GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1991

S	1 

SENATE BILL 731

Short Title:  Long Term Care Managers.	(Public)
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Sponsors: Senators Walker; Daniel, Hunt, Martin of Guilford, Marvin, Perdue, Richardson, Speed, Tally, and Ward.
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Referred to:  Human Resources.
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April 22, 1991

A BILL TO BE ENTITLED
AN ACT FOR THE APPOINTMENT OF TEMPORARY MANAGERS FOR LONG TERM CARE FACILITIES.
The General Assembly of North Carolina enacts:
Section 1.  Chapter 131E of the General Statutes is amended by adding Article 13 as follows:
“ARTICLE 13.
"Temporary Management of Long Term Care Facilities.
"§ 131E-230.  Legislative findings.
The General Assembly finds that:
(1)	The inadequate operation of a long term care facility can have devastating effects on the residents;
(2)	The closure of a long term care facility, even a poor one, can have adverse effects on the residents, especially if the closure and transfer of residents is done hastily;
(3)	There is need of a clear procedure for the court appointment of a temporary manager to assure the proper operation of a long term care facility until a regular manager (new or original) is prepared to properly operate the facility, or until the residents can be humanely transferred to a proper alternative setting; and
(4)	The long term operation of a long term care facility by a temporary manager is not desirable.
"§ 131E-231.  Definitions.
As used in this Article, unless otherwise specified:
(1)	‘Long term care facility' means a nursing home or a domiciliary home, whether or not the domiciliary home is operated as part of a nursing home.
(2)	‘Resident' means a person who has been admitted to a long term care facility.
"§ 131E-232.  Who may petition.
The Department of Human Resources may petition a court of competent jurisdiction to appoint a temporary manager to operate a long term care facility.
"§ 131E-233.  Grounds for appointment.
The court may appoint a temporary manager upon the filing of a petition for one or more of the following grounds:
(1)	A violation that creates a substantial risk that death or serious physical harm to a resident will occur or such harm has occurred, together with the probability that the facility will not or cannot immediately remedy the violation;
(2)	The long term care facility is operating without a license;
(3)	The license of the long term care facility has been suspended or revoked or the long term care facility is closing or intends to close and: (i) adequate arrangements for relocating residents have not been made, or (ii) quick relocation would not be in the best interest of the residents;
(4)	The procedures for nonrenewal or revocation by the Department of Human Resources of the long term care facility's license have been initiated and violations in the long term care facility result in conditions that create a substantial risk that death or serious physical harm to a resident will occur;
(5)	The inability, for financial reasons, to assure adequate care;
(6)	A previous court order has been issued requiring respondent to act or refrain from acting in a manner directly affecting the care of the residents and respondent has failed to comply with the court order.
"§ 131E-234.  Procedures for appointment.
The procedure for petitioning a court for an appointment of a temporary manager, including service of process, shall be in accordance with the North Carolina Rules of Civil Procedure.  If  personal service of a copy of the petition cannot be made with due diligence upon the respondent, service may be made upon the respondent by posting a copy of the summons and petition in a conspicuous place within the long term care facility, and sending a copy of the summons and petition to the respondent by registered mail at his last known address.  Service shall be complete upon filing a return of service with the clerk of courts.  A hearing shall be held within 20 days of service.
"§ 131E-235.  Candidates for temporary managers.
As petitioner for temporary management, the Department of Human Resources shall nominate at least one candidate for temporary manager and shall give the name, address, and qualifications of each nominee.  The Department of Human Resources shall maintain a list of persons qualified to act as temporary managers, but the Department is not required to nominate from that list.
"§ 131E-236.  Temporary manager; powers and duties.
