The California Health Facilities Financing Authority Act authorizes the California Health Facilities Financing Authority (authority) to, among other things, make loans from the continuously appropriated California Health Facilities Financing Authority Fund to participating health institutions, as defined, for financing or refinancing the acquisition, construction, or remodeling of health facilities.

Under existing law, the board of supervisors of each county may maintain in the county hospital, in any other hospital situated within or without the county, or in any other psychiatric health facility situated within or without the county, suitable facilities and nonhospital or hospital services for the detention, supervision, care, and treatment of persons who have a mental health disorder or a developmental disability, or who are alleged to be such. Existing law defines county psychiatric hospital as a hospital, ward, or facility provided by the county pursuant to certain provisions.

This bill would establish the California Acute Care Psychiatric Hospital Loan Fund to be used by the authority to provide loans to qualifying county or city and county applicants for the purpose of building or renovating acute care psychiatric hospitals, psychiatric health facilities, or psychiatric units in general acute care hospitals, as defined. The bill would authorize the authority to establish an interest rate for loans funded by general obligation bonds, as specified, and would otherwise require that loans be provided at zero interest. The bill would require the authority to develop an application for county or city and county applicants by January 1, 2025. The bill would require initial preliminary applications for projects to be submitted to the authority by April 1, 2025, and would require the authority to approve the project based on specified criteria. The bill would provide for the return of any funds not encumbered by a loan recipient within a specified period and would require a loan recipient to maintain and operate the facility for the life of the loan. The bill would authorize the authority to charge a fee to cover the cost of administering the loan. The bill would also require the authority to provide a report to the Department of Finance and the budget and health committees of the Assembly and Senate by a specified date that would include, among other things, the number of projects that are receiving loans and their geographic distribution.

The California Health Facilities Financing Authority Act authorizes the California Health Facilities Financing Authority (authority) to, among other things, make loans from the continuously appropriated California Health Facilities Financing Authority Fund to participating health institutions, as defined, for financing or refinancing the acquisition, construction, or remodeling of health facilities.

Under existing law, the board of supervisors of each county may maintain in the county hospital, in any other hospital situated within or without the county, or in any other psychiatric health facility situated within or without the county, suitable facilities and nonhospital or hospital services for the detention, supervision, care, and treatment of persons who have a mental health disorder or a developmental disability, or who are alleged to be such. Existing law defines county psychiatric hospital as a hospital, ward, or facility provided by the county pursuant to certain provisions.

This bill would establish the California Acute Care Psychiatric Hospital Loan Fund and would continuously appropriate moneys in that fund to be used by the authority to provide loans to qualifying county or city and county applicants for the purpose of building or renovating acute care psychiatric hospitals, psychiatric health facilities, or psychiatric units in general acute care hospitals, as defined. The bill would authorize the authority to establish an interest rate for loans funded by general obligation bonds, as specified, and would otherwise require that loans be provided at zero interest. The bill would require the authority to develop an application for county or city and county applicants by January 1, 2025. The bill would require initial preliminary applications for projects to be submitted to the authority by April 1, 2025, and would require the authority to approve the project based on specified criteria. The bill would provide for the return of any funds not encumbered by a loan recipient within a specified period and would require a loan recipient to maintain and operate the facility for the life of the loan. The bill would authorize the authority to charge a fee to cover the cost of administering the loan. The bill would also require the authority to provide a report to the Department of Finance and the budget and health committees of the Assembly and Senate by a specified date that would include, among other things, the number of projects that are receiving loans and their geographic distribution. By creating a continuously appropriated fund, the bill would make an appropriation.

The California Health Facilities Financing Authority Act authorizes the California Health Facilities Financing Authority (authority) to, among other things, make loans from the continuously appropriated California Health Facilities Financing Authority Fund to participating health institutions, as defined, for financing or refinancing the acquisition, construction, or remodeling of health facilities.

Under existing law, the board of supervisors of each county may maintain in the county hospital, in any other hospital situated within or without the county, or in any other psychiatric health facility situated within or without the county, suitable facilities and nonhospital or hospital services for the detention, supervision, care, and treatment of persons who have a mental health disorder or a developmental disability, or who are alleged to be such. Existing law defines county psychiatric hospital as a hospital, ward, or facility provided by the county pursuant to certain provisions.

This bill would establish the California Acute Care Psychiatric Hospital Loan Fund and would continuously appropriate moneys in that fund to the authority to provide loans to qualifying county or city and county applicants for the purpose of building or renovating acute care psychiatric hospitals, psychiatric health facilities, or psychiatric units in general acute care hospitals, as defined. The bill would require the authority to develop an application for county or city and county applicants by January 1, 2025. The bill would require initial preliminary applications for projects to be submitted to the authority by April 1, 2025, and would require the authority to approve the project based on specified criteria. The bill would provide for the return of any funds not encumbered by a loan recipient within a specified period and would require a loan recipient to maintain and operate the facility for the life of the loan. The bill would authorize the authority to charge a fee to cover the cost of administering the loan. The bill would also require the authority to provide a report to the Department of Finance and the budget and health committees of the Assembly and Senate by a specified date that would include, among other things, the number of projects that are receiving loans and their geographic distribution. By creating a continuously appropriated fund, the bill would make an appropriation.

Date of Hearing: July 12, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

SBPCA Bill Id:SB 45

Author:(Roth) – As Amended Ver:June 29, 2023

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill establishes the California Acute Care Psychiatric Hospital Loan Fund (loan fund) to be used by the California Health Facilities Financing Authority (CHFFA) to provide loans to qualifying county or city and county applicants to build or renovate acute care psychiatric hospitals (APHs) or psychiatric health facilities (PHFs), or to build, renovate, or expand psychiatric units in general acute care hospitals (GACHs). This bill authorizes CHFFA to set a fee to cover the cost of administering the loan.

FISCAL EFFECT:

This bill does not specify the source or amount of funding needed to provide the start-up funds for the loans and for state administration. The Office of the State Treasurer states implementing the provisions of this bill would require stakeholder outreach, regulation development, policy development, development of underwriting criteria and a financial model, creation of forms, and a loan tracking system. In addition, CHFFA staff would need to review the loan applications and make recommendations to the CHFFA board to approve the loans. CHFFA would need to hire six additional staff members and engage services of a mental health consultant and a financial consultant at an estimated annual cost of $1.2 million. Initially, the funding source would be the General Fund; however, costs for administration could eventually be offset by fee revenues.

COMMENTS:

1. Purpose. According to the author:

California is home to over 1 million adults who are afflicted with serious mental disorders, such as schizophrenia and/or bipolar disorder, with over 477,000 people going untreated. Psychiatric beds are essential infrastructure for meeting the needs of individuals with severe mental health conditions. The lack of acute care psychiatric hospital beds has increased the strain on the complex and interconnected mental health delivery system for inpatient care. In the rapidly growing and ethnically diverse area of Inland Southern California, the shortage of beds is particularly severe, per [data from the Department of Health Care Access and Information]. For example, Riverside County currently has 8.3 inpatient psychiatric beds per 100,000 people. SB 45 would provide qualifying counties with an opportunity to access scarce infrastructure dollars to construct new acute psychiatric hospitals.

1. Background.

CHFFA. CHFFA was created to be the state's vehicle for providing financial assistance to public and nonprofit health care providers primarily through loans funded by the issuance of tax-exempt bonds. CHFFA provides direct loans to small and rural health facilities through the Healthcare Expansion Loan Program II Financing Program. Additionally, CHFFA administers several grant programs, including the Children's Hospital Programs, the Community Services Infrastructure Grant Program, and the Investment in Mental Health Wellness Grant Program.

Shortage of Inpatient Psychiatric Beds. According to a California Hospital Association report, “California’s Acute Psychiatric Bed Loss,” updated February 2019, as of 2017, there were 139 hospitals in California providing acute inpatient psychiatric care. Of those, 32 were freestanding APHs, which do not maintain and operate an emergency department, 28 were county-based PHFs, and 79 were GACHs providing inpatient psychiatric services. Together, these facilities provided nearly 6,800 beds available to individuals in need of short-term acute psychiatric inpatient services. In the same report, a panel of 15 psychiatric experts concluded 50 public psychiatric beds per 100,000 individuals is the minimum number required to meet current needs, if appropriate outpatient services are available in the community. According to the report, in 2017, California fell short of this target by nearly 4,000 beds, with 17.16 psychiatric inpatient beds for every 100,000 residents – a per capita loss of over 42% since 1995.

1. Proposed Bond Measure. The Governor has proposed placing a bond measure on the 2024 ballot as part of his plan to reform the Mental Health Services Act, noting the state’s shortage of 6,000 behavioral health beds. To qualify for funds potentially raised by the bond, the bond measure would have to specifically reference the loan fund proposed under this bill.
2. Prior Legislation. SB 1143 (Roth), of the 2021-22 Legislative Session, was substantially similar to this bill. Governor Newsom vetoed SB 1143, stating, in part:

I commend the author on his efforts to address the state's need for increased access to inpatient psychiatric care by facilitating infrastructure growth and providing additional units and bed capacity. However, the bill creates a new loan program without a funding source, creating millions of dollars in General Fund cost pressures that are not accounted for in the budget. With our state facing lower-than-expected revenues over the first few months of this fiscal year, it is important to remain disciplined when it comes to spending, particularly spending that is ongoing. We must prioritize existing obligations and priorities, including education, health care, public safety and safety-net programs.

