Bill Text: CA AB975 | 2013-2014 | Regular Session | Amended
Bill Title: Health facilities community benefits.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced - Dead) 2014-02-03 - Died on inactive file. [AB975 Detail]
Download: California-2013-AB975-Amended.html
BILL NUMBER: AB 975 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 24, 2013
AMENDED IN ASSEMBLY APRIL 25, 2013
AMENDED IN ASSEMBLY APRIL 8, 2013
AMENDED IN ASSEMBLY MARCH 21, 2013
INTRODUCED BY Assembly Members Wieckowski and Bonta
FEBRUARY 22, 2013
An act to amend Sections 127280, 127400, and 129050 of, to add
Chapter 2.6 (commencing with Section 127470) to Part 2 of Division
107 of, and to repeal Article 2 (commencing with Section 127340) of
Chapter 2 of Part 2 of Division 107 of, the Health and Safety Code,
relating to health facilities.
LEGISLATIVE COUNSEL'S DIGEST
AB 975, as amended, Wieckowski. Health facilities community
benefits.
Existing law makes certain findings and declarations regarding the
social obligation of private nonprofit hospitals to provide
community benefits in the public interest, and requires these
hospitals, among other responsibilities, to adopt and update a
community benefits plan for providing community benefits either
alone, in conjunction with other health care providers, or through
other organizational arrangements. Existing law requires each private
nonprofit hospital, as defined, to complete a community needs
assessment, as defined, and to thereafter update the community needs
assessment at least once every 3 years. Existing law also requires
the hospital to file a report on its community benefits plan and the
activities undertaken to address community needs with the Office of
Statewide Health Planning and Development. Existing law requires the
statewide office to make the plans available to the public. Existing
law requires that each hospital include in its community benefits
plan measurable objectives and specific benefits.
This bill would declare the necessity of establishing uniform
standards for reporting the amount of charity care and community
benefits a facility provides to ensure that private nonprofit
hospitals and nonprofit multispecialty clinics actually meet the
social obligations for which they receive favorable tax treatment,
among other findings and declarations.
This bill would require a private nonprofit hospital and nonprofit
multispecialty clinic, as defined, by January 1, 2015
2016 , to develop, in collaboration with the
community, a community benefits statement, as specified, and a
description of the process for approval of the community benefits
statement by the hospital's or clinic's governing board, as
specified. This bill would require the hospital or clinic, prior to
adopting a community benefits plan, to complete a community needs
assessment, as provided. The bill would authorize the hospital or
clinic to create a community benefits advisory committee for the
purpose of soliciting community input. This bill would require the
hospital or clinic to make available to the public a copy of the
assessment, file the assessment with the Office of Statewide Health
Planning and Development, and update the assessment at least every 3
years.
This bill would also require a private nonprofit hospital and
nonprofit multispecialty clinic, by April 1, 2015
2016 , to develop a community benefits plan that includes
a summary of the needs assessment and a statement of the community
health care needs that will be addressed by the plan, and list the
services, as provided, that the hospital or clinic intends to provide
in the following year to address community health needs identified
in the community health needs assessments. The bill would require the
hospital or clinic to make its community health needs assessment and
community benefits plan or community health plan available to the
public on its Internet Web site and would require that a copy of the
assessment and plan be given free of charge to any person upon
request.
This bill would require a private nonprofit hospital or nonprofit
multispecialty clinic, after April 1, 2015
2016 , every 2 years to revise and submit its community
benefits plan to the Office of Statewide Health Planning and
Development, as specified, and would allow a hospital or clinic under
the common control of a single corporation or other entity to file a
consolidated plan, as provided. The bill would require that the
governing board of each hospital or clinic adopt the community
benefits plan and make it available to the public, as specified.
This bill would require the Office of Statewide Health Planning
and Development to develop and adopt regulations to prescribe a
standardized format for community benefits plans, as provided, to
provide technical assistance to help private nonprofit hospitals and
nonprofit multispecialty clinics exempt from licensure comply with
the community benefits provisions, to make public each community
health needs assessment and community benefits plan and any comments
received regarding those assessments and plans, and to
annually calculate and make public the total value of
community benefits provided by hospitals , as specified .
This bill would authorize the Office of Statewide Health Planning and
Development to assess a civil penalty, as provided, against any
hospital or clinic that fails to comply with these provisions. This
bill would make conforming changes.