A temporary manager appointed under this section:
(1)	May exercise those powers and shall perform those duties set out by the court;
(2)	Shall operate the long term care facility in compliance with this act and assure the safety of the residents and the delivery of services to them;
(3)	May operate the facility under a temporary license issued by the Department of Human Resources in the event that the license of the original operator has been revoked or suspended or was never issued;
(4)	Shall have the same rights to possession of the building in which the long term care facility is located and of all goods and fixtures at the time the petition for temporary management is filed as the respondent would have had if the temporary manager had not been appointed.  The temporary manager shall take such action as is necessary to protect or conserve the assets or property of which the temporary manager takes possession, or the proceeds of any transfer thereof, and may use them only in the performance of the powers and duties set forth in this section and by order of the court;
(5)	May use the building, fixtures, furnishings, and any accompanying consumable goods in the provision of care and services to residents and to any other persons receiving services from the long term care facility at the time the petition for temporary management was filed.  The temporary manager shall collect payment for all goods and services provided to residents or others during the period of the temporary management at the same rate and method of payment as was charged by the respondent at the time the petition for temporary management was filed, unless a different rate is set by the court;
(6)	May correct or eliminate any deficiency in the structure or furnishings of the long term care facility that endangers the safety or health of residents while they remain in the long term care facility, provided the total cost of correction does not exceed one thousand dollars ($1,000);
(7)	Shall submit to the court a plan as provided in G.S. 131E-237 for correction or elimination of any deficiency in the structure or furnishings of the long term care facility that endangers the safety or health of residents while they remain in the long term care facility, if such corrections are estimated to exceed one thousand dollars ($1,000), and shall carry out the plan with any modification as approved by the court;
(8)	May let contracts and hire agents and employees to carry out the powers and duties created under this section;
(9)	Except as specified in G.S. 131E-238, shall honor all leases, mortgages, and secured transactions governing the building in which the long term care facility is located an all goods and fixtures in the building of which the temporary manager has taken possession, but, in the case of a rental agreement, only to the extent of payments that are for the use of the property during the period of the temporary management, or, in the case of a purchase agreement, come due during the period of the temporary management;
(10)	Shall have full power to direct, manage, and discharge employees of the long term care facility, subject to any contract rights they may have;
(11)	If transfer of the residents is necessary, shall cooperate with the Department of Human Resources and/or local Departments of Social Services in carrying out the transfer of residents to an alternative placement; and
(12)	Shall be entitled to and shall take possession of all property or assets of residents in the possession of the respondents.  The temporary manager shall preserve all property, assets, and records of residents of which the temporary manager takes possession and shall provide for the prompt transfer of the property, assets, and records to the alternative placement of any transferred resident.
"§ 131E-237.  Plan for correction of deficiencies in excess of one thousand dollars ($1,000).
(a)	If the temporary manager determines that it is necessary to correct a deficiency estimated by the temporary manager to cost in excess of one thousand dollars ($1,000), the temporary manager shall submit to the court a written plan that contains the following:
(1)	A description of the deficiency that requires correction;
(2)	A description of the method proposed by the temporary manager for correction of the deficiency; and
(3)	An estimate of the cost of the correction.
(b)	A copy of the plan shall be served upon the petitioner and the respondent within three days after the submission of the plan to the court.
(c)	Upon the written request of a party within seven days after the submission of the plan to the court, a hearing on the proposed plan of correction shall be held.  If a hearing is requested by a party, the hearing shall be held within 14 days of the written request.  The petitioner, respondent, and temporary manager shall have the opportunity to present evidence at the hearing regarding the proposed plan.  Upon hearing the evidence, the court may approve the plan, modify the plan, or, if the court determines as a result of the evidence that the alleged deficiency does not require correction, it may reject the plan.
(d)	If no party requests a hearing on the plan, the court may order the temporary manager to proceed to implement the plan.
(e)	Upon written petition, affidavits, and any other evidence submitted to the court showing that violations in the long term care facility have resulted in conditions that present an imminent danger, the court may approve ex parte a written plan of the temporary manager to correct a deficiency of the long term care facility.  Notice of the plan and the ex parte order shall be served upon the parties within 24 hours after issuance of the ex parte order approving the plan.  A hearing on the plan shall be held within three days after service of the notice.  Upon hearing the evidence presented at the hearing, the court may continue, modify, or reject further implementation of the written plan.
"§ 131E-238.  Payment to temporary manager.
(a)	A person who is served with notice of an order of the court appointing a temporary manager and of the temporary manager's name and address shall be liable to pay the temporary manager for any goods or services provided by the temporary manager after the date of the order if the person would have been liable for the goods or services as supplied by the respondent or agent of the respondent.  The temporary manager shall give a receipt for each payment and shall keep a copy of each receipt on file.  The temporary manager shall deposit amounts received in a special account and shall use this account for all disbursements.
(b)	The temporary manager may bring an action to enforce the liability created by subsection (a) of this section.  Proof of payment to the temporary manager is as effective in favor of the person making the payment as payment of the amount to the person who, but for this subsection, would have been entitled to receive the sum so paid.
(c)	A resident may not be discharged, nor may any contract or rights be forfeited or impaired, nor may forfeiture or liability be increased, by reason of an omission to pay a respondent, licensee, or other person a sum paid to the temporary manager.
"§ 131E-239.  Avoidance of preexisting leases, mortgages, and contracts.
(a)	A temporary manager shall not be required to honor any lease, mortgage, secured transaction, or other wholly or partially executory contract entered into by the respondent, licensee, or administrator of the long term care facility if:
(1)	The person seeking payment under the agreement was a respondent or a licensee or administrator of the long term care facility or was an affiliate of respondent or a licensee or administrator at the time the agreement was made; or
(2)	The rental price, or rate of interest required to be paid under the agreement was substantially in excess of a reasonable rental price or rate of interest at the time the contract was entered into.
(b)	If the temporary manager is in possession of real estate or goods subject to a lease, mortgage, security interest, or other contract which the temporary manager is permitted to avoid under subsection (a) of this section, and if the real estate or goods are necessary for the continued operation of the long term care facility under this section, the temporary manager may apply to the court to set a reasonable rental price or rate of interest to be paid by the temporary manager during the duration of the temporary management.  The court shall hold a hearing on the application within 15 days after receipt of the application.  The temporary manager shall send notice of the application to any known owners of the property involved at least 10 days prior to the hearing.
