A controversial bill aimed at fixing aspects of California’s broken nursing home licensing system was signed Tuesday by Gov. Gavin Newsom, who faced dueling pressure from advocates who typically are aligned.

In approving Assembly Bill 1502, the governor had no comment about his decision.

The bill was drafted to address serious problems with the state’s nursing home licensing system, which is overseen by the California Department of Public Health. A CalMatters investigation last year highlighted an opaque licensing process marred by indecision, confusion and yearslong delays that advocates contend affects patient care and transparency for consumers.

CalMatters examined the Department of Public Health’s treatment of Los Angeles businessman Shlomo Rechnitz and his web of companies, which own facilities up and down the state.

For years, CalMatters found, the department allowed Rechnitz and his companies to unofficially operate 18 Country Villa facilities with license applications in “pending” status. The state also has permitted Rechnitz and his companies to operate five Windsor homes, even after the department denied their licensing applications.

As of last year, Rechnitz and his companies, including Brius Healthcare, had acquired at least 81 facilities with more than 9,000 beds, many with below-average ratings from the federal government.

Along with licensing facilities, the Department of Public Health is responsible for routinely inspecting the state’s 1,200 nursing homes. It also conducts complaint investigations and can cite facilities and levy fines for violating federal or state rules.

The bill signed by Newsom was co-authored by Democratic Assemblymembers Al Muratsuchi of Los Angeles and Jim Wood of Santa Rosa. Muratsuchi said the bill will close a loophole that allows nursing home operators to run a facility without first receiving a license, something advocates refer to as “squatting.” It also will require the Department of Public Health to look at an applicant’s track record over several years before granting a license.

Dr. Michael Wasserman, a geriatrician and chair of public policy for the California Association of Long Term Care Medicine, sent the governor a letter of strong support in August from his organization, saying the bill brings “critical accountability to the nursing home industry in California.”

In an interview, Wasserman called the bill “implementable, actionable, more effective, sustainable,” and “an incredibly positive step forward.”

“What I see in here is a lot more transparency,” he said.

But, in a significant plot twist, the bill’s original sponsors, California Advocates for Nursing Home Reform, not only pulled their support this summer, but came out in “strong opposition” to the bill. In a letter sent a few days after Wasserman’s, the organization’s executive director, Patricia McGinnis, asked the governor for a veto.

“Instead of the major reform that the nursing home licensing system needs, AB 1502 cements the current system, a system that has nourished the most dangerous operators in the state,” she wrote.

The bill’s original language, which the organization helped craft, would have established strict suitability standards, including 10-year history checks for new owners, a public process for vetting them, and annual reports to the Legislature by the Department of Public Health.

“Instead of the major reform that the nursing home licensing system needs, AB 1502 cements the current system, a system that has nourished the most dangerous operators in the state.”
— Patricia McGinnis, executive director, California Advocates for Nursing Home Reform

The amended language took out some of these provisions, has shorter history checks, and institutes smaller, discretionary financial penalties in lieu of more significant ones.

But the organization’s biggest objection was what they say is a loophole related to background checks on applicants, said Tony Chicotel, a staff attorney for California Advocates for Nursing Home Reform.

While the original language required the department to look at applicants, as well as associated persons or entities, the bill signed by Newsom only focuses on the applicants themselves. The problem, Chicotel said, is that some people file each new application under a unique limited liability corporation. If the Department of Public Health doesn’t look beyond the applicant, he said, it could allow officials to rubber-stamp applications regardless of the track record of the individual behind the entity.

Assemblymember Wood said such details can be overcome or fixed in the future.

“Rest assured, we’ll be watching this,” he said, calling the new law “a really big step forward.”

“Rest assured, we’ll be watching this.”
— Assemblymember Jim Wood of Santa Rosa

Due to the strength of the nursing home lobby, Wood said, nursing home legislation can be especially tough to shepherd through.

The California Association of Health Facilities, an industry group, did not register opposition to this bill.

Corey Egel, spokesperson for the organization, declined to comment for this story. But he referred back to a statement the group issued earlier this summer, saying that the change-of-ownership process “needs to be reformed to ensure the timely and expedited review of licensure applications.” Requirements for applicants need to be “reasonable with minimal disruptions to patient access to long term care services,” the group stated.

Wood held an emotional hearing last fall about licensing issues, repeatedly calling the Department of Public Health to task.

“We don’t need excuses,” he told them. “We have to do more.”

Since then, he said, department officials have stepped up to provide technical assistance in crafting legislation to help reform the licensing process.

The department, he said, is “under a big spotlight and they’re going to do the very best they can.”

“Sometimes it’s not only in the letter of the law, but it’s in the spirit of the law,” he said.

###

CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.