Under existing law, patients with high medical costs who are at or
below 350% of the federal poverty level are eligible to apply for
participation under a hospital's charity care policy or discount care
policy. A patient with high medical costs is defined as a patient
who, among other things, does not receive a discounted rate from the
hospital as a result of his or her third-party coverage.
This bill would delete that limitation from the definition of a
patient with a high medical costs.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 127280 of the Health and Safety Code is amended
to read:
127280. (a) Every health facility licensed pursuant to Chapter 2
(commencing with Section 1250) of Division 2, except a health
facility owned and operated by the state, shall each year be charged
a fee established by the office consistent with the requirements of
this section.
(b) Commencing in calendar year 2004, every freestanding
ambulatory surgery clinic, as defined in Section 128700, shall each
year be charged a fee established by the office consistent with the
requirements of this section.
(c) The fee structure shall be established each year by the office
to produce revenues equal to the appropriation made in the annual
Budget Act or another statute to pay for the functions required to be
performed by the office pursuant to this chapter, Chapter 2.6
(commencing with Section 127470), or Chapter 1 (commencing with
Section 128675) of Part 5, and to pay for any other health-related
programs administered by the office. The fee shall be due on July 1
and delinquent on July 31 of each year.
(d) The fee for a health facility that is not a hospital, as
defined in subdivision (c) of Section 128700, shall be not more than
0.035 percent of the gross operating cost of the facility for the
provision of health care services for its last fiscal year that ended
on or before June 30 of the preceding calendar year.
(e) The fee for a hospital, as defined in subdivision (c) of
Section 128700, shall be not more than 0.035 percent of the gross
operating cost of the facility for the provision of health care
services for its last fiscal year that ended on or before June 30 of
the preceding calendar year.
(f) The fee for a freestanding ambulatory surgery clinic shall be
established at an amount equal to the number of ambulatory surgery
data records submitted to the office pursuant to Section 128737 for
encounters in the preceding calendar year multiplied by not more than
fifty cents ($0.50).
(g) There is hereby established the California Health Data and
Planning Fund within the office for the purpose of receiving and
expending fee revenues collected pursuant to this chapter.
(h) Any amounts raised by the collection of the special fees
provided for by subdivisions (d), (e), and (f) that are not required
to meet appropriations in the Budget Act for the current fiscal year
shall remain in the California Health Data and Planning Fund and
shall be available to the office in succeeding years when
appropriated by the Legislature in the annual Budget Act or another
statute, for expenditure under the provisions of this chapter,
Chapter 2.6 (commencing with Section 127470), and Chapter 1
(commencing with Section 128675) of Part 5, or for any other
health-related programs administered by the office, and shall reduce
the amount of the special fees that the office is authorized to
establish and charge.
(i) (1) No health facility liable for the payment of fees required
by this section shall be issued a license or have an existing
license renewed unless the fees are paid. A new, previously
unlicensed, health facility shall be charged a pro rata fee to be
established by the office during the first year of operation.
(2) The license of any health facility, against which the fees
required by this section are charged, shall be revoked, after notice
and hearing, if it is determined by the office that the fees required
were not paid within the time prescribed by subdivision (c).
SEC. 2. Article 2 (commencing with Section 127340) of Chapter 2 of
Part 2 of Division 107 of the Health and Safety Code is repealed.
SEC. 3. Section 127400 of the Health and Safety Code is amended to
read:
127400. The following definitions apply for the purposes of this
article:
(a) "Allowance for financially qualified patient" means, with
respect to services rendered to a financially qualified patient, an
allowance that is applied after the hospital's charges are imposed on
the patient, due to the patient's determined financial inability to
pay the charges.
(b) (1) "Charity care" means the unreimbursed cost to a private
nonprofit hospital or nonprofit multispecialty clinic of providing
services to the uninsured or underinsured, as well as providing
funding or otherwise financially supporting any of the following:
(A) Health care services or items on an inpatient or outpatient
basis to a financially qualified patient with no expectation of
payment.
(B) Health care services or items provided to a financially
qualified patient through other nonprofit or public outpatient
clinics, hospitals, or health care organizations with no expectation
of payment.
