Chapter 226

2005 -- H 6551 SUBSTITUTE A

Enacted 07/08/05

A N A C T

RELATING TO HEALTH AND SAFETY -- THE LONG-TERM CARE REFORM ACT OF 2005 -- NURSING FACILITIES RECEIVERSHIP ACT

Introduced By: Representatives Jackson, Corvese, Faria, McNamara, and Kennedy

Date Introduced: May 26, 2005

It is enacted by the General Assembly as follows:

SECTION 1. The title of Chapter 23-17.11 of the General Laws is hereby amended to

read as follows: ~~The Emergency Skilled Nursing and Intermediate Care Facilities Act~~ The

Nursing Facilities Receivership Act.

SECTION 2. Sections 23-17.11-2, 23-17.11-3, 23-17-4 and 23-17.11-6 of the General

Laws in Chapter 23-17.11 entitled "The Emergency Skilled Nursing and Intermediate Care

Facilities Act" are hereby amended to read as follows:

23-17.11-2. Declaration of purpose. -- The purpose of this chapter is to ensure quality

care for citizens of the state by vesting in the department of health the power necessary to

regulate ~~skilled~~ nursing facilities ~~and intermediate care facilities~~ and provide appropriate legal

remedies to provide quality of care for residents in nursing care facilities.

23-17.11-3. Definitions. -- As used in this chapter:

(1) "Department" means the department of health.

(2) "Director" means the director of the department of health.

(3) "Facility" means any ~~skilled~~ nursing facilities ~~or intermediate care facility~~ as defined

in chapter 17 of title 23 and the regulations adopted under chapter 17 of title 23.

(4) "Person" means any individual, trust or estate, partnership, limited liability company,

limited liability partnership, corporation (including associations, joint stock companies and

insurance companies), state or political subdivision or instrumentality of a state.

(5) "Resident" means a person who resides in a nursing facility as defined in chapter 17

of title 23 and the regulations adopted pursuant to chapter 17 of title 23.

(6) "Mismanagement" means the director's determination that a facility lacks financial

solvency or has demonstrated the inability to correct patterns of deficiencies in resident care or

management. These deficiencies may be evidenced by excessive turnover and instability in the

administration and clinical leadership, a consistent pattern of maintaining inadequate direct care

and support service personnel or a demonstrated failure to implement a plan of correction and/or

remediation as prescribed by the department.

(7) "Financial solvency" shall be defined by the department through regulation. Such

regulation shall develop in consultation with the department of human services. In developing the

definition, the department shall consider whether any of the following criteria should be included

in the definition of financial solvency and whether other criteria should apply:

(i) Sufficient liquid resources, including anticipated accounts receivable due from

providing care to residents to operate the facility for thirty (30) days;

(ii) Current to agreed-upon payment terms for all material financial obligations of the

facility including, but not limited to, mortgage payments, lease payments, management contracts,

payments to employees and for all employee benefit programs, payments for food and other

resident supplies, payments for utilities and payments of all state and federal taxes;

(iii) Free from lien resulting from default by the facility;

(iv) No combination of current indebtedness totaling more than one hundred twenty (120)

days of total facility revenues;

(v) Significant operating losses for two (2) successive years;

(vi) Frequent requests for advances on Medicaid reimbursement;

(vii) Unfavorable working capital ratios of assets to liabilities;

(viii) High proportion of accounts receivable more than ninety (90) days old;

(ix) Increasing accounts payable, unpaid taxes and/or payroll related costs;

(x) Minimal or decreasing equity and/or reserves; and/or

(xi) High levels of debt and high borrowing costs.

