Seniors & Families Protected by Senator Mendoza Bill Approved Today

Requires Elder Care Referral Agency Licensing, Inspections & Financial Disclosure

June 21, 2016

Sacramento - Senate Bill 648 authored by Senator Tony Mendoza was approved today by the Assembly Aging and Long-Term Care Committee. The bill will strengthen licensing and financial disclosure requirements in order to protect seniors and their families from elder care referral agencies that engage in unscrupulous business practices. The bill now goes to the Assembly Judiciary Committee for consideration.

As the population of aging adults who need specialized medical care and support services has grown in the last several years, there has been an explosion of for-profit businesses that offer referral assistance to seniors and their families in finding suitable long-term care housing options in extended care, skilled nursing home or intermediate care facilities and residential care facilities. While these agencies provide a valuable service, current licensing requirements leave room for abuse. For example, some referral agencies advertise their services as free-of-charge to the consumer. However, they often contract with care facilities and receive commissions, incentives, and bonuses for each senior or family placement. These financial incentives are largely undisclosed to the senior or families being placed, and may lead to a placement that is not helpful and may even be harmful to the patient.

“We must strengthen the licensing and financial disclosure requirements for referral agencies in order to guarantee that seniors and their families are not victimized. This will help protect against referral agencies that engage in unscrupulous business practices,” said Senator Tony Mendoza.

“Seniors and their families who use these services have a right to know what financial relationships may be influencing the referral to a specific nursing home or long-term care facility,” said Senator Mendoza.

“My bill requires a more transparent process so that seniors will be able to make a more informed decision about what long-term care options are available,” added Mendoza.

“A decision to find long-term care quickly creates an environment that makes families and seniors more susceptible to pressure, misinformation, and unscrupulous business practices,” said Senator Mendoza.

Minimum standards for disclosure are needed to ensure that seniors, and their families, are making the most informed choices when it comes to their long-term assisted care needs.”

In spite of their proliferation, referral placement agencies are largely unregulated in California. Under current law, only certain referral agencies are required to be licensed and there are no requirements for ensuring that referrals are made solely to licensed care facilities. There is a need to address these gaps in current law in order to ensure that every placement agency meets some licensing and financial disclosure requirements to ensure that seniors are not being referred to facilities that have lost their license to operate in California.

“Referral agencies targeting a senior or family member during one of the most difficult times in their life and profiting from it without full disclosure of their financial interest is just wrong. I am meeting with various stakeholders that represent a vast number of referral agencies, including brick & mortar and online referral agencies, to ensure that my bill will end this practice,” said Senator Mendoza.

SB 648 will:

  • Require placement referral agencies to disclose whether the agency shares any financial interest with a care facility, including whether a fee or commission is received, and other financial benefits resulting from the placement.
  • Require placement referral agencies to disclose their latest visit to a facility being referred, and provide the client with information from the State Department of Social Services’ most recent evaluation of the facility. 
  • Enact provisions to guard the medical privacy of seniors, and require the referral agency to maintain liability insurance.
  • Add “residential care facility for the elderly” to the definition of a referral agency.
  • Require referral agencies to be licensed under the Department of Social Services.

In 2011, the state of Washington became the first state in the nation to regulate elder placement referrals in response to an investigative report conducted by The Seattle Times. The Times reported that some referral companies did not disclose the commissions they collected from facilities, oftentimes steering seniors to those facilities regardless of the patient’s needs. Agencies also referred patients to facilities with known histories of poor care and neglect, a practice that SB 648 will address.

“The Consumer Federation of California is sponsoring this bill to give the elderly and their families the information they need to make good decisions in difficult times. They have a right to know whether a placement agency is being paid to promote a facility, whether from fees, commissions or other considerations. They also have a right to know what qualifies a placement agency to advise them on such a life-changing decision. Our elders ought to be able to count on these agencies to have their clients’ best interests at heart, not their own profits,” said Richard Holober, Executive Director of the Consumer Federation of California (CFC). Since 1960, the CFC has been active in safeguarding the rights of the elderly and all Californians.

Senator Tony Mendoza, a Los Angeles native and former elementary school teacher in East Los Angeles, represents the 32nd Senate District encompassing portions of Los Angeles and Orange Counties. For more information about Senator Mendoza visit his website or follow him on Facebook and Twitter.


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