435200930-5-21-2021-26-AS-ANAI-C38VD3-20210521162002

Community Care Licensing

COMPLAINT INVESTIGATION REPORT

Facility Number: 435200930
Report Date: 02/24/2021
Date Signed: 05/21/2021 03:20:41 PM

STATE OF CALIFORNIA - HEALTH AND HUMAN SERVICES AGENCY

COMPLAINT INVESTIGATION REPORT

CALIFORNIA DEPARTMENT OF SOCIAL SERVICES
COMMUNITY CARE LICENSING DIVISION
CCLD Regional Office, 2580 N. FIRST STREET, STE. 350
SAN JOSE, CA 95131

This is an official report of an unannounced visit/investigation of a complaint received in our office on
02/24/2021 and conducted by Evaluator Jennifer Walden

PUBLIC

COMPLAINT CONTROL NUMBER: 26-AS-20210224150108

FACILITY NAME:	VI AT PALO ALTO		FACILITY NUMBER:	435200930
ADMINISTRATOR:	STEVE A. BRUDNICK		FACILITY TYPE:	741
ADDRESS:	620 SAND HILL ROAD		TELEPHONE:	(650) 853-5000
CITY:	PALO ALTO	STATE: CA	ZIP CODE:	94304
CAPACITY:	876	CENSUS:	DATE:	02/24/2021
		UNANNOUNCED	TIME BEGAN:	01:00 PM
MET WITH:	Tara Cope and Paul Gordon		TIME COMPLETED:	02:00 PM

ALLEGATION(S):

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CC Palo Alto, dba Vi at Palo Alto, Classic Residence Management LP, and CC Development, (Providers) settled a suit brought under the Labor Code Private Attorneys General Act (LCPAGA) alleging wage and hour violations. Providers included the cost of settlement and future attorneys fees related to the suits as operating costs.  The settlement included fines, penalties and LCPAGA attorney’s fees.  By charging these costs to the community operating account, the Community Operating Surplus (COS) account was reduced, which impacts resident monthly care fees in that any rebates due to residents under the policies governing the COS would be proportionately reduced.  Residents complained that costs arising out of a wage and hour suit under the LCPAGA are not properly considered costs of operating the community and should not be included as “projected costs, prior year per capita costs and economic indicators,” under Health and Safety Code section 1788(a)(22)(B).

INVESTIGATION FINDINGS:

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Rachel Raymond, Assistant Chief Counsel, Carla Nuti-Martinez, Regional Manager, and Allison Nakatomi, Manager of the Continuing Care Contracts Bureau, conducted a virtual meeting to deliver the findings of an investigation conducted by the Department and met with Tara Cope, General Counsel of Vi Living, Gary Smith, CFO of Vi Living, and Paul Gordon, Hanson Bridgett

The Department received and reviewed a complaint dated November 12, 2020, and titled “Formal Complaint on Behalf of the Residents of Vi at La Jolla Village and Vi at Palo Alto Life Plan Communities,” from complainants.  As part of its investigation of the complaint, the Department in interviewed representatives of the residents, along with Tara Cope and Gary Smith of the provider and conducted records review. 

Based on the preponderance of evidence standard, the Department finds the above allegation to be substantiated, meaning there is a preponderance of evidence to prove the allegation occurred.
  
The Department is informed that there was a settlement pending court approval in the amount of one million dollars. A portion of the settlement has been allocated to the 2020 operating account for Vi at Palo Alto. Specifically, it shows an expense in the amount of approximately $350,000, which includes $250,000 for the cost of settlement and $100,000 for the cost of defense attorneys’ fees. This will result in a reduction of the COS in the amount of $350,000. Further, the provider intends to pass on $175,000 in attorneys fees it projects for this suit in 2021.