Analysis Prepared by: Allegra Kim / APPR. / (916) 319-2081

Date of Hearing: June 27, 2023

ASSEMBLY COMMITTEE ON HEALTH

Jim Wood, Chair

SBPCA Bill Id:SB 45

Author:(Roth) – As Amended Ver:May 18, 2023

SENATE VOTE: 40-0

SUBJECT: California Acute Care Psychiatric Hospital Loan Fund.

SUMMARY: Establishes the California Acute Care Psychiatric Hospital Loan Fund (the fund) to be used by the California Health Facilities Financing Authority (CHFFA) to provide loans to qualifying county or city and county applicants to build or renovate acute care psychiatric hospitals (APHs), psychiatric health facilities (PHFs), or psychiatric units in general acute care hospitals (GACHs). Specifically, this bill:

1. Establishes the fund in the State Treasury to provide loans to qualifying county or city and county applicants for any of the following purposes:
   1. Constructing or renovating APHs, as defined;
   2. Constructing or renovating PHFs, as defined; or,
   3. Renovating or expanding GACHs, as defined, to add or expand an inpatient psychiatric unit.
      
2. Requires CHFFA, if a loan provided pursuant to this bill is funded with general obligation bonds, to establish, and allows CHFFA to modify, the interest rate. Prohibits any interest rate established from exceeding the interest rate for the bonds issued to fund the loan.
   
3. Requires loans funded by any other source to be provided at zero interest.
   
4. Authorizes the Treasurer to invest moneys in the fund that are not required for its current needs in eligible securities, and to transfer moneys in the fund to the Surplus Money Investment Fund for investment. Requires all interest or other increment resulting from the investment or deposit of moneys from the fund to be deposited in the fund. Prohibits moneys in the fund from being subject to transfer to any other funds, except to the Surplus Money Investment Fund.
   
5. Requires CHFFA to develop an application for county and city and county applicants. Requires the application to include requests for relevant information, such as project goals, costs, demonstrated need, timeline for the project, financial feasibility of the project, and other information deemed necessary for evaluation of creditworthiness and public benefit criteria established by CHFFA pursuant to this bill.
   
6. Requires the applications to be available by January 1, 2025, in accordance with CHFFA’s existing regulations or any necessary amendments, which must be undertaken as emergency regulations, if necessary.
   
7. Requires the initial preliminary applications for projects to be considered pursuant to this bill to be submitted to CHFFA no later than April 1, 2025. Authorizes CHFFA to also establish subsequent application periods, as necessary.
8. Authorizes applications to be submitted to CHFFA by county or city and county applicants as set forth in this bill pursuant to certain criteria as determined by CHFFA.
   
9. Requires CHFFA, in the event that CHFFA receives or anticipates receiving more applications than its allocation of moneys can support, to consider any of the following criteria in the selection of the projects:
   
   1. The county’s or city and county’s unmet need for APH infrastructure, with priority given to applicants with greater unmet need;
   2. A local match is available and priority is given to applicants with a local match based on the proposed number of acute psychiatric beds:
      1. For a project with 75 beds or greater, requires priority to be given to projects with a 20% match;
      2. For a project with 50 beds, priority to be given to projects with a 30% match;
      3. For a project with 25 beds, priority to be given to projects with a 40% match; and,
      4. For a project with fewer than 25 beds, priority to be given to projects with a 50% match.
   3. Medically underserved regions in the state; and,
   4. When considered as a whole, the applications approved to be fairly representative of various geographical regions, including inland regions of the state.
      
10. Requires a loan recipient to maintain the facility and provide sufficient staff to operate the facility throughout the life of the loan.
    
11. Requires any funds not encumbered by a loan recipient for the purposes of this bill within 36 months of the issuance of a loan to be returned to the fund for use consistent with 1) above. Authorizes CHFFA to extend this timeframe to accommodate delays associated with regulatory and economic environments, and to cause funds to be reverted to the fund at any time, if it determines there is diminished demand.
    
12. Authorizes CHFFA to adopt, amend, or repeal rules and regulations pursuant to this bill as emergency regulations. Makes the adoption, amendment, or repeal of regulations conclusively presumed to be necessary for the immediate preservation of the public peace, health, safety, or general welfare.
    
13. Authorizes a loan made pursuant to this bill to be subject to a fee set by CHFFA sufficient to cover, but not exceed the cost of administering the loan.
    
14. Requires CHFFA to provide a report to the Department of Finance and the Budget Committees and Health Committees of the Assembly and Senate no later than two years after implementation of this bill. Requires the report to include, but not necessarily be limited to, all of the following information:
    
    1. The number of projects receiving loans and their geographic distribution;
    2. The total dollar amount of loans made;
    3. The dollar amount of the loan provided for each project; and,
    4. The terms of the loan for each project.
       
15. Finds and declares, that psychiatric beds are an essential infrastructure for meeting the needs of individuals with serious mental health conditions, psychiatric bed capacity is severely strained in California, and that hundreds of Californians in need of psychiatric beds are held in hospital emergency rooms or county jails awaiting openings in inpatient care settings.

EXISTING LAW:

1. Licenses and regulates hospitals, including GACHs and APHs, by the Department of Public Health (DPH). Permits GACHs, in addition to the basic services all hospitals are required to offer, to be approved by DPH to offer special services, including, among other services, an emergency department (ED) and psychiatric services. [Health and Safety Code (HSC) §1250 and § 1255, et seq.]
   
2. Licenses PHFs by the Department of Health Care Services (DHCS), which are defined as health facilities that provide 24-hour inpatient care for people with mental health disorders, whose physical health needs can be met in an affiliated hospital or in outpatient settings. [HSC §1250.2]
   
3. Establishes the Lanterman-Petris-Short (LPS) Act and declares the intent of the Legislature to end the inappropriate, indefinite, and involuntary commitment of persons with mental health disorders, developmental disabilities, and chronic alcoholism, as well as to safeguard a person’s rights, provide prompt evaluation and treatment, and provide services in the least restrictive setting appropriate to the needs of each person. [Welfare and Institutions Code (WIC) § 5000, et seq.]
   
4. Authorizes a peace officer, member of the attending staff of a “designated facility,” as defined, member of the attending staff of a designated facility, or other professional person designated by the county, upon probable cause, to take a person with a mental disorder who is a danger to self or others, or is gravely disabled, into custody (referred to as a “5150” hold) and place them in a designated facility. [WIC §5150]
   
5. Defines “designated facility” or “facility designated by the county for evaluation and treatment” as a facility that is licensed or certified as a mental health treatment facility or a hospital, as defined, and includes, but is not limited to, an APH, a PHF, and a certified crisis stabilization unit. [WIC §5008] 
   
6. Establishes CHFFA, consisting of nine members, led by the State Treasurer who serves as the chair, and the executive director, who is appointed by the State Treasurer. States the intent of the Legislature to provide financing to health institutions that can demonstrate the financial feasibility of their projects, and that any savings experienced by the health institution be passed on to the consuming public through lower charges or containment of the rate of increase in hospital rates. [Government Code §15430, et seq.]
   

FISCAL EFFECT: According to the Senate Appropriations Committee:

1. While the bill creates a new fund to provide loans, the bill does not specify the source or amount of funding needed to provide the start-up funds for the loans and funding for state administration.
2. Ongoing annual costs, likely $1.2 million, for CHFFA to administer the new loan program. To the extent CHFFA could charge fees, costs for administration could be offset by fee revenues.

