HBA-MPM C.S.S.B. 1839 77(R) BILL ANALYSIS Office of House Bill AnalysisC.S.S.B. 1839 By: Moncrief Human Services 6/26/2001 Committee Report (Amended) BACKGROUND AND PURPOSE Currently, the nursing home industry in Texas is facing a crisis. Liability insurance rates are rising quickly, availability to insurance is dwindling, and lawsuit settlements are increasing. Senate Bill 1839 sets forth provisions regarding quality of care, makes available liability insurance for all nursing homes, and provides for an amelioration process. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Health and Human Services Commission in SECTION 7.02 (Section 531.058, Government Code), SECTION 9.01 (Section 242.855, Health and Safety Code), and SECTION 9.03 and to the commissioner of health and human services in SECTION 7.04 of this bill. ANALYSIS Senate Bill 1839 creates the Long-Term Care Facility Improvement Act (Act). The bill amends the Health and Safety Code to require a court to notify the Texas Department of Human Services (DHS) if exemplary damages are awarded against a convalescent or nursing home or related institution (nursing home) or an officer, employee, or agent of the nursing home. If DHS receives such notice, it is required to maintain the information contained in the notice in DHS records relating to the history of the nursing home (Sec. 242.051). S.B. 1839 amends the Human Resources Code related to the medical assistance program to authorize a record of the Health and Human Services Commission (HHSC), including a record of a survey, complaint or incident investigation, or survey report that relates to an institution, including an intermediate care facility for the mentally retarded (ICF-MR), to be introduced into evidence in a civil or enforcement action or related proceeding if the record is admissible under the Texas Rules of Evidence. The bill authorizes an HHSC surveyor or investigator to testify in a civil action as to observations, factual findings, conclusions or violations of requirements for licensure or certification for participation in the state Medicaid program that were made in the discharge of official duties if the testimony is admissible under the Texas Rules of Evidence (Sec. 32.021). The bill repeals the provision that provisions governing the admissibility of an HHSC record do not: _apply in an enforcement action or related proceeding in which the state or an agency or political subdivision of the state is a party; _prohibit or limit the testimony of an HHSC surveyor or investigator in a civil action; or _bar the admission into evidence in a civil action of certain HHSC records offered to establish warning or notice to an institution of a relevant finding or offered under any rule or evidentiary predicate of the Texas Rules of Civil Evidence (Sec. 32.021). The bill amends the Health and Safety Code to provide that provisions governing the admissibility of records and testimony by HHSC also govern the admissibility of records and testimony of DHS in a civil action against a nursing home or ICF-MRs (Secs. 242.000 and 252.045). S.B. 1839 amends the Insurance Code to require each insurer that writes professional liability insurance policies for nursing homes, including an insurer whose rates are not regulated, to comply with a request for information from the commissioner of insurance (commissioner). The commissioner may require information in rate filings, special data calls, or informational hearings or by any other means consistent with the Insurance Code applicable to the affected insurer as a condition of writing the policies to allow the commissioner to: _determine whether insurers writing coverage are passing to insured nursing homes on a prospective basis the savings that accrue as a result of the reduction in risk to insurers writing that coverage that will result from legislation enacted by the 77th Legislature, including legislation that limits the exposure of an insurer to exemplary damages for certain claims against nursing homes and clarifies the admissibility of certain documents in a civil action against a nursing home; or _prepare the report required of the commissioner under this bill or any other report the commissioner is required to submit to the legislature in connection with the recent legislation. The bill specifies that information provided under this provision is privileged and confidential and remains so unless and until introduced into evidence at an administrative hearing or in court (Sec. 38.251). The commissioner is required to assemble information and take other appropriate measures to assess and evaluate changes in the marketplace resulting from the implementation of the legislation described above and to report findings and recommendations to the legislature (Sec. 38.252). S.B. 1839 requires the commissioner to adopt no later than December 1, 2001 best practices for risk management and loss control that may be used by for-profit and not-for-profit nursing