Additional reporting requirements were added to California Senate Bill 650 (SB 650). The bill, approved in 2021, requires certain incremental financial reporting by skilled nursing facilities (SNF) to increase financial and operational transparency. New requirements begin with fiscal years ended December 31, 2023, and will be due within four months after the fiscal year end.
In July 2023, the Department of Health Care Access and Information (HCAI) published proposed regulatory text, with comments due by September 5, 2023, to implement SB 650. In October 2023, HCAI issued a Notice of Modification to Text of Proposed Rulemaking, with comments due by November 3, 2023.
In addition to providing increased transparency, the implementation of SB 650 is likely to impact California SNFs’ annual financial reporting and auditing procedures.
Key Impacts
The HCAI regulations require an organization that operates or manages a SNF to prepare and file an annual consolidated financial report audited or reviewed by a certified public accountant (CPA). This includes SNFs licensed pursuant Section 1250, Subdivision C of the Health and Safety Code, with state- and district-operated facilities exempt from requirements.
The report must include:
- Consolidated balance sheet
- Consolidated statement of income
- Consolidated statement of changes in equity
- Consolidated statement of cash flows
- Combined financial statement that separately reports the finances of all entities included in the consolidated financial report as a consolidating schedule
- Statement of patient census, reporting patient days by payer and service type
- Statement of patient revenue, reporting revenue by payer and by routine and ancillary services
The statements of patient census and patient revenue aren’t standardized statements by the Financial Accounting Standards Board and therefore, shall undergo a regulatory audit or review by a CPA to ensure compliance with the Accounting and Reporting Manual for California Long-Term Care Facilities, Second Edition incorporated by reference in the California Code of Regulations Title 22 Section 97019.
The above statements will also be required for each related party, as defined in the Health and Safety Code Section 128734, in which the organization has a 5% or more ownership interest and that provides goods and services to the SNF. These related party schedules don’t require audit or review by a CPA.
Additionally, a visual representation of the organization’s structure will need to be included in the annual consolidated financial report and include:
- Related parties that the organization has a 5% or greater interest in and provide goods or services to the SNF
- Unrelated parties that provide goods or services to the SNF, including management and property companies, and are paid more than $200,000 by the SNF
The reporting due date is four months after the SNF’s fiscal year-end. A SNF may request a 90-day extension if needed due to unintended or unforeseen delays. SNFs that fail to meet the required reporting due date will be liable for a civil penalty of $100 per day, up to a maximum of $36,500.
The HCAI released a new webpage with information and resources regarding these new requirements.
We’re Here to Help
For help understanding the impact of the new California SNF reporting regulations to your health care organization, contact your Moss Adams professional.
Additional Resources