citation: HSC § 1787

text:
(a) All continuing care contracts shall be in writing and shall contain all the information required by Section 1788.

(b) All continuing care contract forms, including all addenda, exhibits, and any other related documents, incorporated therein, as well as any modification to these items, shall be approved by the department prior to their use.

(c) The department shall approve continuing care contract forms that comply with this chapter. The requirements of this chapter and Chapter 3.2 (commencing with Section 1569) shall be the bases for approval by the department. To the extent that this chapter conflicts with Chapter 3.2 (commencing with Section 1569), this chapter shall prevail.

(d) A continuing care contract approved by the department shall constitute the full and complete agreement between the parties.

(e) More than one continuing care contract form may be used by a provider if multiple program options are available.

(f) All text in continuing care contract forms shall be printed in at least 10-point typeface.

(g) A clearly legible copy of the continuing care contract, executed by each provider named on the provisional certificate of authority or the certificate of authority, the resident, and any transferor, shall be furnished with all required or included attachments to the resident at the time the continuing care contract is executed. A copy shall also be furnished within 10 calendar days to any transferor who is not a resident.

(h) The provider shall require a written acknowledgment from the resident (and any transferor who is not a resident) that the executed copy of the continuing care contract and attachments have been received.

(i) The continuing care contract shall be an admissions agreement for purposes of the residential care facility for the elderly and long-term health care facility requirements and shall state the resident’s entitlement to receive these levels of care. The continuing care contract may state the entitlement for skilled nursing care in accordance with the provisions of law governing admissions to long-term health care facilities in effect at the time of admission to the skilled nursing facility. The parties may agree to the terms of nursing facility admission at the time the continuing care contract is executed, or the provider may present an exemplar of the then-current nursing facility admission agreement and require the resident to execute the form of agreement in effect at the time of admission to the nursing facility. The terms shall include the nursing fee, or the method of determining the fee, at the time of the execution of the continuing care contract, the services included in and excluded from the fee, the grounds for transfers and discharges, and any other terms required to be included under applicable law.

(j) Only the skilled nursing admission agreement sections of continuing care contracts which cover long-term health care facility services are subject to Chapter 3.95 (commencing with Section 1599.60). The provider shall use a skilled nursing admission nursing agreement that complies with the requirements of Chapter 3.95 (commencing with Section 1599.85).

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 48. Effective January 1, 2001.)

article: 5. Contract

path: 2. LICENSING PROVISIONS > 10. Continuing Care Contracts > 5. Contract


kind: section

code: HSC

citation: HSC § 1788

text:
(a) A continuing care contract shall contain all of the following:

(1) The legal name and address of each provider.

(2) The name and address of the continuing care retirement community.

(3) The resident’s name and the identity of the unit the resident will occupy.

(4) If there is a transferor other than the resident, the transferor shall be a party to the contract and the transferor’s name and address shall be specified.

(5) If the provider has used the name of any charitable or religious or nonprofit organization in its title before January 1, 1979, and continues to use that name, and that organization is not responsible for the financial and contractual obligations of the provider or the obligations specified in the continuing care contract, the provider shall include in every continuing care contract a conspicuous statement that clearly informs the resident that the organization is not financially responsible.

(6) The date the continuing care contract is signed by the resident and, where applicable, any other transferor.

(7) The duration of the continuing care contract.

(8) A list of the services that will be made available to the resident as required to provide the appropriate level of care. The list of services shall include the services required as a condition for licensure as a residential care facility for the elderly, including all of the following:

(A) Regular observation of the resident’s health status to ensure that his or her dietary needs, social needs, and needs for special services are satisfied.

(B) Safe and healthful living accommodations, including housekeeping services and utilities.

(C) Maintenance of house rules for the protection of residents.

(D) A planned activities program, which includes social and recreational activities appropriate to the interests and capabilities of the resident.

(E) Three balanced, nutritious meals and snacks made available daily, including special diets prescribed by a physician as a medical necessity.

(F) Assisted living services.

(G) Assistance with taking medications.

(H) Central storing and distribution of medications.

(I) Arrangements to meet health needs, including arranging transportation.

(9) An itemization of the services that are included in the monthly fee and the services that are available at an extra charge. The provider shall attach a current fee schedule to the continuing care contract. The schedule shall state that a provider is prohibited from charging the resident or his or her estate a monthly fee once a unit has been permanently vacated by the resident, unless the fee is part of an equity interest contract.

(10) The procedures and conditions under which a resident may be voluntarily and involuntarily transferred from a designated living unit. The transfer procedures, at a minimum, shall include provisions addressing all of the following circumstances under which a transfer may be authorized:

(A) A continuing care retirement community may transfer a resident under the following conditions, taking into account the appropriateness and necessity of the transfer and the goal of promoting resident independence:

(i) The resident is nonambulatory. The definition of “nonambulatory,” as provided in Section 13131, shall either be stated in full in the continuing care contract or be cited. If Section 13131 is cited, a copy of the statute shall be made available to the resident, either as an attachment to the continuing care contract or by specifying that it will be provided upon request. If a nonambulatory resident occupies a room that has a fire clearance for nonambulatory residents, transfer shall not be necessary.

(ii) The resident develops a physical or mental condition that is detrimental to or endangers the health, safety, or well-being of the resident or another person.

(iii) The resident’s condition or needs require the resident’s transfer to an assisted living care unit or skilled nursing facility, because the level of care required by the resident exceeds that which may be appropriately provided in the living unit.

(iv) The resident’s condition or needs require the resident’s transfer to a nursing facility, hospital, or other facility, and the provider has no facilities available to provide that level of care.

(B) Before the continuing care retirement community transfers a resident under any of the conditions set forth in subparagraph (A), the community shall satisfy all of the following requirements:

(i) Involve the resident and the resident’s responsible person, as defined in paragraph (6) of subdivision (r) of Section 87101 of Title 22 of the California Code of Regulations, and upon the resident’s or responsible person’s request, family members, or the resident’s physician or other appropriate health professional, in the assessment process that forms the basis for the level of care transfer decision by the provider. The provider shall offer an explanation of the assessment process, which shall include, but not be limited to, an evaluation of the physical and cognitive capacities of the resident. An assessment tool or tools, including scoring and evaluating criteria, shall be used in the determination of the appropriateness of the transfer. The provider shall make copies of the completed assessment to share with the resident or the resident’s responsible person.

(ii) Prior to sending a formal notification of transfer, the provider shall conduct a care conference with the resident and the resident’s responsible person, and, upon the resident’s or responsible person’s request, family members, and the resident’s health care professionals, to explain the reasons for transfer.

(iii) Notify the resident and the resident’s responsible person of the reasons for the transfer in writing.

(iv) Notwithstanding any other provision of this subparagraph, if the resident does not have impairment of cognitive abilities, the resident may request that his or her responsible person not be involved in the transfer process.

(v) The notice of transfer shall be made at least 30 days before the transfer is expected to occur, except when the health or safety of the resident or other residents is in danger, or the transfer is required by the resident’s urgent medical needs. Under those circumstances, the written notice shall be made as soon as practicable before the transfer.

(vi) The written notice shall contain the reasons for the transfer, the effective date, the designated level of care or location to which the resident will be transferred, a statement of the resident’s right to a review of the transfer decision at a care conference, as provided for in subparagraph (C), and for disputed transfer decisions, the right to review by the Continuing Care Contracts Branch of the State Department of Social Services, as provided for in subparagraph (D). The notice shall also contain the name, address, and telephone number of the department’s Continuing Care Contracts Branch.

(vii) The continuing care retirement community shall provide sufficient preparation and orientation to the resident to ensure a safe and orderly transfer and to minimize trauma.

(viii) For disputed transfer decisions, the provider shall provide documentation of the resident’s medical reports, other documents showing the resident’s current mental and physical function, the prognosis, and the expected duration of relevant conditions, if applicable. The documentation shall include an explanation of how the criteria set out in subparagraph (A) are met. The provider shall make copies of the completed report to share with the resident or the resident’s responsible person.

(C) The resident has the right to review and dispute the transfer decision at a subsequent care conference that shall include the resident, the resident’s responsible person, and, upon the resident’s or responsible person’s request, family members, the resident’s physician or other appropriate health care professional, and members of the provider’s interdisciplinary team. The local ombudsperson may also be included in the care conference, upon the request of the resident, the resident’s responsible person, or the provider.

(D) For disputed transfer decisions, the resident or the resident’s responsible person has the right to a prompt and timely review of the transfer process by the Continuing Care Contracts Branch of the State Department of Social Services. The branch of the department shall provide a description of the steps a provider took and the factors a provider considered in deciding to transfer a resident, including the assessment tool or tools and the scoring and evaluating criteria used by the provider to justify the transfer.

(E) The decision of the department’s Continuing Care Contracts Branch shall be in writing and shall determine whether the provider failed to comply with the transfer process pursuant to subparagraphs (A) to (C), inclusive, and whether the transfer is appropriate and necessary. Pending the decision of the Continuing Care Contracts Branch, the provider shall specify any additional care the provider believes is necessary in order for the resident to remain in his or her unit. The resident may be required to pay for the extra care, as provided in the contract.