COMMENTS:

1. PURPOSE OF THIS BILL. According to the author, California is home to over one million adults who are afflicted with serious mental disorders, such as schizophrenia and/or bipolar disorder, with over 477,000 people going untreated. Psychiatric beds are essential infrastructure for meeting the needs of individuals with severe mental health conditions. The lack of APH beds has increased the strain on the complex and interconnected mental health delivery system for inpatient care. In the rapidly growing and ethnically diverse area of Inland Southern California, the shortage of beds is particularly severe, per Department of Health Care Access and Information (HCAI) data. For example, Riverside County currently has 8.3 inpatient psychiatric beds per 100,000 people. The author concludes that this bill would provide qualifying counties with an opportunity to access scarce infrastructure dollars to construct new acute psychiatric hospitals
2. BACKGROUND. According to the National Institute of Mental Health, nearly one in five U.S. adults live with a mental illness. In California, that equates to nearly 8 million people in 2020. According to the California Health Care Foundation, an average of 2.9 million Californians per year, age 12 and older (8.8%), had a substance use disorder (SUD) in 2018-19. According to HCAI data, in 2020, patients with behavioral health diagnoses accounted for 1,144,835 Inpatient hospitalizations and 2,090,085 ED treat and release visits, which is one third of all inpatient hospitalizations (3,444,532) and one fifth of all Emergency Department visits (10,023,851).
   1. Lack of inpatient psychiatric beds. According to the California Hospital Association (CHA), since 1995 the state has lost at least 37 facilities, either through the elimination of psychiatric inpatient care, or complete hospital closure, representing a 20% drop. CHA states that while there has been an increase in psychiatric beds over the past several years, California has lost nearly 30% of the psychiatric beds it had in 1995. On a per capita basis, accounting for the growth in California’s population, this translates into a loss of more than 42% of the psychiatric inpatient beds per capita since 1995. California now has only 17 psychiatric beds for every 100,000 residents, compared to nearly 30 beds per 100,000 in 1995, and well short of the recommended minimum number of 50 psychiatric beds per 100,000.
   2. CHFFA. CHFFA was created to be the state's vehicle for providing financial assistance to public and nonprofit health care providers primarily through loans funded by the issuance of tax-exempt bonds. CHFFA administers the Bond Financing Program and the Tax-Exempt Equipment Financing Program. CHFFA also provides direct loans to small and rural health facilities, including acute psychiatric facilities, through the Healthcare Expansion Loan Program (HELP) II Financing Program. In September of 2021, the Governor signed into law the Nondesignated Public Hospital Bridge Loan Program to enable CHFFA to issue up to $40 million in working capital loans at zero interest rate to certain hospitals that are affected by financial delays associated with the transition to the Quality Incentive Program. These Nondesignated Public Hospital Bridge Loans are required to be paid back in two years, and are secured by Medi-Cal reimbursements.
      
      Additionally, CHFFA administers several grant programs, including the Children's Hospital Programs, the Community Services Infrastructure Grant Program, and the Investment in Mental Health Wellness Grant Program. Under the Mental Health Wellness grant program, counties can apply for funding to develop a continuum of crisis services to children and youth up to 21 years of age in four categories: crisis residential treatment, crisis stabilization, mobile crisis support teams, and family respite care. There was an initial allocation of about $40 million for the Mental Health Wellness grant program, and about $9 million is available for mobile crisis support team programs.

In order to meet the requirements for CHFFA financing, an institution must be a public hospital, a private non-profit corporation, or an association authorized by the laws of California to provide or operate a health facility and undertake the financing or refinancing of a project. Generally, non-profit, licensed health facilities in the State of California including adult day health centers, community clinics, developmentally disabled centers, and drug and alcohol rehabilitation centers are eligible for financing. Applicants must be approved by a resolution of the CHFFA Members at a regularly scheduled public meeting. In addition to initial eligibility, CHFFA requires borrowers to comply with its Bond Issuance Guidelines per bond rating category and provide loan security provisions and bond covenants that correspond with its rating. Savings resulting from issuance of tax-exempt bonds for borrowers must be transferred to the consuming public via lower or contained costs for delivery of health services.

• 1. APHs, PHFs, and crisis stabilization units. Most inpatient beds for acute psychiatric patients are either provided in a distinct behavioral health unit of a GACH, in a freestanding APH, or in a PHF. All of these can be, and most are, “designated facilities” under provisions of the LPS Act that allow individuals to be involuntarily held and treated in a manner that safeguards their constitutional rights. There are 33 licensed APHs and 29 PHFs in California. APHs are licensed by DPH, and are required to provide medical, nursing, rehabilitative, pharmacy and dietary services, in addition to psychiatric services. PHFs are licensed by DHCS, and while not a hospital, are licensed to provide inpatient acute psychiatric care similar to a psychiatric hospital. However, the requirements for PHFs are not the same as those for APHs. For example, PHFs are not required to provide general medical services. While a PHF must have a physician on-call at all times, a patient can only be admitted to a PHF if the individual’s physical health care could otherwise be managed on an outpatient basis. An APH is required to provide a medical service as part of their basic services, which must include a general medicine component. General medicine component must provide all incidental medical services necessary for the care and support of patients, including general medicine and surgery. PHFs historically are county-run, or under contract by counties, to provide inpatient care to Medi-Cal beneficiaries through a county mental health plan.
     

In addition to inpatient facilities, counties can designate certain outpatient facilities under the LPS Act, such as crisis stabilization units. A crisis stabilization unit is generally open 24 hours a day, seven days a week, and provides up to 23 hours of psychiatric urgent care intended to stabilize a patient suffering from psychiatric distress, with the goal of stabilizing the patient and avoiding the need for inpatient care.

• 1. Medicaid institution for medical diseases (IMD) exclusion. Under the Medi-Cal program, federal rules do not allow for a federal match for adults under the age of 65 who are receiving care in a treatment facility with more than 16 beds. This is known as the IMD, or, “institution for mental diseases,” exclusion.

Federal rules define an IMD as any “hospital, nursing facility, or other institution of more than 16 beds that is primarily engaged in providing diagnosis, treatment, or care of persons with mental diseases.” Because the rule requires the institution to “primarily” be established and maintained for the care of individuals with mental disease, that means that a GACH, even if it has a large wing with more than 16 beds dedicated to in-patient psychiatric care, would not be considered an IMD as long as more than 50% of all admitted patients at the hospital were there for non-psychiatric reasons. The IMD exclusion is the reason that 29 out of the 33 PHFs licensed statewide, the majority of which are operated by counties, have 16 or fewer beds.

The federal Centers for Medicare and Medicaid Services (CMS) began approving waivers from the IMD payment exclusion for treatment of substance abuse disorders in 2016. In 2018, CMS created a similar waiver for those with serious mental illnesses or emotional disturbances. California is currently one of 34 states that operate under the waiver from the substance abuse treatment exclusion, which it sought as part of its 2020 CalAIM waiver request. An IMD waiver for mental illness would require that communities develop and demonstrate their ability to meet robust accountability requirements; ensuring that care is provided in a facility-based setting only when medically necessary and in a clinically appropriate manner; offering a robust array of enhanced community-based services; and reinvesting new Medi-Cal funding into community-based care, so that patients could be “stepped down” to community-based care as their condition improves. To prepare for an IMD waiver request, the 2021-22 Budget authorized DHCS to establish the Behavioral Health Continuum Infrastructure Program (BHCIP) which awarded $2.2 billion to local public and private entities to construct, acquire, and expand properties and invest in mobile crisis infrastructure related to behavioral health.

• 1. Governor’s Budget proposal. The Governor’s 2023 Budget proposes a delay on BHCIP Funding. DHCS is releasing BHCIP funds through six grant rounds targeting various gaps in the state’s behavioral health facility infrastructure. BHCIP Round 1: Crisis Care Mobile Units, Round 2: County and Tribal Planning Grant, Round 3: Launch Ready, and Round 4: Children and Youth projects totaling $1.22 billion, were awarded in 2021 and 2022. The request for application process in the amount of $480 million for BHCIP Round 5: Crisis and Behavioral Health Continuum is currently underway with award announcements anticipated for Spring 2023.
     
     The final round, BHCIP Round 6: Outstanding Needs Remaining is currently in the planning/stakeholder engagement process but is proposed to be delayed until Fiscal Year (FY) 2024-25 and FY 2025-26, reducing costs by $480.7 million General Fund in FY 2022-23.
     
     According to a May 24, 2023 Behavioral Health Stakeholder Advisory Committee Meeting presentation, DHCS intends to submit the final Behavioral Health Community-Based Organized Networks of Equitable Care and Treatment (BH-CONNECT) Demonstration application, including an IMD waiver, and implementation plan to CMS in fall 2023, following stakeholder review, BH-CONNECT Demonstration webinar sessions, and incorporating feedback received during public comment. It is unclear at this time when an IMD waiver for mental illness will be approved, or what additional conditions may be associated with allowing Medi-Cal payment for IMDs with more than 16 beds.
     
     The Governor has also proposed placing a bond measure on the 2024 ballot as part of his plan to reform the Mental Health Services Act, noting that the state faces a shortage of 6,000 behavioral health beds. In order for the program proposed under this bill to qualify for those funds, the bond measure would have to specifically reference the fund.

1. SUPPORT. The County of Riverside supports this bill and states that the fund would serve to provide zero-interest loans to assist in financing APH projects repayable over a 30-year period. Given the significant needs of their communities, Riverside County notes that they have prioritized investments in behavioral health infrastructure; and are actively planning for the replacement of an existing facility with a modern, 100-bed facility that will better integrate mental health, substance use, and physical health services to achieve the best outcomes for patients. Riverside County concludes that this bill offers a significant opportunity to move this critical project forward to increase their capacity as a safety-net hospital and to provide timely, high quality, and patient-centered care that more fully meets the needs of the population.
   
   The California State Association of Psychiatrists (CSAP) supports this bill and notes that California is home to over one million adults who are afflicted with serious mental disorders, such as schizophrenia and/or bipolar disorder, with over 477,000 people going untreated. Psychiatric beds are essential infrastructure for meeting the needs of individuals with severe mental health conditions. CSAP states that as it stands right now, the lack of APH beds has increased the strain on the complex and interconnected mental health delivery system for inpatient care. CSAP concludes that this bill provides necessary bridge funding that would prioritize regions in California where there are significant impediments to inpatient psychiatric care.
   
