AN ACT Relating to quality of care provided to nursing home residents; amending RCW 18.51.060, 18.51.220, 18.51.260, 74.42.055, 74.42.580, 74.42.600, 18.51.091, and 74.46.460; adding new sections to chapter 18.51 RCW; and prescribing penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that closure of a nursing home can have devastating effects on residents and that, under certain circumstances, courts should consider placing nursing homes in receivership. As receivership has long existed as a remedy to preserve assets subject to litigation and to reorganize troubled affairs, the legislature finds that receivership is to be utilized to correct problems associated with either disregard of residents' health, safety, or welfare or with the possible closure of the nursing home for any reason.

NEW SECTION. Sec. 2. A petition to establish a receivership shall allege that one or more of the following conditions exist:

(1) The facility is operating without a license;

(2) The facility intends to close and has not made arrangements acceptable to the department within thirty days prior to closure for the orderly transfer of its residents;

(3) An emergency exists threatening the health, security, or welfare of the facility's residents, including, but not limited to, abandonment of the facility by the owner;

(4) A condition exists in the facility in substantial violation of a licensing statute or regulation, which adversely affects the health, safety, or welfare of the residents of the facility;

(5) The facility demonstrates a pattern and practice of habitually violating chapter 18.51 RCW, chapter 74.42 RCW, or other statutes or rules adopted by the department designed to safeguard the health, security, or welfare of residents; or

(6) The facility demonstrates a pattern or practice of habitually violating a standard or condition level as defined by the federal government under the authority of Title XIX of the social security act.

The petition may be filed in the superior court in the county in which the nursing home is located or in the superior court of Thurston county. A petition to establish a receivership may be initiated by the department whenever a violation of this section has been alleged to occur. The current or former operator or licensee, and the owner of the nursing home, if different than the operator or licensee, shall be made parties to the action.

NEW SECTION. Sec. 3. It shall be a defense to the petition to establish a receivership that the conditions alleged do not in fact exist. It shall not be a defense to the petition to allege that the respondent did not possess knowledge of the alleged condition or could not have been reasonably expected to know about the alleged condition. In a petition which alleges that the health, safety, or welfare of the residents of the facility is at issue, it shall not be a defense to the petition that the respondent had not been afforded a reasonable opportunity to correct the alleged condition.

NEW SECTION. Sec. 4. A petition for receivership shall include the name of the candidate for receiver. The department shall maintain a list of qualified persons to act as receivers. However, no person may be considered to be qualified to be a receiver who:

(1) Is the owner, licensee, or administrator of the facility;

(2) Is affiliated with the facility;

(3) Has a financial interest in the facility; or

(4) Has owned or operated a nursing home which has been ordered into receivership.

NEW SECTION. Sec. 5. Upon receipt of a petition for receivership, the court shall hear the matter within fourteen days. However, temporary relief may be obtained under chapter 7.40 RCW and other statutes. In all actions arising under sections 1 through 14 of this act, the posting of a certified copy of the summons and petition in a conspicuous place in the nursing home shall constitute service of those documents upon the respondent.

NEW SECTION. Sec. 6. Upon agreement of the candidate to the terms of the receivership and any special instructions of the court, the court may appoint such person as receiver of the nursing home if the court determines it is likely that a permanent operator will be found or conditions will be corrected without undue risk of harm to the patients. Appointment of a receiver may be in lieu of or in addition to temporary removal of some or all of the patients in the interests of their health, security, or welfare. A receiver shall be appointed for a term not to exceed twelve months: PROVIDED, HOWEVER, That such term may be extended for good cause shown.

NEW SECTION. Sec. 7. The receivership shall terminate:

(1) At the end of the appointed term;

(2) When all residents have been transferred and the facility closed;

(3) When all deficiencies have been eliminated and the facility has been sold or returned to its former owner: PROVIDED, HOWEVER, That when a rehabilitated facility is returned to its former owner, the court may impose conditions to assure the continued compliance with chapter 18.51 RCW, chapter 74.42 RCW, and other applicable statutes and rules; or

(4) Upon possession and control of the nursing home by a licensed replacement operator.

NEW SECTION. Sec. 8. The receiver shall render to the court an accounting of acts performed and expenditures made during the receivership. Nothing in this section relieves a court-appointed receiver from the responsibility of making all reports and certifications to the department required by law or rule relating to the receiver's operation of the subject nursing home, the care of its residents, and participation in the medicaid program, if any.

