What AB 1502 Means for the CA Senior Housing Market

Owners and operators of California skilled nursing facilities (SNFs) are keeping a watchful eye on AB 1502, the Skilled Nursing Facility Ownership Management and Reform Act of 2022. This new regulation could bring significant changes to the ownership and management of SNFs throughout California. The reforms will go into effect on July 1, 2023, and will require owners and operators of SNFs to seek counsel for any changes in operations and governance.
In 2022, California Governor Gavin Newsom signed 997 bills into law, all of which apply to the healthcare industry. AB 1502, specifically, includes changes that will impact ownership, operations, and management of SNFs, while restructuring existing requirements as well. 

Regulatory Changes Could Cause Disruption 

As it stands now, a new California license must be acquired when there is a change of ownership to a “freestanding SNF.” However, come July 1, 2023, operators will need to adhere to the updated time frames, application requirements, management, and eligibility for licensure. 
One of the most significant changes in AB 1502 is the banning of interim and long-term management agreements. In the past, these arrangements have allowed prospective licensees to operate before applications have been finalized. While this process was only intended to be temporary, due to a backlog at the CDPH, some SNFs have been operating under these interim arrangements on a quasi-permanent basis. Once put into action, SNFs will no longer have the option to operate in a provisional state. 
Sherman & Roylance co-founder John Sherman had this to say about the bill: “AB 1502 will require a new license to be acquired before a transfer of ownership can happen, which will undoubtedly slow down the sales process for California SNFs drastically. It also negatively affects the patients who are in these facilities that need new management for better care.”
It’s important to note that the bill was originally introduced in 2021, but has undergone numerous changes up to this point. Under the new changes, SNF operators should expect the following:
  • Any future applicants that “own, operate, or manage 10% or more of SNFs statewide will be automatically disqualified from receiving a new SNF license, unless CDPH grants an exception.”
  • As stated above, interim agreements during the changing of ownership will be prohibited.
  • A new license may be necessary for other changes to ownership, operations, or management. 
  • All licensing applications are required to be submitted to CDPH at a minimum of 120 calendar days prior to maintaining or operating an SNF.
  • Current licensees must submit plans to relinquish a license.

Health and Safety a Top Priority 

The pandemic was a major turning point for the senior housing industry as the health and safety of residents became a primary concern. Facilities operating within this provisional state were often at the center of this conversation surrounding safety and the future of senior living.
The skilled nursing market closed out 2022 on a high note, but AB 1502 is an essential piece of legislation that will bring significant changes to the ownership and management of these facilities throughout California. 
We don’t know the exact implications of these new regulatory changes, but there’s no question it will impact operators and facilities across the state. The Sherman & Roylance team is keeping a close eye on this bill and others that will impact operators, investors, or providers in California and elsewhere in the country. If you have any questions or would like to learn more about our services, don’t hesitate to reach out.