2. RELATED LEGISLATION.
   1. AB 512 (Waldron) would have required the California Health and Human Services Agency, either on its own or through the Behavioral Health Task Force established by the Governor, to create an ad hoc committee to study how to develop a real-time, internet-based system, usable by specified entities, to display information about available beds in specified facilities for the transfer to, and temporary treatment of, individuals in mental health or SUD crisis. AB 512 was held in the Assembly Appropriations Committee.
   2. SB 363 (Eggman) requires DHCS, in consultation with DPH and the Department of Social Services, to develop a real-time, internet-based database, to be operational by January 1, 2025, to collect, aggregate, and display information about beds in specified facilities to identify the availability of inpatient and residential mental health or SUD treatment. SB 363 is pending in the Assembly Appropriations Committee.
      
3. PREVIOUS LEGISLATION. SB 1143 (Roth) was substantially similar to this bill. SB 1143 was vetoed by Governor Newsom who stated, in part: “I commend the author on his efforts to address the state's need for increased access to inpatient psychiatric care by facilitating infrastructure growth and providing additional units and bed capacity. However, the bill creates a new loan program without a funding source, creating millions of dollars in General Fund cost pressures that are not accounted for in the budget. With our state facing lower-than-expected revenues over the first few months of this fiscal year, it is important to remain disciplined when it comes to spending, particularly spending that is ongoing. We must prioritize existing obligations and priorities, including education, health care, public safety and safety-net programs.”
4. POLICY COMMENTS.
   1. Given that SB 1143 was substantially similar to this bill, the Committee may wish to inquire from the author how this bill addresses the Governor’s veto message.
   2. This bill requires CHFFA, if a loan provided pursuant to this bill is funded with general obligation bonds, to establish, and allows CHFFA to modify, the interest rate. However the bill will have no force or effect unless the Legislature appropriates money from the General Fund. CHFFA would not be able to issue bonds to fund the loans because the facilities cannot establish credit for investors to buy the bonds. According to CHFFA, there needs to be established credit and a given stream of sustainable revenue identified to repay the bonds prior to a facility applying for bonds. In order to achieve his intended effect, the author may wish to make the provisions of this bill subject to an appropriation.
   3. This bill requires CHFFA to give priority to projects with specific numbers of beds and specific amounts of local matching funds. It is unclear how CHFFA would prioritize/score projects with local matches that differ from the bill’s language. Should this bill move forward, the author may wish to work with CHFFA to clarify the prioritization/funding process.
   4. This bill authorizes CHFFA to adopt emergency regulations. The author may wish to work with CHFFA to determine the timeline by which the regulations must be adopted.
5. SUGGESTED AMENDMENT. This bill requires CHFFA, in the event that CHFFA receives or anticipates receiving more applications than its allocation of moneys can support, to consider certain criteria in the selection of the projects including: “When considered as a whole, the applications approved pursuant to this bill are fairly representative of various geographical regions, including inland regions of the state.” The Committee may wish to amend this bill to require CHFFA to consider the representation of rural areas of the state, as well as inland regions.

REGISTERED SUPPORT / OPPOSITION:

Support

California Hospital Association
California State Association of Psychiatrists
City of Moreno Valley
County Behavioral Health Directors Association
County of Riverside
County of Santa Clara
Inland Empire Health Plan
Santa Monica; City of
Southwest California Legislative Council
Steinberg Institute
Sycamores
Tenet Healthcare Corporation

Opposition

None on file.

Analysis Prepared by: Lara Flynn / HEALTH / (916) 319-2097

 THIRD READING  

Bill No: SB 45

Author: Roth (D)

Amended: 5/18/23

Vote: 21

SENATE HEALTH COMMITTEE: 11-0, 3/22/23

AYES: Eggman, Nguyen, Glazer, Gonzalez, Hurtado, Limón, Menjivar, Roth, Rubio, Wahab, Wiener

NO VOTE RECORDED: Grove

SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/18/23

AYES: Portantino, Jones, Ashby, Bradford, Seyarto, Wahab, Wiener

SUBJECT: California Acute Care Psychiatric Hospital Loan Fund

SOURCE: Author

DIGEST:

This bill establishes the California Acute Care Psychiatric Hospital Loan Fund to provide loans to qualifying county applicants for the purpose of constructing or renovating acute care psychiatric hospitals or psychiatric health facilities, or renovating or expanding general acute care hospitals in order to add or expand an inpatient psychiatric unit.

ANALYSIS:

Existing law:

1. Licenses and regulates hospitals, including general acute care hospitals and an acute psychiatric hospitals (APHs), by the California Department of Public Health (CDPH). Permits general acute care hospitals, in addition to the basic services all hospitals are required to offer, to be approved by CDPH to offer special services, including, among other services, an emergency department, and psychiatric services. [HSC §1250 and §1255, et seq.]
2. Licenses psychiatric health facilities by the Department of Health Care Services (DHCS), which are defined as health facilities that provide 24-hour inpatient care for people with mental health disorders, whose physical health needs can be met in an affiliated hospital or in outpatient settings. [HSC §1250.2]
3. Establishes the Lanterman-Petris-Short (LPS) Act and declares the intent of the Legislature to end the inappropriate, indefinite, and involuntary commitment of persons with mental health disorders, developmental disabilities, and chronic alcoholism, as well as to safeguard a person’s rights, provide prompt evaluation and treatment, and provide services in the least restrictive setting appropriate to the needs of each person. [WIC §5000, et seq.]
4. Authorizes a peace officer, member of the attending staff of a “designated facility,” as defined, member of the attending staff of a designated facility, or other professional person designated by the county, upon probable cause, to take a person with a mental disorder who is a danger to self or others, or is gravely disabled, into custody (referred to as a “5150” hold) and place him or her in a designated facility. [WIC §5150]
5. Defines “designated facility” or “facility designated by the county for evaluation and treatment” as a facility that is licensed or certified as a mental health treatment facility or a hospital, as defined, and includes, but is not limited to, a licensed psychiatric hospital, a licensed psychiatric health facility, and a certified crisis stabilization unit. [WIC §5008] 
6. Establishes the California Health Facilities Financing Authority (CHFFA), consisting of nine members, led by the State Treasurer who serves as the chair, and the executive director, who is appointed by the State Treasurer. States the intent of the Legislature to provide financing to health institutions that can demonstrate the financial feasibility of their projects, and that any savings experienced by the health institution be passed on to the consuming public through lower charges or containment of the rate of increase in hospital rates. [GOV §15430, et seq.]

This bill:

1. Establishes the California Acute Care Psychiatric Hospital (CACPH) Loan Fund to provide loans to qualifying county applicants for the purpose of constructing or renovating APHs, as defined, constructing or renovating PHFs, as defined, or renovating or expanding general acute care hospitals in order to add or expand an inpatient psychiatric unit.
2. Permits CHFFA, if a loan under this bill is funded with general obligation bonds, to establish the interest rate, but prohibits the interest rate from exceeding the interest rate for the bonds issued to fund the loan.
3. Requires loans under this bill funded by any source other than general obligation bonds to be provided at zero interest.
4. Requires all moneys accruing to CHFFA pursuant to this bill from any source to be deposited into the CACPH Loan Fund.
5. Permits the California State Treasurer to invest moneys in the CACPH Loan Fund that are not required for its current needs in eligible securities, as specified, and to transfer moneys in the fund to the Surplus Money Investment Fund, as specified.
6. Requires CHFFA to develop an application for county applicants to the CACPH Loan Fund, and requires the application to include requests for relevant information, such as project goals, costs, demonstrated need, timeline for the project, financial feasibility of the project, and other information deemed necessary for evaluation of creditworthiness and public benefit criteria established by CHFFA.
7. Requires the application developed in 4) above to be available by January 1, 2025, in accordance with CHFFA’s existing regulations or any necessary amendments, which are required to be undertaken as emergency regulations, if necessary.
8. Permits applications to be submitted to the authority by county applicants pursuant to criteria to be developed by CHFFA, and requires initial preliminary applications for projects to be considered to be submitted to the authority no later than April 1, 2025. Permits CHFFA to establish subsequent application periods, as necessary.
9. Requires CHFFA, in the event that it receives or anticipates receiving more applications than its allocation of moneys can support, to consider any of the following criteria in the selection of projects:
   1. The county’s unmet need for acute care psychiatric hospital infrastructure, with priority given to applicants with greater unmet need;
   2. Whether a local match is available, and priority is given to projects with a local match based on the proposed number of acute psychiatric beds:
      1. For a project with 75 beds or greater, requires priority to be given to projects with a 20% match;
      2. For a project with 50 beds, requires priority to be given to projects with a 30% match;
      3. For a project with 25 beds, requires priority to be given to projects with a 40% match; and,
      4. For a project with fewer than 25 beds, requires priority to be given to projects with a 50% match;
   3. Medically underserved regions in the state; and,
   4. When considered as a whole, applications approved pursuant to this bill are fairly representative of various geographical regions, including inland regions of the state.
10. Requires a loan recipient to maintain the facility and provide sufficient staff to operate the facility throughout the life of the loan.
11. Requires any funds not encumbered by a loan recipient within 36 months of the issuance of a loan to be returned to the CACPH Loan Fund, but permits CHFFA to extend this timeframe to accommodate delays associated with regulatory and economic environments. Permits CHFFA to cause funds to be reverted to the CACPH Loan Fund at any time, if it determines there is diminished demand.
12. Permits a loan made pursuant to this bill to be subject to a fee set by CHFFA sufficient to cover, but not exceed, the cost of administering the loan.
13. Requires CHFFA to provide a report to the Department of Finance and the budget committees and health committees of the Assembly and Senate no later than two years after implementation of this program. Requires the report to include, but not be limited to, the number of projects receiving loans and their geographic distribution, the total dollar amount of the loans made, and the dollar amount and the terms of the loan for each project.
14. Makes various legislative findings and declarations, including that psychiatric beds are an essential infrastructure for meeting the needs of individuals with serious mental health conditions, psychiatric bed capacity is severely strained in California, and that hundreds of Californians in need of psychiatric beds are held in hospital emergency rooms or county jails awaiting openings in inpatient care settings.

