OLR Bill Analysis

sHB 5358 (as amended by House "A")



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 their rights and advise the provider on resident welfare and interests. The bill also stipulates rights and entitlements for 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 required information providers must (1) file with the Department of Social Services (DSS) and (2) include in the disclosure statement a person entering into a continuing care contract must receive.

The bill extends current penalties for providers that violate continuing care facility laws to also apply to providers who violate the bill's requirements on residents' rights, residents councils, and provider communications.

The bill also makes minor, technical, and conforming changes.

*House Amendment “A” (1) delays the effective date of the bill from July 1, 2015 to October 1, 2015; (2) changes the refund deadline for residents' cancelled contracts from two years from the date the unit is vacated to three years from the date the contract is terminated; (3) eliminates a requirement that DSS approve and supervise providers' remediation plans and establish a process for proposing such plans; and (4) allows, rather than requires, DSS to adopt certain regulations concerning continuing care facilities and contracts.

EFFECTIVE DATE: October 1, 2015


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

1. a voice in all decisions affecting their health, welfare, and financial security;

2. transparency regarding the financial stability of the provider operating the facility;

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

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. This prohibition is subject to the provider's policies and procedures for protecting residents' health and safety. It stipulates that residents receiving 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 also prohibits providers from infringing on a resident's right to participate, as much as he or she 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.)


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. This 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 that body's 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 a 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 the residents council, at least 120 days advance written 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 natural disaster, except that the provider must give reasonable written notice about these projects to the resident council or each resident.

Change in Ownership

The bill requires a provider to notify DSS and residents at all facilities the provider operates at least 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 a provider to give residents at all facilities it operates 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 the 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.


By law, providers cannot offer or enter into continuing-care contracts or complete a change of facility ownership until the provider or proposed owner has registered with DSS by filing, among other things, a disclosure statement. By law, providers must file revised disclosure statements within 150 days of the end of their first fiscal year registered with DSS. The bill also requires providers to file revised disclosure statements at least annually and amend the most recently filed disclosure statement before (1) undertaking major facility construction, renovation, or expansion or (2) changing ownership. By law, providers may also revise disclosure statements if they believe revision is necessary to prevent the disclosure statement from containing a material misstatement or omission.

Financial Information

Current law also requires providers to file certain financial information with DSS and (1) in their initial disclosure statements to potential residents, summarize the financial information and set forth by year any anticipated excess of future liabilities over future revenues with a description of how the provider intends to meet such liabilities; and (2) include the financial information in revised disclosure statements. The bill eliminates the requirements for the summary of the financial information and instead requires much of the financial information in all disclosure statements.

Under current law, such financial information includes the provider's audited and certified financial statements, including a balance sheet for the end of the most recent fiscal year and income statements for the three most recent fiscal years. The bill instead requires disclosure statements to include the provider's financial statements for its two most recent fiscal years. Under the bill, such statements must include (a) a balance sheet, income statement, and statement of cash flow and (b) associated notes or comments to these statements.

Under current law, disclosure statements also include pro forma annual income statements for the facility for the next five years. The bill instead requires pro forma cash flow statements for three years.

The bill requires certain information currently in annual filings to instead be included in the disclosure statement. This includes such things as anticipated resident turnover rates, average age of residents, and health care utilization rates.

Under current law, financial information also includes the facility's current rate schedule. The bill instead requires this information in disclosure statements and specifies that it includes current rate schedules for entrance fees, monthly fees, and fees for ancillary services. It reduces the required disclosure of past entrance fee increases and periodic charges from the previous seven years to the previous five years.

While the bill eliminates the requirement to file a statement of source and application of funds for the five-year period beginning the year of initial filing or, in some cases, subsequent filings, it maintains a requirement that, if the operation of the facility has not yet commenced or construction is to be completed in stages, the provider must include the anticipated source and application of funds involved with such construction or purchase in the disclosure statement.

The bill eliminates a requirement that the provider file the basis for amortization assumptions for its capital costs. It also eliminates an explicit requirement that financial and actuarial projections be determined on an actuarially sound basis using reasonable assumptions for mortality, morbidity, and interest.

The bill also eliminates a requirement that the provider include in disclosure statements obligations assumed by the provider under continuing-care contracts for each facility the provider operates, as calculated on an actuarially sound basis, using reasonable assumptions for mortality and morbidity.

Confirmation of Required Escrow Accounts

Current law requires providers to include verification of the maintenance of required escrow accounts in their revised disclosure statement. The bill instead requires all disclosure statements to include a sworn statement of the applicable escrow agents that (1) such required escrows have been established or maintained or (2) an independent certified public accounting firm has verified such accounts.

Viewing and Copies

Under current law, each provider operating a facility in the state must make financial information and revised disclosure statements filed with DSS available to its residents for viewing during regular business hours. Current law also requires providers to (1) provide them with a copy of the most recently filed financial information upon request and (2) notify residents at least annually of their right to view financial filings and receive a copy of the most recent filing. The bill extends these requirements to apply to all disclosure statements and other information the provider must deliver to prospective residents.

Filing Fees

The bill eliminates a provision requiring the DSS commissioner to prescribe fees of up to $100 for filings, excluding the initial filing. By law, unchanged by the bill, a provider must pay an annual filing fee of $24 for each resident unit it operates to remain registered with DSS.


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 at (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 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 the provider to have received a minimum deposit for all presold units before commencing construction. 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 the latter amount ($10,000 for each presold unit).

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



By law, continuing care facility contracts must specify (1) the terms and conditions under which the contracts may be cancelled by the provider or the resident and (2) the conditions for any refunds. The bill requires that, for contracts entered into after October 1, 2015, any refund be delivered to the resident or his or her estate within three years of the date the contract is terminated or sooner if contractual conditions for the refund have been met.

Periodic Charges and Recurring Fees

By law, the provider must include in the contract the manner in which it may adjust periodic charges or other recurring fees and any limitations of these adjustments. Current law requires that if there are no limits on these adjustments, the provider must include a clear statement that such increases may be made at the provider's discretion. For contracts entered into after October 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.


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 first mortgage or 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 one month, excluding such payments for (1) debt service, rental payments, or lease payments and (2) capital improvements.

The bill 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 requirements.

Under current law, entrance fee or reserve fund escrows may not be pledged as collateral. The bill creates an exception to allow providers to pledge reserve fund escrows as collateral for a first mortgage 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 councils within seven business days of making the request. If DSS determines that a facility is in financial distress, the provider must propose a remediation plan to improve the provider's financial health. Under the bill, the provider must submit the plan to DSS and disclose the plan to the residents council. The provider must file regular reports (quarterly or on an alternative schedule established by DSS) on its progress in meeting its submitted remediation plan with DSS and the residents 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 providers' and resident's concerns, and when appropriate, recommends changes in statutes and regulations.


Current law requires DSS to adopt regulations to carry out provisions related to continuing care facilities and contracts. The bill instead allows, rather than requires, DSS to adopt such regulations, including those concerning resident rights and protections.


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 governs 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.


Human Services Committee

Joint Favorable Substitute