SECTIONS 129050-129110 - California Statutes

HEALTH AND SAFETY CODE

SECTION 129050-129110

129050. A loan shall be eligible for insurance under this chapter
if all of the following conditions are met:
(a) The loan shall be secured by a first mortgage, first deed of
trust, or other first priority lien on a fee interest of the borrower
or by a leasehold interest of the borrower having a term of at least
20 years, including options to renew for that duration, longer than
the term of the insured loan. The security for the loan shall be
subject only to those conditions, covenants and restrictions,
easements, taxes, and assessments of record approved by the office,
and other liens securing debt insured under this chapter. The office
may require additional agreements in security of the loan.
(b) The borrower obtains an American Land Title Association title
insurance policy with the office designated as beneficiary, with
liability equal to the amount of the loan insured under this chapter,
and with additional endorsements that the office may reasonably
require.
(c) The proceeds of the loan shall be used exclusively for the
construction, improvement, or expansion of the health facility, as
approved by the office under Section 129020. However, loans insured
pursuant to this chapter may include loans to refinance another prior
loan, whether or not state insured and without regard to the date of
the prior loan, if the office determines that the amount refinanced
does not exceed 90 percent of the original total construction costs
and is otherwise eligible for insurance under this chapter. The
office may not insure a loan for a health facility that the office
determines is not needed pursuant to subdivision (k).
(d) The loan shall have a maturity date not exceeding 30 years
from the date of the beginning of amortization of the loan, except as
authorized by subdivision (e), or 75 percent of the office's
estimate of the economic life of the health facility, whichever is
the lesser.
(e) The loan shall contain complete amortization provisions
requiring periodic payments by the borrower not in excess of its
reasonable ability to pay as determined by the office. The office
shall permit a reasonable period of time during which the first
payment to amortization may be waived on agreement by the lender and
borrower. The office may, however, waive the amortization
requirements of this subdivision and of subdivision (g) of this
section when a term loan would be in the borrower's best interest.
(f) The loan shall bear interest on the amount of the principal
obligation outstanding at any time at a rate, as negotiated by the
borrower and lender, as the office finds necessary to meet the loan
money market. As used in this chapter, "interest" does not include
premium charges for insurance and service charges if any. Where a
loan is evidenced by a bond issue of a political subdivision, the
interest thereon may be at any rate the bonds may legally bear.
(g) The loan shall provide for the application of the borrower's
periodic payments to amortization of the principal of the loan.
(h) The loan shall contain those terms and provisions with respect
to insurance, repairs, alterations, payment of taxes and
assessments, foreclosure proceedings, anticipation of maturity,
additional and secondary liens, and other matters the office may in
its discretion prescribe.
(i) The loan shall have a principal obligation not in excess of an
amount equal to 90 percent of the total construction cost.
(j) The borrower shall offer reasonable assurance that the
services of the health facility will be made available to all persons
residing or employed in the area served by the facility.
(k) The office has determined that the facility is needed by the
community to provide the specified services. In making this
determination, the office shall do all of the following:
(1) Require the applicant to describe the community needs the
facility will meet and provide data and information to substantiate
the stated needs.
(2) Require the applicant, if appropriate, to demonstrate
participation in the community needs assessment required by Section
127350.
(3) Survey appropriate local officials and organizations to
measure perceived needs and verify the applicant's needs assessment.
(4) Use any additional available data relating to existing
facilities in the community and their capacity.
(5) Contact other state and federal departments that provide
funding for the programs proposed by the applicant to obtain those
departments' perspectives regarding the need for the facility.
Additionally, the office shall evaluate the potential effect of
proposed health care reimbursement changes on the facility's
financial feasibility.
(6) Consider the facility's consistency with the Cal-Mortgage
state plan.
(l) In the case of acquisitions, a project loan shall be
guaranteed only for transactions not in excess of the fair market
value of the acquisition.
Fair market value shall be determined, for purposes of this
subdivision, pursuant to the following procedure, that shall be
utilized during the office's review of a loan guarantee application:
(1) Completion of a property appraisal by an appraisal firm
qualified to make appraisals, as determined by the office, before
closing a loan on the project.
(2) Evaluation of the appraisal in conjunction with the book value
of the acquisition by the office. When acquisitions involve
additional construction, the office shall evaluate the proposed
construction to determine that the costs are reasonable for the type
of construction proposed. In those cases where this procedure reveals
that the cost of acquisition exceeds the current value of a
facility, including improvements, then the acquisition cost shall be
deemed in excess of fair market value.
(m) Notwithstanding subdivision (i), any loan in the amount of ten
million dollars ($10,000,000) or less may be insured up to 95
percent of the total construction cost.
In determining financial feasibility of projects of counties
pursuant to this section, the office shall take into consideration
any assistance for the project to be provided under Section 14085.5
of the Welfare and Institutions Code or from other sources. It is the
intent of the Legislature that the office endeavor to assist
counties in whatever ways are possible to arrange loans that will
meet the requirements for insurance prescribed by this section.
(n) The project's level of financial risk meets the criteria in
Section 129051.

