownership

When a nursing home's ownership is transferred, state law requires a CON from DSS only when the transfer occurs before the facility's initial licensure (CGS 17b-352). Because of the moratorium on new nursing home beds, out of state corporations can only assume ownership of existing beds. Therefore, DSS is not currently issuing CONs to these corporations.

This rule differs from the CON requirements for certain health care facilities under OCHA. In 1998, the legislature amended the law to require a CON review for the transfer of ownership or control of a health care facility's license at any time, not just before granting the initial license (PA 98-150, CGS 19a-638). The health care institutions, such as nursing homes, under DSS's jurisdiction are exempt from this requirement (CGS 19a-639a).

EVALUATION PERIOD FOR NEW LICENSEES

If a person has not operated a nursing home in Connecticut before, DPH can institute an “evaluation period” of up to five years from the time of initial licensure in order to assess the standard of care the nursing home provides. During this evaluation period, the person is prohibited from acquiring any additional nursing homes (CGS 19a-493a).

HYPERLINKS

OLR Report 2007-R-0657, Nursing Home Bed Con Moratorium, http://cga.ct.gov/2007/rpt/2007-R-0657.htm

State of Connecticut, Department of Public Health, Facility License and Investigations Section, Licensure Application, http://www.ct.gov/dph/lib/dph/facility_licensing_and_investigations/pdf/lic_app_06_ccnh_rhns.pdf

ND:dw