NEW SECTION. Sec. 9. If a receiver is appointed, the court shall set reasonable compensation for the receiver to be paid from operating revenues of the nursing home. The receiver shall be liable in his or her personal capacity only for negligent acts, intentional acts, or breaches of a fiduciary duty to the residents of the facility.

The department may revise the nursing home's medicaid reimbursement rate, consistent with reimbursement principles contained in chapter 74.46 RCW and rules adopted under that chapter, if revision is necessary to cover the receiver's compensation and other reasonable costs associated with the receivership and transition of control. Rate revision may also be granted if necessary to cover start-up costs and costs of repairs, replacements, and additional staff needed for patient health, security, or welfare: PROVIDED, That the property return on investment components of the medicaid rate shall be established for the receiver consistent with reimbursement principles contained in chapter 74.46 RCW. The department may also expedite the issuance of necessary licenses, contracts, and certifications, temporary or otherwise, necessary to carry out the purposes of receivership.

NEW SECTION. Sec. 10. Upon appointment of a receiver, the current or former licensee or operator and managing agent, if any, shall be divested of possession and control of the nursing home in favor of the receiver who shall have full responsibility and authority to continue operation of the home and the care of the residents. The receiver may perform all acts reasonably necessary to carry out the purposes of receivership, including, but not limited to the following:

(1) Protecting the health, security, and welfare of the residents;

(2) Remedying violations of state and federal law and regulations governing the operation of the home;

(3) Hiring, directing, managing, and discharging all consultants and employees, including the administrator of the nursing home and settling labor disputes;

(4) Receiving and expending in a prudent manner all revenues and financial resources of the home; and

(5) Making all repairs and replacements needed for patient health, security, and welfare: PROVIDED, That expenditures for repairs or replacements in excess of ten thousand dollars shall require approval of the court which shall expedite approval or disapproval for such expenditure.

Upon order of the court, a receiver may not be required to honor leases, mortgages, secured transactions, or contracts if the rent, price, or rate of interest was not a reasonable rent, price, or rate of interest at the time the contract was entered into or if a material provision of the contract is unreasonable.

NEW SECTION. Sec. 11. Upon order of the court, the department shall provide emergency or transitional financial assistance to receivers. The receiver shall file with the court an accounting for any money expended. Any emergency or transitional expenditure shall be recovered from revenue generated by the facility which is not obligated to the operation of the facility. If such funds are not fully recovered at the termination of the receivership, an action to recover such sums may be filed by the department against the owner. In lieu of filing an action, the department may file a lien on the facility or on the proceeds of the sale of the facility. Such a lien shall take priority over all other liens except for liens for wages to employees. The owner of the facility shall be entitled to the proceeds of the facility or the sale of the facility to the extent that these exceed the liabilities of the facility, including liabilities to the state, receiver, employees, and contractors, at the termination of the receivership.

Revenues relating to services provided by the current or former licensee, operator, or owner and available operating funds belonging to such licensee, operator, or owner shall be under the control of the receiver. The receiver shall consult the court in cases of extraordinary or questionable debts incurred prior to his or her appointment and shall not have the power to close the home or sell any assets of the home without prior court approval.

Priority shall be given to debts and expenditures directly related to providing care and meeting the needs of patients. Any payment made to the receiver shall act to discharge the obligation of the payor to the owner of the facility.

NEW SECTION. Sec. 12. If the nursing home is providing care to recipients of state medical assistance, the receiver shall become the medicaid contractor for the duration of the receivership period and shall assume all reporting and other responsibilities required by applicable laws and regulations.

NEW SECTION. Sec. 13. No seizure, foreclosure, or interference with nursing home revenues, supplies, real property, improvements, or equipment shall be allowed for the duration of the receivership without prior court approval.

NEW SECTION. Sec. 14. At least sixty days prior to the effective date of any change of ownership, change of operating entity, or change of management of a nursing home, the current operating entity shall notify, separately and in writing, each resident of the home, the resident's guardian, family member, or other responsible person of the proposed change. The notice shall include the identity of the proposed new owner, operating entity, or managing entity and the names, addresses, and telephone numbers of departmental personnel to whom comments regarding the change may be directed. If the proposed new owner, operating entity, or managing entity is a corporation, the notice shall include the names of all officers, the registered agent in the state of Washington, and all stockholders with a five percent or greater ownership interest. If the proposed new owner, operating entity, or managing entity is a partnership, the notice shall include the names of all general and limited partners. This section shall apply regardless of whether the current operating entity holds a medicaid provider contract with the department and whether the operating entity intends to enter such a contract.

