California Legislative Update Part II: Upcoming Changes for Health Facilities

Governor Gavin Newsom signed 997 bills into law in 2022, including a substantial number relating to health care. In Part II of our legislative update, we summarize many of the laws relevant to health facilities, a number of which will go into effect January 1, 2023.

Long Term Care Facilities

AB 1502: Skilled Nursing Facility Ownership Management and Reform Act of 2022

Owners and operators of skilled nursing facilities (SNFs) expecting to engage in transactions or make other changes to operations and governance should consult counsel as soon as possible regarding the reforms that will go into effect next year. Under existing law, changes of ownership in a freestanding SNF require a new California license and changes to information provided on the licensing application (e.g., changes to administrator and principal officers) require notice to the California Department of Public Health (CDPH). Beginning July 1, 2023, significant reforms will become effective for changes of ownership, changes of control, and changes of information related to definitions, management, time frames, application requirements, and eligibility for licensure, among others.

While the legislation codifies some existing requirements imposed through the application process, key changes include (but are not limited to):

• Applicants that own, operate, or manage 10% or more of SNFs statewide will be automatically disqualified from receiving a new SNF license, unless CDPH grants an exception.
• Interim or longer term management agreements during changes of ownership processing are prohibited unless approved by CDPH due to exigent circumstances.
• A new license is required for certain changes to ownership, operations, or management, including but not limited to:
  • Entering into interim or longer-term management agreements where operational control or management responsibilities are transferred from the owner or licensee to a new entity;
  • Entering into an agreement with an entity or person that will make financial decisions for the facility, directly or control aspects of patient care and quality within the facility, or make hiring, firing, supervision, and direction of direct care staff on behalf of a licensee;
  • Transferring, purchasing, or selling any direct or indirect ownership interest in a SNF of 5% or more;
  • Selling or transferring a licensed SNF; and
  • Leasing all or part of a SNF.
• Licensing applications must be submitted to CDPH at least 120 calendar days prior to acquiring, operating, establishing, managing, conducting, or maintaining a SNF.
• Existing licensees must report plans to relinquish a license (e.g., a transaction that will result in new license holder) to CDPH 120 calendar days prior to the anticipated change. Current licensees may not relinquish their license until the new licensee is approved.
• Notice of any change to licensing information on file with CDPH must be provided within 10 days unless a shorter time is specified.
• CDPH has 120 calendar days from receipt of a complete licensing application to make a decision, plus another 60 days if the process cannot be completed due to extenuating circumstances.
• If agreements and transactions do not go through after an application is filed, the license holder must notify CDPH within 10 days of the event terminating the sale, transfer, or change, including, but not limited to, the end of contract negotiations or a transaction not closing escrow.

The initial version of the bill introduced in 2021 has gone through several changes, including the removal of provisions requiring public comment on new application forms, lighter suitability criteria for operators, and weaker penalties than were included in the original legislation. Some patient advocacy organizations have criticized these revisions, arguing that they will ultimately limit the effectiveness of the law.

Still, the banning of interim and long term management agreements is significant. These type of arrangements allow a prospective licensee or management company to operate while facilities’ applications are pending. However, there were never any regulatory time frames on what constituted “interim,” and due to a backlog at the CDPH that includes pending applications submitted in 2016, these agreements have essentially resulted in the unlicensed (though legal) operation of SNFs in the state on a quasi-permanent basis. During the COVID-19 pandemic, concerns about the health and safety of residents residing in SNFs operating under these interim arrangements became a particularly contentious political issue. While the legislation may be aimed towards addressing these safety concerns, the extent to which CDPH has the resources to process applications within the regulatory time frames without having the backstop of interim arrangements is unclear. Entities involved in the sale or purchase of SNFs in the state will no longer be able to rely on these interim arrangements to close transactions, and will need to keep considerations about timing top of mind. 

AB 895: Certain Long Term Care Facilities Must Provide Notice with Ombudsman Contact

Effective January 1, 2023, SNFs and intermediate care facilities (collectively, Facilities) must provide to a prospective resident (or their representative) prior to or at the time of admission a written notice (which may be incorporated into the admission agreement) that includes the telephone number, internet website address, and email address for the local long-term care ombudsman and links to CDPH’s licensing and certification internet website, the California Health Facility Information Database (Cal Health Find) page, and CalLongTermCareCompare.org. The notice also must state that the ombudsman is intended as a resource for both of the following purposes:

• Accessing additional information regarding resident care at the facility.
• Reporting resident care complaints.

In addition, Facilities’ grievance forms must include contact information for the local long-term care ombudsman and the CDPH, and instructions on how to file a grievance with both entities.

