Cal. HSC § 1253.3 — California Code / Code hsc / Division 2 / Chapter 2 / Article 1 / Section 1253.3
Section 1253.3
Status: in_force

(a) No person, as defined in Section 19, nor an applicant for licensure, change of ownership, or change of management shall acquire, either directly or indirectly, an ownership interest in a skilled nursing facility nor operate, establish, manage, conduct, or maintain a skilled nursing facility prior to department review, approval, and issuance of a license under this chapter.

(1) An applicant for a license under this section shall submit an application to the department at least 120 calendar days prior to acquiring, operating, establishing, managing, conducting, or maintaining a skilled nursing facility.

(2) A licensee or party that plans to relinquish ownership, operations, or management of a skilled nursing facility shall report the change to the department on a form provided by the department 120 calendar days prior to the anticipated change of ownership. No licensee may relinquish ownership, operations, or management of a skilled nursing facility until the department completes its review and approval of the application of the prospective licensee or management company.

(3) Notwithstanding the requirements of this section, if a facility is subject to receivership under Section 1325, subject to temporary management under Section 1325.5, at immediate risk of decertification, license revocation or suspension or closure, or other exigent circumstances exist that the department in its discretion concludes that the health and safety of the residents would be best served by bringing in an interim manager, the applicant may request an expedited application review. The applicant shall submit a complete application to the department. The department shall expedite the determination that the applicant is reputable and responsible to assume the facility’s license. The applicant may operate the facility once the reputability and responsibility assessment has been conducted while the remainder of the application review occurs. The interim manager may only operate the facility until the department completes the application review and approval of the application of the prospective licensee.

(b) This section applies to any form of change of ownership, operations, or management involving a skilled nursing facility, including, but not limited to, the following transactions:

(1) Establishment of interim or longer-term management agreements wherein operational control or management responsibilities are transferred from the owner or licensee to a new entity.

(2) Establishment of any type of agreement with an entity or person to make financial decisions for the facility, to direct or control aspects of patient care and quality within the facility, or to be involved in the hiring, firing, supervision, and direction of direct care staff when these actions are completed by a management company hired, retained, or authorized to act on behalf of a licensee.

(3) The transfer, purchase, or sale of ownership interest in the facility or licensee of 5 percent or more.

(4) Transactions described in Section 1267.5 or 1253 and other applicable laws and regulations.

(5) Sale or transfer of the entity licensed by the department.

(6) The lease of all or part of a facility.

(c) An application for a license under this section shall be filed on forms established and furnished by the department, that shall require, but not be limited to, all of the following information:

(1)  Information required by Sections 1265 and 1267.5.

(2)  Whether the applicant is a for-profit, not-for-profit, or government entity.

(3) Name and address of the applicant.

(4) Names of all prospective owners and their prospective ownership percentages.

(5) Names of all prospective directors, board members, and managers of the licensee.

(6) Name and address of any and all parent organizations.

(7) Names and addresses of all directors, board members, and managers of any and all parent organizations.

(8) Evidence satisfactory to the department that the applicant is reputable and responsible to assume the facility’s license or management of its operations and meets the requirements of this chapter, other applicable laws, and the department’s rules and regulations.

(9) Evidence that the applicant has the financial capacity to operate the facility and to provide services required by state and federal laws and regulations for 90 days.

(10) If applicable, all of the following information:

(A) The name, address, license number, and licensing agency name of other skilled nursing, health, residential, or community care facilities owned, managed, or operated by the same applicant or by any parent organization of the applicant.

(B) If part of a chain, a diagram indicating the relationship between the applicant and the persons or entities that are part of the chain and the name, address, and license number, if applicable, for each person or entity in the diagram.

(C) The name and address of any persons, organizations, or entities that own the real property on which the facility seeking licensure and the licensed facilities described in subparagraph (A) are located along with copies of any existing or proposed property or lease agreements.

(D) The name and address of the prospective property owner if the real property is being transferred or sold.

(E) The name and address of any management company that would manage the facility and the same information required of applicants for the management company and copies of any existing or proposed management agreements or contracts between the licensee and the management company.