(F) Transfer of a second resident when a shared accommodation arrangement is terminated.

(11) Provisions describing any changes in the resident’s monthly fee and any changes in the entrance fee refund payable to the resident that will occur if the resident transfers from any unit, including, but not limited to, terminating his or her contract after 18 months of residential temporary relocation, as defined in paragraph (9) of subdivision (r) of Section 1771. Unless the fee is part of an equity interest contract, a provider is prohibited from charging the resident or his or her estate a monthly fee once a unit has been permanently vacated by the resident.

(12) The provider’s continuing obligations, if any, in the event a resident is transferred from the continuing care retirement community to another facility.

(13) The provider’s obligations, if any, to resume care upon the resident’s return after a transfer from the continuing care retirement community.

(14) The provider’s obligations to provide services to the resident while the resident is absent from the continuing care retirement community.

(15) The conditions under which the resident must permanently release his or her living unit.

(16) If real or personal properties are transferred in lieu of cash, a statement specifying each item’s value at the time of transfer, and how the value was ascertained.

(A) An itemized receipt that includes the information described above is acceptable if incorporated as a part of the continuing care contract.

(B) When real property is or will be transferred, the continuing care contract shall include a statement that the deed or other instrument of conveyance shall specify that the real property is conveyed pursuant to a continuing care contract and may be subject to rescission by the transferor within 90 days from the date that the resident first occupies the residential unit.

(C) The failure to comply with this paragraph shall not affect the validity of title to real property transferred pursuant to this chapter.

(17) The amount of the entrance fee.

(18) In the event two parties have jointly paid the entrance fee or other payment that allows them to occupy the unit, the continuing care contract shall describe how any refund of entrance fees is allocated.

(19) The amount of any processing fee.

(20) The amount of any monthly care fee.

(21) For continuing care contracts that require a monthly care fee or other periodic payment, the continuing care contract shall include the following:

(A) A statement that the occupancy and use of the accommodations by the resident is contingent upon the regular payment of the fee.

(B) The regular rate of payment agreed upon (per day, week, or month).

(C) A provision specifying whether payment will be made in advance or after services have been provided.

(D) A provision specifying the provider will adjust monthly care fees for the resident’s support, maintenance, board, or lodging, when a resident requires medical attention while away from the continuing care retirement community.

(E) A provision specifying whether a credit or allowance will be given to a resident who is absent from the continuing care retirement community or from meals. This provision shall also state, when applicable, that the credit may be permitted at the discretion or by special permission of the provider.

(F) A statement of billing practices, procedures, and timelines. A provider shall allow a minimum of 14 days between the date a bill is sent and the date payment is due. A charge for a late payment may only be assessed if the amount and any condition for the penalty is stated on the bill.

(G) A statement that the provider is prohibited from charging the resident or his or her estate a monthly fee once a unit has been permanently vacated by the resident, unless the fee is part of an equity interest contract.

(22) All continuing care contracts that include monthly care fees shall address changes in monthly care fees by including either of the following provisions:

(A) For prepaid continuing care contracts, which include monthly care fees, one of the following methods:

(i) Fees shall not be subject to change during the lifetime of the agreement.

(ii) Fees shall not be increased by more than a specified number of dollars in any one year and not more than a specified number of dollars during the lifetime of the agreement.

(iii) Fees shall not be increased in excess of a specified percentage over the preceding year and not more than a specified percentage during the lifetime of the agreement.

(B) For monthly fee continuing care contracts, except prepaid contracts, changes in monthly care fees shall be based on projected costs, prior year per capita costs, and economic indicators.

(23) A provision requiring that the provider give written notice to the resident at least 30 days in advance of any change in the resident’s monthly care fees or in the price or scope of any component of care or other services.

(24) A provision indicating whether the resident’s rights under the continuing care contract include any proprietary interests in the assets of the provider or in the continuing care retirement community, or both. Any statement in a contract concerning an ownership interest shall appear in a large-sized font or print.

(25) If the continuing care retirement community property is encumbered by a security interest that is senior to any claims the residents may have to enforce continuing care contracts, a provision shall advise the residents that any claims they may have under the continuing care contract are subordinate to the rights of the secured lender. For equity projects, the continuing care contract shall specify the type and extent of the equity interest and whether any entity holds a security interest.

(26) Notice that the living units are part of a continuing care retirement community that is licensed as a residential care facility for the elderly and, as a result, any duly authorized agent of the department may, upon proper identification and upon stating the purpose of his or her visit, enter and inspect the entire premises at any time, without advance notice.

(27) A conspicuous statement, in at least 10-point boldface type in immediate proximity to the space reserved for the signatures of the resident and, if applicable, the transferor, that provides as follows: “You, the resident or transferor, may cancel the transaction without cause at any time within 90 days from the date you first occupy your living unit. See the attached notice of cancellation form for an explanation of this right.”

(28) Notice that during the cancellation period, the continuing care contract may be canceled upon 30 days’ written notice by the provider without cause, or that the provider waives this right.

(29) The terms and conditions under which the continuing care contract may be terminated after the cancellation period by either party, including any health or financial conditions.

(30) A statement that, after the cancellation period, a provider may unilaterally terminate the continuing care contract only if the provider has good and sufficient cause.

(A) Any continuing care contract containing a clause that provides for a continuing care contract to be terminated for “just cause,” “good cause,” or other similar provision, shall also include a provision that none of the following activities by the resident, or on behalf of the resident, constitutes “just cause,” “good cause,” or otherwise activates the termination provision:

(i) Filing or lodging a formal complaint with the department or other appropriate authority.

(ii) Participation in an organization or affiliation of residents, or other similar lawful activity.

(B) The provision required by this paragraph shall also state that the provider shall not discriminate or retaliate in any manner against any resident of a continuing care retirement community for contacting the department, or any other state, county, or city agency, or any elected or appointed government official to file a complaint or for any other reason, or for participation in a residents’ organization or association.

(C) This paragraph does not diminish the provider’s ability to terminate the continuing care contract for good and sufficient cause.

(31) A statement that at least 90 days’ written notice to the resident is required for a unilateral termination of the continuing care contract by the provider.

(32) A statement concerning the length of notice that a resident is required to give the provider to voluntarily terminate the continuing care contract after the cancellation period.

(33) The policy or terms for refunding or repaying a lump sum of any portion of the entrance fee, in the event of cancellation, termination, or death. Every continuing care contract that provides for a refund or repaying a lump sum of all or a part of the entrance fee shall also do all of the following:

(A) Specify the amount, if any, the resident has paid or will pay for upgrades, special features, or modifications to the resident’s unit.

(B) State that if the continuing care contract is canceled or terminated by the provider, the provider shall do both of the following:

(i) Amortize the specified amount at the same rate as the resident’s entrance fee.

(ii) Refund the unamortized balance to the resident at the same time the provider pays the resident’s entrance fee refund.

(C) State that the resident has a right to terminate his or her contract after 18 months of residential temporary relocation, as defined in paragraph (9) of subdivision (r) of Section 1771. Provisions for refunds due to cancellation pursuant to this subparagraph shall be set forth in the contract.

(D) State the provider shall make a good-faith effort to reoccupy or resell a unit for which a lump-sum payment is conditioned upon resale of the unit. No later than July 1, 2017, a provider shall provide notice to all current residents with contracts applicable to this subparagraph regarding the statement required by this subparagraph as a clarification of the resident’s existing contract.

(E) For all contracts with a repayment of all or a portion of the entrance fee conditioned upon the resale of the unit, the provider shall state the average and longest amount of time that it has taken to resell a unit within the last five calendar years.

(34) The following notice at the bottom of the signatory page: “NOTICE”(date)“This is a continuing care contract as defined by paragraph (8) of subdivision (c) or subdivision (l) of Section 1771 of the California Health and Safety Code. This continuing care contract form has been approved by the State Department of Social Services as required by subdivision (b) of Section 1787 of the California Health and Safety Code. The basis for this approval was a determination that (provider name) has submitted a contract that complies with the minimum statutory requirements applicable to continuing care contracts. The department does not approve or disapprove any of the financial or health care coverage provisions in this contract. Approval by the department is NOT a guaranty of performance or an endorsement of any continuing care contract provisions. Prospective transferors and residents are strongly encouraged to carefully consider the benefits and risks of this continuing care contract and to seek financial and legal advice before signing.”

(35) The provider shall not attempt to absolve itself in the continuing care contract from liability for its negligence by any statement to that effect, and shall include the following statement in the contract: “Nothing in this continuing care contract limits either the provider’s obligation to provide adequate care and supervision for the resident or any liability on the part of the provider which may result from the provider’s failure to provide this care and supervision.”

(36) Provisions describing how the provider will proceed in the event of a closure, including an explanation of how the provider will comply with Sections 1793.80, 1793.81, 1793.82, and 1793.83.

(b) A life care contract shall also provide that:

(1) All levels of care, including acute care and physicians’ and surgeons’ services, will be provided to a resident.