(C) Community benefits, provided that the provision, funding, or
financial support of those benefits is demonstrated to reduce
community health care costs. For purposes of this subparagraph,
"community benefits" means any of the following: vaccination programs
and services for low-income families, school health
centers, as defined in Section 124174, chronic illness
prevention programs and services, nursing and caregiver training
provided without assessment of fees or payment of tuition, home-based
health care programs for low-income families, or community-based
mental health and outreach and assessment programs for low-income
families. For purposes of this subparagraph, "low-income families"
means families or individuals with income less than or equal to 350
percent of the federal poverty level.
(2) Charity care does not include any of the following:
(A) Uncollected fees or accounts written off as bad debt.
(B) Care provided to patients for which a public program or public
or private grant funds pay for any of the charges for the care.
(C) Contractual adjustments in the provision of health care
services below the amount identified as gross charges or
"chargemaster" rates by the health care provider.
(D) Any amount over 125 percent of the Medicare rate for the
health care services or items provided on an inpatient or outpatient
basis.
(E) Any amount over 125 percent of the Medicare rate for
providing, funding, or otherwise financially supporting health care
services or items with no expectation of payment provided to
financially qualified patients through other nonprofit or public
outpatient clinics, hospitals, or health care organizations.
(F) The cost to a nonprofit hospital of paying a tax or other
governmental assessment.
(c) "Federal poverty level" means the poverty guidelines updated
periodically in the Federal Register by the United States Department
of Health and Human Services under authority of subsection (2) of
Section 9902 of Title 42 of the United States Code.
(d) "Financially qualified patient" means a patient who is both of
the following:
(1) A patient who is a self-pay patient, as defined in subdivision
(g) or a patient with high medical costs, as defined in subdivision
(h).
(2) A patient who has a family income that does not exceed 350
percent of the federal poverty level.
(e) "Hospital" means a facility that is required to be licensed
under subdivision (a), (b), or (f) of Section 1250, except a facility
operated by the State Department of State Hospitals or the
Department of Corrections and Rehabilitation.
(f) "Office" means the Office of Statewide Health Planning and
Development.
(g) "Self-pay patient" means a patient who does not have
third-party coverage from a health insurer, health care service plan,
Medicare, or Medicaid, and whose injury is not a compensable injury
for purposes of workers' compensation, automobile insurance, or other
insurance as determined and documented by the hospital. Self-pay
patients may include charity care patients.
(h) "A patient with high medical costs" means a person whose
family income does not exceed 350 percent of the federal poverty
level, as defined in subdivision (c), if that individual
does not receive a discounted rate from the hospital as a result of
his or her third-party coverage. For these purposes,
and who incurs "high medical costs , "
means any of which are defined as any of the
following:
(1) Annual out-of-pocket costs incurred by the individual at the
hospital that exceed 10 percent of the patient's family income in the
prior 12 months.
(2) Annual out-of-pocket expenses that exceed 10 percent of the
patient's family income, if the patient provides documentation of the
patient's medical expenses paid by the patient or the patient's
family in the prior 12 months.
(3) A lower level determined by the hospital in accordance with
the hospital's charity care policy.
(i) "Patient's family" means the following:
(1) For persons 18 years of age and older, spouse, domestic
partner, as defined in Section 297 of the Family Code, and dependent
children under 21 years of age, whether living at home or not.
(2) For persons under 18 years of age, parent, caretaker
relatives, and other children under 21 years of age of the parent or
caretaker relative.
SEC. 4. Chapter 2.6 (commencing with Section 127470) is added to
Part 2 of Division 107 of the Health and Safety Code, to read:
CHAPTER 2.6. COMMUNITY BENEFITS
Article 1. Hospital Community Benefits
127470. (a) The Legislature finds and declares the following:
(1) Access to health care services is of vital concern to the
people of California.
(2) Health care providers play an important role in providing
essential health care services in the communities they serve.
(3) Notwithstanding public and private efforts to increase access
to health care, the people of California continue to have significant
unmet health needs. Studies indicate that as many as 6.9 million
Californians are uninsured during a year.
(4) The state has a substantial interest in ensuring that the
unmet health needs of its residents are addressed. Health care
providers can help address these needs by providing charity care and
community benefits to the uninsured and underinsured members of their
communities.
(5) Hospitals have different roles in the community depending on
their mission, governance, tax status, and articles of incorporation.