(11) The name of the chief executive officer, general partner, owner, and that person’s prior or present service as an administrator, chief executive officer, general partner, director, or as a person who has held or holds a beneficial ownership interest of 5 percent or more in, any skilled nursing facility, intermediate care facility, residential care facility for the elderly, community care facility, health facility, or a similarly licensed facility in California or any other state within the past five years.

(12) The following information regarding the applicant and each individual or entity identified pursuant to paragraph (11) for the past five years:

(A) Any revocation, suspension, probation, exclusion order, termination of Medicare or Medicaid certification, receivership, appointment of a temporary manager, designation as a special focus facility or special focus facility candidate by the federal Centers for Medicare and Medicaid Services, or other similar administrative enforcement or disciplinary action that was initiated in California or any other state or by the federal government, or is in the process of being adjudicated, against a facility associated with the applicant or a person identified pursuant to paragraph (11), by any authority responsible for the licensing of health, residential, or community care facilities.

(B) Copies of findings, orders, or both, issued by any health, residential, or community care licensing agency, certification agency, or any court relevant to the actions described in subparagraph (A).

(C) Any injunctions, corporate integrity agreements, judgments, or settlements resulting from actions filed by the Attorney General, the Department of Justice, a district attorney’s office, or other federal, state, or local law enforcement agency against the applicant or any facilities that they have owned, operated, or managed.

(D) Any petition for bankruptcy relief involving the applicant’s operation or closure of a health, residential, or community care facility licensed in California or any other state, the court, date, and case number of the filing, and whether a discharge was granted. If a discharge was not granted, the applicant shall provide copies of any court findings supporting denial of discharge.

(E) The identity of any skilled nursing facility operated, managed, or owned by the applicant that has been subject to foreclosures, judgment liens, utility cutoffs, or disruptions in staffing, services, or supplies due to failures to meet payroll or pay bills.

(13) The expected date of sale, assignment, lease, change of management company, or other change in the license status of a health facility.

(14) Any other information as may be required by the department for the proper administration and enforcement of this chapter.

(15) Applicable fees.

(d) The information required by this section shall be provided to the department upon initial application for licensure, and any change in the information shall be provided to the department within 10 calendar days of that change unless a shorter timeframe is required by the department. A licensee of multiple facilities may provide a single notice of changes to the department on behalf of all licensed facilities within the chain. This single notice shall clearly identify which changes apply to which facilities within the chain.

(e) The applicant shall provide complete and accurate information to the department.

(f) (1) An applicant’s failure to provide complete and accurate information to the department in its submission of an application or the applicant’s failure to correct deficiencies in an application noted by the department may be grounds for the denial of the application.

(g) (1) The department may deny an application for licensure or may subsequently revoke a license under this chapter if the applicant withheld information or made a false statement of material fact with regard to information that was required by the application for licensure.

(2) The department may deny an application for licensure or may subsequently revoke a license under this chapter if the applicant did not disclose administrative disciplinary or enforcement actions on the application as required by paragraph (12) of subdivision (c).

(3) The applicant shall provide any additional information related to the consideration of the application regarding the reputability and responsibility of the applicant.

(4) The department shall consider the criminal history of the prospective licensee, or prospective management company, including all officers, directors, or shareholders having a beneficial ownership interest of 5 percent or more in the applicant corporation or partnership, and general or limited partners thereof, or other individuals or entities enumerated in Section 1267.5. The department’s criminal history review shall be in accordance with Sections 1265.1 and 1265.2.

(5) The department shall cross-check all information and evidence submitted by the applicant concerning its reputability and responsibility, including, but not limited to, by verifying ownership and compliance histories through its own records, cross-checking with other licensing agencies in this state, other states, and territories.

(6) If the applicant holds a health care professional’s license issued by the state, the department shall contact the appropriate licensing agencies to obtain information about disciplinary actions taken against the licensees and to confirm that their licenses are in good standing.

(7) To the extent not prohibited by federal or state law, the department may obtain any information deemed necessary to make a determination on whether the applicant is reputable and responsible for licensure.

