Assisted living: the regulatory outlook.

An overview for those waiting for the Federal regulatory "shoe to drop"

This January, the Federal government released its report "An Overview of Nursing Homes and Their Current Residents: Data From the 1995 National Nursing Home Survey." It noted that, from 1985 to 1995, the number of nursing home beds in the United States increased 9%, from 1,624,200 to 1,770,900, while the number of beds per 1,000 people actually decreased, from 56.9 to 52.6. By all appearances, the occupancy rates of skilled nursing facilities should have risen. In fact, they dropped, from an average 91.8% to 87.4%. If the elderly population was growing faster than the number of nursing home beds, where was this elderly population receiving care?

The answer is that many of the elderly who formerly would have become nursing home residents are being treated at home through home health agencies or are turning to such alternatives as assisted living. And they are doing so in rapidly growing numbers.

How big a force has assisted living become in the senior living market? Even without comprehensive statistics as yet available for this highly varied field, nursing home providers and investors know very well that assisted living is a booming industry. A 1996 Wall Street Journal article called assisted living stocks "the latest hot area in the small-stock marketplace." And we do know that, during 1996, Construction for assisted living accounted for 54% of all senior housing built in the United States.

Meanwhile, nursing home providers have found themselves in the unenviable position of competing with assisted living while they deal with decreasing government reimbursement, moratoriums on new beds and seemingly endless regulation at both the state and Federal government levels. As assisted living seems poised to make its mark on the long-term care industry, the industry is asking: What is its future? And when, if ever, will Federal regulation become a factor?

We must begin that assessment by defining, as clearly as possible, what "assisted living" really is. A senior housing concept originally developed in Scandinavia during the 1970s, assisted living combines residential housing for the elderly with services. Common features in American assisted living include incandescent lighting, soft fabrics for upholsteries and carpets, locking doors, kitchenettes, open stairways, balconies, reflecting pools and even fireplaces. Common services include meals, housekeeping, transportation, social activities, assistance with ADLs and, occasionally, nursing services.

While the focus on the residential quality of assisted living has been consistent throughout its development, the profile of the resident to be served has changed. These changes - the natural result of the evolution of assisted living - have created pressures for the development of state and Federal regulation.

Originally, developers sought residents who required minimal assistance with ADLs and required no nursing services. Operators quickly found that, as these resident's conditions deteriorated, they were forced to move out, resulting in a 55% turnover rate. To address this high turnover, many providers began accepting and retaining residents requiring more assistance with ADLs and more than occasional nursing services. According to the American Health Care Association's "Facts and Trends: Assisted Living Sourcebook," the average assisted living resident in 1996 required assistance with 1.7 ADLs, compared with only 1.5 ADLs the year before. The percentage of assisted living residents requiring assistance with four or five ADLs grew from 11% to 15%. As resident acuity has increased, so too has the perception that regulations guaranteeing the standard of care and the availability of staff in assisted living are necessary.

Others have raised concerns about the fire safety of assisted living facilities. Some advocates argue that these facilities should be required to meet standards more stringent than local building codes because residents with higher acuity have greater difficulty evacuating a facility in the event of an emergency. Currently, many states allow assisted living to be provided in buildings that meet local building codes but do not meet Life Safety Code 101.

Also, as more states have implemented pilot projects pursuant to Medicaid waivers allowing for Medicaid payments for assisted living services, states' regulatory requirements have increased - from compliance with the Life Safety Code to required staffing ratios, for example.

Finally, and not surprisingly, many traditional long-term care providers are calling for regulation of assisted living. For many skilled nursing providers, the idea of having to contend with newly constructed, heavily marketed assisted living facilities in a highly competitive marketplace while having to meet over 700 Federal certification and licensing requirements is simply too much to ask. State licensing authorities are, as a result, seeing a large increase in the number of complaints about unlicensed assisted living facilities, thus heightening attention to the possibilities for regulation.

Many in the assisted living industry have responded by pointing out that they are providing services in the resident's home and that they should be no more hampered in this than a home health agency would be. In fact, some providers have intentionally established their projects with distinct housing and service components to avoid meeting the regulatory definition of a health care facility. The residential character of assisted living may offer it some protection, and some providers have been successful in using the Fair Housing Act amendments to avoid excessive regulation. But as assisted living's focus moves from housing to medical services, it risks being viewed and regulated as a health care provider.

Assisted living providers have also argued that regulation will make assisted living a non-viable concept. Regulations requiring "redundant workers" or "unnecessary services" raise operating costs, they note. Life Safety Code requirements can increase construction costs by $30 per square foot. Under comprehensive inflexible regulations, they argue, assisted living is transformed from a cost-effective senior housing option to a luxury beyond most seniors' reach.