Private hospitals that are investor owned and have for-profit tax
status pay property taxes, corporate income taxes, and other taxes,
such as unemployment insurance, on a different basis than nonprofit,
district, or public hospitals. Nonprofit health facilities, including
hospitals and multispecialty clinics, as described in subdivision
(l) of Section 1206, receive favorable tax treatment by the
government and, in exchange, assume a social obligation to provide
charity care and other community benefits in the public interest.
(b) It is the intent of the Legislature in enacting this chapter
to provide uniform standards for reporting the amount of charity care
and community benefits provided to ensure that private nonprofit
hospitals and multispecialty clinics operated by nonprofit
corporations, as described in subdivision (l) of Section 1206,
actually meet the social obligations for which they receive favorable
tax treatment.
127472. The following definitions apply for the purposes of this
chapter:
(a) "Community" means the service area or patient population for
which a private nonprofit hospital or nonprofit multispecialty clinic
provides health care services.
(b) "Community benefits" means the unreimbursed goods, services,
and resources provided by a private nonprofit hospital or nonprofit
multispecialty clinic that addresses community-identified health
needs and concerns, particularly for people who are uninsured,
underserved, or members of a vulnerable population. Community
benefits include, but are not limited to, charity care, as defined in
Section 127400, the cost of community health improvement services
and community benefit operations, the cost of school health
centers, as defined in Section 124174, and the cost of health
professions education, subsidized health services for vulnerable
populations, research, contributions to community groups, and
community building activities.
(c) "Community benefits plan" means the written document prepared
for annual submission to the office that includes, but is not limited
to, a description of the activities that the private nonprofit
hospital or nonprofit multispecialty clinic has undertaken to address
identified community needs within its mission and financial
capacity, and the process by which the hospital or clinic develops
the plan in consultation with the community.
(d) "Community health needs assessment" means the process by which
the private nonprofit hospital or nonprofit multispecialty clinic
identifies, for its primary service area as determined by the
hospital or clinic, unmet community needs.
(e) "Discounted care" means the cost for medical care provided
consistent with Article 1 (commencing with Section 127400) of Chapter
2.5.
(f) "Free care" means the unreimbursed cost for medical care for a
patient who cannot afford to pay for care provided consistent with
Article 1 (commencing with Section 127400) of Chapter 2.5.
(g) "Nonprofit multispecialty clinic" means a clinic as described
in subdivision (l) of Section 1206.
(h) "Office" means the Office of Statewide Health Planning and
Development.
(i) "Private nonprofit hospital" means a private nonprofit acute
care hospital operated or controlled by a nonprofit corporation, as
defined in Section 5046 of the Corporations Code, that has been
determined to be exempt from taxation under the Internal Revenue
Code. For purposes of this chapter, "private nonprofit hospital" does
not include any of the following:
(1) A district hospital organized and governed pursuant to the
Local Health Care District Law (Division 23 (commencing with Section
32000)).
(2) A rural general acute care hospital, as defined in subdivision
(a) of Section 1250.
(3) A children's hospital, as defined in Section 10727 of the
Welfare and Institutions Code.
(4) A multispecialty clinic operated by a for-profit hospital,
regardless of its net revenue.
(j) "Underserved and vulnerable population" means a population
that has disproportionate unmet health-related needs, such as a high
prevalence of one or more health conditions or concerns, and that has
limited access to timely, quality health care.
127473. A private nonprofit hospital or a nonprofit
multispecialty clinic that reports community benefits to the
community shall report on those community benefits in a consistent
and comparable manner to all other private nonprofit hospitals and
nonprofit multispecialty clinics.
127474. A private nonprofit hospital or a nonprofit
multispecialty clinic shall make its community health needs
assessment and community benefits plan or community health plan
available to the public on its Internet Web site. A copy of the
assessment and plan shall be given free of charge to any person upon
request.
Article 2. Community Benefits Statement, Community Needs
Assessment, and Community Benefits Plan
127475. (a) Private nonprofit hospitals and nonprofit
multispecialty clinics shall provide community benefits to the
community.
(b) By January 1, 2015 2016 , each
private nonprofit hospital and each nonprofit multispecialty clinic
shall develop, in collaboration with the community, all of the
following:
(1) A community benefits statement that describes the hospital's
or clinic's commitment to developing, adopting, and implementing a
community benefits program. The hospital's or clinic's governing
board shall document that it has reviewed the clinic's organizational
mission statement and considered amendments to it that would better
align that organizational mission statement with the community
benefits statement.