Sec. 15. Section 7, chapter 117, Laws of 1951 as last amended by section 18, chapter 2, Laws of 1981 1st ex. sess. and RCW 18.51.060 are each amended to read as follows:

(1) The department is authorized to deny, suspend, or revoke a license or, in lieu thereof or in addition thereto, assess monetary penalties of a civil nature not to exceed ((~~one~~)) ten thousand dollars per violation in any case in which it finds that the applicant, or licensee, or any partner, officer, director, owner of five percent or more of the assets of the nursing home, or managing employee:

((~~(1)~~)) (a) Failed or refused to comply with the requirements of this chapter or of chapter 74.42 RCW, or the standards, rules and regulations established ((~~hereunder~~)) under them; or

(((2) Was the holder of a license issued pursuant to this chapter, which was revoked for cause and never reissued by the department, or which license was suspended for cause and the terms of the suspension have not been fulfilled)) (b) Operated a nursing home without a license or under a revoked or suspended license; or

((~~(3)~~)) (c) Has knowingly or with reason to know made a false statement of a material fact in his application for license or any data attached thereto, or in any matter under investigation by the department; or

((~~(4)~~)) (d) Refused to allow representatives or agents of the department to inspect all books, records, and files required to be maintained or any portion of the premises of the nursing home; or

((~~(5)~~)) (e) Wilfully prevented, interfered with, or attempted to impede in any way the work of any duly authorized representative of the department and the lawful enforcement of any provision of this chapter or of chapter 74.42 RCW; or

((~~(6)~~)) (f) Wilfully prevented or interfered with any representative of the department in the preservation of evidence of any violation of any of the provisions of this chapter or of chapter 74.42 RCW or the standards, rules, and regulations promulgated ((~~hereunder~~)) under them; or

((~~(7)~~)) (g) Failed to report patient abuse or neglect in violation of chapter 70.124 RCW; or

((~~(8)~~)) (h) Fails to pay any civil monetary penalty assessed by the department pursuant to this chapter within ten days after such assessment becomes final: PROVIDED, That in no event shall the department assess a civil monetary penalty authorized pursuant to this section or post the said premises as provided in RCW 18.51.260 or include in the report required pursuant to RCW 18.51.270 during any period in which it has not reasonably implemented and funded its cost-related reimbursement system for public patients.

(2) A person subject to civil penalty under subsection (1)(a) of this section shall have a reasonable opportunity, not to exceed sixty days from notification of the violation, to correct the violation before being assessed a civil monetary penalty under this section. However, if the department determines that the violation resulted in serious harm to or death of a patient, constitutes a serious threat to patient life, health, or safety, or substantially limits the nursing home's capacity to render adequate care, the violator will be so notified and a penalty may be assessed without prior opportunity to correct and each day the violation continues shall constitute a separate violation subject to assessment of a separate penalty.

Failure to correct a violation or maintain correction of any violation for at least one year after correction shall constitute a separate violation subject to assessment of a separate penalty not to exceed ten thousand dollars without a prior opportunity to correct the violation.

(3) A person subject to civil penalty under subsections (1)(b) through (h) of this section shall not have a prior opportunity to correct the violation before being assessed a civil monetary penalty under this section.

Following the notification of a violation of subsections (1)(b) through (h) of this section, each day upon which the same or a substantially similar action occurs shall constitute a separate violation subject to the assessment of a separate penalty.

(4) Any civil penalty assessed under this section or chapter 74.46 RCW shall bear a reasonable rate of interest from the date of the violation. The department may administer civil fines under this section or chapter 74.46 RCW in any of the following ways:

(a) Requiring payment in full;

(b) Permitting installment payments;

(c) Requiring that the full amount or a portion of the assessed civil penalty be expended to ameliorate the violation or to improve nonadministrative services within the facility;

(d) Deferring the penalty or a portion thereof until one year after corrective action has been completed to assure maintenance of such action: PROVIDED, That the penalty may be reduced all or in part at the end of such year: PROVIDED FURTHER, That the penalty may be trebled if such corrective action is not maintained for one year.

(5) Any civil penalty assessed under this section or chapter 74.46 RCW shall be a nonreimbursable item under chapter 74.46 RCW.