homes. In determining rates for professional liability insurance applicable to nursing homes, an insurance company or the Texas Medical Liability Insurance Underwriting Association is authorized to consider whether the nursing home adopts and implements the best practices. The bill requires the commissioner to consult with HHSC and a task force appointed by the commissioner in developing and amending best practices for nursing homes. The bill sets forth the composition of the task force. The bill specifies that the best practices established under this provision do not establish standards of care for nursing homes applicable in a civil action against a nursing home (Sec. 3A, Art. 5.15-4, and SECTION 5.10). S.B. 1839 includes for-profit nursing homes in the definition of "health care provider" for purposes of provisions governing professional liability insurance for physicians and health care providers and the Texas Medical Liability Insurance Underwriting Association Act (Sec. 2, Art. 5.15-1 and Sec. 2, Art. 21.49-3). The bill provides that a nursing home not otherwise eligible for medical liability coverage from the joint underwriting association (JUA) is eligible for coverage if the nursing home demonstrates in accordance with the requirements of the JUA that the nursing home made a verifiable effort to obtain coverage from authorized insurers and eligible surplus lines insurers and was unable to obtain substantially equivalent coverage and rates (Sec. 3A, Art. 21.49-3). The bill provides that rates, rating plans, rating rules, rating classifications, territories, and policy forms for for-profit nursing homes are subject to the requirements for professional liability insurance for physicians and health care providers to the same extent as not-for-profit nursing homes. The bill specifies that rates applicable to professional liability insurance provided by JUA that cover nursing homes that are not for profit must reflect a 30 percent discount from the rates for the same coverage provided to others in the same category of insureds and requires the commissioner to ensure compliance with this provision (Sec. 4, Art. 21.49-3). S.B. 1839 specifies that if in any fiscal year the incurred losses and defense and cost containment expenses from physicians or any single category of health care provider result in a net underwriting loss and exceed 25 percent of the policyholder's stabilization reserve fund (fund), as valued for that year, the commissioner is authorized to direct by order the initiation or continuation of the fund charge for physicians or that category of health care provider until the fund recovers the amount by which those losses and cost containment expenses exceed 25 percent of the fund. The bill specifies that the fund and its earnings are state funds and shall be held by the comptroller of public accounts outside of the state treasury. The bill provides that the purpose of the fund is to ensure the financial soundness of the JUA and may only be used for related purposes (Sec. 4A, Art. 21.49-3). The bill provides that the JUA is not liable for exemplary damages under a professional liability insurance policy that covers a for-profit or not-for-profit nursing home and that excludes coverage for exemplary damages awarded in relation to a covered claim. The bill specifies the applicability and effect of this liability limitation in relation to current law (Sec. 4B, Art. 21.49-3). S.B. 1839 establishes a revenue bond program as a method to raise funds to provide professional liability insurance through the JUA for nursing homes (Sec 1, Art. 21.49-3d). The bill requires the Texas Public Finance Authority (authority) on behalf of the fund to issue revenue bonds in a total amount not to exceed $75 million to fund the fund, pay costs associated with the issuance of the bonds, and pay other costs related to the bonds as determined by the board of directors of the authority (board) (Secs. 3 and 5, Art. 21.49-3d). The bill sets forth provisions regarding conditions, additional covenants, special accounts, and security of the bonds (Secs. 6-9, Art. 21.49-3d). The bill provides that a maintenance tax surcharge set by the commissioner is assessed against each insurer and the JUA in an amount sufficient to pay all debt services on the bonds. The bill sets forth provisions for increasing the maintenance tax rate on determining the rate of assessment, and authorizes the JUA and each insurer to pass through the maintenance tax surcharge to each of its policyholders. The bill provides that if a company leaves the market for liability insurance in this state, the insurer's obligation to pay continues (Sec. 10, Art. 21.49-3d). S.B. 1839 amends the Health and Safety Code to provide that to hold a license a nursing home must maintain professional liability insurance coverage against the liability of the nursing home for a health care liability claim. The bill sets forth the requirements for the insurance coverage