129051. (a) The office shall develop and implement a system for
assessing the relative financial risk of the applicant. The system
shall include, but is not limited to, an assessment of the applicant'
s financial strength, credit history, security for the loan,
cash-flow, and ability to repay the debt.
(b) The office shall establish a maximum acceptable level of
financial risk for the projects it insures. The office may only
approve a project if its risk level is below the established maximum,
except as provided in subdivision (c).
(c) The office may approve a project with a level of insurance
risk that exceeds the established maximum if the office determines
that the project meets a significant community need or will be a sole
community provider.

129052. A pledge by or to the office of, or the grant to the office
of a security interest in, revenues, moneys, accounts, accounts
receivable, contract rights, general intangibles, documents,
instruments, chattel paper, and other rights to payment of whatever
kind made by or to the office pursuant to the authority granted in
this chapter shall be valid and binding from the time the pledge is
made for the benefit of pledgees and successors thereto. The
revenues, moneys, accounts, accounts receivable, contract rights,
general intangibles, documents, instruments, chattel paper, and other
rights to payment of whatever kind pledged by or to the office or
its assignees shall immediately be subject to the lien of the pledge
without physical delivery or further act. The lien of such pledge
shall be valid and binding against all parties, irrespective of
whether the parties have notice of the lien. The indenture, trust
agreement, resolution, or another instrument by which such pledge is
created need not be recorded or the security interest otherwise
perfected.

129055. In order to comply with subdivision (j) of Section 129050,
any borrower that is certified for reimbursement for cost of care
under Chapter 7 (commencing with Section 14000) of Part 3 of Division
9 of the Welfare and Institutions Code shall demonstrate that its
facility is used by persons for whom the cost of care is reimbursed
under that chapter, in a proportion that is reasonable based upon the
proportion of Medi-Cal patients in the community served by the
borrower and by persons for whom the costs of care is reimbursed
under Title XVIII of the federal Social Security Act in a proportion
that is reasonable based upon the proportion of Medicare patients in
the community served by the borrower.
For the purposes of this chapter, the community means the service
areas or patient populations for which the health facility provides
health care services, unless the office determines that, or the
borrower demonstrates to the satisfaction of the office that, a
different definition is more appropriate for the borrower's facility.

129060. Subdivisions (b) and (c) of Section 129355 shall apply to
any residential or nonresidential alcoholism or drug abuse recovery
or treatment program or facility, as certified under Section 11831.5,
or licensed under former Section 11834.19; and any facility that
provides an organized program of therapeutic, social, and health
activities and services to persons with functional impairments, as
licensed under Section 1576.