(8) "Controlling person" means any person or entity in control of a nursing facility

directly or indirectly, including:

(i) in the case of a corporation or a limited liability company, or limited liability

partnership, a person having a beneficial ownership interest of five percent (5%) or more in the

corporation, limited liability company or limited liability partnership to which the facility is

licensed;

(ii) in the case of a general partnership or limited partnership, any general partner;

(iii) in the case of a limited liability company, or limited liability partnership any

member;

(iv) a legal entity that operates or contracts with another person for the operation of a

nursing facility or an owner thereof;

(v) each of the president, vice president, secretary and treasurer of a corporation that is

not exempt from taxation under section 501(a) of the United States Internal Revenue Code as an

organization described in section 501(c)(3) of such code; and

(vi) such other ownership interest or relationship as may be determined by the director.

23-17.11-4. Powers and duties of director. -- (a) The director shall promulgate any rules

and regulations pertaining to ~~skilled~~ nursing facilities ~~and intermediate care facilities~~ that he or

she shall determine are necessary and proper to carry out the purposes of this chapter and shall

establish a process for notification of quality of care concerns, survey results and enforcement

actions to residents and their families, residents' legal representative and health care providers, the

long-term care ombudsman, and the public.

(b) The director shall have proper standing and is authorized to bring suit in the superior

court to enforce the provisions of this chapter. The attorney general or his or her designee shall

represent the director in the proceeding, including any ancillary proceeding and any appeals

resulting from the proceeding.

to be determined by the director or the attorney general, subject to the approval of the superior

court.

(d) For the purposes of this chapter, any nursing facility licensed under chapter 23-17

shall provide on demand to the director of the department of health, the director of the department

of human services and the attorney general any and all documents referring or relating to the

financial management of the facility, including, but not limited to; liens; Medicaid cost reports;

accounts receivable; accounts payable; monthly unaudited financial statements; audited, reviewed

or compiled financial statements as prepared in the ordinary course of business; contracts with

related parties; tax returns related to indebtedness; payroll and staffing; state taxes and federal

taxes.

23-17.11-6. Mismanagement of facility. -- (a) Whenever the director shall determine

that a facility is being mismanaged or operated in a manner which will have a detrimental impact

on the health, safety, or well-being of any residents of a facility, and that the appointment of a

receiver would facilitate the protection of health, safety, or well-being of the residents of the

facility, the director shall petition the superior court for the appointment of a receiver.

(b) The court shall appoint a receiver if it determines that the appointment of a receiver

is necessary or appropriate to the protection of the health, safety, and well-being of the persons.

The court shall appoint as a receiver any person(s) who shall have experience in the delivery of

health care services, and, if feasible, shall have experience with the operation of long-term care

facilities. A receiver shall not have a financial interest in, or any affiliation with, the facility that

is the subject of the receivership including, but not limited to, its owners, licensee, management

company, employee(s), agent(s), or related party(ies). The court may, as it deems necessary or

appropriate to accomplish the purposes of this chapter, confer upon any receiver appointed under

this section any or all of the following powers:

(1) All power under common law and the laws of this state and the rules of its courts

regarding receiverships generally;

(2) The power to continue to operate the facility for the benefit of the residents of the

facility;

(3) The power to sell the facility with the approval of the court; and/or

(4) The power to ~~effectuate~~ facilitate the safe and orderly removal and placement of all

residents of the facility in a manner which will not be detrimental to the health and safety of the

~~persons~~ residents.

approval by the court.

(d) Upon the removal of the last resident from a facility, the licensee shall forfeit his or

her license to operate the facility.

SECTION 3. Chapter 23-17.11 of the General Laws entitled ~~"The Emergency Skilled~~

~~Nursing and Intermediate Care Facilities Act"~~ "The Nursing Facilities Receivership Act" is

hereby amended by adding thereto the following sections:

23-17.11-7. Reports -- Use of experts -- Costs. – The department of health or the

department of attorney general may, in effectuating the purposes of this chapter, engage experts

or consultants, including, but not limited to, accountants, auditors, nursing home administrators,

medical doctors, nurses or industry analysts. All copies of reports prepared by experts and

consultants, and costs associated with these reports, shall be made available to the facility and to

the public. All costs incurred under this chapter shall be the responsibility of the facility in an

amount to be determined by the attorney general or the director, as they deem appropriate.