maintained by the nursing home. The bill provides that to the extent permitted by federal law and applicable state and federal rules, the cost of the liability insurance coverage is an allowable cost for reimbursement under the state Medicaid program. A nursing home is not required to maintain professional liability insurance before September 1, 2002 and DHS is prohibited from taking any enforcement action because a nursing home fails to maintain the insurance before September 1, 2003 (Sec. 242.0372 and SECTION 6.02). S.B. 1839 amends the Human Resources Code relating to require DHS to require a surveyor to complete a basic training program before the surveyor inspects, surveys, or investigates a nursing home, ICF-MR, or assisted living facility (long-term care facility). The training must include observation of a facility for a minimum of 10 working days within a 14-day period. The bill requires DHS semiannually to provide training for surveyors and providers on subjects that address at least one of the 10 most common violations by long-term care facilities under federal or state law. The bill also sets forth provisions relating to the required continuing education credits of a surveyor who is a licensed health care professional or pharmacist in gerontology or care for individuals with cognitive or physical disabilities (Sec. 22.037). The bill amends the Government Code to require HHSC to adopt procedures to review citations or penalties assessed for a violation of a rule or law against an institution or facility licensed or certified as a long-term care facility and the performance of duties by employees and agents of DHS or another state agency responsible for licensing, inspecting, surveying, or investigating long-term care facilities. The bill also requires HHSC to annually report to the speaker of the house of representatives, the lieutenant governor, and the governor on the findings of the review (Sec. 531.056). The bill requires HHSC to establish an early warning system to detect conditions that could be detrimental to the health, safety, and welfare of residents, including an analysis of financial and quality-care indicators that would predict the need for HHSC to take action. The bill requires HHSC to establish regional offices with one or more quality-of-care monitors based on the number of long-term care facilities in the region. HHSC is required to establish regional offices with one or more quality-of-care monitors, based on the number of long-term facilities in the region, to monitor the facilities in the region on a regular, unannounced, aperiodic basis, including nights, evenings, weekends, and holidays. The bill provides that priority for monitoring visits is required to be given to long-term care facilities with a history of patient care deficiencies. The bill sets forth provisions regarding the deployment, the assessment, confidentiality, findings, recommendations, and observations of quality-of-care monitors. The bill prohibits a quality-of-care monitor from interfering with the performance of the duties of a DHS surveyor, inspector, or investigator. The bill requires HHSC to create rapid response teams composed of health care experts that can visit longterm care facilities identified through the early warning system. The bill authorizes rapid response teams to visit long-term care facilities that request the assistance of HHSC and prohibits the deployment of rapid response teams for the purpose of helping a long-term care facility prepare for a regular inspection or survey (Sec. 531.057). The bill amends the Human Resources and Government codes to require HHSC by rule to establish an informal dispute resolution process that provides for adjudication by an appropriate disinterested person of disputes relating to a proposed enforcement action or related proceeding regarding certain long-term care facilities of DHS. The bill requires HHSC to adopt rules to adjudicate claims in contested cases, including claims unresolved by the informal dispute resolution process of HHSC. The bill prohibits HHSC from delegating its responsibility to administer the informal dispute resolution process to another state agency (Secs. 32.021, Human Resources Code and 531.058, Government Code). The bill requires the commissioner of health and human services, not later than January 1, 2002, to adopt any rules necessary to implement the review and survey process, the quality assurance early warning system, and the informal dispute resolution process (SECTION 7.04). The bill requires DHS, no later than January 1, 2002, to develop training necessary to implement the training and continuing education. The bill provides for the transfer, effective January 1, 2002, of all property and records in the custody of DHS and any rules or forms adopted by DHS to HHSC. The bill prohibits HHSC from transferring employees or funding from the regulatory functions of DHS to HHSC. The bill prohibits HHSC from transferring employees