129065. As part of its assurance under subdivision (j) of Section
129050, any borrower that is a general acute care hospital or acute
psychiatric hospital shall agree to the following actions:
(a) To advise each person seeking services at the borrower's
facility as to the person's potential eligibility for Medi-Cal and
Medicare benefits or benefits from other governmental third party
payers.
(b) To make available to the office and to any interested person a
list of physicians with staff privileges at the borrower's facility,
that includes:
(1) Name.
(2) Speciality.
(3) Language spoken.
(4) Whether takes Medi-Cal and Medicare patients.
(5) Business address and phone number.
(c) To inform in writing on a periodic basis all practitioners of
the healing arts having staff privileges in the borrower's facility
as to the existence of the facility's community service obligation.
The required notice to practitioners shall contain a statement, as
follows:
"This hospital has agreed to provide a community service and to
accept Medi-Cal and Medicare patients. The administration and
enforcement of this agreement is the responsibility of the Office of
Statewide Health Planning and Development and this facility."
(d) To post notices in the following form, that shall be
multilingual where the borrower serves a multilingual community, in
appropriate areas within the facility, including but not limited to,
admissions offices, emergency rooms, and business offices:

NOTICE OF COMMUNITY SERVICE OBLIGATION

"This facility has agreed to make its services available to all
persons residing or employed in this area. This facility is
prohibited by law from discriminating against Medi-Cal and Medicare
patients. Should you believe you may be eligible for Medi-Cal or
Medicare, you should contact our business office (or designated
person or office) for assistance in applying. You should also contact
our business office (or designated person or office) if you are in
need of a physician to provide you with services at this facility. If
you believe that you have been refused services at this facility in
violation of the community service obligation you should inform
(designated person or office) and the Office of Statewide Health
Planning and Development."

The borrower shall provide copies of this notice for posting to
all welfare offices in the county where the borrower's facility is
located.

129070. In the event the borrower cannot demonstrate that it meets
the requirement of Section 129055, it may nonetheless be eligible for
a loan under this chapter if it presents a plan that is satisfactory
to the office, that details the reasonable steps and timetables that
the borrower agrees to take to bring the facility into compliance
with Section 129055.

129075. (a) Each borrower shall provide any reports as may be
required of it by Part 5 (commencing with Section 128675), from which
the office shall determine the borrower's compliance with
subdivision (j) of Section 129050.
(b) If a report indicates noncompliance with subdivision (j) of
Section 129050, Section 129055, or Section 129065, the office shall
require the borrower to submit a plan detailing the steps and
timetables the borrower will take to bring the facility into
compliance.
(c) The office shall annually report to the Legislature the extent
of the borrowers' compliance with their community service
obligations pursuant to subdivision (j) of Section 129050, Section
129055, and Section 129065.

129080. The office may impose additional appropriate remedies and
sanctions against a borrower when any of the following occurs:
(a) The office determines that the annual compliance report
required in Section 129075 indicates that the borrower is out of
compliance with subdivision (j) of Section 129050.
(b) A facility fails to carry out the actions agreed to in a plan
approved by the office pursuant to Section 129070.
(c) The facility fails to submit compliance reports as required by
Section 129075. The additional remedies include referring the
violation to the office of Attorney General of California for legal
action authorized under existing law or other remedy at law or
equity.
However, the remedies obtainable by legal action shall not include
withdrawal or cancellation of the loan insurance provided under this
chapter.

129085. (a) If a borrower is unable to comply with subdivision (j)
of Section 129050 due to selective provider contracting under the
Medi-Cal program, and the office has determined the borrower has
negotiated in good faith but was not awarded a contract, the borrower
may be eligible for insurance under this chapter as provided in
subdivision (b).
(b) The office may determine that a noncontracting borrower shall
be considered as meeting the requirements of subdivision (j) of
Section 129050 if the borrower otherwise provides a community service
in accordance with regulations adopted by the office. The
regulations shall describe alternative methods of meeting the
obligation, that may include, but not be limited to, providing free
care, charity care, trauma care, community education, or primary care
outreach and care to the elderly, in amounts greater than the
community average. The regulations shall include a requirement that a
general acute care hospital, that is not a small and rural hospital
as defined in Section 124840, shall have, and continue to maintain, a
24-hour basic emergency medical service with a physician on duty, if
it provided this service on January 1, 1990. The office shall have
the authority to waive this requirement upon a determination by the
director that this requirement would create a hardship for the
hospital, be inconsistent with regionalization of emergency medical
services, or not be in the best interest of the population served by
the hospital.