AB 2511: Skilled Nursing Facilities Must Have Alternative Power Sources

By no later than January 1, 2024, SNFs must have an alternative source of power (e.g., emergency generators using fuel, large capacity batteries, and renewable electrical generation facilities) sufficient to (at a minimum) maintain a safe temperature for residents and availability of life-saving equipment and oxygen-generating devices for no fewer than 96 hours during any type of power outage.

AB 1907: Skilled Nursing Facility Inspection Timelines Extended

In addition to making non-substantive updates, the new law extends the maximum period between inspections of SNFs by the CDPH from two years to 30 months.

Hospitals

AB 2096: More Flexibility for Chemical Dependency Recovery Hospitals

Existing law requires that a chemical dependency recovery hospital (CDRH), which is licensed to provide the most comprehensive of chemical dependency services, be located in one of three approved building types: general acute care hospital (GACH), acute psychiatric hospital (APH), or freestanding licensed facility. The new law clarifies that chemical dependency services may be provided in a freestanding facility, within a hospital building that only provides chemical dependency recovery services, or within a distinct part of a hospital. It also clarifies that the flexible construction approach (e.g. lack of seismic safety requirements) applies to all three permissible facility types and specifies that a chemical dependency recovery service may be provided within a hospital building that has been removed from general acute care use.

Among other things, the new law requires that all beds in a CDRH are designated for chemical recovery services and that the beds be used exclusively for alcohol and/or drug dependency treatment. It also allows for GACH and APH facilities to provide chemical dependency recovery services as a supplemental service (which must be a distinct part of the facility) without requiring a separate license.  

AB 1394: General Acute Care Hospitals Must Screen for Suicidal Ideation and Behavior

No later than January 1, 2025, GACHs must screen patients 12 years of age and older for risk of suicidal ideation and behavior. Currently validated or evidence-based screening tools and suicide risk assessment tools recommended by The Joint Commission may serve as a model. Written policies and procedures must be adopted that:

• Identify, as part of a medical screening, a patient’s risk for suicidal ideation and behavior.
• Document in the medical record a patient’s risk for suicidal ideation and behavior.
• Provide to a patient who exhibits a sign of a risk for suicidal ideation and behavior a current referral list of private and public community agencies that provide, or arrange for, the evaluation, counseling, and care of persons experiencing a risk of suicidal ideation and behavior, including, but not limited to, hotlines and locally available mental health services.
• Designate the licensed staff to be responsible for the implementation of screening policies and procedures.

SB 864: General Acute Care Hospitals Drug Screening Must Include Fentanyl

Effective January 1, 2023 through January 1, 2028 if a GACH performs a urine drug screening to assist in diagnosing the patient’s condition, it must include fentanyl testing.

AB 1882: General Acute Care Hospitals Must Provide Notice of Non-Compliance with Upcoming Seismic Safety Standards

Before January 1, 2024, GACH owners that do not substantially comply with the seismic safety regulations or standards (Non-Compliant Hospitals) must post in any lobby or waiting area generally accessible to patients or the public a notice provided by the department that the hospital is not in compliance with the seismic safety requirements that the hospital is required to meet by January 1, 2030, until the seismic requirements are met. The content of the notices will be developed by the Department of Health Care Access and Information (HCAI) by no later than January 1, 2023.

Beginning no later than January 1, 2024, Non-Compliant Hospitals will also be required to update HCAI and other individuals and agencies on an annual basis regarding the structural performance category (SPC) ratings of the buildings (which range from SPC 1 for buildings that may be at risk of collapse to SPC 5 for buildings reasonably capable of providing services to the public following a strong earthquake) and the services provided in each hospital building on the hospital campus.

Pharmacies

SB 872: Cities and Counties May Operate Mobile Pharmacies

Existing law allows for temporary use of a mobile pharmacy under limited circumstances. The new law authorizes a county, city and county, or special hospital authority (Local Authority) to operate a mobile unit to provide prescription medication within its jurisdiction to individuals without fixed addresses and certain other patients of limited means (e.g., Medi-Cal beneficiaries). The mobile unit may dispense medications that are not controlled substances pursuant to a valid prescription, including those issued by a physician who practices in the mobile unit, if specific requirements are met.

Hospice

AB 1852: Hospices May Use Automated Drug Delivery Systems

Effective January 1, 2024, licensed hospice facilities may use automated drug delivery systems which collect, control, and maintain all transaction information to accurately track the movement of drugs into and out of the system for security, accuracy, and accountability purposes, including automated unit dose systems.

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