OLR Bill Analysis

sHB 5358

AN ACT ESTABLISHING A BILL OF RIGHTS FOR RESIDENTS OF CONTINUING-CARE RETIREMENT COMMUNITIES.

SUMMARY:

This bill requires continuing care facility providers to give residents advance notice of major construction, ownership change, and increases in monthly service fees. It allows residents of continuing care facilities to form residents councils, defined in the bill as boards elected by residents to advocate for residents' rights and also function as an advisory board to the provider with respect to resident welfare and interests. The bill also stipulates rights and entitlements of continuing care residents.

The bill adds to continuing care contracts new requirements regarding refunds, new construction, and periodic charges and fees.

The bill also decreases the amount of funds continuing care providers must keep in escrow and allows providers to use funds in accounts for mortgage loans, bond indentures, or other long-term financing in their computation of required reserve amounts for the escrow account, in certain circumstances.

The bill also makes several changes to requirements for information providers must file with the Department of Social Services (DSS). It adds many of these existing requirements to the disclosure statement a person entering into a continuing care contract must receive.

EFFECTIVE DATE: July 1, 2015

RESIDENT PROTECTIONS

Under the bill, residents of continuing care facilities are entitled to:

1. a voice in all decisions affecting the resident's health, welfare, and financial security;

2. transparency regarding the financial stability of the provider operating the facility at which the resident resides;

3. timely notification of developments affecting the facility, including (a) ownership changes of the provider operating the resident's facility; (b) change in the financial condition of the provider operating the resident's facility; and (c) construction and renovation at the facility;

4. independence in decisions about medical care and assisted living services; and

5. reasonable accommodations for persons with disabilities.

The bill prohibits providers from infringing upon a resident's right to obtain treatment, care, and services, including home health and hospice care, from those providing health care who are not under contract or affiliated with the provider, subject to the provider's policies and procedures for protecting the resident's health and safety. The bill stipulates that residents getting assisted living or skilled nursing services are entitled to all rights and protections by law, including the right to refuse medications and treatments. The bill prohibits providers from infringing on a resident's right to participate, as much as the resident is able, in decision making about permanent moves to an assisted living facility or skilled care unit. Providers must inform designated family members of the resident's medical condition and care plan.

The bill requires providers to make reasonable accommodations in accordance with the federal Americans with Disabilities Act and other federal and state laws to ensure that services and notices are accessible and communicated to residents who have hearing loss, low vision, or other disabilities. (By law, these accommodations are already required.)

PROVIDER COMMUNICATION WITH RESIDENTS

The bill requires each provider to develop a process for facilitating communication between residents and the personnel, management, board of directors, and owner of the provider. Such process must include:

1. permitting residents at each facility to form a residents council, defined as a board elected by residents to advocate for residents' rights and function as an advisory board to the provider with respect to resident welfare and interests and

2. allowing residents, including those who serve on the council, to serve as voting members of the provider's board of directors or other governing body if the rules allow for resident membership and the board or governing body approves.

If the provider has no board of directors or similar governing body, or if resident council is not established, then the provider must seek comments from residents before designing or adopting policies affecting its ability to avert financial distress.

The law defines “financial distress” as failure to meet debt service payments, drawing down on debt service reserve, or the issuance of a negative going concern opinion (i.e., a report from an auditor or accountant expressing doubts about the company's ability to stay in business).

Major Construction

The bill also requires providers to give residents, individually or through their council, at least 120 days advance notice of any major construction, modification, renovation, or expansion project. The notice must include at least:

1. a project schedule and areas to be impacted,

2. funding needed for the project,

3. financing plans,

4. the expected amount of debt to be incurred, and

5. projected income from the project.

Under the bill, if the provider plans to use any incurred debt to fund a project at a location other than the facility, the provider must hold at least one meeting with residents to discuss the project and advise them in writing of any impact on their monthly service fee. Under the bill, these notice requirements do not apply to immediate renovation or construction necessary to address a public safety or health issue or related natural disaster, except that the provider must provide reasonable written notice of such projects to the resident council or each resident.

Change in Ownership

The bill requires providers to notify DSS and residents at all facilities they operate not less than three months before any changes in ownership. The bill allows DSS to excuse providers from this requirement on a case-by-case basis, if reasonable written notice of the ownership change is also provided to each resident council or, if no resident council exists, to each resident.

Monthly Service Fee Increases

The bill requires providers to provide residents at all facilities they operate at least 30 days advance written notice of increases in any monthly service fees charged to residents, along with an explanation for such increases and an opportunity for dialogue and comments from residents concerning such increases.

Resident Satisfaction Surveys

By January 1, 2016, and at least every two years thereafter, the bill requires providers to (1) conduct resident satisfaction surveys at each facility (2) make survey results available to the facility's resident council (or to each resident if there is no council), and (3) post a copy of the results at a conspicuous location at each facility.