Comments

1. Author’s statement. According to the author, California is home to over 1 million adults who are afflicted with serious mental disorders, such as schizophrenia and/or bipolar disorder, with over 477,000 people going untreated. Psychiatric beds are essential infrastructure for meeting the needs of individuals with severe mental health conditions. The lack of acute care psychiatric hospital beds has increased the strain on the complex and interconnected mental health delivery system for inpatient care. In the rapidly growing and ethnically diverse area of Inland Southern California, the shortage of beds is particularly severe, per OSHPD data. For example, Riverside County currently has 8.3 inpatient psychiatric beds per 100,000 people. This bill would provide qualifying counties with an opportunity to access scarce infrastructure dollars to construct new acute psychiatric hospitals.
2. Background on existing CHFFA programs. CHFFA was created to be the state's vehicle for providing financial assistance to public and nonprofit health care providers primarily through loans funded by the issuance of tax-exempt bonds. To this end, CHFFA administers the Bond Financing Program and the Tax-Exempt Equipment Financing Program. CHFFA also provides direct loans to small and rural health facilities through the Healthcare Expansion Loan Program (HELP) II Financing Program. In September of 2021, the Governor signed into law the Nondesignated Public Hospital Bridge Loan Program to enable CHFFA to issue up to $40 million in working capital loans at zero interest rate to certain hospitals that are affected by financial delays associated with the transition to the Quality Incentive Program. These Nondesignated Public Hospital Bridge Loans are required to be paid back in two years, and are secured by Medi-Cal reimbursements. Additionally, CHFFA administers several grant programs, including the Children's Hospital Programs, the Community Services Infrastructure Grant Program, and the Investment in Mental Health Wellness Grant Program. Under the Mental Health Wellness grant program, Counties can apply for funding to develop a continuum of crisis services to children and youth up to 21 years of age in four categories: crisis residential treatment, crisis stabilization, mobile crisis support teams, and family respite care. There was an initial allocation of about $40 million for this Mental Health Wellness grant program, and there is still about $9 million available for mobile crisis support team programs.
   
   By borrowing through CHFFA’s tax-exempt bond financing program, health facilities can likely obtain lower interest rates than they would through conventional bonds. Generally, non-profit, licensed health facilities in California, including adult day health centers, community clinics, skilled nursing facilities, developmentally disabled centers, hospitals, and drug and alcohol rehabilitation centers are eligible for CHFFA financing. Proceeds from CHFFA financings may be used for project-related costs, including: construction; remodeling and renovation; land acquisition (as part of the proposed project); acquisition of existing health facilities; purchase or lease of equipment; refinancing or refunding of prior debt; working capital for start-up facilities; costs of bond issuance; feasibility studies; and reimbursement of prior expenses. Under statute, savings resulting from issuance of tax-exempt bonds for borrowers must be transferred to the consuming public through lower or contained costs for delivery of health services. Since its first bond issuance in 1981, CHFFA’s bond financing program has issued 639 bonds for an aggregate total of approximately $46 billion, with 275 health facilities availing themselves of this financing.
3. APHs, psychiatric health facilities, and crisis stabilization units. Generally speaking, inpatient beds for acute psychiatric patients are either provided in a distinct behavioral health unit of a general acute care hospital, in a freestanding APH, or in a PHF. All of these can be, and most are, “designated facilities” under provisions of the LPS Act that allow individuals to be involuntarily held and treated in a manner that safeguards their constitutional rights. There are 33 licensed APHs in California, and 29 PHFs. APHs are licensed by CDPH, and are required to provide medical, nursing, rehabilitative, pharmacy and dietary services, in addition to psychiatric services. PHFs are licensed by DHCS, and while not a hospital, are licensed to provide inpatient acute psychiatric care similar to a psychiatric hospital. However, the requirements for PHFs are not the same as those for APHs. For example, PHFs are not required to provide general medical services. While a PHF is required to have a physician be on-call at all times, a patient can only be admitted to a PHF if the individual’s physical health care could otherwise be managed on an outpatient basis. An APH, on the other hand, is required to provide a medical service as part of their basic services, which must include a general medicine component. The general medicine component is required to provide all incidental medical services necessary for the care and support of patients, including general medicine and surgery. PHFs historically are county-run, or under contract by counties, to provide inpatient care to Medi-Cal beneficiaries through a county mental health plan.
   
   In addition to inpatient facilities, counties can designate certain outpatient facilities under the LPS Act, such as crisis stabilization units. A crisis stabilization unit is generally open 24 hours a day, seven days a week, and provides up to 23 hours of psychiatric urgent care intended to stabilize a patient suffering from psychiatric distress, with the goal of stabilizing the patient and avoiding the need for inpatient care.
   1. Insufficient inpatient psychiatric beds. According to the California Hospital Association (CHA), since 1995 the state has lost at least 37 facilities, either through the elimination of psychiatric inpatient care, or complete hospital closure, representing a 20% drop. CHA states that while there has been an increase in psychiatric beds over the past several years, California has lost nearly 30% of the psychiatric beds it had in 1995. On a per capita basis, accounting for the growth in California’s population, this translates into a loss of more than 42% of the psychiatric inpatient beds per capita since 1995. California now has only 17 psychiatric beds for every 100,000 residents, compared to nearly 30 beds per 100,000 in 1995, and well short of the recommended minimum number of 50 psychiatric beds per 100,000.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee:

• While the bill creates a new fund to provide loans, the bill does not specify the source or amount of funding needed to provide the start-up funds for the loans and funding for state administration.
• Ongoing annual costs, likely $1.2 million, for the California Health Facilities Financing Authority (CHFFA) to administer the new loan program. To the extent CHFFA could charge fees, costs for administration could be offset by fee revenues.

SUPPORT: (Verified 5/19/23)

American Medical Response

California Hospital Association

California State Association of Psychiatrists

City of Moreno Valley

City of Santa Monica

County Behavioral Health Directors Association

County of Riverside

Inland Empire Health Plan

Moreno Valley Chamber of Commerce

Moreno Valley Unified School District

Oasis Behavioral Health

Riverside County Workforce Development Board

Steinberg Institute

Sycamores

Telecare Corporation
Tenet Healthcare Corporation

OPPOSITION: (Verified 5/19/23)

None received

ARGUMENTS IN SUPPORT: The California Hospital Association states in support that it understands that demand for behavioral health care has grown exponentially and far outpaces community options, and supports this bill to expand mental health capacity. The County Behavioral Health Directors Association (CBHDA) states that the lack of acute psychiatric beds has increased the strain on the complex and interconnected mental health delivery system for inpatient care, and that Californians are often held in hospital emergency departments or county jails awaiting openings in inpatient care settings. The County of Riverside states that it has prioritized investments in its behavioral health infrastructure, and are actively planning for the replacement of its existing facility with a modern, 100-bed facility that will better integrate mental health, substance use, and physical health services. The County of Riverside states this bill offers a significant opportunity to move this critical project forward to increase its capacity as a safety net hospital. The Steinberg Institute states that California is in the middle of a statewide mental health crisis, and this bill provides an important opportunity to finance, through revolving loans, additional acute care psychiatric beds, a key part of the mental health treatment continuum. The City of Santa Monica states that this bill provides necessary bridge funding that would prioritize regions in California where there are significant impediments to inpatient psychiatric care.

Prepared by: Vincent D. Marchand / HEALTH / (916) 651-4111

5/24/23 15:30:06

**** END ****

SENATE COMMITTEE ON

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

SB 45 (Roth) - California Acute Care Psychiatric Hospital Loan Fund

Bill Summary:

SB 45 would establish the California Acute Care Psychiatric Hospital Loan Fund to provide zero-interest loans to qualifying county applicants for the purpose of constructing or renovating acute care psychiatric hospitals or psychiatric health facilities, or renovating or expanding general acute care hospitals in order to add or expand an inpatient psychiatric unit.