(2) Care will be provided for the duration of the resident’s life unless the life care contract is canceled or terminated by the provider during the cancellation period or after the cancellation period for good cause.

(3) A comprehensive continuum of care will be provided to the resident, including skilled nursing, in a facility under the ownership and supervision of the provider on, or adjacent to, the continuing care retirement community premises.

(4) Monthly care fees will not be changed based on the resident’s level of care or service.

(5) A resident who becomes financially unable to pay his or her monthly care fees shall be subsidized provided the resident’s financial need does not arise from action by the resident to divest the resident of his or her assets.

(c) Continuing care contracts may include provisions that do any of the following:

(1) Subsidize a resident who becomes financially unable to pay for his or her monthly care fees at some future date. If a continuing care contract provides for subsidizing a resident, it may also provide for any of the following:

(A) The resident shall apply for any public assistance or other aid for which he or she is eligible and that the provider may apply for assistance on behalf of the resident.

(B) The provider’s decision shall be final and conclusive regarding any adjustments to be made or any action to be taken regarding any charitable consideration extended to any of its residents.

(C) The provider is entitled to payment for the actual costs of care out of any property acquired by the resident subsequent to any adjustment extended to the resident under this paragraph, or from any other property of the resident that the resident failed to disclose.

(D) The provider may pay the monthly premium of the resident’s health insurance coverage under Medicare to ensure that those payments will be made.

(E) The provider may receive an assignment from the resident of the right to apply for and to receive the benefits, for and on behalf of the resident.

(F) The provider is not responsible for the costs of furnishing the resident with any services, supplies, and medication, when reimbursement is reasonably available from any governmental agency, or any private insurance.

(G) Any refund due to the resident at the termination of the continuing care contract may be offset by any prior subsidy to the resident by the provider.

(2) Limit responsibility for costs associated with the treatment or medication of an ailment or illness existing before the date of admission. In these cases, the medical or surgical exceptions, as disclosed by the medical entrance examination, shall be listed in the continuing care contract or in a medical report attached to and made a part of the continuing care contract.

(3) Identify legal remedies that may be available to the provider if the resident makes any material misrepresentation or omission pertaining to the resident’s assets or health.

(4) Restrict transfer or assignments of the resident’s rights and privileges under a continuing care contract due to the personal nature of the continuing care contract.

(5) Protect the provider’s ability to waive a resident’s breach of the terms or provisions of the continuing care contract in specific instances without relinquishing its right to insist upon full compliance by the resident with all terms or provisions in the contract.

(6) Provide that the resident shall reimburse the provider for any uninsured loss or damage to the resident’s unit, beyond normal wear and tear, resulting from the resident’s carelessness or negligence.

(7) Provide that the resident agrees to observe the off-limit areas of the continuing care retirement community designated by the provider for safety reasons. The provider shall not include any provision in a continuing care contract that absolves the provider from liability for its negligence.

(8) Provide for the subrogation to the provider of the resident’s rights in the case of injury to a resident caused by the acts or omissions of a third party, or for the assignment of the resident’s recovery or benefits in this case to the provider, to the extent of the value of the goods and services furnished by the provider to or on behalf of the resident as a result of the injury.

(9) Provide for a lien on any judgment, settlement, or recovery for any additional expense incurred by the provider in caring for the resident as a result of injury.

(10) Require the resident’s cooperation and assistance in the diligent prosecution of any claim or action against any third party.

(11) Provide for the appointment of a conservator or guardian by a court with jurisdiction in the event a resident becomes unable to handle his or her personal or financial affairs.

(12) Allow a provider, whose property is tax exempt, to charge the resident, on a pro rata basis, property taxes, or in-lieu taxes, that the provider is required to pay.

(13) Make any other provision approved by the department.

(d) A copy of the resident’s rights as described in Section 1771.7 shall be attached to every continuing care contract.

(e) A copy of the current audited financial statement of the provider shall be attached to every continuing care contract. For a provider whose current audited financial statement does not accurately reflect the financial ability of the provider to fulfill the continuing care contract obligations, the financial statement attached to the continuing care contract shall include all of the following:

(1) A disclosure that the reserve requirement has not yet been determined or met, and that entrance fees will not be held in escrow.

(2) A disclosure that the ability to provide the services promised in the continuing care contract will depend on successful compliance with the approved financial plan.

(3) A copy of the approved financial plan for meeting the reserve requirements.

(4) Any other supplemental statements or attachments necessary to accurately represent the provider’s financial ability to fulfill its continuing care contract obligations.

(f) A schedule of the average monthly care fees charged to residents for each type of residential living unit for each of the five years preceding execution of the continuing care contract shall be attached to every continuing care contract. The provider shall update this schedule annually at the end of each fiscal year. If the continuing care retirement community has not been in existence for five years, the information shall be provided for each of the years the continuing care retirement community has been in existence.

(g) If any continuing care contract provides for a health insurance policy for the benefit of the resident, the provider shall attach to the continuing care contract a binder complying with Sections 382 and 382.5 of the Insurance Code.

(h) The provider shall attach to every continuing care contract a completed form in duplicate, captioned “Notice of Cancellation.” The notice shall be easily detachable, and shall contain, in at least 10-point boldface type, the following statement:“NOTICE OF CANCELLATION” (date)Your first date of occupancy under this contractis: _____________________________________________“You may cancel this transaction, without any penalty within 90 calendar days from the above date.

If you cancel, any property transferred, any payments made by you under the contract, and any negotiable instrument executed by you will be returned within 14 calendar days after making possession of the living unit available to the provider. Any security interest arising out of the transaction will be canceled.

If you cancel, you are obligated to pay a reasonable processing fee to cover costs and to pay for the reasonable value of the services received by you from the provider up to the date you canceled or made available to the provider the possession of any living unit delivered to you under this contract, whichever is later.

If you cancel, you must return possession of any living unit delivered to you under this contract to the provider in substantially the same condition as when you took possession.

Possession of the living unit must be made available to the provider within 20 calendar days of your notice of cancellation. If you fail to make the possession of any living unit available to the provider, then you remain liable for performance of all obligations under the contract.

To cancel this transaction, mail or deliver a signed and dated copy of this cancellation notice, or any other written notice, or send a telegramto(Name of provider)at(Address of provider’s place of business)not later than midnight of_____________ (date). I hereby cancel this transaction (Resident’s or Transferor’s signature)”

history: (History: Amended by Stats. 2018, Ch. 92, Sec. 135. (SB 1289) Effective January 1, 2019.)

division: 2. LICENSING PROVISIONS

chapter: 10. Continuing Care Contracts

article: 5. Contract


text:
(a) A continuing care contract may be canceled without cause by written notice from either party within 90 days from the date of the resident’s initial occupancy.

(b) For all continuing care contracts, death of the resident before or during the cancellation period shall constitute a cancellation of the continuing care contract under subdivision (a), unless the continuing care contract includes specific provisions otherwise.

(c) The cancellation period and the associated refund obligations shall apply as follows:

(1) To all executed continuing care contracts regarding a unit in a continuing care retirement community that is not an equity continuing care retirement community.

(2) To continuing care contracts executed in conjunction with a purchase of an equity interest from a provider but not to continuing care contracts executed in conjunction with sales of an equity interest by one resident to another.

(d) The following fees may be charged before or during the 90-day cancellation period:

(1) If possession of the living unit in a continuing care retirement community that is not an equity continuing care retirement community is returned to the provider in substantially the same condition as when received, the resident’s only obligations shall be to pay a reasonable fee to cover costs and to pay the reasonable value of services rendered pursuant to the canceled continuing care contract.

(2) Equity project providers may impose a resale fee on sellers. For contracts entered into after January 1, 1996, upon the cancellation of a continuing care contract executed in conjunction with the purchase of an equity interest from the provider, the provider may charge a resale fee not to exceed the excess of the gross resale price of the equity interest over the purchase price paid by the resident or on behalf of the resident for the interest.

(e) No resale fee shall exceed the sum of 10 percent of either the original or resale price of the equity interest and 100 percent of the excess if any, of the gross resale price of the equity interest over the purchase price paid by the resident or on behalf of the resident for the interest if either of the following applies:

(1) The continuing care contract involved the purchase of an equity interest from the provider and is terminated after the cancellation period.

(2) The continuing care contract involved the purchase of an equity interest from another resident and is terminated at any time.

(f) For purposes of this section, “gross resale price” means the resale price before any deductions for resale fees, transfer taxes, real estate commissions, periodic fees, late charges, interest, escrow fees, or any other fees incidental to the sale of real property.

(g) This section may not be construed to limit the provider’s ability to withhold delinquent periodic fees, late charges, accrued interest, or assessments from the sale proceeds, as provided by the continuing care contract or the real estate documents governing the equity continuing care retirement community.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 50. Effective January 1, 2001.)

article: 5. Contract


text:
(a) During the cancellation period, the provider shall pay all refunds owed to a resident within 14 calendar days after a resident makes possession of the living unit available to the provider.