PROVIDER REGISTRATION WITH DSS

By law, providers must register with DSS by filing a disclosure statement (see next section), financial information, and a sworn statement on required escrows. Under the bill, provider registration with DSS remains effective unless the provider (1) withdraws or (2) fails to file documents required as part of its disclosure statement within 150 days of the end of the first fiscal year in which it registers. The bill requires providers to file (1) revised disclosure statements annually with DSS and (2) a narrative describing any material differences between the pro forma income and cash flow statements and the actual results of operations during the most recently concluded fiscal year.

Under the bill, providers may revise their previously filed disclosure statement at any time if they believe revision is needed to prevent the statement from containing a material misstatement of fact or omitting required information. Under the bill, DSS must only deem the most recently filed disclosure statement as current. The bill requires facilities to amend the most recently filed disclosure statement prior to undertaking major facility reconstruction, renovation or expansion, or ownership change in order to avoid misstatement or omission of required information.

DISCLOSURE STATEMENT REQUIREMENTS

Current law requires providers operating facilities in the state to:

1. file with DSS certain financial and actuarial information for each of their facilities with DSS;

2. make this information available to residents for viewing during regular business hours and, upon request, provide residents with a copy of the provider's most recent filing; and

3. notify each resident, at least annually, of the right to view the filings and get a copy of the most recent filing.

The bill instead requires much of this information to be included in the provider's disclosure statement, which, under the bill, must also be filed with DSS. The bill requires that providers (1) make information filed with DSS as part of the disclosure statement available to residents for viewing during regular business hours and, upon request, provide residents with a copy of the provider's most recent filing; and (2) notify each resident, at least annually, of the right to view disclosure statement filings and right to a copy of the most recent filing. By law, providers must deliver the disclosure statement to prospective residents before executing a contract or transferring money or property to a provider by or on behalf of a prospective resident.

Rate Schedules and Fees

Current law requires providers to file the facility's current rate schedule and its occupancy rates with DSS. The bill instead requires the disclosure statement to include the facility's current rate schedules for entrance fees, monthly fees, fees for ancillary services, and current occupancy rates.

The bill reduces, from seven to five years, the record of past increase of entrance fees and periodic charges required in the disclosure statement.

Financial Information

Current law requires the disclosure to include audited and certified financial statements of the provider, including a balance sheet as of the end of the most recent fiscal year and income statement for the three most recent fiscal years, or shorter period if the provider has existed for less than three years. The bill eliminates those requirements and instead requires the disclosure statement to include the provider's financial statements, including a balance sheet, income statement, and statement of cash flow, associated notes, or comments to these statements, audited by an independent certified public accounting firm for the two most recent fiscal years (or shorter time, if provider has existed less than two years).

Current law requires the facility to file with DSS financial statements, including certified current balance sheets and certified income and pro forma statements for the next five years. Current law also requires the disclosure statement to include pro forma annual income statements for the facility for the next five fiscal years. The bill eliminates those requirements and instead requires the disclosure statement to include pro forma cash flow statements for the facility for the next three fiscal years.

Current law requires providers to file with DSS the (1) number of healthcare admissions per year, (2) days of care per year, and (3) number of permanent transfers. The bill instead requires this information in the disclosure statement as part of a summary of projections used in the assumptions for the pro forma statements. The bill similarly moves to the disclosure statement summary information on anticipated resident turnover rates, average age of residents, and health care utilization rates. But the bill removes from it explicit requirements (1) for current residential turnover rates, (2) that average age information is for the next five years, and (3) that healthcare utilization rates include admission rates and days per 100 residents by level of care.

The bill eliminates a requirement that the provider provide a statement of the source and application of funds for the five-year period beginning when it registers with DSS. It also removes a requirement to include in the disclosure statement a summary of this information that sets forth by year any anticipated excess of future liabilities over future revenues and describes how the provider plans to meet such liabilities. The bill also eliminates a requirement that the provider file with DSS a basis for amortization assumptions for its capital costs.

The bill requires the disclosure statement to include a sworn statement by the applicable escrow agents stating that required escrows have been established and maintained or an independent certified accounting firm has verified such escrow accounts.

The bill eliminates a requirement that the disclosure statement include, for each facility operated by the provider, the total actuarial present value of prepaid healthcare obligations assumed by the provider under continuing-care contracts as calculated on an actuarially sound basis using reasonable assumptions for mortality and morbidity.

REQUIREMENTS BEFORE CONSTRUCTION

For providers that have not yet begun constructing facilities, the law prohibits construction from beginning until a minimum number of living units have been presold. Current law sets the minimum number to at least (1) one-half of the units in the facility or (2) if the construction is to be completed in stages, one-half of the units in the designated part of the planned facility that show financial feasibility. Under the bill, the minimum number is at least (1) one-half of the units in the facility or (2) 50% of any designated part or parts thereof as determined by DSS. The bill eliminates the (1) requirement that such units evidence feasibility through a written notice from the DSS commissioner stating that the provider has filed proof of committed construction financing or other documentation of financial feasibility deemed sufficient by the commissioner.