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on May 18, 2023

Fiscal Impact:

• While the bill creates a new fund to provide loans, the bill does not specify the source or amount of funding needed to provide the start-up funds for the loans and funding for state administration.
• Ongoing annual costs, likely $1.2 million, for the California Health Facilities Financing Authority (CHFFA) to administer the new loan program. To the extent CHFFA could charge fees, costs for administration could be offset by fee revenues.

Author Amendments:

Author amendments authorize CHFFA to establish an interest rate for loans funded by general obligation bonds, as specified, and otherwise require that loans be provided at zero-interest.

Committee Amendments: Committee amendments delete the continuous appropriation provision.

-- END --

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

SB 45 (Roth) - California Acute Care Psychiatric Hospital Loan Fund

Bill Summary:

SB 45 would establish the California Acute Care Psychiatric Hospital Loan Fund to provide zero-interest loans to qualifying county applicants for the purpose of constructing or renovating acute care psychiatric hospitals or psychiatric health facilities, or renovating or expanding general acute care hospitals in order to add or expand an inpatient psychiatric unit.

Fiscal Impact:

• The California Health Facilities Financing Authority (CHFFA) estimates ongoing annual costs of $1.2 million, for state staffing and consultants, to administer the new loan program.
• While the bill creates a new, continuously appropriated fund, the bill does not specify the source or amount of funding needed to provide the start-up funds for the loans and funding for staff/administration. To the extent CHFFA could charge fees, costs for administration could be offset by fee revenues.

Background:

The California Health Facilities Financing Authority (CHFFA) was created to be the state's vehicle for providing financial assistance to public and nonprofit health care providers primarily through loans funded by the issuance of tax-exempt bonds. To this end, CHFFA administers the Bond Financing Program and the Tax-Exempt Equipment Financing Program. CHFFA also provides direct loans to small and rural health facilities through the Healthcare Expansion Loan Program (HELP) II Financing Program. In September of 2021, the Governor signed into law the Nondesignated Public Hospital Bridge Loan Program to enable CHFFA to issue up to $40 million in working capital loans at zero interest rate to certain hospitals. These Nondesignated Public Hospital Bridge Loans are required to be paid back in two years, and are secured by Medi-Cal reimbursements.

Additionally, CHFFA administers several grant programs, including the Children's Hospital Programs, the Community Services Infrastructure Grant Program, and the Investment in Mental Health Wellness Grant Program. Under the Mental Health Wellness grant program, counties can apply for funding to develop a continuum of crisis services to children and youth up to 21 years of age in four categories: crisis residential treatment, crisis stabilization, mobile crisis support teams, and family respite care. There was an initial allocation of about $40 million for this Mental Health Wellness grant program, and there is still about $9 million available for mobile crisis support team programs.

By borrowing through CHFFA’s tax-exempt bond financing program, health facilities can likely obtain lower interest rates than they would through conventional bonds. Generally, non-profit, licensed health facilities in California, including adult day health centers, community clinics, skilled nursing facilities, developmentally disabled centers, hospitals, and drug and alcohol rehabilitation centers are eligible for CHFFA financing. Proceeds from CHFFA financings may be used for project-related costs, including: construction; remodeling and renovation; land acquisition (as part of the proposed project); acquisition of existing health facilities; purchase or lease of equipment; refinancing or refunding of prior debt; working capital for start-up facilities; costs of bond issuance; feasibility studies; and reimbursement of prior expenses. Under statute, savings resulting from issuance of tax-exempt bonds for borrowers must be transferred to the consuming public through lower or contained costs for delivery of health services. Since its first bond issuance in 1981, CHFFA’s bond financing program has issued 639 bonds for an aggregate total of approximately $46 billion, with 275 health facilities availing themselves of this financing.

Proposed Law:

Specific provisions of the bill would:

• Establish the California Acute Care Psychiatric Hospital (CACPH) Loan Fund to provide zero-interest loans to qualifying county applicants for the purpose of constructing or renovating acute care psychiatric hospitals, as defined; constructing or renovating psychiatric health facilities, as defined; or renovating or expanding general acute care hospitals in order to add or expand an inpatient psychiatric unit.
• Require all moneys in the CACPH Loan Fund to be continuously appropriated without regard to fiscal years to CHFFA, and require all moneys accruing to CHFFA pursuant to this bill from any source to be deposited into the fund.
• Permit the California State Treasurer to invest moneys in the CACPH Loan Fund that are not required for its current needs in eligible securities, as specified, and to transfer moneys in the fund to the Surplus Money Investment Fund, as specified.
• Require CHFFA to develop an application for county applicants to the CACPH Loan Fund.
• Permit a loan made pursuant to this bill to be subject to a fee set by CHFFA sufficient to cover, but not exceed, the cost of administering the loan.
• Require CHFFA to provide a report to the Department of Finance and the budget committees and health committees of the Assembly and Senate no later than two years after implementation of this program.

Related Legislation:

SB 1143 (Roth, 2022) was substantially similar to this bill. SB 1143 was vetoed by the Governor. The veto message included, “…the bill creates a new loan program without a funding source, creating millions of dollars in General Fund cost pressures that are not accounted for in the budget.”

-- END --

SENATE COMMITTEE ON HEALTH

Senator Dr. Susan Talamantes Eggman, Chair

BILL NO: SB 45

SUBJECT: California Acute Care Psychiatric Hospital Loan Fund

SUMMARY:

Establishes the California Acute Care Psychiatric Hospital Loan Fund to provide zero-interest loans to qualifying county applicants for the purpose of constructing or renovating acute care psychiatric hospitals or psychiatric health facilities, or renovating or expanding general acute care hospitals in order to add or expand an inpatient psychiatric unit.

Existing law:

1. Licenses and regulates hospitals, including general acute care hospitals and an acute psychiatric hospitals (APHs), by the California Department of Public Health (CDPH). Permits general acute care hospitals, in addition to the basic services all hospitals are required to offer, to be approved by CDPH to offer special services, including, among other services, an emergency department, and psychiatric services. [HSC §1250 and §1255, et seq.]
2. Licenses psychiatric health facilities by the Department of Health Care Services (DHCS), which are defined as health facilities that provide 24-hour inpatient care for people with mental health disorders, whose physical health needs can be met in an affiliated hospital or in outpatient settings. [HSC §1250.2]
3. Establishes the Lanterman-Petris-Short (LPS) Act and declares the intent of the Legislature to end the inappropriate, indefinite, and involuntary commitment of persons with mental health disorders, developmental disabilities, and chronic alcoholism, as well as to safeguard a person’s rights, provide prompt evaluation and treatment, and provide services in the least restrictive setting appropriate to the needs of each person. [WIC §5000, et seq.]
4. Authorizes a peace officer, member of the attending staff of a “designated facility,” as defined, member of the attending staff of a designated facility, or other professional person designated by the county, upon probable cause, to take a person with a mental disorder who is a danger to self or others, or is gravely disabled, into custody (referred to as a “5150” hold) and place him or her in a designated facility. [WIC §5150]
5. Defines “designated facility” or “facility designated by the county for evaluation and treatment” as a facility that is licensed or certified as a mental health treatment facility or a hospital, as defined, and includes, but is not limited to, a licensed psychiatric hospital, a licensed psychiatric health facility, and a certified crisis stabilization unit. [WIC §5008] 
6. Establishes the California Health Facilities Financing Authority (CHFFA), consisting of nine members, led by the State Treasurer who serves as the chair, and the executive director, who is appointed by the State Treasurer. States the intent of the Legislature to provide financing to health institutions that can demonstrate the financial feasibility of their projects, and that any savings experienced by the health institution be passed on to the consuming public through lower charges or containment of the rate of increase in hospital rates. [GOV §15430, et seq.]

