New California Law Imposes Heightened Disclosure Requirements on Owners and Operators of Skilled Nursing Facilities

Under existing California law, skilled nursing facilities (SNFs) have multiple ongoing reporting duties. For example, SNFs must disclose to the California Department of Public Health the names and addresses of any person or organization that has an ownership or control interest of 5% or more in a management company that operates the facility. In addition, SNFs must report various financial information to the Office of Statewide Health Planning and Development, which includes a balance sheet detailing assets, liabilities, and net worth of the health facility, a statement of income, expenses, and operating surplus or deficit, and a statement of cash flows.

The new law, which goes into effect on January 1, 2020, will require licensed SNFs to provide additional disclosures regarding business ties between the owners and operators of SNFs and related parties (organizations that are related to the licensee provider or that are under common ownership or control as the licensee provider). The new law has 3 main additional disclosure requirements:

1. Any organization that operates, conducts, owns, or maintains a SNFs must report when the facility’s licensee, general partner, director, or officer has an ownership or control interest of 5% or more in a related party that provides services to the SNF.
2. If the licensee, or the general partner, director, or officer of the licensee has such an interest, the licensee shall disclose information on all services provided by the related party and the number of individuals who provide that service to the SNF.
3. If the related party delivers goods, fees, and services collectively worth $10,000 or more per year to the skilled nursing facility, the disclosure must include the related party’s profit and loss statement and the Payroll-Based Journal public use data of the previous quarter for the SNF’s direct caregivers.

The bill was introduced by Assemblyman Jim Wood in response to an investigation of the owner of 3 SNFs in California, Bruis Healthcare, which revealed that Bruis owned companies provided services to the SNFs. While Wood acknowledged that “there is nothing technically illegal with using ‘related-party companies,’” he also stated that the new law was designed to increase transparency and ensure these kinds of business arrangements do not “generate excessive profits for the owners of these facilities on the backs of the residents.” Thus, the new law aims to expose any fraud and abuse in related party business relationships.

For more information about Assembly Bill 1953, please click here.