(c)	Payment by the temporary manager of the amount determined by the court to be reasonable is a defense to any action against the temporary manager for payment or for possession of the goods or real estate subject to the lease, mortgage, security interest, or other contract involved by any person who received such notice, but the payment does not relieve the obligee of liability for the difference between the amount paid by the temporary manager and the amount due under the original lease, mortgage, or security interest involved.
"§ 131E-240.  Bond and contingency fund.
(a)	The Department of Human Resources shall establish and collect a reasonable bond to be posted by the licensee as a condition of licensure or relicensure.  The initial bond payment for all long term care facilities shall be due within three months of the effective date of this Article.  The interest on all such bond money shall be deposited in a temporary management contingency fund.
(b)	Upon a showing that expenses of the temporary management exceed the operating funds of the long term care facility, the court, in its discretion, may order that the Department of Human Resources pay to the temporary manager proceeds from the licensee's bond and the temporary management contingency fund, in that order, for the following:
(1)	Payment of the expenses of the temporary manager incurred with respect to implementation of a court-approved plan for correction of deficiencies in excess of one thousand dollars ($1,000); and
(2)	Compensation of the temporary manager.
"§ 131E-241.  Review and termination of temporary management.
(a)	The operations and continuing need for a temporary manager shall be reviewed by the court every 30 days following the appointment of the temporary manager.
(b)	The court shall order the termination of the temporary management upon a showing that the goals of the temporary management have been met.
(c)	When a facility is returned to its owner, the court may impose conditions to assure compliance with applicable laws and regulations.
"§ 131E-242.  Compensation of temporary manager.
The court shall set the compensation of the temporary manager.
"§ 131E-243.  Accounting lien for expenses.
(a)	Within 30 days after termination of the temporary management, the temporary manager shall give the court a complete accounting of:
(1)	All property of which the temporary manager has taken possession;
(2)	All funds collected under this section; and
(3)	Expenses of the temporary management.
(b)	If the operating funds collected by the temporary management exceed the reasonable expenses of the temporary management, the court shall order payment of the surplus to the respondent, after reimbursement of funds drawn from the contingency fund.  If the operating funds are insufficient to cover the reasonable expenses of the temporary management, the respondent shall be liable for the deficiency.  The respondent may apply to the court to determine the reasonableness of any expenses of the temporary management.  The respondent shall not be responsible for expenses in excess of what the court finds to be reasonable.  Payment recovered from the respondent shall be used to reimburse the contingency fund for amounts drawn by the temporary manager.
(c)	The court may order that the Department of Human Resources shall have a lien for any reasonable costs of the temporary management which are not covered by the operating funds collected by the temporary manager and for any funds paid out of the contingency fund during the temporary management upon any beneficial interest, direct or indirect, of any respondent in the following property:
(1)	The building in which the long term care facility is located;
(2)	The land on which the long term care facility is located;
(3)	Any fixtures, equipment, or goods used in the operation of the long term care facility; or
(4)	The proceeds from any conveyance of property described in subdivisions (1), (2), and (3) of this subsection made by the respondent within one year prior to the filing of the petition for temporary management.
(d)	The lien provided for in this section is superior to any lien or other interest that originates subsequent to the filing of a petition for temporary management under this section, except for a construction or mechanic's lien arising out of work performed with the express consent of the temporary manager.
(e)	The clerk of the court for the county in which the long term care facility is located shall record the filing of the petition for temporary management in the lien docket opposite the names of the respondents, licensees, and administrator named in the petition.
(f)	Within 60 days after termination of the temporary management, the temporary manager shall file a notice of any lien created under this section.  If the lien is on real property, the notice shall be filed with the clerk of the court of the county in which the long term care facility is located and entered on the lien docket.  If the lien is on personal property, the lien shall be filed with the person against whom the lien is claimed, and shall state the name of the temporary manager, the dates of the petition for temporary management, the termination of temporary management, a description of the property involved, and the amount claimed.  No lien shall exist under this section against any person, on any property, or for any amount not specified in the notice filed under this section.
"§ 131E-244.  Obligations of licensee.
Nothing in this section shall be deemed to relieve any respondent, licensee, or administrator of a long term care facility placed in temporary management of any civil or criminal liability incurred, or any duty imposed by law, by reason of acts of omissions of the respondent, licensee, or administrator prior to the appointment of a temporary manager under this section.  Nothing contained in this section shall be construed to suspend     during the temporary management any obligation of the respondent, licensee, or administrator for payment of taxes or other operating and maintenance expenses of the facility nor the respondent, licensee, or administrator or any other person for the payment of mortgages or liens.  No licensee or administrator shall be held professionally liable for acts or omissions of the temporary manager or the temporary manager's employees during the term of the temporary management."
Sec. 2.  This act becomes effective October 1, 1991.