This bill:

1. Establishes the California Acute Care Psychiatric Hospital (CACPH) Loan Fund to provide zero-interest loans to qualifying county applicants for the purpose of constructing or renovating APHs, as defined, constructing or renovating PHFs, as defined, or renovating or expanding general acute care hospitals in order to add or expand an inpatient psychiatric unit.
2. Requires all moneys in the CACPH Loan Fund to be continuously appropriated without regard to fiscal years to CHFFA, and requires all moneys accruing to CHFFA pursuant to this bill from any source to be deposited into the fund.
3. Permits the California State Treasurer to invest moneys in the CACPH Loan Fund that are not required for its current needs in eligible securities, as specified, and to transfer moneys in the fund to the Surplus Money Investment Fund, as specified.
4. Requires CHFFA to develop an application for county applicants to the CACPH Loan Fund, and requires the application to include requests for relevant information, such as project goals, costs, demonstrated need, timeline for the project, financial feasibility of the project, and other information deemed necessary for evaluation of creditworthiness and public benefit criteria established by CHFFA.
5. Requires the application developed in 4) above to be available by January 1, 2025, in accordance with CHFFA’s existing regulations or any necessary amendments, which are required to be undertaken as emergency regulations, if necessary.
6. Permits applications to be submitted to the authority by county applicants pursuant to criteria to be developed by CHFFA, and requires initial preliminary applications for projects to be considered to be submitted to the authority no later than April 1, 2025. Permits CHFFA to establish subsequent application periods, as necessary.
7. Requires CHFFA, in the event that it receives or anticipates receiving more applications than its allocation of moneys can support, to consider any of the following criteria in the selection of projects:
   1. The county’s unmet need for acute care psychiatric hospital infrastructure, with priority given to applicants with greater unmet need;
   2. Whether a local match is available, and priority is given to projects with a local match based on the proposed number of acute psychiatric beds:
      1. For a project with 75 beds or greater, requires priority to be given to projects with a 20% match;
      2. For a project with 50 beds, requires priority to be given to projects with a 30% match;
      3. For a project with 25 beds, requires priority to be given to projects with a 40% match; and,
      4. For a project with fewer than 25 beds, requires priority to be given to projects with a 50% match;
   3. Medically underserved regions in the state; and,
   4. When considered as a whole, applications approved pursuant to this bill are fairly representative of various geographical regions, including inland regions of the state.
8. Requires a loan recipient to maintain the facility and provide sufficient staff to operate the facility throughout the life of the loan.
9. Requires any funds not encumbered by a loan recipient within 36 months of the issuance of a loan to be returned to the CACPH Loan Fund, but permits CHFFA to extend this timeframe to accommodate delays associated with regulatory and economic environments. Permits CHFFA to cause funds to be reverted to the CACPH Loan Fund at any time, if it determines there is diminished demand.
10. Permits a loan made pursuant to this bill to be subject to a fee set by CHFFA sufficient to cover, but not exceed, the cost of administering the loan.
11. Requires CHFFA to provide a report to the Department of Finance and the budget committees and health committees of the Assembly and Senate no later than two years after implementation of this program. Requires the report to include, but not be limited to, the number of projects receiving loans and their geographic distribution, the total dollar amount of the loans made, and the dollar amount and the terms of the loan for each project.
12. Makes various legislative findings and declarations, including that psychiatric beds are an essential infrastructure for meeting the needs of individuals with serious mental health conditions, psychiatric bed capacity is severely strained in California, and that hundreds of Californians in need of psychiatric beds are held in hospital emergency rooms or county jails awaiting openings in inpatient care settings.

FISCAL EFFECT:

This bill has not been analyzed by a fiscal committee.

COMMENTS:

1. Author’s statement. According to the author, California is home to over 1 million adults who are afflicted with serious mental disorders, such as schizophrenia and/or bipolar disorder, with over 477,000 people going untreated. Psychiatric beds are essential infrastructure for meeting the needs of individuals with severe mental health conditions. The lack of acute care psychiatric hospital beds has increased the strain on the complex and interconnected mental health delivery system for inpatient care. In the rapidly growing and ethnically diverse area of Inland Southern California, the shortage of beds is particularly severe, per OSHPD data. For example, Riverside County currently has 8.3 inpatient psychiatric beds per 100,000 people. This bill would provide qualifying counties with an opportunity to access scarce infrastructure dollars to construct new acute psychiatric hospitals.
2. Background on existing CHFFA programs. CHFFA was created to be the state's vehicle for providing financial assistance to public and nonprofit health care providers primarily through loans funded by the issuance of tax-exempt bonds. To this end, CHFFA administers the Bond Financing Program and the Tax-Exempt Equipment Financing Program. CHFFA also provides direct loans to small and rural health facilities through the Healthcare Expansion Loan Program (HELP) II Financing Program. In September of 2021, the Governor signed into law the Nondesignated Public Hospital Bridge Loan Program to enable CHFFA to issue up to $40 million in working capital loans at zero interest rate to certain hospitals that are affected by financial delays associated with the transition to the Quality Incentive Program. These Nondesignated Public Hospital Bridge Loans are required to be paid back in two years, and are secured by Medi-Cal reimbursements. Additionally, CHFFA administers several grant programs, including the Children's Hospital Programs, the Community Services Infrastructure Grant Program, and the Investment in Mental Health Wellness Grant Program. Under the Mental Health Wellness grant program, Counties can apply for funding to develop a continuum of crisis services to children and youth up to 21 years of age in four categories: crisis residential treatment, crisis stabilization, mobile crisis support teams, and family respite care. There was an initial allocation of about $40 million for this Mental Health Wellness grant program, and there is still about $9 million available for mobile crisis support team programs.
   
   By borrowing through CHFFA’s tax-exempt bond financing program, health facilities can likely obtain lower interest rates than they would through conventional bonds. Generally, non-profit, licensed health facilities in California, including adult day health centers, community clinics, skilled nursing facilities, developmentally disabled centers, hospitals, and drug and alcohol rehabilitation centers are eligible for CHFFA financing. Proceeds from CHFFA financings may be used for project-related costs, including: construction; remodeling and renovation; land acquisition (as part of the proposed project); acquisition of existing health facilities; purchase or lease of equipment; refinancing or refunding of prior debt; working capital for start-up facilities; costs of bond issuance; feasibility studies; and reimbursement of prior expenses. Under statute, savings resulting from issuance of tax-exempt bonds for borrowers must be transferred to the consuming public through lower or contained costs for delivery of health services. Since its first bond issuance in 1981, CHFFA’s bond financing program has issued 639 bonds for an aggregate total of approximately $46 billion, with 275 health facilities availing themselves of this financing.
3. APHs, psychiatric health facilities, and crisis stabilization units. Generally speaking, inpatient beds for acute psychiatric patients are either provided in a distinct behavioral health unit of a general acute care hospital, in a freestanding APH, or in a PHF. All of these can be, and most are, “designated facilities” under provisions of the LPS Act that allow individuals to be involuntarily held and treated in a manner that safeguards their constitutional rights. There are 33 licensed APHs in California, and 29 PHFs. APHs are licensed by CDPH, and are required to provide medical, nursing, rehabilitative, pharmacy and dietary services, in addition to psychiatric services. PHFs are licensed by DHCS, and while not a hospital, are licensed to provide inpatient acute psychiatric care similar to a psychiatric hospital. However, the requirements for PHFs are not the same as those for APHs. For example, PHFs are not required to provide general medical services. While a PHF is required to have a physician be on-call at all times, a patient can only be admitted to a PHF if the individual’s physical health care could otherwise be managed on an outpatient basis. An APH, on the other hand, is required to provide a medical service as part of their basic services, which must include a general medicine component. The general medicine component is required to provide all incidental medical services necessary for the care and support of patients, including general medicine and surgery. PHFs historically are county-run, or under contract by counties, to provide inpatient care to Medi-Cal beneficiaries through a county mental health plan.
   
   In addition to inpatient facilities, counties can designate certain outpatient facilities under the LPS Act, such as crisis stabilization units. A crisis stabilization unit is generally open 24 hours a day, seven days a week, and provides up to 23 hours of psychiatric urgent care intended to stabilize a patient suffering from psychiatric distress, with the goal of stabilizing the patient and avoiding the need for inpatient care.
4. Insufficient inpatient psychiatric beds. According to the California Hospital Association (CHA), since 1995 the state has lost at least 37 facilities, either through the elimination of psychiatric inpatient care, or complete hospital closure, representing a 20% drop. CHA states that while there has been an increase in psychiatric beds over the past several years, California has lost nearly 30% of the psychiatric beds it had in 1995. On a per capita basis, accounting for the growth in California’s population, this translates into a loss of more than 42% of the psychiatric inpatient beds per capita since 1995. California now has only 17 psychiatric beds for every 100,000 residents, compared to nearly 30 beds per 100,000 in 1995, and well short of the recommended minimum number of 50 psychiatric beds per 100,000. A County Behavioral Health Directors Association of California (CBHDA) Governing Board Policy Brief from November 2015 cites specific challenges that contribute to the lack of crisis and inpatient care capacity, including:
   1. The federal Medicaid Institutions for Mental Disease exclusion (IMD exclusion), which prohibits states from receiving federal matching funds for inpatient services they provide to adult Medicaid enrollees aged 18-65 years in a hospital, nursing home, or other inpatient care setting with more than 16 beds;
   2. Stigma and discrimination, due to negative attitudes and myths about the dangerousness of people with mental illness. Counties and providers often face substantial community opposition when attempting to construct or repurpose a facility intended to be used for individuals in psychiatric crisis or in need of inpatient care; and,
   3. Divestment in acute psychiatric care and competing demands on hospitals, as, according to a report by the California HealthCare Foundation, hospitals have focused more in the last decade on general acute care services (both adult and newborn intensive care capacity) over skilled nursing and acute psychiatric services. According to the American Hospital Association, hospitals have been closing psychiatric units because of low payments from public and private payers, uncompensated care for uninsured patients, and a dearth of psychiatrists willing to work in hospitals.
5. IMD exclusion, possible waiver, and continuum of care grant program. Under the Medi-Cal program, federal rules do not allow for a federal match for adults under the age of 65 who are receiving care in a treatment facility with more than 16 beds. This is known as the IMD exclusion. Federal rules define an IMD as any “hospital, nursing facility, or other institution of more than 16 beds that is primarily engaged in providing diagnosis, treatment, or care of persons with mental diseases.” Because the rule requires the institution to “primarily” be established and maintained for the care of individuals with mental disease, that means that a general acute care hospital, even if it has a large wing with more than 16 beds dedicated to in-patient psychiatric care, would not be considered an IMD as long as more than 50% of all admitted patients at the hospital were there for non-psychiatric reasons. The IMD exclusion is the reason that 29 out of the 33 PHFs licensed statewide, the majority of which are operated by counties, have 16 or fewer beds.
   