(b) After the cancellation period, any refunds due to a resident under a continuing care contract shall be paid within 14 calendar days after a resident makes possession of the living unit available to the provider or 90 calendar days after death or receipt of notice of termination, whichever is later.

(c) In nonequity projects, if the continuing care contract is canceled by either party during the cancellation period or terminated by the provider after the cancellation period, the resident shall be refunded the difference between the total amount of entrance, monthly, and optional fees paid and the amount used for care of the resident.

(d) If a resident has paid additional amounts for upgrades, special features, or modifications to the living unit and the provider terminates the resident’s continuing care contract, the provider shall amortize those additional amounts at the same rate as the entrance fee and shall refund the unamortized balance to the resident.

(e) A lump-sum payment after termination of a repayable contract, as defined in paragraph (3) of subdivision (r) of Section 1771, shall not be considered to be a refund and may not be characterized or advertised as a refund. The full lump sum owed, including any interest accrued, shall be paid to the resident or the resident’s estate within 14 calendar days after resale of the unit.

(f) (1) Any balance of the lump sum owed that has not been paid to the resident or the resident’s estate within 180 days after termination of a repayable contract shall accrue interest at a rate calculated pursuant to paragraph (2). Any balance of the lump sum owed that has not been paid to the resident or the resident’s estate within 240 days after termination of a repayable contract shall accrue interest at a rate calculated pursuant to paragraph (3). Interest shall continue to accrue annually pursuant to paragraph (4) until the date the full lump sum owed is paid to the resident or the resident’s estate. This subdivision shall apply only to repayable contracts entered into on or after January 1, 2017.

(2) Any amount owed that is not paid to the resident or the resident’s estate within the 180-day period pursuant to paragraph (1) shall accrue simple interest at a rate of 4 percent of the amount owed.

(3) Any amount owed that is not paid to the resident or the resident’s estate within the 240-day period pursuant to paragraph (1) shall accrue simple interest at a rate of 6 percent of the amount owed.

(4) Any amount owed that is not paid to the resident or the resident’s estate within one year after the 240-day period pursuant to paragraph (3) shall accrue interest at a rate of 6 percent, compounded annually.

(5) Until January 1, 2018, this subdivision shall not apply to a project that is in development prior to January 1, 2017, including current repayable agreements, current deposit agreements that contemplate repayable entrance fees, and other projects that have received department approval to market units pursuant to Section 1771.4, or have received issuer, lender, or bond insurer approval to obtain bond financing, or other governmental approval based on a repayable entrance fee option, if the initial contract for the project is entered into on or before January 1, 2018.

(g) Except as otherwise obligated by an equity interest contract, once the unit has been vacated and made available to the provider, the provider shall not make any further charges to the resident or his or her estate or charges against the lump sum owed to the resident or the resident’s estate for purposes of continued monthly payments to the provider or for maintenance or housekeeping on the vacated unit.

(h) Nothing in this section shall be construed to limit or alter any legal remedies otherwise available to a resident or his or her estate.

history: (History: Amended by Stats. 2016, Ch. 112, Sec. 3. (SB 939) Effective January 1, 2017.)

article: 5. Contract


citation: HSC § 1789

text:
(a) A provider shall notify the department and obtain its approval before making any changes to any of the following: its name; its business structure or form of doing business; the overall management of its continuing care retirement community; or the terms of its financing.

(b) The provider shall give written notice of proposed changes to the department at least 60 calendar days in advance of making the changes described in this section.

(c) This notice requirement does not apply to routine facility staff changes.

(d) Within 10 calendar days of submitting notification to the department of any proposed changes under subdivision (a), the provider shall notify the resident association of the proposed changes in the manner required by subdivision (e) of Section 1779.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 52. Effective January 1, 2001.)

article: 6. Reporting and Reserve Requirements

path: 2. LICENSING PROVISIONS > 10. Continuing Care Contracts > 6. Reporting and Reserve Requirements


text:
(a) Before executing a deposit agreement or continuing care agreement, or receiving any payment from a depositor or prospective resident, a provider shall deliver to the other parties in the deposit or continuing care agreement a disclosure statement in the form prescribed by the department.

(b) The department shall issue a disclosure statement form that shall generally require disclosure, at a minimum, of the following information:

(1) General information regarding the provider and the continuing care retirement community, including at a minimum all of the following:

(A) The continuing care retirement community’s name, address, and telephone number.

(B) The type of ownership, names of the continuing care retirement community’s owner and operator, the names of any affiliated facilities, and any direct religious affiliation.

(C) Whether accredited and by what organization.

(D) The year the continuing care retirement community opened and the distance to the nearest shopping center and hospital.

(E) Whether the continuing care retirement community offers life care contracts or continuing care contracts, and whether the continuing care retirement community is single story or multistory.

(F) The number of the continuing care retirement community’s studio units, one bedroom units, two bedroom units, cottages or houses, assisted living beds, and skilled nursing beds.

(G) The continuing care retirement community’s percentage occupancy at the provider’s most recent fiscal yearend.

(H) The form of contracts offered, the range of entrance fees, the percentages of a resident’s entrance fees that may be refunded, and the health care benefits included in contract.

(I) Any age and insurance requirements for admission.

(J) A listing of common area amenities and other services included with the monthly service fee, and a listing of those amenities and services that are available for an additional charge.

(K) The number of meals each day included in the monthly service fee, the number of meals available for an extra charge, the frequency of housekeeping services, and additional cost, if any , for housekeeping services.

(2) Income from operations during the most recent five years for which audited financial statements have been completed, including all of the following:

(A) Operating income (excluding amortization of entrance fee income).

(B) Operating expense (excluding depreciation, amortization, and interest).

(C) Net income from operations.

(D) Interest expense.

(E) Unrestricted contributions.

(F) Nonoperating income or expense, excluding extraordinary items.

(G) Net income or loss before entrance fees.

(H) Net cash-flow from entrance fees, that is the total deposits less refunds.

(3) The name of the lender, outstanding balance, interest rate, date of origination, date of maturity, and amortization period for all secured debt.

(4) Financial ratios for each of the three most recent years for which audited financial statements have been prepared, including all of the following: debt-to-asset ratio, operating ratio, debt service coverage ratio, and days cash-on-hand. The formulas for each ratio shall be determined by the department after consultation with the Continuing Care Advisory Committee.

(5) The average monthly service fees charged during the most recent five years, and the percentage changes in the average from year to year, for each of the following: studio units, one bedroom units, two bedroom units, cottages and houses, assisted living units, and skilled nursing units.

(6) Comments from the provider explaining any of the information included in the disclosure form.

(c) Each provider shall update its disclosure statement at least annually when it completes its annual audited financial statements. Each provider shall file its updated version of the disclosure statement with the department not later than the final filing date for its annual report.

(d) The form prescribed by the department under this section shall be used by providers to comply with the requirements of this section.

history: (History: Added by Stats. 2000, Ch. 820, Sec. 53. Effective January 1, 2001.)

article: 6. Reporting and Reserve Requirements


text:
(a) A provider shall provide the department with written notice at least 90 calendar days prior to closing any transaction that results in an encumbrance or lien on a continuing care retirement community property or its revenues.

(b) The written notice required by this section shall include all of the following:

(1) A description of the terms and amount of the proposed transaction.

(2) An analysis of the sources of funds for repayment of principal and interest.

(3) An analysis of the impact of the proposed transaction on monthly care fees.

(4) An analysis of the impact that the proposed encumbrance would have on assets available for liquid reserves required by Section 1792, and refund reserves required by Section 1792.6.

(c) Within seven calendar days of receipt of notice of proposed changes, the department shall acknowledge receipt of the notice in writing.

(d) Within 30 calendar days following its receipt of the notice, the department shall inform the provider in writing whether additional materials are required to evaluate the transaction.

(e) Within 90 calendar days following its receipt of additional materials, the department shall inform the provider of its approval or denial of the proposed transaction.

(f) Providers shall not execute the proposed financial transaction for which notice has been given pursuant to subdivision (a) without the department’s written authorization unless either the 30-day response period or the 90 calendar day period for the department’s review of the provider’s request has expired without any response by the department.

(g) If the department determines that the proposed financial transaction will materially increase monthly care fees or impair the provider’s ability to maintain required reserves, the department may:

(1) Refuse to approve the transaction.

(2) Record a notice of lien on the provider’s property pursuant to Section 1793.15 after notifying the provider and giving the provider an opportunity to withdraw the planned transaction.

(3) Take both actions and any other action that it determines is necessary to protect the best interests of the residents.

(h) Within 10 calendar days of submitting notification to the department of any proposed encumbrance to the community property, the provider shall notify the resident governing body or association of the proposed encumbrance in the manner required by subdivision (e) of Section 1779.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 54. Effective January 1, 2001.)

article: 6. Reporting and Reserve Requirements


text:
(a) A provider for a continuing care retirement community shall obtain approval from the department before consummating any sale or transfer of the continuing care retirement community or any interest in that community, other than sale of an equity interest in a unit to a resident or other transferor.

(b) The provider shall provide written notice to the department at least 120 calendar days prior to consummating the proposed transaction.

