Will it Work? SB 897, Foreclosure Protection for Assisted Living Residents

Signed into law on 9/30/11, the RCFE Residents Foreclosure Protection Act of 2011 will require RCFE licensees to notify, within 2 days, the Department of Social Services, the State Long-Term Care Ombudsman Office, facility residents and their representatives, as well as applicants for potential residence, when their facility is in financial distress. Financial distress under SB 897 is defined as foreclosure, bankruptcy, NSF checks for payroll, and/or payment notices from utility companies. It expands the discretionary authority of the Department of Social Services to issue civil penalties for failure to provide this notification, and to suspend or revoke a facility’s license should the failure to provide such information result in a resident

experiencing transfer trauma from subsequent relocation [Chaptered legislation can be viewed at http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201120120SB897&search_keywords=.  The legislation was in response to a growing number of facilities experiencing financial distress, in particular foreclosure, and closing their doors leaving elders curbside, belongings boxed, waiting for their family to pick them up and pick up the pieces. 

The principle focus of the Act is to provide increased protection for residents and their responsible parties. By notifying concerned parties, these consumers are made aware of the need to investigate the financial stability of the facility under question and afforded adequate time to select another facility and/or plan for the relocation of a resident. All this, with the implicit support of the Department and local ombudsman office. In theory, the enactment of this legislation should be enough to guarantee these said protections. But the truth is, once implemented into the current regulatory climate it may do little to raise the status quo.

Relying on a Self-Reporting System: In California, with state inspections required only once every 5 years, the regulations rely heavily on facilities to self-report. If an incident occurs, it is the licensee’s duty to notify the Department. If worrisome enough, the Department will investigate. Let us not overlook the fact that this very Act is aimed at addressing the irresponsibility of licensees who would (1) find themselves in this predicament and (2) then elect not to disclose such relevant information in a timely manner. In the face of bankruptcy or foreclosure, civil penalties or license suspension may do little to deter the silence of unprincipled licensees. Furthermore, the diminished budgets of both the Department and State Ombudsman program, will allow for minimal follow through when issues are reported and facilities need on-going technical support.

Discretionary Application of the Law: Based on CARR research, the simple declaration that this notification is now required and that consequences may or may not be attached will not be sufficient to guarantee action on the part of licensees. Title 22 is full of declarations, known as laws, which go un-followed by licensees and unenforced by the Department. Additionally, the collection of civil penalties once issued remains a major challenge on the part of the Department (or at least maintaining proof of collection in the public file).

The only way to guarantee the Act’s intended protections within the current system is to fundamentally change the way financial information is provided by licensees (aka facilities). For starters, it should be provided…by every facility…updated every year at the time of license renewal for every consumer to review before placement decisions are made.

Presently, facilities are only required to fill out an LIC401 during the application process stating expected monthly operating revenue and costs. In some cases, the forms in the files are 30 years old. Never again are financials provided to or verified by the Department, unless the facility is a Continuing Care Retirement Community. As it stands now, consumers wanting to verify and investigate the financial viability of facilities will have to ask licensees to provide this information or personally run credit reports. If SB 897 is to truly benefit consumers (i.e. residents) then included in its implementation must be the requirement that licensees disclose financial information annually and that the Department maintains this information in every facility’s public file.

-C. Selder, On  the Soap Box