Sec. 16. Section 7, chapter 99, Laws of 1975 1st ex. sess. and RCW 18.51.220 are each amended to read as follows:

(1) No licensee shall discriminate or retaliate in any manner against a patient or employee in its nursing home on the basis or for the reason that such patient or employee or any other person has initiated or participated in any proceeding specified in this chapter. A licensee who violates this section is subject to a civil penalty of not more than ((~~five hundred~~)) ten thousand dollars.

(2) Any attempt to expel a patient from a nursing home, or any type of discriminatory treatment of a patient by whom, or upon whose behalf, a complaint has been submitted to the department or any proceeding instituted under or related to this chapter within one year of the filing of the complaint or the institution of such action, shall raise a rebuttable presumption that such action was taken by the licensee in retaliation for the filing of the complaint.

Sec. 17. Section 13, chapter 99, Laws of 1975 1st ex. sess. and RCW 18.51.260 are each amended to read as follows:

Each citation for a violation specified in ((~~subsections (1) through (7) of~~)) RCW 18.51.060 which is issued pursuant to this section and which has become final, or a copy or copies thereof, shall be prominently posted, as prescribed in regulations issued by the director, until the violation is corrected to the satisfaction of the department up to a maximum of one hundred twenty days. The citation or copy shall be posted in a place or places in plain view of the patients in the nursing home, persons visiting those patients, and persons who inquire about placement in the facility.

Sec. 18. Section 3, chapter 284, Laws of 1985 and RCW 74.42.055 are each amended to read as follows:

(1) The purpose of this section is to prohibit discrimination against medicaid recipients by nursing homes which have contracted with the department to provide skilled or intermediate nursing care services to medicaid recipients.

(2) It shall be unlawful for any nursing home which has a medicaid contract with the department:

(a) To require, as a condition of admission, assurance from the patient or any other person that the patient is not eligible for or will not apply for medicaid;

(b) To deny or delay admission or readmission of a person to a nursing home because of his or her status as a medicaid recipient;

(c) To transfer a patient, except from a private room to another room within the nursing home, because of his or her status as a medicaid recipient;

(d) To transfer a patient to another nursing home because of his or her status as a medicaid recipient;

(e) To discharge a patient from a nursing home because of his or her status as a medicaid recipient; or

(f) To charge any amounts in excess of the medicaid rate from the date of eligibility, except for any supplementation permitted by the department pursuant to RCW 18.51.070.

(3) Any nursing home which has a medicaid contract with the department shall maintain one list of names of persons seeking admission to the facility, which is ordered by the date of request for admission. This information shall be retained for one year from the month admission was requested.

(4) The department may assess monetary penalties of a civil nature, not to exceed ((~~one~~)) ten thousand dollars for each violation of this section.

(5) Because it is a matter of great public importance to protect senior citizens who need medicaid services from discriminatory treatment in obtaining long-term health care, any violation of this section shall be construed for purposes of the application of the consumer protection act, chapter 19.86 RCW, to constitute an unfair or deceptive act or practice or unfair method of competition in the conduct of trade or commerce.

(6) It is not an act of discrimination under this chapter to refuse to admit a patient if admitting that patient would prevent the needs of the other patients residing in that facility from being met at that facility.

Sec. 19. Section 58, chapter 211, Laws of 1979 ex. sess. as amended by section 15, chapter 184, Laws of 1980 and RCW 74.42.580 are each amended to read as follows:

The department may deny, suspend, or revoke a license or provisional license or, in lieu thereof or in addition thereto, assess monetary penalties of a civil nature ((pursuant to the provisions of chapter 34.04 RCW not to exceed one thousand dollars for such violations when the department finds that the licensee, or any partner, officer, director, owner of five percent or more of the assets of the facility, or managing employee:

~~(1) Failed or refused to comply with the requirements of RCW 74.42.010 through 74.42.570 or the standards and rules established by the department under RCW 74.42.010 through 74.42.570;~~

(2) Was the holder of a license issued under chapter 18.51 RCW, which was revoked for cause and never reissued by the department, or which license was suspended for cause and the terms of the suspension have not been fulfilled;

~~(3) Has knowingly or with reason to know made a false statement of a material fact in any records required under RCW 74.42.010 through 74.42.570;~~

(4) Refused to allow representatives or agents of the department to inspect all books, records, and files required to be maintained under RCW 74.42.010 through 74.42.570 or any portion of the premises of the facility;

(5) Wilfully prevented, interfered with, or attempted to impede in any way the work of any authorized representative of the department and the lawful enforcement of any provision of RCW 74.42.010 through 74.42.570; or

(6) Wilfully prevented or interfered with any representative of the department in the preservation of evidence of any violation of any of the provisions of RCW 74.42.010 through 74.42.570 or the standards and rules adopted pursuant to RCW 74.42.010 through 74.42.570.

