HBA-ATS, DMD C.S.S.B. 1198 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.S.B. 1198 By: Moncrief Human Services 5/14/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Currently, Texas law does not require certain convalescent and nursing homes to execute a surety bond. C.S.S.B. 1198 provides that, if three or more institutions that are licensed or required to be licensed are owned by the same owner or controlled by the same controlling person, the license holder of each of the institutions must execute a surety bond issued by a surety company authorized to do business in this state as a condition of obtaining or renewing a license, provided that there are three or more companies willing to provide this service to the institutions and that the dedication of collateral by the institutions or license holders is not a condition for the issuance of bonds. This bill also provides that the bond must be payable to the Texas Department of Human Services in the event a trustee is appointed under Subchapter D (Trustees for Nursing or Convalescent Homes), Chapter 242, Health and Safety Code, and the trustee uses emergency assistance funds to alleviate an immediate threat to the health and safety of the residents of the institution. This bill also requires the Texas Board of Human Services (board) to set the amounts of bonds according to a schedule adopted, by rule, but prohibits the board from requiring a bond in an amount that exceeds $50,000. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Texas Board of Human Services in SECTION 1 (Section 242.0325, Health and Safety Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter B, Chapter 242, Health and Safety Code, by adding Section 242.0325, as follows: Sec. 242.0325. SURETY BOND REQUIREMENT. (a) Provides that, if three or more institutions that are licensed or required to be licensed are owned by the same owner or controlled by the same controlling person, the license holder of each of the institutions must execute a surety bond issued by a surety company authorized to do business in this state as a condition of obtaining or renewing a license, provided that there are three or more companies willing to provide this service to the institutions and that the dedication of collateral by the institutions or license holders is not a condition for the issuance of bonds. (b) Provides that the bond must be payable to the Texas Department of Human Services (department) in the event a trustee is appointed under Subchapter D (Trustees for Nursing or Convalescent Homes) and the trustee uses emergency assistance funds to alleviate an immediate threat to the health and safety of the residents of the institution. Provides that the term of the bond must be coextensive with the term of the institution's license. Provides that the surety is liable to the department under a bond only for the amounts of emergency assistance funds that the department disburses during the term covered by the bond and only in a cumulative amount not to exceed the face amount of the bond. (c) Requires the Texas Board of Human Services (board) to set the amounts of bonds under this section according to a schedule adopted, by rule. Prohibits the board from requiring a bond in an amount that exceeds $50,000. Requires the board to schedule the amounts based on the number of residents in an institution and on the department's experience regarding the amounts disbursed from the emergency assistance fund when a trustee has been appointed under Subchapter D. (d) Requires the department on behalf of the board, before the board adopts any rule under Subsection (c), to attempt to engage in negotiated rulemaking to assist the board in drafting the proposed rule by following the procedures prescribed by Chapter 2008, Government Code. SECTION 2.Effective date: September 1, 1999. SECTION 3.Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.S.B. 1198 differs from the original bill in SECTION 1 (proposed Section 242.0325(a), Health and Safety Code) by providing that, if three or more institutions that are licensed or required to be licensed are owned by the same owner or controlled by the same controlling person, the license holder of each of the institutions, rather than each of the institutions, must execute a surety bond issued by a surety company authorized to do business in this state as a condition of obtaining or renewing a license, provided that there are three, rather than two, or more companies willing to provide this service to the institutions. The substitute also adds the provision that the dedication of collateral by the institutions or license holders is not a condition for the issuance of bonds. In proposed Section 242.0325(b), the substitute differs from the original by providing that the bond must be payable to the Texas Department of Human Services (department) in the event a trustee is appointed under Subchapter D (Trustees for Nursing or Convalescent Homes) and the trustee uses emergency assistance funds to alleviate an immediate threat to the health and safety of the residents of the institution, rather than providing that the bond must be payable to the department and conditioned on the institution's compliance with Chapter 242 (Convalescent and Nursing Homes and Related Institutions) and rules adopted under that chapter. The substitute also adds the following provisions: the term of the bond must be coextensive with the term of the institution's license; and the surety is liable to the department under a bond only for the amounts of emergency assistance funds that the department disburses during the term covered by the bond and only in a cumulative amount not to exceed the face amount of the bond. In proposed Section 242.0325(c), the substitute differs from the original by prohibiting the Texas Board of Human Services (board) from requiring a bond in an amount that exceeds $50,000. The substitute also requires the board to schedule the amounts based on the number of residents in an institution and on the department's experience regarding the amounts disbursed from the emergency assistance fund when a trustee has been appointed under Subchapter D, rather than on the costs incurred by the department when it is necessary to close an institution, arrange for the placement of a trustee, transfer residents, or take other regulatory actions in connection with a violation of Chapter 242 or rules adopted under that chapter. In proposed Section 242.0325(d), the substitute differs from the original by removing "as added by Chapter 1315, Acts of the 75th Legislature, Regular Session, 1997" as a description of which Chapter 2008, Government Code, is to be followed by the board in drafting its proposed rule.