(2) A description of the process for approval of the community
benefits statement by the hospital's or clinic's governing board,
including a declaration that the board and administrators of the
hospital or clinic shall be responsible for oversight and
implementation of the community benefits plan. The board may
establish a community benefits implementation committee that shall
include members of the board, senior administrators, and community
stakeholders.
(3) A community health needs assessment pursuant to Section 127476
that evaluates the health needs and resources of the community it
serves.
(c) By April 1, 2015 2016 , a private
nonprofit hospital or nonprofit multispecialty clinic shall develop,
in collaboration with the community, a community benefits plan
pursuant to Section 127477 designed to achieve all of the following
outcomes:
(1) Access to health care for members of underserved and
vulnerable populations.
(2) The addressing of essential health care needs of the
community, with particular attention to the needs of members of
underserved and vulnerable populations.
(3) The creation of measurable improvements in the health of the
community, with particular attention to the needs of members of
underserved and vulnerable populations.
127476. (a) Prior to adopting a community benefits plan, a
private nonprofit hospital or nonprofit multispecialty clinic shall
complete a community needs assessment that evaluates the health needs
and resources of the community served by the hospital or clinic that
is designed to achieve the outcomes specified in subdivision (c) of
Section 127475.
(b) In conducting its community health needs assessment, a private
nonprofit hospital or nonprofit multispecialty clinic shall solicit
comments from and meet with local government officials, including
representatives of local public health departments. A private
nonprofit hospital or nonprofit multispecialty clinic shall also
solicit comments from and meet with health care providers, registered
nurses, community groups representing, among others, patients,
labor, seniors, and consumers, and other health-related
organizations. Particular attention shall be given to persons who are
themselves underserved and who work with underserved and vulnerable
populations. Particular attention shall also be given to identifying
local needs to address racial and ethnic disparities in health
outcomes. A private nonprofit hospital or nonprofit multispecialty
clinic may create a community benefits advisory committee for the
purpose of soliciting community input.
(c) In preparing its community health needs assessment, a private
nonprofit hospital or nonprofit multispecialty clinic shall use
available public health data. A private nonprofit hospital or
nonprofit multispecialty clinic may collaborate with other facilities
and health care institutions in conducting community health needs
assessments and may make use of existing studies in completing their
own needs assessments.
(d) Prior to completing a community health needs assessment, a
private nonprofit hospital or nonprofit multispecialty clinic shall
make available to the public a copy of the assessment for review and
comment.
(e) A community health needs assessment shall be filed with the
office. A private nonprofit hospital or a nonprofit multispecialty
clinic shall update its community needs assessment at least every
three years.
127477. (a) By April 1, 2015 2016 ,
a private nonprofit hospital or nonprofit multispecialty clinic
shall develop a community benefits plan that conforms with this
chapter.
(b) In developing a community benefits plan, a private nonprofit
hospital or nonprofit multispecialty clinic shall solicit comments
from and meet with local government officials, including
representatives of local public health departments. A private
nonprofit hospital or nonprofit multispecialty clinic shall also
solicit comments from and meet with health care providers, community
groups representing, among others, patients, labor, seniors, and
consumers, and other health-related organizations. Particular
attention shall be given to persons who are themselves underserved,
who work with underserved and vulnerable populations, and who work
with populations at risk for racial and ethnic disparities in health
outcomes.
(c) A community benefits plan shall include, at a minimum, all of
the following:
(1) A summary of the needs assessment and a statement of the
community health care needs that will be addressed by the plan.
(2) A list of the services the private nonprofit hospital or
nonprofit multispecialty clinic intends to provide in the following
year to address community health needs identified in the community
health needs assessments. The list of services shall be categorized
under the following:
(A) Charity care, as defined in subdivision (b) of Section 127400.
(B) Other community benefits, including community health
improvement services and community benefit operations, health
professions education, subsidized health services, research, and
contributions to community groups.
(C) Community building activities targeting underserved and
vulnerable populations.
(3) A description of the target community or communities that the
plan is intended to benefit.
(4) An estimate of the economic value of the community benefits
that the private nonprofit hospital or nonprofit multispecialty
clinic intends to provide.
(5) A summary of the process used to elicit community
participation in the community health needs assessment and community
benefits plan design, and a description of the process for ongoing
participation of community members in plan implementation and
oversight, and a description of how the assessment and plan respond
to the comments received by the private nonprofit hospital or
nonprofit multispecialty clinic from the community.
