LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session February 25, 1997 TO: Honorable Judith Zaffirini, Chair IN RE: Senate Bill No. 190 Committee on Health & Human Services By: Zaffirini/et al. Senate Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on SB190 ( Relating to the regulation of nursing homes and similar facilities; providing penalties.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by SB190-As Introduced Implementing the provisions of the bill would result in a net negative impact of $(9,238,633) to General Revenue Related Funds through the biennium ending August 31, 1999. The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill. The bill would amend Chapter 242 of the Health and Safety Code relating to the regulation of convalescent and nursing homes and related institutions. It would substantially revise the state licensing law governing the operation of these facilities in Texas, and significantly alter the regulatory responsibilities of the Texas Department of Human Services. Fiscal Analysis The bill would amend Section 242.032 to require the Texas Department of Human Services to consider the background and qualifications of a wide range of individuals when reviewing license applications, including the applicant; the applicant's partners, officers, directors, and managing employees; persons who control the applicant or institution; and persons who own or control the owner of the physical plant. It would require each applicant to file a sworn affidavit of satisfactory compliance history over the past ten years for each of these individuals. It would also amend Section 242.034 to permit the Board of Human Services by rule to establish a background examination fee to defray the department's expenses. It is assumed that implementation of these provisions would have no significant fiscal impact. The bill would amend Section 242.1225 to require employees of convalescent and nursing homes and related institutions to report suspected violations of state law, rules and standards, and federal law and regulations. It would also require employees to report unsanitary or unsatisfactory conditions. It is assumed that implementation of these provisions would significantly increase the workload of the department. The bill would amend Section 242.126 to require the Texas Department of Human Services to begin an investigation of abuse or neglect within two hours when there is an allegation of imminent danger, a recent death due to alleged conduct, or emergency room treatment or hospitalization due to alleged conduct. The bill would require the department to begin an investigation of abuse or neglect before the end of the next working day when these conditions do not exist. Each investigation must include an unannounced visit that involves activities such as interviews and a personal inspection of the evidence. The department must also complete an initial status report within two working days, and prepare a written investigation report no later than the fifth working day after the investigation is complete and no later than 45 days after the initial status report is complete. It is assumed that implementation of these provisions would significantly increase the workload of the department. The bill would amend Section 242.061(a) to establish new grounds for license denial, suspension, or revocation. These include violating the licensing statute, rules, standards, or orders; making a false statement of a material fact; refusing the department access to inspect books, records, files, or any portion of the premises; willfully interfering with the work of departmental representatives, and failing to pay a penalty assessed by the department within 10 days after it becomes final. The bill would amend Section 242.066 to permit the Texas Department of Human Services to assess an administrative penalty for any of the violations noted above. It would also permit the department to assess the administrative penalty against the applicant or license holder; the applicant or license holder's partner, officer, director, or managing employee; and the person who controls the institution. The administrative penalty for certain violations, such as violating the rights of a resident, would be limited to no more than $1,000 per day. The maximum administrative penalty for other violations would increase from $10,000 to $25,000 per day. The bill would amend Subchapter C to permit an institution to avoid paying the administrative penalty by correcting certain violations within 60 days. It would also permit the department to assess an administrative penalty up to $75,000 per day when there is a subsequent violation and the institution has failed to maintain the correction for at least 12 months. The bill would amend Section 242.070 to permit the Commissioner of Human Services to require a person to use any portion of the administrative penalty to ameliorate a violation or to improve services, in lieu of ordering payment of the administrative penalty. The department collected about $194,000 from administrative penalties in 1995, and $65,000 in 1996. It is assumed that implementation of the administrative penalty provisions would have no significant fiscal impact because most institutions would correct their violations within 60 days, and the Commissioner of Human Services could require violators to use their administrative penalty money to correct violations or to improve services. The bill would amend Section 242.065(a) to allow the imposition of a civil penalty when state licensing standards are violated. It would also increase the maximum amount for a civil penalty from $10,000 to $25,000 per day. It is assumed that implementation of these provisions would have no significant fiscal impact. Finally, the bill would amend Section 32.021 of the Human Resources Code to require the department to institute a reimbursement system to compensate nursing facilities for the fair rental value of their investment in property. It is assumed that implementation of this provision would have a significant fiscal impact. Methodolgy The Texas Department of Human Services reports that 6,338 incident reports were filed by employees of convalescent and nursing homes and related institutions in 1996. It is assumed that implementation of the bill's amendments to Section 242.1225 would cause 17,662 additional incident reports to be filed each year, and that 21% of these reports would require an on-site investigation. The department would need to hire additional state office staff to process the incoming reports, and additional regional office staff to conduct the on-site investigations. The Texas Department of Human Services reports that 2,691 complaints alleging serious abuse or neglect were filed in 1996. Implementation of the bill's amendments to Section 242.126 would not change the number of complaints filed annually. However, it is assumed that nurse-investigators would respond to each complaint by making an on-site visit within two hours of receiving the complaint. The department would need to hire additional regional office staff to conduct these on-site investigations. The bill's provisions relating to incident reports and abuse or neglect complaints would take effect on January 1, 1998. First year costs have been reduced to reflect a partial year operation. It is assumed that the requirement to compensate nursing facilities for the fair rental value of their investment in property would cost $5,000,000 annually. The probable fiscal implications of implementing the provisions of the bill during each of the first five years following passage is estimated as follows: Five Year Impact: Fiscal Year Probable Probable Change in Number Savings/(Cost) Savings/(Cost) of State from General from Federal Funds Employees from Revenue Fund FY 1997 0001 0555 1998 ($4,512,950) ($4,512,950) 103.0 1998 (4,725,683) (4,725,683) 103.0 2000 (4,708,683) (4,708,683) 103.0 2001 (4,708,683) (4,708,683) 103.0 2002 (4,708,683) (4,708,683) 103.0 Net Impact on General Revenue Related Funds: The probable fiscal implication to General Revenue related funds during each of the first five years is estimated as follows: Fiscal Year Probable Net Postive/(Negative) General Revenue Related Funds Funds 1998 ($4,512,950) 1999 (4,725,683) 2000 (4,708,683) 2001 (4,708,683) 2002 (4,708,683) Similar annual fiscal implications would continue as long as the provisions of the bill are in effect. No fiscal implication to units of local government is anticipated. Source: Agencies: 501 Department of Health 304 Comptroller of Public Accounts 530 Department of Protective and Regulatory Services 324 Department of Human Services LBB Staff: JK ,BB ,NM