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