(8) In making a determination on whether an applicant is reputable and responsible, the department shall thoroughly examine the compliance histories of facilities that are or have been owned, operated, or managed by the applicant and of any skilled nursing facility chain that is associated with the applicant. The department’s review shall consider compliance histories during the five-year period before the date of the application.

(9) The department may review and consider information and evidence concerning the applicant’s reputability and responsibility, including, but not limited to, the department’s inspection findings for health facilities owned, operated, or managed by the applicant in the five years prior to the application, including federal and state findings resulting in regulatory violations, citations, other enforcement penalties, temporary manager appointments, findings of violations of required staffing levels, financial instability related to the operation of the health facility, special focus facility status, and any other information the department considers necessary for its determination on whether an applicant is reputable and responsible.

(10) The applicant shall provide or cause to be provided, at the department’s request, any additional information related to consideration of the application regarding the reputability and responsibility of the applicant.

(11) The department may deny an application if the applicant fails to establish through the evidence satisfactory to the department submitted pursuant to this section that the applicant is reputable and responsible, has ability to comply with the rules and regulations of the department, and has the education, experience, and financial resources for the operation of the skilled nursing facility.

(12) Any of the following within the prior five years or during the application review period shall automatically disqualify an applicant from being determined reputable and responsible for licensure:

(A) The applicant or anyone with a beneficial ownership interest of 5 percent or more in the applicant entity has owned, operated, or managed a skilled nursing facility, nursing facility, intermediate care facility, assisted living facility, community care facility, or other type of long-term care facility in this state or any other state or territory that, while under their ownership, operation, or management, was terminated from the federal Medicare program or the Medi-Cal program due to noncompliance, had its license suspended or revoked, or was subjected to receivership or temporary management.

(B) The applicant is on the List of Excluded Individuals/Entities of the United States Department of Health and Human Services Office of Inspector General.

(C) The applicant has owned, operated, or managed a long-term care health facility that, while under their ownership, operation, or management, has been issued two or more of any combination of “AA” citations or “A” citations involving the death of a resident at the facility within a consecutive 24-month period within the prior five years.

(D) The applicant owns, operates, or manages 10 percent or more of the licensed skilled nursing facilities in the state upon the date of submission of the application for licensure to the department, unless the department in its discretion concludes that the interests of resident health and safety requires that an exception is warranted.

(13) Notwithstanding Section 1265.2 or paragraph (4), if the applicant has had a felony conviction related to the services or care provided in a health or community care facility, regardless of the length of time between the date of the application for licensure and the felony conviction, the applicant shall automatically be disqualified from being determined reputable and responsible for licensure.

(h) The department shall review and make a determination within 120 calendar days of an applicant’s submission of a complete application.

(1) The department may extend the 120-day time period by up to an additional 60 calendar days if it cannot complete its determination due to extenuating circumstances. The department shall notify the applicant in writing of the extension and the estimated date of its determination.

(2) If the department determines the application submitted is incomplete, the department shall provide written notice of missing information to the applicant. If the applicant does not submit a completed application within 45 days of notification of missing information, the application shall be denied.

(3) The applicant shall not acquire, operate, establish, manage, conduct, or maintain a skilled nursing facility prior to obtaining a favorable determination from the department on a licensure application. A transfer of ownership, operations, or management of the facility shall not take place prior to the department’s approval, whether interim, long term, or permanent.

(i) If the department approves the application, the department shall notify the applicant in writing if it determines that the applicant is reputable and responsible and has complied with all requirements of this section and other applicable statutory and regulatory requirements for licensure. The applicant and licensee shall notify the department within 10 days of the final transactions effecting the orderly transfer of the health facility operations from the licensee to the applicant. The final orderly transfer of the health facility operations shall occur no later than 120 days after the department’s notice of approval of the application for licensure. The applicant may apply for one 60-day extension notifying the department of the expected date of the transfer, and the reasons for delay in the transfer beyond the initial 120 days from the department’s notice.