(c) The notice required by this section shall include all of the following:

(1) The identity of the purchaser.

(2) A description of the terms of the transfer or sale, including the sales price.

(3) A plan for ensuring performance of the existing continuing care contract obligations.

(d) The provider shall give written notice to all continuing care contract residents and depositors 120 calendar days prior to the sale or transfer. The notice shall do all of the following:

(1) Describe the parties.

(2) Describe the proposed sale or transfer.

(3) Describe the arrangements for fulfilling continuing care contract obligations.

(4) Describe options available to any depositor or resident who does not wish to have his or her contract assumed by a new provider.

(5) Include an acknowledgment of receipt of the notice to be signed by the resident.

(e) Unless a new provider assumes all of the continuing care obligations of the selling provider at the close of the sale or transfer, the selling provider shall set up a trust fund or secure a performance bond to ensure the fulfillment of all its continuing care contract obligations.

(f) The purchaser shall make applications for, and obtain, the appropriate licenses and a certificate of authority before executing any continuing care contracts or assuming the selling provider’s continuing care contract obligations.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 55. Effective January 1, 2001.)

article: 6. Reporting and Reserve Requirements


text: A provider shall record with the county recorder a “Notice of Statutory Limitation on Transfer” for each community as required by subdivision (aa) of Section 1779.4 and Section 1786.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 56. Effective January 1, 2001.)

article: 6. Reporting and Reserve Requirements


text: Each provider shall obtain and maintain in effect insurance or a fidelity bond for each agent or employee, who, in the course of his or her agency or employment, has access to any substantial amount of funds. This requirement is separate from the bonding requirements of residential care facility for the elderly regulations.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 57. Effective January 1, 2001.)

article: 6. Reporting and Reserve Requirements


citation: HSC § 1790

text:
(a) Each provider that has obtained a provisional or final certificate of authority and each provider that possesses an inactive certificate of authority shall submit an annual report of its financial condition. The report shall consist of audited financial statements and required reserve calculations, with accompanying certified public accountants’ opinions thereon, the reserve information required by paragraph (2), Continuing Care Provider Fee and Calculation Sheet, evidence of fidelity bond as required by Section 1789.8, and certification that the continuing care contract in use for new residents has been approved by the department, all in a format provided by the department, and shall include all of the following information:

(1) A certification, if applicable, that the entity is maintaining reserves for prepaid continuing care contracts, statutory reserves, and refund reserves.

(2) Full details on the status, description, and amount of all reserves that the provider currently designates and maintains, and on per capita costs of operation for each continuing care retirement community operated.

(3) Disclosure of any amounts accumulated or expended for identified projects or purposes, including, but not limited to, projects designated to meet the needs of the continuing care retirement community as permitted by a provider’s nonprofit status under Section 501(c)(3) of the Internal Revenue Code, and amounts maintained for contingencies. The disclosure of a nonprofit provider shall state how the project or purpose is consistent with the provider’s tax-exempt status. The disclosure of a for-profit provider shall identify amounts accumulated for specific projects or purposes and amounts maintained for contingencies. Nothing in this subdivision shall be construed to require the accumulation of funds or funding of contingencies, nor shall it be interpreted to alter existing law regarding the reserves that are required to be maintained.

(4) Full details on any increase in monthly care fees, the basis for determining the increase, and the data used to calculate the increase.

(5) The required reserve calculation schedules shall be accompanied by the auditor’s opinion as to compliance with applicable statutes.

(6) Any other information as the department may require.

(b) Each provider shall file the annual report with the department within four months after the provider’s fiscal yearend. If the complete annual report is not received by the due date, a one thousand dollar ($1,000) late fee shall accompany submission of the reports. If the reports are more than 30 days past due, an additional fee of thirty-three dollars ($33) for each day over the first 30 days shall accompany submission of the report. The department may, at its discretion, waive the late fee for good cause.

(c) The annual report and any amendments thereto shall be signed and certified by the chief executive officer of the provider, stating that, to the best of his or her knowledge and belief, the items are correct.

(d) A copy of the most recent annual audited financial statement shall be transmitted by the provider to each transferor requesting the statement.

(e) A provider shall amend its annual report on file with the department at any time, without the payment of any additional fee, if an amendment is necessary to prevent the report from containing a material misstatement of fact or omitting a material fact.

(f) If a provider is no longer entering into continuing care contracts, and currently is caring for 10 or fewer continuing care residents, the provider may request permission from the department, in lieu of filing the annual report, to establish a trust fund or to secure a performance bond to ensure fulfillment of continuing care contract obligations. The request shall be made each year within 30 days after the provider’s fiscal yearend. The request shall include the amount of the trust fund or performance bond determined by calculating the projected life costs, less the projected life revenue, for the remaining continuing care residents in the year the provider requests the waiver. If the department approves the request, the following shall be submitted to the department annually:

(1) Evidence of trust fund or performance bond and its amount.

(2) A list of continuing care residents. If the number of continuing care residents exceeds 10 at any time, the provider shall comply with the requirements of this section.

(3) A provider fee as required by subdivision (c) of Section 1791.

(g) If the department determines a provider’s annual audited report needs further analysis and investigation, as a result of incomplete and inaccurate financial statements, significant financial deficiencies, development of work out plans to stabilize financial solvency, or for any other reason, the provider shall reimburse the department for reasonable actual costs incurred by the department or its representative. The reimbursed funds shall be deposited in the Continuing Care Contract Provider Fee Fund.

history: (History: Amended by Stats. 2009, Ch. 513, Sec. 1. (AB 1169) Effective January 1, 2010.)

article: 6. Reporting and Reserve Requirements


citation: HSC § 1791

text:
(a) An annual fee shall be required of each provider which has obtained a provisional or final certificate of authority.

(b) Each annual report submitted pursuant to Section 1790 shall be accompanied by a payment to the Continuing Care Provider Fee Fund in the amount of one-tenth of 1 percent of the portion of total operating expenses, excluding debt service and depreciation from audited financial statements, which has been allocated to continuing care contract residents. The allocation shall be based on the ratio of the mean number of total residents.

(c) If a provider is granted an exemption from filing annual reports to the department pursuant to subdivision (f) of Section 1790, the minimum annual provider fee shall be two hundred fifty dollars ($250). This fee shall be submitted after the end of the provider’s fiscal year with proof of trust fund or performance bond as required by subdivision (f) of Section 1790.

history: (History: Amended by Stats. 1995, Ch. 920, Sec. 45. Effective January 1, 1996.)

article: 6. Reporting and Reserve Requirements


citation: HSC § 1792

text:
(a) A provider shall maintain at all times qualifying assets as a liquid reserve in an amount that equals or exceeds the sum of the following:

(1) The amount the provider is required to hold as a debt service reserve under Section 1792.3.

(2) The amount the provider must hold as an operating expense reserve under Section 1792.4.

(b) The liquid reserve requirement described in this section is satisfied when a provider holds qualifying assets in the amount required. Except as may be required under subdivision (d), a provider is not required to set aside, deposit into an escrow, or otherwise restrict the assets it holds as its liquid reserve.

(c) A provider shall not allow the amount it holds as its liquid reserve to fall below the amount required by this section. In the event the amount of a provider’s liquid reserve is insufficient, the provider shall prudently eliminate the deficiency by increasing its assets qualifying under Section 1792.2.

(d) The department may increase the amount a provider is required to hold as its liquid reserve or require that a provider immediately place its liquid reserve into an escrow account meeting the requirements of Section 1781 if the department has reason to believe the provider is any of the following:

(1) Insolvent.

(2) In imminent danger of becoming insolvent.

(3) In a financially unsound or unsafe condition.

(4) In a condition such that it may otherwise be unable to fully perform its obligations pursuant to continuing care contracts.

(e) For providers that have voluntarily and permanently discontinued entering into continuing care contracts, the department may allow a reduced liquid reserve amount if the department finds that the reduction is consistent with the financial protections imposed by this article. The reduced liquid reserve amount shall be based upon the percentage of residents at the continuing care retirement community who have continuing care contracts.

history: (History: Amended by Stats. 2004, Ch. 129, Sec. 2. Effective January 1, 2005.)

article: 6. Reporting and Reserve Requirements


text:
(a) A provider shall satisfy its liquid reserve obligation with qualifying assets. Qualifying assets are:

(1) Cash.

(2) Cash equivalents as defined in paragraph (4) of subdivision (c) of Section 1771.

(3) Investment securities, as defined in paragraph (2) of subdivision (i) of Section 1771.

(4) Equity securities, including mutual funds, as defined in paragraph (7) of subdivision (e) of Section 1771.

(5) Lines of credit and letters of credit that meet the requirements of this paragraph. The line of credit or letter of credit shall be issued by a state or federally chartered financial institution approved by the department or whose long-term debt is rated in the top three long-term debt rating categories by either Moody’s Investors Service, Standard and Poor’s Corporation, or a recognized securities rating agency acceptable to the department. The line of credit or letter of credit shall obligate the financial institution to furnish credit to the provider.

(A) The terms of the line of credit or letter of credit shall at a minimum provide both of the following:

(i) The department’s approval shall be obtained by the provider and communicated in writing to the financial institution before any modification.

