New Transparency Requirements for Skilled Nursing Facilities in California

On July 21, 2023, the Department of Health Care Access and Information of the California Health and Human Services Agency released a Notice of Proposed Rulemaking (the “Proposed Rule”) with regulations that would implement new financial and ownership transparency requirements for skilled nursing facilities (“SNFs”) in California.

Senate Bill 650, which was signed into law in October 2021 and codified at Section 128734.1 of the California Health and Safety Code, requires organizations that operate, conduct, own, manage, or maintain a SNF to file annual consolidated financial reports with the Department, effective for fiscal years ending on or after December 31, 2023. Under the statute, an organization’s report must include data from all operating entities, license holders, and related parties in which the organization has an ownership or control interest of 5 percent or more and that provide any service, facility, or supply to the SNF.

The Proposed Rule implements Senate Bill 650 and outlines specific requirements for the submission of the annual consolidated financial report, including that it be reviewed by a certified public accountant and include various financial statements, balance sheets, and statements of patient census and patient revenue by payer. The organization also must submit to the Department a visual representation of the organization’s structure that includes all (i) related parties in which the organization has an ownership or control interest of 5 percent or more and that provide any service, facility, or supply to the SNF and (ii) unrelated parties that provide services, facilities, or supplies to the SNF or other facilities that are operated or owned by the organization, and that are paid more than $200,000.

Each report will be due to the Department within four months after the SNF’s fiscal year end and must be accompanied by a certification signed by a duly authorized official of the SNF. If a SNF fails to file a required report, it will be liable for a civil penalty of $100 for each day after the due date, with a maximum annual civil penalty of $36,500.

The Department is accepting comments on the Proposed Rule until September 5, 2023. The Proposed Rule would be effective for fiscal years ending on or after December 31, 2023.