(j) If the department denies the application, the department shall notify the applicant in writing of its determination and the basis for the determination. Within 20 days of service of the department’s notice of denial on the applicant, the applicant may serve upon the director, or the director’s designee, a written petition for an appeal and request for administrative hearing regarding the department’s denial. Upon timely service by the applicant of the written petition, as set forth in this subdivision, a hearing shall be set and the proceedings shall be conducted in accordance with Article 1 (commencing with Section 131071) of Chapter 2 of Part 1 of Division 112. During the pendency of the appeal, the applicant shall not acquire, operate, establish, manage, conduct, or maintain the facility that is the subject of the appeal, and management and operational control of the facility shall remain with the current licensee.

(k) The following actions may immediately be taken if an applicant acquires, operates, establishes, manages, conducts, or maintains a skilled nursing facility before the department acts on its application, following the department’s denial of its application, or in any instance when a person or entity acquires, operates, establishes, manages, conducts, or maintains a skilled nursing facility without first applying to and obtaining a license from the department for that purpose:

(1) If an applicant for licensure or prospective licensee assumes management or operational control of a facility on behalf of a licensee prior to submitting an application to and receiving approval from the department for a license, or if a licensee fails to report changes to the department, as required by this chapter, the department may issue a class “B” citation and civil penalty, in an amount not less than five hundred dollars ($500) and not exceeding two thousand dollars ($2,000) for each and every citation. Where a licensee or prospective licensee has failed to correct a violation of this chapter within the time specified in the citation, the department shall assess the licensee or prospective licensee an additional civil penalty in the amount of five hundred dollars ($500) for each day that the deficiency continues beyond the date specified for correction. If a licensee or prospective licensee desires to contest a class “B” citation assessed under this section, the licensee or prospective licensee shall, within 15 working days after service of the citation, notify the director or the director’s designee that they wish to appeal the class “B” citation through the procedures set forth in Section 1428. Nothing in this section shall preclude the department from taking additional state or federal enforcement actions it may determine are necessary to preserve and protect the health and safety of the residents in the skilled nursing facility, including misdemeanor penalties for willful or repeated violations, as provided in Section 1290. Any penalty assessed pursuant to this paragraph shall be paid prior to the issuance of the permanent license. If at the time of issuance of the permanent license there is a balance due, the remaining balance shall be collected by Medi-Cal offset. Penalties collected pursuant to this paragraph shall be deposited into the State Health Facilities Citation Penalties Account created pursuant to Section 1417.2.

(2) The department may, subsequent to licensure, assess a civil penalty of ten thousand dollars ($10,000) for a material violation of this section. The civil penalty shall be issued and enforced, except as provided in this subdivision, in the same manner as a class “A” violation, and shall include the right of appeal as specified in Section 1428.

(3) If an applicant acquires, operates, establishes, or manages a facility following the department’s denial of its application, the department shall ensure that the facility’s operation is transitioned to a qualified operator in a manner that will protect the health and safety of the residents.

(4) The facility administrator shall advise all residents, their representatives, and the state and local long-term care ombudsperson offices of the circumstances, and inform them of the sanctions that are being imposed and of the residents’ right to remain at the facility while corrective actions are taken.

(l) If any proposed sale, transfer of operations, or change in management of a facility to an applicant for licensure does not occur after the applicant’s submission of an application for licensure to the department, the licensee shall notify the department within 10 days of the event terminating the sale, transfer, or change, including, but not limited to, the end of contract negotiations or a transaction not closing escrow.

(m) All applications prepared pursuant to this section shall be considered public records, except to the extent the information in the application is confidential or privileged under applicable state or federal privacy laws, pursuant to the Information Practices Act of 1977, or is otherwise exempt under the California Public Records Act.

(n) This section does not apply to a skilled nursing facility that is operated as a distinct part of an acute care hospital or to receivers or temporary managers that are appointed in accordance with state or federal laws. This section does apply to changes of ownership of a distinct part skilled nursing facility that will be separated from the hospital’s license.

(o) This section applies only to license applications or reports of changes submitted after July 1, 2023.

(p) On or before April 1, 2023, the department shall convene a stakeholder group to discuss, review, and determine the feasibility of establishing a new methodology to calculate application fees for skilled nursing facilities that reflect departmental costs to process required applications.