Residents have argued that the costs of the suit cannot be used to increase monthly care fees because they are barred by Health and Safety Code section 1788(a)(35) and Civil Code section 1688 as indemnity. The Department has rejected this conclusion because these statutes do not address indemnity. The residents have also argued that the cost of settlement and attorneys fees cannot be passed on because they are costs of the management company and not the provider. The Department has rejected this contention because after review of the management agreement the Department has concluded that there is not sufficient evidence to find that the costs could not be passed on to the providers.

Nevertheless, the Department finds that the apportionment of these costs to the Vi at Palo Alto operating account does result in a reduction in the COS, which affects the monthly care fees. The provider is obligated to base monthly care fee increases on “projected costs, prior year per capita costs and economic indicators.” While the defense fees are an appropriate cost, it is not clear that the costs in the settlement agreement are because, to date, the settlement agreement has not apportioned the proceeds between attorney’s fees for defense, restitution, fines, penalties and LCPAGA attorney’s fees. The Department is requiring that this information be provided to it and the residents prior to any adjustment to the COS.  Proceeds associated with attorney fees for defense of the action and payments to employees may be included as a cost of operation.  Costs associated fines, penalties and LCPAGA attorney’s fees are not allowed to be included as a cost of operation. 

This report was reviewed with Katie Hernandez and a copy of the report was provided.

Substantiated

Estimated Days of Completion:

SUPERVISOR'S NAME: Allison Nakatomi	TELEPHONE: (916) 531-5336
LICENSING EVALUATOR NAME: Jennifer Walden	TELEPHONE: (916) 651-8148
LICENSING EVALUATOR SIGNATURE:	DATE: 05/21/2021

I acknowledge receipt of this form and understand my licensing appeal rights as explained and received.

FACILITY REPRESENTATIVE SIGNATURE:

DATE: 05/21/2021

This report must be available at Child Care and Group Home facilities for public review for 3 years.

LIC9099 (FAS) - (06/04)

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Control Number 26-AS-20210224150108

STATE OF CALIFORNIA - HEALTH AND HUMAN SERVICES AGENCY

COMPLAINT INVESTIGATION REPORT (Cont)

CALIFORNIA DEPARTMENT OF SOCIAL SERVICES
COMMUNITY CARE LICENSING DIVISION
CCLD Regional Office, 2580 N. FIRST STREET, STE. 350
SAN JOSE, CA 95131

FACILITY NAME: VI AT PALO ALTO	FACILITY NUMBER: 435200930
DEFICIENCY INFORMATION FOR THIS PAGE:	VISIT DATE: 02/24/2021

Deficiency Type POC Due Date / Section Number	DEFICIENCIES		PLAN OF CORRECTIONS(POCs)
Type B 02/24/2021 Section Cited HSC 1788(a)(22)(B)	1 2 3 4 5 6 7	For monthly fee continuing care contracts, except prepaid contracts, changes in monthly care fees shall be based on projected costs, prior year per capita costs, and economic indicators. The facility included costs in their calculation for the monthly care fee increase that are not allowed by the statutes.	1 2 3 4 5 6 7	The Department is requiring a corrective action plan by March 10, 2021, including a plan for disclosure of the apportionment of the settlement, adjustments to the COS in accordance with these findings, and a timeline for the outlined actions.
	1 2 3 4 5 6 7		1 2 3 4 5 6 7
	1 2 3 4 5 6 7		1 2 3 4 5 6 7
	1 2 3 4 5 6 7		1 2 3 4 5 6 7

Failure to correct the cited deficiency(ies), on or before the Plan of Correction (POC) due date, may result in a civil penalty assessment.

SUPERVISOR'S NAME: Allison Nakatomi	TELEPHONE: (916) 531-5336
LICENSING EVALUATOR NAME: Jennifer Walden	TELEPHONE: (916) 651-8148
LICENSING EVALUATOR SIGNATURE:	DATE: 05/21/2021

I acknowledge receipt of this form and understand my appeal rights as explained and received.

FACILITY REPRESENTATIVE SIGNATURE:

DATE: 05/21/2021

LIC9099 (FAS) - (06/04)

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