or funding from the regulatory functions of DHS to HHSC (SECTIONS 7.05 and 7.06). Senate Bill 1839 amends the Health and Safety Code to modify provisions relating to amelioration of violations by nursing homes and ICF-MRs. The bill authorizes the commissioner of human services or DHS as applicable, in lieu of demanding payment of an administrative penalty, to allow the person to use any portion of the penalty to ameliorate the violation or to improve services in the affected nursing home or ICF-MR. The bill requires DHS to offer amelioration to a person for a charged violation if DHS determines that the violation does not constitute immediate jeopardy to the health and safety of a resident and prohibits DHS from offering amelioration if DHS determines that the charged violation constitutes immediate jeopardy to a resident. The bill also prohibits DHS from offering amelioration for a nursing home violation if the person has been charged with a violation which is subject to correction. The bill requires DHS to offer amelioration to a person not later than the 10th day after the date the person receives a final notification of assessment of administrative penalty after an informal dispute resolution process. A person to whom amelioration has been offered must file a plan for amelioration not later than the 45th day after the person receives the offer. In submitting the plan, the person must agree to waive the person's right to an administrative hearing if DHS approves the plan. The bill sets forth guidelines for what an amelioration plan must include. The bill prohibits DHS from offering amelioration to a person more than one time in a twoyear period for the same or a similar violation or more than three times in a two-year period (Secs. 242.071 and 252.071). S.B. 1839 requires HHSC or DHS at the direction of HHSC to set a quality assurance fee (fee) imposed on each nursing home and sets forth provisions regarding the computation of the fee. The bill provides that the fee is an allowable cost for reimbursement under the state Medicaid program (Sec. 242.852). The bill provides that for the first month following the effective date of this bill, the fee is equal to $5.25 multiplied by the number of patient days (SECTION 9.02). The bill sets forth the method by which a nursing home determines the number of patient days for purposes of calculating the quality assurance fee (Sec. 242.853). HHSC or DHS at the direction of HHSC is required to collect the fee. The bill establishes deadlines for each nursing home to report the total patient days for the month and pay the fee (Sec. 242.854). The bill requires HHSC to adopt rules for the administration the fee. HHSC is prohibited from adopting rules granting exceptions from the fee. The bill prohibits an administrative penalty from exceeding one-half of the amount of the outstanding fee or $20,000 whichever is greater (Sec. 242.855 and SECTION 9.03). The bill establishes the quality assurance fund as a fund outside the state treasury held by the Texas Treasury Safekeeping Trust Company. The bill specifies that subject to legislative appropriation and these provisions, fees combined with federal matching funds will support or maintain an increase in Medicaid reimbursement for institutions (Sec. 242.856). HHSC is required to use money in the quality assurance fund together with any available federal matching funds to offset allowable expenses under the state Medicaid program or to increase reimbursement rates paid under the Medicaid program to nursing homes. HHSC or DHS is required to devise the formula by which amounts received will increase the reimbursement rates. HHSC is required to ensure that the formula provides incentives for nursing homes to increase direct care staffing and direct care wages and benefits (Sec. 242.857). S.B. 1839 provides that if any portion of provisions governing the quality assurance fee is held invalid by a court that is not subject to appeal or if HHSC determines that the imposition of the fee and the expenditure of amounts collected will not entitle the state to receive additional federal funds under the Medicaid program, HHSC is required to stop collection of the fee and to return any money collected to the nursing homes that paid the fee (Sec. 242.858). The bill requires the 79th Legislature to review the operation and effectiveness of these provisions, and unless continued in effect by the 79th Legislature, provisions governing the fee expire September 1, 2005 (Sec. 242.859). S.B. 1839 requires the Texas Department of Insurance (TDI) to study the implementation of the provisions of this bill relating to the admissibility of certain evidence in a civil action and liability insurance coverage for nursing institutions. The commissioner of insurance is required to submit an interim report to the governor, lieutenant governor, and speaker of the house of representatives no later than December 1, 2002 and to submit a final report no later