23-17.11-8. Duty to cooperate. – The facility has a duty to cooperate with the director

and the attorney general in all aspects as related to this chapter.

23-17.11-9. Retaliation prohibited. – (a) No discriminatory, disciplinary or retaliatory

action shall be taken by the facility against any officer or employee of a facility; or against any

guardian or family member of any resident; or against any resident of the facility; or against any

volunteer, for any communication by him or her with the director or the attorney general or their

designees pursuant to the provisions of this chapter. The identity of individuals who ask to remain

anonymous shall be protected. All anonymous communications shall be investigated but shall not

constitute the sole basis for disciplinary action by the director or the attorney general.

(b) Enforcement. Any person who believes that he or she has been retaliated or

discriminated against in violation of subsection (a) may file a civil action within three (3) years of

the date of retaliation or discrimination.

person who committed the violation to:

(1) Pay compensatory damages, costs of litigation and attorneys' fees; and/or

(2) Take other appropriate actions to remedy any part retaliation or discrimination.

(d) Limitation. The protections of this section shall not apply to any person who

knowingly or recklessly provides substantially false information to the director or the attorney

general or their designees.

23-17.11-10. Lien. – The state shall have a lien for reasonable costs incurred pursuant to

this chapter on the following property: the building in which the facility is located if owned by a

controlling person; the land on which the facility is located if owned by a controlling person; and

any fixtures, equipment or goods used in the operation of the facility if owned by a controlling

person. Such lien shall be prior to any mortgage or lien which the court finds has been executed

or obtained for a fraudulent purpose or to hinder or delay creditors. Such lien shall also be prior to

a mortgage or lien held by any person with an ownership interest in the nursing facility; or held

by any controlling person.

23-17.11-11. Whistleblower protections. – (a) Prohibition against discrimination. No

person subject to the provisions of this chapter may discharge, demote, threaten or otherwise

discriminate against any person or employee with respect to compensation, terms, conditions or

privileges of employment as a reprisal because the person or employee (or any person acting

pursuant to the request of the employee) provided or attempted to provide information to the

director or his or her designee or to the attorney general or his or her designee regarding possible

violation of this chapter.

(b) Enforcement. Any person or employee or former employee subject to the provisions

of this chapter who believes that he or she has been discharged or discriminated against in

violation of subsection (a) may file a civil action within three (3) years of the date of discharge or

discrimination.

the person who committed the violation to:

(1) Reinstate the employee to the employee's former position;

(2) Pay compensatory damages, costs of litigation and attorneys' fees ; and/or

(3) Take other appropriate actions to remedy any past discrimination.

(d) Limitation. The protections of this section shall not apply to any person or employee

who:

(1) Deliberately causes or participates in the alleged violation of law or regulation; or

(2) Knowingly or recklessly provides substantially false information to the director or the

attorney general or his or her designees.

23-17.11-12. Penalties. – Any facility or person that intentionally fails to comply with

sections 23-17.11-4(c) and (d), 23-17.11-7 and 23-17.11-8 shall be guilty of a misdemeanor and

punished by a fine of not more than one thousand dollars ($1,000) or imprisoned for not more

than one year. Each day of violation shall constitute a separate and distinct offense for calculation

of the penalty. Each controlling person of a facility subject to penalties under this section shall be

severally and personally liable for any fine, penalty or imprisonment provided in this section for

violating sections 23-17.11-4(c) and (d), 23-17.11-7, and 23-17.11-8 of this chapter.

23-17.11-13. Severability. – If any provision of this act or application thereof to any

person or circumstance is held invalid, the invalidity shall not affect other provisions or

applications of the chapter which can be given effect without the invalid provision or application, and

to this end the provisions of this chapter are declared to be severable.

SECTION 4. This act shall take effect upon passage.

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LC03362/SUB A/3

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