(ii) The financial institution shall fund the line of credit or letter of credit and pay the proceeds to the provider no later than four business days following written instructions from the department that, in the sole judgment of the department, funding of the provider’s minimum liquid reserve is required.

(B) The provider shall provide written notice to the department at least 14 days before the expiration of the line of credit or letter of credit if the term has not been extended or renewed by that time. The notice shall describe the qualifying assets the provider will use to satisfy the liquid reserve requirement when the line of credit or letter of credit expires.

(C) A provider may satisfy all or a portion of its liquid reserve requirement with the available and unused portion of a qualifying line of credit or letter of credit.

(6) For purposes of satisfying all or a portion of a provider’s debt service reserve requirement described in Section 1792.3, restricted assets that are segregated or held in a separate account or escrow as a debt service reserve under the terms of the provider’s long-term debt instruments are qualifying assets, subject to all of the following conditions:

(A) The assets are restricted by the debt instrument so that they may be used only to pay principal, interest, and credit enhancement premiums.

(B) The provider furnishes to the department a copy of the agreement under which the restricted assets are held and certifies that it is a correct and complete copy. The provider, escrow holder, or other entity holding the assets must agree to provide to the department any information the department may request concerning the debt service reserve it holds.

(C) The market value, or guaranteed value, if applicable, of the restricted assets, up to the amount the provider must hold as a debt reserve under Section 1792.3, will be included as part of the provider’s liquid reserve.

(D) The restricted assets described in this paragraph will not reduce or count towards the amount the provider must hold in its liquid reserve for operating expenses.

(7) For purposes of satisfying all or a portion of a provider’s operating expense reserve requirement described in Section 1792.4, restricted assets that are segregated or held in a separate account or escrow as a reserve for operating expenses, are qualifying assets subject to all of the following conditions:

(A) The governing instrument restricts the assets so that they may be used only to pay operating costs when operating funds are insufficient.

(B) The provider furnishes to the department a copy of the agreement under which the assets are held, certified by the provider to be a correct and complete copy. The provider, escrow holder, or other entity holding the assets shall agree to provide to the department any information the department may request concerning the account.

(C) The market value, or the guaranteed value, if applicable, of the restricted assets, up to the amount the provider is required to hold as an operating expense reserve under Section 1792.4, will be included as part of the provider’s liquid reserve.

(D) The restricted assets described in this paragraph shall not reduce or count towards the amount the provider is required to hold in its liquid reserve for long-term debt.

(b) Except as otherwise provided in this subdivision, the assets held by the provider as its liquid reserve may not be subject to any liens, charges, judgments, garnishments, or creditors’ claims and may not be hypothecated, pledged as collateral, or otherwise encumbered in any manner. A provider may encumber assets held in its liquid reserve as part of a general security pledge of assets or similar collateralization that is part of the provider’s long-term capital debt covenants and is included in the provider’s long-term debt indenture or similar instrument.

history: (History: Repealed and added by Stats. 2000, Ch. 820, Sec. 57.25. Effective January 1, 2001.)

article: 6. Reporting and Reserve Requirements


text:
(a) Each provider shall include in its liquid reserve a reserve for its long-term debt obligations in an amount equal to the sum of all of the following:

(1) All regular principal and interest payments, as well as credit enhancement premiums, paid by the provider during the immediately preceding fiscal year on account of any fully amortizing long-term debt owed by the provider. If a provider has incurred new long-term debt during the immediately preceding fiscal year, the amount required by this paragraph for that debt is 12 times the provider’s most recent monthly payment on the debt.

(2) Facility rental or leasehold payments, and any related payments such as lease insurance, paid by the provider during the immediately preceding fiscal year.

(3) All payments paid by the provider during the immediately preceding fiscal year on account of any debt that provides for a balloon payment. If the balloon payment debt was incurred within the immediately preceding fiscal year, the amount required by this paragraph for that debt is 12 times the provider’s most recent monthly payment on the debt made during the fiscal year.

(b) If any balloon payment debt matures within the next 24 months, the provider shall submit with its annual report a plan for refinancing the debt or repaying the debt with existing assets.

(c) When principal and interest payments on long-term debt are paid to a trust whose beneficial interests are held by the residents, the department may waive all or any portion of the debt service reserve required by this section. The department shall not waive any debt service reserve requirement unless the department finds that the waiver is consistent with the financial protections imposed by this chapter.

history: (History: Added by Stats. 2000, Ch. 820, Sec. 57.3. Effective January 1, 2001.)

article: 6. Reporting and Reserve Requirements


text:
(a) Each provider shall include in its liquid reserve a reserve for its operating expenses in an amount that equals or exceeds 75 days’ net operating expenses. For purposes of this section:

(1) Seventy-five days net operating expenses shall be calculated by dividing the provider’s operating expenses during the immediately preceding fiscal year by 365, and multiplying that quotient by 75.

(2) “Net operating expenses” includes all expenses except the following:

(A) The interest and credit enhancement expenses factored into the provider’s calculation of its long-term debt reserve obligation described in Section 1792.3.

(B) Depreciation or amortization expenses.

(C) An amount equal to the reimbursement paid to the provider during the past 12 months for services to residents other than residents holding continuing care contracts.

(D) Extraordinary expenses that the department determines may be excluded by the provider. A provider shall apply in writing for a determination by the department and shall provide supporting documentation prepared in accordance with generally accepted accounting principles.

(b) A provider that has been in operation for less than 12 months shall calculate its net operating expenses by using its actual expenses for the months it has operated and, for the remaining months, the projected net operating expense amounts it submitted to the department as part of its application for a certificate of authority.

history: (History: Amended by Stats. 2004, Ch. 129, Sec. 4. Effective January 1, 2005.)

article: 6. Reporting and Reserve Requirements


text:
(a) The provider shall compute its liquid reserve requirement as of the end of the provider’s most recent fiscal yearend based on its audited financial statements for that period and, at the time it files its annual report, shall file a form acceptable to the department certifying all of the following:

(1) The amount the provider is required to hold as a liquid reserve, including the amounts required for the debt service reserve and the operating expense reserve.

(2) The qualifying assets, and their respective values, the provider has designated for its debt service reserve and for its operating expense reserve.

(3) The amount of any deficiency or surplus for the provider’s debt service reserve and the provider’s operating expense reserve.

(b) For the purpose of calculating the amount held by the provider to satisfy its liquid reserve requirement, all qualifying assets used to satisfy the liquid reserve requirements shall be valued at their fair market value as of the end of the provider’s most recently completed fiscal year. Restricted assets that have guaranteed values and are designated as qualifying assets under paragraph (6) or (7) of subdivision (a) of Section 1792.2 may be valued at their guaranteed values.

history: (History: Amended by Stats. 2004, Ch. 129, Sec. 5. Effective January 1, 2005.)

article: 6. Reporting and Reserve Requirements


text:
(a) Any provider offering a refundable contract, or other entity assuming responsibility for refundable contracts, shall maintain a refund reserve in trust for the residents. The amount of the refund reserve shall be revised annually by the provider and the provider shall submit its calculation of the refund reserve amount to the department in conjunction with the annual report required by Section 1790. This reserve shall accumulate interest and earnings and shall be invested in any of the following:

(1) Qualifying assets as defined in Section 1792.2.

(2) Real estate, subject to all of the following conditions:

(A) To the extent approved by the department, the trust account may invest up to 70 percent of the refund reserves in real estate that is both used to provide care and housing for the holders of the refundable continuing care contracts and is located on the same campus where these continuing care contractholders reside.

(B) Investments in real estate shall be limited to 50 percent of the providers’ net equity in the real estate. The net equity shall be the book value, assessed value, or current appraised value within 12 months prior to the end of the fiscal year, less any depreciation, and encumbrances, all according to audited financial statements acceptable to the department.

(b) Each refund reserve trust shall be established at an institution qualified to be an escrow agent. The escrow agreement between the provider and the institution shall be in writing and include the terms and conditions described in this section. The escrow agreement shall be submitted to and approved by the department before it becomes effective.

(c) The amount to be held in the reserve shall be the total of the amounts calculated with respect to each individual resident holding a refundable contract as follows:

(1) Determine the age in years and the portion of the entry fee for the resident refundable for the seventh year of residency and thereafter.

(2) Determine life expectancy of that individual based on all of the following rules:

(A) The following life expectancy table shall be used in connection with all continuing care contracts:AgeFemalesMalesAgeFemalesMales5526.32323.635837.9526.2695625.52622.863847.4385.8545724.74022.101856.9565.4755823.96421.350866.4945.1245923.19920.609876.0544.8066022.44619.880885.6134.5136121.70319.163895.2004.2366220.97218.457904.8383.9576320.25317.764914.5013.6706419.54517.083924.1753.3886518.84916.414933.8623.1296618.16515.759943.5792.9036717.49315.116953.3292.7056816.83214.486963.1092.5336916.18213.869972.9142.3847015.55313.268982.7412.2547114.96512.676992.5842.1377214.36712.073100 2.4332.0267313.76111.445101 2.2891.9197413.18910.830102 2.1521.8187512.60710.243103 2.0221.7237612.011 9.673104 1.8991.6377711.394 9.139105 1.7841.5637810.779 8.641106 1.6791.5107910.184 8.159107 1.5881.50080 9.620 7.672108 1.5221.50081 9.060 7.188109 1.5001.50082 8.501 6.719110 1.5001.500(B) If there is a couple, the life expectancy for the person with the longer life expectancy shall be used.

