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F I S C A L I M P A C T R E P O R T

SPONSOR Grubesic

ORIGINAL DATE

LAST UPDATED

02/07/07

02/21/07 HB

SHORT TITLE Health Facility Receivership Liability

SB 399/aSJC

ANALYST Geisler

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY07

FY08

FY09 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

($0.1)

($0.1)

($0.1) Recurring General

Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Enactment of this bill may reduce Costs. See Narrative

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Health (DOH)

Attorney General (AG)

Health Policy Commission (HPC)

Human Services Department (HSD)

SUMMARY

Synopsis of SJC Amendments

The Senate Judiciary Committee amendments to Senate Bill 399:

1)

Extends the notice of hearing requirement from 15 to 30 days and requires publication of a

notice in a newspaper of general circulation at least 30 days prior to a hearing date;

2)

Clarifies the receiver’s limited liability for nonpayment of the health facilities pre-existing

debts. As now written, the receiver’s responsibility extends only to services deemed directly

related to facility operations, providing adequate care, and providing necessary services.

Synopsis of Original Bill

Senate Bill 399 proposes an amendment to the Health Facility Receivership Act (NMSA

Sections 24-1E-1 to 24-1E-7) to clarify the receiver (Secretary of DOH) and deputy receiver’s

powers and duties and limit their financial liability in performing acts directly related to a health

Senate Bill 399/aSJC – Page

2

facility’s continued operations while providing necessary services to residents or other persons in

the health facility.

FISCAL IMPLICATIONS

DOH notes that they are currently paying monthly attorney fees to defend a deputy receiver

against claims for obligations incurred prior to a receivership undertaken by the state in 2005.

Protections provided under this legislation would reduce the legal fees and internal resources

utilized to defend against such claims.

SIGNIFICANT ISSUES

The AG notes that the Secretary of the New Mexico Department of Health is authorized to apply

for appointment as a receiver for a health facility under the Health Facility Receivership Act if

the facility is being operated without a valid license; or the facility will be closed and adequate

arrangements to relocate residents have not been made; or the facility has been or will be

abandoned; or the residents are in danger. This bill protects the Secretary from certain claims and

obligations contracted for by the owners of the facility prior to the receivership and which are

unrelated to the operation of the facility.

Provided by DOH:

Once it is determined that receivership is necessary, a qualified deputy receiver is contracted to

handle the on-site operations of the health facility. DOH has taken 7 healthcare facilities into

receivership since the Act’s inception.

•

Currently the Health Facility Receivership Act only provides DOH and any deputy receiver

the ability to void, with state court approval, those financial obligations incurred by the

health facility within 1-year prior to receivership. To void the obligations and debt incurred

within the 1-year period prior to receivership, DOH or the deputy receiver must prove

“actual" intent to defraud by the health facility. This standard is exceptionally difficult to

attain and problematic while putting an additional burden on the deputy receivers.

•

All other outstanding obligations incurred by the health facility greater than a year old can be

passed onto DOH and the deputy receiver and no statutory relief is granted.

•

Under New Mexico law, DOH may not indemnify its deputy receiver because this conflicts

with the Anti-Donation Clause of the NM Constitution (Art 9, Section 14) in that state money

cannot be used for private enterprise.

The purpose of amendments to the Health Facility Receivership Act is to limit the liability to

DOH and any appointed deputy receiver and without these protections the DOH will have

tremendous difficulty finding and contracting deputy receivers. DOH is currently defending a

deputy receiver against claims involving financial obligations incurred by the former owners of a

nursing home prior to the receivership action.

SB 399 allows for nonpayment of any obligation or debt deemed by the receiver or deputy

receiver to be unrelated to providing the necessary care and shall not subject the receiver or

deputy receiver to the liability, but will not relieve the health facility from liability upon

Senate Bill 399/aSJC – Page

3

termination of receivership. At their discretion, creditors may still seek relief provided by breach

of contract law.

SB 399 does not authorize a complete invalidation of all contractual agreements and debts, but

establishes a criteria and procedures to be followed by DOH, deputy receivers, and any creditor

when attempting to recoup those obligations of the health facility.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

DOH provides:

Receivership is a key element of DOH’s regulatory role and the department’s capacity to ensure

the safety and quality of service to residents, consumers and patients of failing health facilities.

Failure to enact this bill will significantly diminish DOH’s ability to fulfill this key regulatory

role.

Not enacting SB 399 will continue to put DOH and any appointed deputy receiver at financial

risk by not limiting their liability. The liability issue will reduce the already limited number of

competent deputy receivers and could ultimately preclude DOH from contracting with competent

deputy receivers.

GG/nt:csd