Recognizing, however, the significant forces pushing for industry regulation, a coalition of the most influential assisted living-related providers was formed to develop industry guidelines that would preempt the need for stringent state or Federal regulations. It consisted of the Alzheimer's Association, the American Association of Homes and Services for the Aging, the American Association of Retired Persons, the American Seniors Housing Association, the Assisted Living Federation of America and the American Health Care Association. After surviving a temporary defection by the last-named group over regulatory philosophy, the coalition is back at full strength and anticipates development of a proposed framework in a few months. There is at present, however, no apparent industry-wide consensus on how to prevent or slow the development of regulations.

Even as state and Federal regulators set out to draft rules for assisted living, though, their biggest problem remains simply determining what they are regulating. Because assisted living has developed as a market-driven service, it does not fit neatly within existing statutes or regulatory mechanisms. Because developers turned to market studies and public opinion polis rather than existing regulations to determine staffing and services to be provided, all have varying definitions of assisted living. And, as suggested earlier, clear definitions are a precondition of clear and effective regulation.

Assisted living environments, as they exist, range from shared one-room accommodations to apartments complete with kitchens and living rooms. For some providers, assisted living means providing housekeeping services, meals, laundry and transportation. For others, assisted living means providing these services plus nursing services, including the administration of medication, dressing changes, and assistance with IVs. Small wonder, therefore, that would-be regulators find it difficult to pigeonhole assisted living into existing categories. It is an illusion, however, to view assisted living as completely unregulated. Regardless of the definition that is used, there is probably a regulatory category that will apply to a specific project in virtually every state. In fact, while few states have actually drafted regulations using the term "assisted living," virtually every state has a regulatory category for senior housing with a services component (i.e., sheltered care facility, board and care home, adult care home or domiciliary care residence).

The problem is that, for many states, the regulations that do apply to assisted living facilities were originally drafted for a different type of facility. Since the regulations do not accurately reflect today's assisted living marketplace, many providers subject to them feel as if they are a square peg being pounded into a round hole. For example, shared rooms, a common feature of other health care facilities, are disfavored in assisted living. Also, some regulatory schemes make it impossible for assisted living providers to utilize "universal workers," a growing feature of assisted living that allows significant cost savings.

As noted, many assisted living providers have expanded the range of resident acuity they are willing to accept and retain. By doing so, providers are able to reduce unit turnover and maintain occupancy rates. They are finding, however, that state regulations will only allow them to go so far. Some states will allow assisted living facilities to accept only those residents who are capable of evacuating themselves in an emergency within a certain time period (with or without assistance). Some states restrict admission to residents who are not bedridden; often with a grace period allowing a current resident to be bedridden due to illness for a short period of time (e.g., 14 days). Others set forth a laundry list of medical conditions residents may not have.

Medication administration also becomes important as resident acuity increases. Current assisted living regulations span the gamut from requiring all residents to be capable of self-administration to allowing unlicensed staff to administer some medications under a licensed staff member's supervision. Many states allow staff to assist residents with their medication, "assistance" being interpreted to include verbal reminders, opening the medication container, placing the medication in the patient's hand and even guiding the resident's hand to his/her mouth. In those states that emphasize assisted living as a replacement for nursing homes, medication administration regulations are generally more liberal.

Another area of state-by-state variation is the certificate of need (CON) requirement. Some states have completely repealed the health planning laws undergirding the CON process, while others have specifically exempted assisted living from this process. In those states requiring a CON for assisted living, some providers are not applying because they consider themselves outside that domain. In other states where assisted living is exempt, nursing home providers find themselves at yet another competitive disadvantage, and this has become an issue of contention.

Because of the proliferation of pilot projects and other variations among the states, it appears unlikely that there will be broad, comprehensive Federal regulation of assisted living facilities any time soon, if ever. Although the Health Care Financing Administration is considering regulations for personal care services that are now Federally reimbursed, I do not anticipate a Federal regulatory scheme with the complexity or particularity of the OBRA survey and enforcement regulations imposed on nursing homes.

Whether or not this is fair is debatable. But one key strategy every nursing home provider should pursue is involvement in the regulatory process. Unless legislators and regulators understand how nursing facilities fit into the overall continuum of care and why they provide unique value, they cannot be expected to draft or implement policies that will accommodate nursing homes' basic interests.

Matthew J. Murer, JD, is a health care attorney with the firm of Holleb & Coff, based in Chicago. He has been practicing in the long-term care field for several years and advises clients on such issues as regulatory compliance, certification and licensure, certificate-of-need, reimbursement, civil suits and general business planning. He has also been involved in various aspects of developing assisted living facilities. For more information call 312-807-4600.