(C) The life expectancy table set forth in this paragraph shall be used until expressly provided to the contrary through the amendment of this section.

(D) For residents over 110 years of age, 1.500 years shall be used in computing life expectancy.

(E) If a continuing care retirement community has contracted with a resident under 55 years of age, the continuing care retirement community shall provide the department with the methodology used to determine that resident’s life expectancy.

(3) For that resident, use an interest rate of 6 percent or lower to determine from compound interest tables the factor that, when multiplied by one dollar ($1), represents the amount, at the time the computation is made, that will grow at the assumed compound interest rate to one dollar ($1) at the end of the period of the life expectancy of the resident.

(4) Multiply the refundable portion of the resident’s entry fee amount by the factor obtained in paragraph (3) to determine the amount of reserve required to be maintained.

(5) The sum of these amounts with respect to each resident shall constitute the reserve for refundable contracts.

(6) The reserve for refundable contracts shall be revised annually as provided for in subdivision (a), using the interest rate, refund obligation amount, and individual life expectancies current at that time.

(d) Withdrawals may be made from the trust to pay refunds when due under the terms of the refundable entrance fee contracts and when the balance in the trust exceeds the required refund reserve amount determined in accordance with subdivision (c).

(e) Deposits shall be made to the trust with respect to new residents when the entrance fee is received and in the amount determined with respect to that resident in accordance with subdivision (c).

(f) Additional deposits shall be made to the trust fund within 30 days of any annual reporting date on which the trust fund balance falls below the required reserve in accordance with subdivision (c) and the deposits shall be in an amount sufficient to bring the trust balance into compliance with this section.

(g) Providers who have used a method previously allowed by statute to satisfy their refund reserve requirement may continue to use that method.

history: (History: Added by Stats. 2000, Ch. 820, Sec. 57.36. Effective January 1, 2001.)

article: 6. Reporting and Reserve Requirements


text:
(a) The Legislature finds and declares all of the following:

(1) In continuing care contracts, providers offer a wide variety of living accommodations and care programs for an indefinite or extended number of years in exchange for substantial payments by residents.

(2) The annual reporting and reserve requirements for each continuing care provider should include a report that summarizes the provider’s recent and projected performance in a form useful to residents, prospective residents, and the department.

(3) Certain providers enter into “life care contracts” or similar contracts with their residents. Periodic actuarial studies that examine the actuarial financial condition of these providers will help to assure their long-term financial soundness.

(b) Each provider shall annually file with the department a report that shows certain key financial indicators for the provider’s past five years, based on the provider’s actual experience, and for the upcoming five years, based on the provider’s projections. Providers shall file their key indicator reports in the manner required by Section 1792.9 and in a form prescribed by the department.

(c) Each provider that has entered into Type A contracts shall file with the department an actuary’s opinion as to the actuarial financial condition of the provider’s continuing care operations in the manner required by Section 1792.10.

history: (History: Added by Stats. 2004, Ch. 129, Sec. 6. Effective January 1, 2005.)

article: 6. Reporting and Reserve Requirements


text:
(a) For purposes of this article, “actuarial study” means an analysis that addresses the current actuarial financial condition of a provider that is performed by an actuary in accordance with accepted actuarial principles and the standards of practice adopted by the Actuarial Standards Board. An actuarial study shall include all of the following:

(1) An actuarial report.

(2) A statement of actuarial opinion.

(3) An actuarial balance sheet.

(4) A cohort pricing analysis.

(5) A cashflow projection.

(6) A description of the actuarial methodology, formulae, and assumptions.

(b) “Actuary” means a member in good standing of the American Academy of Actuaries who is qualified to sign a statement of actuarial opinion.

(c) “Type A contract” means a continuing care contract that has an up-front entrance fee and includes provision for housing, residential services, amenities, and unlimited specific health-related services with little or no substantial increases in monthly charges, except for normal operating costs and inflation adjustments.

history: (History: Added by Stats. 2004, Ch. 129, Sec. 7. Effective January 1, 2005.)

article: 6. Reporting and Reserve Requirements


text:
(a) All providers shall file annually with the department a financial report disclosing key financial ratios and other key indicators in a form determined by the department.

(b) The department shall issue a “Key Indicators Report” form to providers that shall be used to satisfy the requirements of subdivision (a). The Key Indicators Report shall require providers to disclose the following information:

(1) Operational data indicating the provider’s average annual occupancy by facility.

(2) Margin ratios indicating the provider’s net operating margin and net operating margin adjusted to reflect net proceeds from entrance fees.

(3) Liquidity indicators stating both the provider’s total cash and investments available for operational expenses and the provider’s days cash on hand.

(4) Capital structure indicators stating the provider’s dollar figures for deferred revenue from entrance fees, net annual entrance fee proceeds, unrestricted net assets, and annual capital expenditure.

(5) Capital structure ratios indicating the provider’s annual debt service coverage, annual debt service coverage adjusted to reflect net proceeds from entrance fees, annual debt service over revenue percentage, and unrestricted cash over long-term debt percentage.

(6) Capital structure indicators stating the provider’s average age of facility calculation based on accumulated depreciation and the provider’s average annual effective interest rate.

(c) The department shall determine the appropriate formula for calculating each of the key indicators included in the Key Indicator Report. The department shall base each formula on generally accepted standards and practices related to the financial analysis of continuing care providers and entities engaged in similar enterprises.

(d) Each provider shall file its annual Key Indicators Report within 30 days following the due date for the provider’s annual report. If the Key Indicators Report is not received by the department by the date it is due, the provider shall pay a one thousand dollar ($1,000) late fee at the time the report is submitted. The provider shall pay an additional late fee of thirty-three dollars ($33) for each day the report is late beyond 30 days. For purposes of this section, a provider’s Key Indicators Report is not submitted to the department until the provider has paid all accrued late fees.

history: (History: Added by Stats. 2004, Ch. 129, second Sec. 7 (Sec. 7.5). Effective January 1, 2005.)

article: 6. Reporting and Reserve Requirements


text:
(a) Each provider that has entered into Type A contracts shall submit to the department, at least once every five years, an actuary’s opinion as to the provider’s actuarial financial condition. The actuary’s opinion shall be based on an actuarial study completed by the opining actuary in a manner that meets the requirements described in Section 1792.8. The actuary’s opinion, and supporting actuarial study, shall examine, refer to, and opine on the provider’s actuarial financial condition as of a specified date that is within four months of the date the opinion is provided to the department.

(b) Each provider required to file an actuary’s opinion under subdivision (a) that held a certificate of authority on December 31, 2003, shall file its actuary’s opinion before the expiration of five years following the date it last filed an actuarial study or opinion with the department. Thereafter, the provider shall file its required actuary’s opinion before the expiration of five years following the date it last filed an actuary’s opinion with the department.

(c) Each provider required to file an actuary’s opinion under subdivision (a) that did not hold a certificate of authority on December 31, 2003, shall file its first actuary’s opinion within 45 days following the due date for the provider’s annual report for the fiscal year in which the provider obtained its certificate of authority. Thereafter, the provider shall file its required actuary’s opinion before the expiration of five years following the date it last filed an actuary’s opinion with the department.

(d) The actuary’s opinion required by subdivision (a) shall comply with generally accepted actuarial principles and the standards of practice adopted by the Actuarial Standards Board. The actuary’s opinion shall also include statements that the data and assumptions used in the underlying actuarial study are appropriate and that the methods employed in the actuarial study are consistent with sound actuarial principles and practices. The actuary’s opinion must state whether the provider has adequate resources to meet all its actuarial liabilities and related statement items, including an appropriate surplus, and whether the provider’s financial condition is actuarially sound.

history: (History: Added by Stats. 2004, Ch. 129, Sec. 8. Effective January 1, 2005.)

article: 6. Reporting and Reserve Requirements


citation: HSC § 1793

text:
(a) Any provider offering a refundable contract, or other entity assuming responsibility for refundable contracts, shall maintain a refund reserve fund in trust for the residents. This trust fund shall remain intact to accumulate interest earnings resulting from investments of liquid reserves in accordance with paragraph (1) of subdivision (e) and subparagraphs (A) through (E), inclusive, of paragraph (3) of subdivision (e) of Section 1792.2. The amount of the refund reserve shall be revised annually by the provider and submitted to the department in conjunction with the annual report required by Section 1790.

(b) Any providers or other entity assuming responsibility for refundable contracts, which has not executed refundable contracts in a continuing care retirement community prior to January 1, 1996, and proposes to execute these contracts in that continuing care retirement community after that date, shall maintain a refund reserve fund in trust for the residents holding such contracts.

