The Skilled Nursing Facility (SNF) Ownership and Management Reform Act of 2022 was signed into law by the Governor on September 27, 2022. It makes significant changes in how entities and individuals acquire an interest in, operate, and establish or manage skilled nursing facilities in California. The new law becomes effective July 1, 2023.

Key Highlights:

• Requires an application be submitted to the California Department of Public Health (CDPH) at least 120 days prior to an individual or entity acquiring an ownership interest in a SNF, either directly or indirectly, or operating, establishing, managing, conducting, or maintaining a SNF.
• CDPH must approve the applicant in writing before the ownership, operations and/or management of the facility can be transferred.
• Virtually eliminates the traditional interim management agreement arrangement typical in the change of ownership process of a SNF. Interim management is only permitted if the SNF is under temporary management, at immediate risk of decertification, a license revocation or suspension or closure. Under these circumstances, the applicant may serve as an interim manager pending the processing of the change of ownership application if approved by CDPH.
• Under this law, all license applications to CDPH become public record, except under any applicable federal or state privacy laws.
• The application and CDPH approval requirements apply to any type of agreement to make financial decisions for the facility, to direct or control aspects of patient care and quality within the facility, or to be involved in hiring, firing, supervision, and direction of direct care staff when these actions are completed by a management company, hired, retained, or authorized to act on behalf of the licensee.
• Changes the required evidence of financial capacity to operate the facility that is part of a change of ownership application from 45 days to 90 days.
• Automatically disqualifies an applicant if any of the following has occurred within the last five years, or during the application period:
  • The applicant or anyone with a beneficial ownership interest of 5% or more in the applicant entity has owned, operated, or managed a skilled nursing facility, nursing facility, intermediate care facility, assisted living facility, community care facility, or other type of long term care facility in California or any other state or territory that, while under their ownership, operation, or management was terminated from the Medicare or Medi-Cal program due to noncompliance, has its license suspended or revoked, or was subjected to receivership or temporary management.
  • Has had two or more of any combination of "AA" citations or "A" citation (with patient death) at the facility within a consecutive 24-month period.
  • Applicant owns 10% or more of the licensed SNFs in California, unless CDPH determines an exception is warranted.

We recommend that anyone planning on acquiring, selling, or managing a skilled nursing facility consult with legal counsel as soon as possible to ensure that, either the transaction is negotiated and a complete application is submitted to CDPH prior to July 1, 2023, or the transaction is structured to comply with the new prior approval requirements. In addition, this Act makes it more important than ever to consider whether to appeal higher-level citations at your facilities.