(6) A list of individuals, organizations, and government officials
consulted during the development of the plan.
(7) A description of the intended impact on health outcomes
attributable to the plan, including short- and long-term measurable
goals and objectives.
(8) Mechanisms to evaluate the plan's effectiveness.
(9) The name and title of the individual responsible for
implementing the plan.
(10) The names of individuals on the private nonprofit hospital's
or nonprofit multispecialty clinic's governing board.
(11) If applicable, a report on the community benefits efforts of
the preceding year, including the amounts and types of community
benefits provided, in a manner to be prescribed by the office; a
statement of the plan's impact on health outcomes, including a
description of the private nonprofit hospital's or nonprofit
multispecialty clinic's progress toward meeting its short- and
long-term goals and objectives; and an evaluation of the plan's
effectiveness.
(d) A private nonprofit hospital or nonprofit multispecialty
clinic may also report on bad debts and Medicare shortfalls, although
these shall not be calculated or reported as community benefits.
(e) The governing board of a private nonprofit hospital or
nonprofit multispecialty clinic shall adopt the community benefits
plan. A private nonprofit hospital or nonprofit multispecialty clinic
shall make its draft community benefits plan available to the
public, in hard copy and on its Internet Web site, no later than 30
days prior to its adoption by the governing board of the private
nonprofit hospital or nonprofit multispecialty clinic.
(f) After April 1, 2015 2016 , a
private nonprofit hospital or nonprofit multispecialty clinic shall,
every two years, revise and submit its community benefits plan to the
office, no later than 120 days after the end of the hospital's or
clinic's fiscal year.
(g) A person or entity may file comments on a private nonprofit
hospital's or nonprofit multispecialty clinic's community benefits
plan with the office.
(h) A private nonprofit hospital or nonprofit multispecialty
clinic, under the common control of a single corporation or another
entity, may file a consolidated plan if the plan addresses services
in all of the categories listed in paragraph (2) of subdivision (c)
to be provided by each hospital or clinic under common control of the
corporation or entity.
Article 3. Duties of the Office of Statewide Health Planning
and Development
127487. (a) (1) The office shall develop and adopt regulations to
prescribe a standardized format for community benefits plans
pursuant to this chapter.
(2) The office shall develop a standardized methodology for
estimating the economic value of community benefits.
(3) In developing standards of reporting on community benefits,
the office shall, to the maximum extent possible, conform to Internal
Revenue Service reporting standards for those data elements reported
to the Internal Revenue Service, but shall also include those data
elements required under this chapter or other state law, including
charity care, as defined in Section 127400.
(4) A private nonprofit hospital or nonprofit multispecialty
clinic shall annually file with the office its IRS Form 990, or its
successor form, and the office shall post the form on its Internet
Web site.
(b) The office shall provide technical assistance to help private
nonprofit hospitals and nonprofit multispecialty clinics comply with
this chapter.
(c) The office shall make public a community health needs
assessment and community benefits plan and any comments received
regarding those assessments and plans. The office shall make these
documents available on its Internet Web site.
(d) The For each year that a
community benefits plan is submitted pursuant to subdivision (f) of
Section 127477, the office shall annually calculate and make
public the total value of community benefits provided by each
private nonprofit hospitals hospital
and nonprofit multispecialty clinics
clinic that report reports
pursuant to this chapter.
127488. The office may assess a civil penalty against any private
nonprofit hospital or nonprofit multispecialty clinic that fails to
comply with this article in the same manner as specified in Section
128770.
SEC. 5. Section 129050 of the Health and Safety Code is amended to
read:
129050. A loan shall be eligible for insurance under this chapter
if all of the following conditions are met:
(a) The loan shall be secured by a first mortgage, first deed of
trust, or other first priority lien on a fee interest of the borrower
or by a leasehold interest of the borrower having a term of at least
20 years, including options to renew for that duration, longer than
the term of the insured loan. The security for the loan shall be
subject only to those conditions, covenants and restrictions,
easements, taxes, and assessments of
record approved by the office, and other liens securing
debt insured under this chapter. The office may require additional
agreements in security of the loan.