(1) Except as noted in paragraph (2), this trust fund shall remain intact as specified in subdivision (a).

(2) To the extent approved by the department, the trust account may invest up to 70 percent of the refund reserves in real estate that is used to provide care and housing for the holders of the refundable continuing care contracts and is located on the same campus where these continuing care contract holders reside.

These investments in real estate shall be limited to 50 percent of the providers’ net equity in the real estate. The net equity shall be the book value, assessed value, or current appraised value within 12 months prior to the end of the fiscal year, less any depreciation, encumbrances, and the amount required for statutory reserves under Section 1792.2, all according to audited financial statements acceptable to the department. This paragraph shall apply to applications, and for those phases of the project that were identified as part of applications, submitted after May 31, 1995.

(3) Any provider who submitted an application on or before May 31, 1995, may provide for the refund obligation of this section with a trust account that invests up to 85 percent of the refund reserves in the continuing care retirement community’s real estate and the remaining 15 percent in the form of either cash or an unconditional, irrevocable letter of credit to be phased in over a two-year period beginning with initial occupancy in the facility.

(4) Each refund reserve trust fund shall be established at an institution qualified to be an escrow agent pursuant to an agreement between the provider and the institution based on this section and approved in advance by the department.

(5) The amount to be held in the reserve fund shall be the total of the amounts calculated with respect to each individual resident as follows:

(A) Determine the age in years and the portion of the entry fee for the resident refundable for the seventh year of residency and thereafter.

(B) Determine life expectancy of that individual from the life expectancy table in paragraph (1) of subdivision (b) of Section 1792.2. If there is a couple, use the life expectancy for the individual with the longer life expectancy.

(C) For that resident, use an interest rate of 6 percent or lower to determine from compound interest tables the factor which represents the amount required today to grow at compound interest to one dollar ($1) at the end of the period of the life expectancy of the resident.

(D) Multiply the refundable portion of the resident’s entry fee amount by the factor obtained in subparagraph (C) to determine the amount of reserve required to be maintained.

(E) The sum of these amounts with respect to each resident shall constitute the reserve for refundable contracts.

(F) The reserve for refundable contracts will be revised annually as provided for in subdivision (a), using the interest rate, refund obligation amount, and individual life expectancies current at that time.

(6) Withdrawals may be made from the trust fund to pay refunds when due under the terms of the refundable entry fee contracts and when the balance in the trust fund exceeds the required refund reserve amount determined in accordance with paragraph (5) of subdivision (b).

(7) Deposits shall be made to the trust fund with respect to new residents when the entry fee is received and in the amount determined with respect to that resident in accordance with paragraph (5) of subdivision (b).

(8) Additional deposits shall be made to the trust fund within 30 days of any annual reporting date on which the trust fund balance falls below the required reserve in accordance with paragraph (5) of subdivision (b) and such deposits shall be in an amount sufficient to bring the trust fund balance into compliance with this section.

(c) Any provider which has executed refundable contracts in a continuing care retirement community prior to January 1, 1996, and which has not executed refundable contracts in a continuing care retirement community prior to January 1, 1991, shall submit, for the department’s approval, a method of determining a refund reserve to be held in trust for the residents. Approved methods include any of the following:

(1) The establishment, at the time continuing care contracts are signed, of a reserve fund in trust for the full amount of the refunds promised.

(2) The purchase from an insurance company, authorized to do business in the State of California, of fully paid life insurance policies for the full amount of the refunds promised.

(3) A method approved by the American Academy of Actuaries in their Actuarial Standards of Practice Relating to Continuing Care Retirement Communities, which method provides for fully funding the refund obligations in a separate trust fund as provided in subdivision (b).

(d) Any provider offering a refundable contract, or other entity assuming responsibility for refundable contracts prior to January 1, 1991, shall maintain a refund reserve bank account in trust for the residents as described in subdivision (b) except that the amount of refund reserves shall be calculated based on the following assumptions and methods of calculation:

(1) The continuing care retirement community will no longer receive entry fee income after a period of 40 years following the commencement of operation.

(2) Approved long-term investments, such as treasury notes, will earn 3 percent more than the rate of inflation.

(3) Entrance fees will increase at the rate of inflation.

(4) Land values will increase at the rate of inflation.

(5) Investments in the refund reserve trust will increase at the rate for approved long-term investments.

(6) Calculate the number of units to be resold each year at the approved rate of turnover.

(7) Determine the mean entrance fee, as of the current date.

(8) Determine the factor for inflating the mean entrance fee at the rate of 3 percent below the interest rate on new 30-year treasury bonds, for each year from the current date to the 40th year of operation, or until all units have been turned over.

(9) Calculate the inflated mean entrance fees for the 40th year and for each preceding year, until all units have been turned over.

(10) Multiply the inflated mean entrance fee for the 40th year, and each preceding year, as specified in paragraph (9), by the annual turnover, as specified in paragraph (6), until the total of the annual turnovers used in the calculations equals the total number of units in the continuing care retirement community.

(11) The projected refund liability shall be the sum of the products obtained pursuant to paragraph (10), multiplied by the rate of refund for the seventh year of residency, specified by current continuing care contracts, multiplied by the percentage of current continuing care contracts which specify this rate of refund. The projected refund liability amount shall be calculated for each rate, if existing continuing care contracts specify several rates.

(12) The projected refund liability, or the aggregate of these liabilities, if several rates are obtained pursuant to paragraph (11), may be reduced by the value of the land used for the continuing care retirement community, inflated to the 40th year of operation, as determined pursuant to paragraph (4), if the provider agrees to a lien pursuant to Section 1793.15 to secure this commitment.

(13) Calculate the present value of the projected refund liability at the current rate of interest for new 30-year treasury bonds. The result is the required refund reserve.

(e) Any entity which holds a certificate of authority, provisional certificate of authority, or permit to sell deposit subscriptions on or before September 23, 1986, shall be exempted from the refund reserve requirement established by this section, if the entity has an equity balance of five times the amount of the refund reserves calculated pursuant to subdivision (c).

(1) The equity balance shall be verified by one or more of the following means:

(A) The “stockholders’ equity,” or equivalent amount, as reflected on the most recent Form 10K (which may be on a consolidated basis or on a consolidated and combined basis) filed with the Securities and Exchange Commission.

(B) The “total fund balance of net worth,” or equivalent amount, as reflected on Form 990 or Form 990-PF filed with the Internal Revenue Service.

(C) The “total net worth,” or equivalent amount, as reflected on the most recent Form 109 filed with the Franchise Tax Board.

(2) The amount of the requirement for the equity balance shall be revised annually pursuant to this section.

(3) Compliance shall be based on review, by the department, of financial statements prepared in accordance with generally accepted accounting principles, accompanied by an unqualified opinion by a certified public accountant.

(4) If the equity balance is determined by the department to be less than the required amount, the provider or other entity assuming responsibility shall deposit, in a form satisfactory to the department, an amount equal to the refund reserve required within 60 days.

(f) All continuing care retirement communities offering refundable entrance fees that are not secured by cash reserves, except those facilities that were issued a certificate of authority prior to May 31, 1995, shall clearly disclose this fact in all marketing materials and continuing care contracts.

history: (History: Amended by Stats. 1995, Ch. 920, Sec. 48. Effective January 1, 1996.)

article: 6. Reporting and Reserve Requirements


text:
(a) An entity that accepts deposits and proposes to promise to provide care without having a current and valid permit to accept deposits is guilty of a misdemeanor.

(b) An entity that accepts deposits and fails to place any deposit received into an escrow account as required by this chapter is guilty of a misdemeanor.

(c) An entity that executes a continuing care contract without holding a current and valid provisional certificate of authority or certificate of authority is guilty of a misdemeanor.

(d) An entity that abandons a continuing care retirement community or its obligations under a continuing care contract is guilty of a misdemeanor. An entity that violates this section shall be liable to the injured resident for treble the amount of damages assessed in any civil action brought by or on behalf of the resident in any court having proper jurisdiction. The court may, in its discretion, award all costs and attorney fees to the injured resident, if that resident prevails in the action.

(e) Each violation of subdivision (a), (b), (c), or (d) is subject to a fine not to exceed ten thousand dollars ($10,000), or by imprisonment in the county jail for a period not to exceed one year, or by both.

(f) An entity that issues, delivers, or publishes, or as manager or officer or in any other administrative capacity, assists in the issuance, delivery, or publication of any printed matter, oral representation, or advertising material which does not comply with the requirements of this chapter is guilty of a misdemeanor.

(g) A violation of subdivision (f) by an entity will constitute cause for the suspension of all and any licenses, permits, provisional certificates of authority, and certificates of authority issued to that entity by any agency of the state.

(h) A violation under this section is an act of unfair competition as defined in Section 17200 of the Business and Professions Code.

history: (History: Amended by Stats. 2000, Ch. 820, Sec. 58. Effective January 1, 2001.)

article: 7. Offenses and Penalties

path: 2. LICENSING PROVISIONS > 10. Continuing Care Contracts > 7. Offenses and Penalties