than December 1, 2004 (SECTIONS 10.02-10.03). The bill provides that to the extent of any conflict, the provisions of this bill prevail over any other Act of the 77th Legislature, regardless of the relative dates of enactment (SECTION 11.01). EFFECTIVE DATE On passage, or if the Act does not receive the necessary vote, the Act takes effect September 1, 2001. EXPLANATION OF AMENDMENTS Committee Amendment No. 1 removes provisions relating to a quality assurance fee for nursing homes and substitutes similar provisions relating to a quality assurance fee for intermediate care facilities for the mentally retarded (ICF-MRs). Committee Amendment No. 2 provides that the increased Medicaid reimbursement paid to a convalescent or nursing home or related institution (nursing home) may not be based solely on the amount of the fee paid by that nursing home unless authorized by federal law. Committee Amendment No. 3 specifies that for a nursing home that is owned and operated by a governmental unit, the insurance coverage maintained by the nursing home must provide coverage only to the extent of the governmental unit's liability under state law. Committee Amendment No. 4 removes the definitions in the original bill of "immediate jeopardy to health and safety" and redefines them to provide that the term means a situation in which immediate corrective action is necessary because the nursing home's or ICF-MR's noncompliance has caused or is likely to cause serious injury, harm, impairment, or death of a resident. Committee Amendment No. 5 creates separate groups for nursing homes and for physicians and health care providers other than nursing homes for assigning contingent liability for a proportionate assessment levied by the joint underwriters association (JUA). The amendment specifies that the existing policyholder's stabilization reserve fund is for physicians and health care providers, other than for-profit and not-for-profit nursing homes. The amendment provides that the fund is separate and distinct from the stabilization reserve fund for for-profit and not-for-profit nursing homes created in this amendment. The amendment creates an additional stabilization reserve fund for for-profit and not-for-profit nursing homes and sets forth provisions regarding administration and collection of the fund. The amendment requires each policyholder to pay annually into the fund a charge until the net balance is not less than the projected sum of premiums for for-profit and not-for-profit nursing homes to be written in the year following valuation date. The amendment specifies the manner in which the fund shall be credited and charged. The amendment sets forth provisions regarding termination of the fund and the transfer of assets. The amendment requires the Texas Public Finance Authority to issue revenue bonds to fund the fund and pay costs related to the bonds. The amendment provides that any deficit sustained by the JUA with respect to physicians and health care providers, other than nursing homes, or by nursing homes in any one year shall first be recouped from the appropriate stabilization reserve fund until it is exhausted, then from an assessment upon policyholders, and then from an assessment upon the members. The amendment provides that the JUA, rather than the fund, is authorized to levy, charge, and collect bonds. Committee Amendment No. 6 includes motor vehicle liability insurance in provisions related to determining the rate of assessment for the maintenance tax surcharge. Committee Amendment No. 7 provides that the legislature approves the procedures established through negotiated rulemaking by the Texas Department of Human Services (DHS) for nursing facility bed certification and decertification for Medicaid, including any amendments to those procedures with an effective date before April 1, 2001. The amendment provides that the legislature ratifies any waiver issued by the commissioner of health and human services on or after September 1, 1997 and before April 1, 2001, to a nursing facility relating to the number of certified Medicaid beds at the facility, provided that the facility complies with all applicable requirements for licensure and certification. Committee Amendment No. 8 removes provisions requiring the Health and Human Services Commission (HHSC) to adopt procedures to review citations or penalties assessed against certain long-term care facilities and to review the performance of duties by employees and agents of DHS. The amendment adds similar provisions requiring the office of program integrity of DHS to adopt such procedures. The amendment requires the Texas Board of Human Services rather than the commissioner of health and human services to adopt any rules necessary to implement the survey process by January 1, 2002. Committee Amendment No. 9 removes provisions requiring HHSC to establish a quality assurance early warning system for long-term care facilities and to create rapid response teams.