~~The department shall adopt rules to implement and administer this section not later than January 15, 1981~~)) as provided in RCW 18.51.060 for violations of requirements of this chapter. Chapter 34.04 RCW applies to any such actions.

Sec. 20. Section 60, chapter 211, Laws of 1979 ex. sess. as last amended by section 3, chapter 120, Laws of 1982 and RCW 74.42.600 are each amended to read as follows:

(1) In addition to the inspection required by chapter 18.51 RCW, the department shall inspect the facility for compliance with resident rights and direct care standards of this chapter. The department may inspect any and all other provisions randomly, by exception profiles, or during complaint investigations.

(2) If the facility has not complied with ((~~any of the standards in RCW 74.42.010 through 74.42.570~~)) all the requirements of this chapter, the department shall notify the facility in writing that the facility is in noncompliance and describe the reasons for the facility's noncompliance and the department may impose penalties under RCW 18.51.060. ((The notice shall inform the facility that, except for life-threatening situations or situations which substantially limit the provider's capacity to render adequate care which may be for a shorter period of time, the facility shall comply within a specified time, not to exceed sixty days from the date the plan of correction is approved by the department. The penalties in RCW 74.42.580 may be imposed if, upon inspection after the specified period, the department determines that the facility has not complied.))

Sec. 21. Section 63, chapter 211, Laws of 1979 ex. sess. as last amended by section 2, chapter 236, Laws of 1983 and RCW 18.51.091 are each amended to read as follows:

The department shall make or cause to be made at least one inspection of each nursing home prior to license renewal and shall inspect community-based services as part of the licensing renewal survey. Such inspection shall be made without providing advance notice of the inspection. Every inspection may include an inspection of every part of the premises and an examination of all records, methods of administration, the general and special dietary and the stores and methods of supply. Those nursing homes that provide community-based care shall establish and maintain separate and distinct accounting and other essential records for the purpose of appropriately allocating costs of the providing of such care: PROVIDED, That such costs shall not be considered allowable costs for reimbursement purposes under chapter 74.46 RCW. Following such inspection or inspections, written notice of any violation of this law or the rules and regulations promulgated hereunder, shall be given the applicant or licensee and the department. The notice shall describe the reasons for the facility's noncompliance. ((The notice shall inform the facility that it must comply with a plan of correction within a specified time, not to exceed sixty days from the date the plan of correction is approved by the department. The penalties in RCW 18.51.060 may be imposed if, after the specified period, the department determines that the facility has not complied. In life-threatening situations or situations which substantially limit the provider's capacity to render adequate care, the department may require immediate correction or proceed immediately under RCW 18.51.060.)) The department may prescribe by regulations that any licensee or applicant desiring to make specified types of alterations or additions to its facilities or to construct new facilities shall, before commencing such alteration, addition or new construction, submit its plans and specifications therefor to the department for preliminary inspection and approval or recommendations with respect to compliance with the regulations and standards herein authorized.

Sec. 22. Section 46, chapter 177, Laws of 1980 as last amended by section 15, chapter 361, Laws of 1985 and RCW 74.46.460 are each amended to read as follows:

(1) Each contractor's reimbursement rates will be determined prospectively at least once each calendar year, to be effective July 1st.

(2) Rates may be adjusted as determined by the department to take into account variations of more than ten percent in the distribution of patient classifications or changes in patient characteristics from the prior reporting year, program changes required by the department, or changes in staffing levels at a facility required by the department. Rates may also be adjusted to cover costs associated with placing a nursing home in receivership which are not covered by the rate of the former contractor, including: Compensation of the receiver, reasonable expenses of receivership and transition of control, and costs incurred by the receiver in carrying out court instructions or rectifying deficiencies found. Rates shall be adjusted for any capitalized additions or replacements made as a condition for licensure or certification.

(3) Where the contractor participated in the provisions of prospective cost-related reimbursement in effect prior to July 1, 1983, such contractor's prospective rate effective July 1, 1983, will be determined utilizing the contractor's desk-reviewed allowable costs for calendar year 1982.

(4) All prospective reimbursement rates for 1984 and thereafter shall be determined utilizing the prior year's desk-reviewed cost reports.

NEW SECTION. Sec. 23. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 24. Sections 1 through 14 of this act are each added to chapter 18.51 RCW.