(b) The borrower obtains an American Land Title Association title
insurance policy with the office designated as beneficiary, with
liability equal to the amount of the loan insured under this chapter,
and with additional endorsements that the office may reasonably
require.
(c) The proceeds of the loan shall be used exclusively for the
construction, improvement, or expansion of the health facility, as
approved by the office under Section 129020. However, loans insured
pursuant to this chapter may include loans to refinance another prior
loan, whether or not state insured and without regard to the date of
the prior loan, if the office determines that the amount refinanced
does not exceed 90 percent of the original total construction costs
and is otherwise eligible for insurance under this chapter. The
office may not insure a loan for a health facility that the office
determines is not needed pursuant to subdivision (k).
(d) The loan shall have a maturity date not exceeding 30 years
from the date of the beginning of amortization of the loan, except as
authorized by subdivision (e), or 75 percent of the office's
estimate of the economic life of the health facility, whichever is
the lesser.
(e) The loan shall contain complete amortization provisions
requiring periodic payments by the borrower not in excess of its
reasonable ability to pay as determined by the office. The office
shall permit a reasonable period of time during which the first
payment to amortization may be waived on agreement by the lender and
borrower. The office may, however, waive the amortization
requirements of this subdivision and of subdivision (g) of this
section when a term loan would be in the borrower's best interest.
(f) The loan shall bear interest on the amount of the principal
obligation outstanding at any time at a rate, as negotiated by the
borrower and lender, as the office finds necessary to meet the loan
money market. As used in this chapter, "interest" does not include
premium charges for insurance and service charges if any. Where a
loan is evidenced by a bond issue of a political subdivision, the
interest thereon may be at any rate the bonds may legally bear.
(g) The loan shall provide for the application of the borrower's
periodic payments to amortization of the principal of the loan.
(h) The loan shall contain those terms and provisions with respect
to insurance, repairs, alterations, payment of taxes and
assessments, foreclosure proceedings, anticipation of maturity,
additional and secondary liens, and other matters the office may in
its discretion prescribe.
(i) The loan shall have a principal obligation not in excess of an
amount equal to 90 percent of the total construction cost.
(j) The borrower shall offer reasonable assurance that the
services of the health facility will be made available to all persons
residing or employed in the area served by the facility.
(k) The office has determined that the facility is needed by the
community to provide the specified services. In making this
determination, the office shall do all of the following:
(1) Require the applicant to describe the community needs the
facility will meet and provide data and information to substantiate
the stated needs.
(2) Require the applicant, if appropriate, to demonstrate
participation in the community needs assessment required by Section
127476.
(3) Survey appropriate local officials and organizations to
measure perceived needs and verify the applicant's needs assessment.
(4) Use any additional available data relating to existing
facilities in the community and their capacity.
(5) Contact other state and federal departments that provide
funding for the programs proposed by the applicant to obtain those
departments' perspectives regarding the need for the facility.
Additionally, the office shall evaluate the potential effect of
proposed health care reimbursement changes on the facility's
financial feasibility.
(6) Consider the facility's consistency with the Cal-Mortgage
state plan.
(l) In the case of acquisitions, a project loan shall be
guaranteed only for transactions not in excess of the fair market
value of the acquisition.
Fair market value shall be determined, for purposes of this
subdivision, pursuant to the following procedure, that shall be
utilized during the office's review of a loan guarantee application:
(1) Completion of a property appraisal by an appraisal firm
qualified to make appraisals, as determined by the office, before
closing a loan on the project.
(2) Evaluation of the appraisal in conjunction with the book value
of the acquisition by the office. When acquisitions involve
additional construction, the office shall evaluate the proposed
construction to determine that the costs are reasonable for the type
of construction proposed. In those cases where this procedure reveals
that the cost of acquisition exceeds the current value of a
facility, including improvements, then the acquisition cost shall be
deemed in excess of fair market value.
(m) Notwithstanding subdivision (i), any loan in the amount of ten
million dollars ($10,000,000) or less may be insured up to 95
percent of the total construction cost.
In determining financial feasibility of projects of counties
pursuant to this section, the office shall take into consideration
any assistance for the project to be provided under Section 14085.5
of the Welfare and Institutions Code or from other sources. It is the
intent of the Legislature that the office endeavor to assist
counties in whatever ways are possible to arrange loans that will
meet the requirements for insurance prescribed by this section.
(n) The project's level of financial risk meets the criteria in
Section 129051.