   The federal Centers for Medicare and Medicaid Services (CMS) began approving waivers from the IMD payment exclusion for treatment of substance abuse disorders in 2016. In 2018, CMS created a similar waiver for those with serious mental illnesses or emotional disturbances. California is currently one of 34 states that operate under the waiver from the substance abuse treatment exclusion, which it sought as part of its 2020 CalAIM waiver request. An IMD waiver for mental illness would require that communities develop and demonstrate a robust continuum of care so that patients could be “stepped down” to community-based care as their condition improves. To prepare for an IMD waiver request, the 2021-22 Budget authorized DHCS to establish the Behavioral Health Continuum Infrastructure Program (BHCIP) and awarded $2.2 billion to local public and private entities to construct, acquire, and expand properties and invest in mobile crisis infrastructure related to behavioral health. DHCS is releasing these funds through six grant rounds targeting various gaps in the state’s behavioral health facility infrastructure. It is likely that an IMD waiver for mental illness will be submitted sometime this year, but it is unclear when it might be approved, or what conditions will be associated with allowing Medi-Cal payment for IMDs with more than 16 beds.
6. Related legislation. SB 363 (Eggman) Requires the Department of Health Care Services, in consultation with the California Department of Public Health and California Department of Social Services, to develop a real-time, Internet-based database, to be operational by January 1, 2025, to collect, aggregate, and display information about beds in specified facilities to identify the availability of inpatient and residential mental health or substance use disorder treatment. SB 363 is set for hearing on March 22, 2023 in this Committee.
   
   AB 512 (Waldron) requires the California Health and Human Services Agency, either on its own or through the Behavioral Health Task Force established by the Governor, to create an ad hoc committee to study how to develop a real-time, internet-based system, usable by specified entities, to display information about available beds in specified facilities for the transfer to, and temporary treatment of, individuals in mental health or SUD crisis. AB 512 passed the Assembly Health Committee by a vote of 13-0 on March 14, 2023.
7. Prior legislation. SB 1143 (Roth of 2022) was substantially similar to this bill. SB 1143 was vetoed by the Governor. According to the veto message, the Governor stated that creating a new loan program without a funding source would create millions of dollars in General Fund pressure, and stated that bills with significant fiscal impact should be considered and accounted for as part of the annual budget process.
   
   SB 1154 (Eggman of 2022) was substantially similar to SB 363 (Eggman). SB 1154 was held on Assembly Appropriations Committee suspense file.
   
   SB 929 (Eggman, Chapter 539, Statutes of 2022) expands DHCS’s responsibility in current law to collect and publish information about involuntary detentions to include additional information, such as clinical outcomes, services provided, and availability of treatment beds, as specified.
   
   AB 2768 (Waldron of 2022) was substantially similar to AB 512 (Waldron). AB 2768 was held on the Senate Appropriations Committee suspense file.
   
   AB 451 (Arambula, Chapter 438, Statutes of 2021) required a psychiatric unit of a general acute care hospital, a psychiatric health facility of more than 16 beds that is not county operated, and an acute psychiatric hospital, to accept a transfer of a person with a psychiatric emergency medical condition, regardless of whether the facility operates an emergency department, if the facility has appropriate facilities and qualified personnel available to provide the services.
   
   AB 1372 (Levine of 2017) would have permitted a certified crisis stabilization unit, as specified, to provide medically necessary crisis stabilization services to individuals beyond the service time of 24 hours, in cases where an individual needs inpatient psychiatric care or outpatient care, and inpatient psychiatric beds or outpatient services are not reasonably available. AB 1372 was not taken up on the Senate Floor.
   
   AB 1136 (Eggman of 2018) would have required CDPH to develop and submit a proposal to solicit a grant under the federal 21st Century Cures Act to develop a real-time, Internet-based database to collect, aggregate, and display information about beds in inpatient psychiatric facilities, crisis stabilization units, residential community mental health facilities, and licensed residential substance use disorder treatment facilities. AB 1136 was held on the Senate Appropriations Committee suspense file.
   
   AB 1300 (Ridley-Thomas of 2016) would have made numerous changes to the 5150 process, including allowing non-designated facilities to place 5150 holds. AB 1300 would also have required a designated facility to accept, within its clinical capability and capacity, all categories of persons for whom it is designated without regard to insurance or financial status. AB 1300 was held in the Senate Rules Committee.
   
   SB 364 (Steinberg, Chapter 567, Statutes of 2014) broadened the types of facilities that can be used for purposes of a 5150 hold to include facilities licensed or certified as mental health treatment facilities by the DHCS or CDPH, and permitted county mental health directors to develop procedures for the designation and training of professionals who will be designated to perform functions under Section 5150.
   
   SB 743 (Committee on Health, Chapter 612, Statutes of 2009) extended the amount of time, up to 24 hours, a non-designated hospital can detain persons who meet criteria for a 5150 hold and also extended civil and criminal liability protection to non-designated hospitals and specified staff.
   
   SB 916 (Yee, Chapter 308, Statutes of 2007) extended to APHs civil and criminal immunity related to the detention and release of individuals that are a harm to themselves or others or gravely disabled, and extended from eight to 24 hours the period of time that individuals can be detained in such hospitals, providing the hospital has not been designated by a county pursuant to the LPS Act.
8. Support. The California Hospital Association states in support that it understands that demand for behavioral health care has grown exponentially and far outpaces community options, and supports this bill to expand mental health capacity. The County Behavioral Health Directors Association (CBHDA) states that the lack of acute psychiatric beds has increased the strain on the complex and interconnected mental health delivery system for inpatient care, and that Californians are often held in hospital emergency departments or county jails awaiting openings in inpatient care settings. The County of Riverside states that it has prioritized investments in its behavioral health infrastructure, and are actively planning for the replacement of its existing facility with a modern, 100-bed facility that will better integrate mental health, substance use, and physical health services. The County of Riverside states this bill offers a significant opportunity to move this critical project forward to increase its capacity as a safety net hospital. The Steinberg Institute states that California is in the middle of a statewide mental health crisis, and this bill provides an important opportunity to finance, through revolving loans, additional acute care psychiatric beds, a key part of the mental health treatment continuum. The City of Santa Monica states in support that this bill provides necessary bridge funding that would prioritize regions in California where there are significant impediments to inpatient psychiatric care.
9. Policy comments.
   1. Funding. Unlike CHFFA’s core tax-exempt bond financing program, which is self-sustaining through the issuance of bonds, repaid with interest from the health facilities that utilize the financing program, a zero percent financing program would likely need to be funded from a dedicated pot of money provided via the General Fund. The author has stated that he will be requesting funding for this bill in the budget, but at this time has not specified a dollar amount. While it is still a loan program, and so once a facility repays the loan the money can be re-lent, depending on the repayment period, it could take a long time for this money to recirculate. Additionally, as CHFFA would be authorized to take a percentage in order to operate the program, the available pool of moneys available to lend would decrease over time without additional General Fund support. Given how expensive large health facilities are to build, even a large initial allocation in the budget would only fund a small number of applicants if it is funding close to the entirety of the project’s construction costs.
   2. Priority language. Related to the above comment about the limits of this funding structure, this bill establishes specific prioritization criteria for CHFFA to follow in the event there are more applications than available funds. Among the proposed criteria is requiring a smaller match for larger facilities. While the intent of this criteria is to encourage the construction of larger facilities to address the great unmet need for psychiatric beds, prioritizing large 75-plus bed facilities by requiring a smaller match of only 20 percent, will have the effect of making it more likely that only a handful of facilities, at most, will get whatever funds are ultimately allocated to this program. Additionally, while it is appropriate for the Legislature to set prioritization criteria for a limited pool of money, the author may wish to consider whether it would be preferable to direct CHFFA to develop regulations setting prioritization criteria according to more general direction (i.e., “the prioritization criteria established by CHFFA shall give priority to projects with larger bed capacity”) rather than setting specific matching amounts by bed size.

SUPPORT AND OPPOSITION:

Support: California Hospital Association

City of Santa Monica

County Behavioral Health Directors Association

County of Riverside

Steinberg Institute

Oppose: None received

-- END --