The law also requires that the provider has received a minimum deposit for all presold units. Under current law, the minimum deposit is the lesser of 5% of the entrance fee per unit for all presold units or $10,000 per unit for all presold units. The bill instead requires a minimum of $10,000.

Under the bill, these new requirements apply to contracts entered into after July 1, 2015.

ADDITIONAL CONTRACT SPECIFICATIONS

Refunds

By law, continuing care facility contracts must specify the terms and conditions under which the contracts may be cancelled by the provider or the resident, and the conditions for any refunds. The bill requires that, for contracts entered into after July 1, 2015, any refund must be delivered to the resident or his or her estate within two years from the date the unit is vacated or sooner if contractual conditions for such refund have been met.

Periodic Charges and Recurring Fees

By law, the provider must include in the contract the manner in which the provider may adjust periodic charges or other recurring fees and any limitations of such adjustments. Current law requires that if there are no limits on such adjustments, the provider must include a clear statement that such increases may be made at the provider's discretion. For contracts entered into after July 1, 2015, the bill instead prohibits providers from increasing periodic charges or other recurring fees without providing the resident with 30 days advance written notice.

ESCROW REQUIREMENTS AND FINANCIAL DISTRESS

Connecticut Place of Business Requirement

By law, providers must establish an entrance fee escrow with a bank or trust company as escrow agent before soliciting or entering into any continuing care contract. Current law requires that if a prospective resident is a Connecticut resident when signing the contract, the bank or trust must be one that has its principal place of business in Connecticut. The bill instead requires all providers to use banks or trusts with a place of business in Connecticut.

Funds in Escrow and Reserve Requirement Calculations

The bill decreases the required amount providers must maintain in escrow. Current law requires providers to maintain enough funds in escrow to cover all principal and interest, rental, or lease payments due during the next 12 months on account of any mortgage loan or any other long-term financing of the facility. The bill decreases this requirement to six months. By law, the provider must also have enough in escrow to cover the total cost of operations of the facility for a one-month period, excluding such payments for debt service, rental payments, or lease payments.

The bill also allows providers to use funds in accounts for mortgage loans, bond indentures, or other long-term financing in their computation of required reserve amounts, provided such funds are available to make payments when operating funds are insufficient for these purposes. The bill also allows providers to apply cash amounts held pursuant to requirements for such loans, indentures, or financing toward the provider's computation of the required operating reserve amount. Under the bill, DSS may accept the terms or covenants regarding establishment or maintenance of reserve or escrow funds or financial ratios associated with such loans, indentures, or other long-term financing as an alternative to reserve provisions.

By law, entrance fee escrows may not be pledged as collateral or subordinated to other loans or commitments of any kind. The bill creates an exception to allow providers to pledge reserve fund escrows as collateral for a first mortgage loan or other long-term financing obligation of the facility.

Financial Distress and Remediation Plan

Under the bill, if a provider seeks modification, waiver, or extension of any of its material financial covenants or material payment terms under a mortgage loan, bond indenture, or other long term financing agreement, the provider must report such requests in writing to the DSS commissioner and provide a copy to the applicable residents council of the facility or facilities operated by the provider in the state, within seven business days of making the request. Under the bill, if DSS determines that a facility is in financial distress, the provider of that facility must propose a remediation plan to improve the provider's financial health. Under the bill, the provider must submit the plan for DSS approval and supervision and must disclose the plan to residents. The provider must file regular reports (quarterly or on an alternative schedule established by DSS) on its progress in meeting its approved remediation plan with DSS and the residents council.

ADVISORY COUNCIL

The bill requires the Advisory Committee on Continuing Care to meet by August 1, 2015, (though the bill is not effective until October 1, 2015) and quarterly thereafter. It adds to the committee a DSS designee who must report to the DSS commissioner after every meeting on actions taken and recommendations made at the meeting.

By law, the committee assists continuing-care staff in its review and registration of functions and reports to the commissioner on developments in the field, any special problems associated with continuing care and concerns of providers and residents, and when appropriate, recommends changes in statutes and regulations.

BACKGROUND

Continuing-Care Contract

By law, a continuing-care contract is an agreement in which the provider furnishes a person care and shelter in a facility or care at home with the right to future access to care and shelter in a facility and medical or nursing services or other health-related benefits for the life of a person or for a period in excess of one year. By law, the agreement is to care for a person not related to the provider and requires a present or future transfer of assets or an entrance fee in addition to or instead of periodic charges.

Continuing Care Provider

By law, a continuing care provider is any person, corporation, limited liability company, business trust, trust, partnership, unincorporated association or other legal entity, furnishing care and shelter in a facility or care at home with the right to future access to care and shelter in a facility and other services under a continuing-care contract.

COMMITTEE ACTION

Human Services Committee

Joint Favorable Substitute

Yea

16

Nay

0

(03/24/2015)