129087. The office shall develop and maintain a formal system of
monitoring borrowers, in order to assist the office in detecting at
the earliest possible date those borrowers who are experiencing
financial difficulties. This system shall include, but shall not be
limited to, all of the following:
(a) A method of tracking the receipt of information that borrowers
are required by law and regulatory agreement to submit to the
office.
(b) A process for thoroughly reviewing borrowers' financial
statements, budgets, auditor's management letters, and health
facility utilization trends.
(c) Timely and structured site visits to insured facilities.

129090. Pursuant to this chapter, political subdivisions and
nonprofit corporations may apply for state insurance of needed
construction, improvement, or expansion loans for construction,
remodeling, or acquisition of health facilities to be or already
owned, established, and operated by them as provided in this chapter.
Applications shall be submitted to the office by the nonprofit
corporation or political subdivision authorized to construct and
operate a health facility. Each application shall conform to the
requirements of the office, shall be submitted in the manner and form
prescribed by the office, and shall be accompanied by an application
fee of one-half of 1 percent of the amount of the loan applied for,
but in no case shall the application fee exceed five hundred dollars
($500). The fees shall be deposited by the office in the fund and
used to defray the office's expenditures in the administration of
this chapter.

129092. Notwithstanding any other provision of law, upon the
application of a borrower for insurance, the office shall perform a
feasibility study relating to the proposed project, the cost of which
shall be paid by the applicant. The office may retain independent
consultants and require a deposit from the applicant for such
services, upon submission of the application. This section shall take
effect on January 1, 2001.

129095. (a) The office shall not regulate, impose requirements on,
or require approval by the office of a professional, or a fee charged
by a professional, used by applicants for the initial application
for loan insurance. The choice of any professional and the funding
source used shall be left entirely to the participants.
(b) For purposes of this section, "professional" includes, but is
not limited to, an underwriter, bond counsel, or consultant.
(c) Nothing in this section shall prohibit the office, in the
event of defaults, from taking any action authorized under this
chapter to protect the financial interest of the state.

129100. Every applicant for insurance shall be afforded an
opportunity for a fair hearing before the commission upon 10 days'
written notice to the applicant. If the office, after affording
reasonable opportunity for development and presentation of the
application and after receiving the advice of the commission, finds
that an application complies with the requirements of this article
and of Section 129020 and is otherwise in conformity with the state
plan, it may approve the application for insurance. The office shall
consider and approve applications in the order of relative need set
forth in the state plan in accordance with Section 129020. Judicial
review of a final decision made under this section may be had by
filing a petition for writ of mandate. Any petition shall be filed
within 30 days after the date of the final decision of the office.

129105. The office may upon application of the borrower insure any
loan that is eligible for insurance under this chapter, and upon the
terms prescribed by the office, may make commitments for the insuring
of the loans prior to their date of execution or disbursement
thereon. The decision to grant loan insurance upon an application of
the borrower is within the discretion of the director of the office.
Showing need for the project or meeting the eligibility requirements
for loan insurance and establishing financial feasibility of the
project or recommendation for approval from the committee does not
create any entitlement to loan insurance.

129110. Any contract of insurance executed by the office under this
chapter shall be conclusive evidence of the eligibility of the loan
for insurance and the validity of any contract of insurance so
executed shall be incontestable from the date of the execution of the
contract, except in case of fraud or misrepresentation on the part
of the lender.