The 10 Trends and Legal Challenges We Are Tracking Throughout 2024

1. Increased Scrutiny of Assisted Living Residences

Following a The Washington Post investigation into the assisted living industry released in December 2023, the US Senate Special Committee on Aging held a hearing in which staffing concerns, high costs, and poor care were highlighted by bipartisan lawmakers. Following the hearing, some senators called for assisted living facilities to be brought under the regulation and oversight of the federal government, a drastic shift in the landscape as assisted living facilities are currently left to state regulation. We continue to monitor developments on the federal level but also expect some states will begin passing enhanced regulations for providers, potentially leading to increased enforcement activities.

2. Increased Disclosure Requirements for Medicare-Participating Nursing Homes Target Private Equity

Skilled nursing facilities (SNFs) enrolled in Medicare or Medicaid will soon be required to disclose more information on their ownership structures as part of their initial enrollment, change of ownership, or revalidation. Under section 1124(c) of the Social Security Act, trustees, parties that exercise financial control over the SNF, parties that lease or sublease the property to the SNF operator, and parties that own a whole or part interest of 5% or greater of the total value of real estate on which a SNF is located, among other disclosable persons, will now be required to be disclosed. However, SNFs will not have to disclose the data required under section 1124(c) of the Social Security Act until Form CMS-855A is revised to account for this data and made publicly available for use. Similarly for Medicaid, the new information must be reported if the Medicaid agencies have a way to collect it. However, the Centers for Medicare & Medicaid Services (CMS) expects the Medicaid agencies to promptly establish a way to collect this information.[1] At the time of this article, the new 855A is not available.

3. CMS Publishes Final Rule With New Minimum Staffing Requirements for Long Term Care Facilities

On April 22, CMS issued a final rule imposing minimum nurse staffing standards. Facilities will be required to provide a minimum of 3.48 hours per resident day (HPRD) of total direct nursing care to residents, of which at least 0.55 HPRD of care must be provided by registered nurses and 2.45 HPRD of care must be provided by nurse aides. In addition, a registered nurse will be required to be onsite 24/7.

For non-rural areas, facilities must meet the 3.48 HPRD total nurse staffing requirement and the 24/7 registered nurse requirement within two years of the final rule publication, while for rural areas, these requirements must be met within three years of the final rule publication.

4. New Minimum Staffing Standards and Ongoing Staffing Shortages Will Create a Competitive Hiring Market

The new minimum staffing standards addressed above will make hiring competitive in light of persistent, ongoing staffing shortages in the senior living industry. A report issued by the US Department of Health and Human Services (HHS) found that nursing homes faced significant staff losses and substantial difficulties in hiring, training, and retaining staff, which was significantly impacted by the COVID-19 pandemic. While the report focused on nursing homes, staffing shortages have impacted the health care industry as a whole. With providers already struggling to retain workers, the new minimum staffing requirements will only make it more difficult for long term care and senior living providers to hire and retain qualified workers.

5. FTC Bans Noncompete Agreements

On top of the persistent staffing challenges and the new minimum staffing requirements, the Federal Trade Commission (FTC) recently issued a final rule banning noncompete clauses nationwide. Under the new rule, existing noncompete clauses for the majority of workers will no longer be enforceable. This new rule will present challenges to employers that seek to retain employees while also protecting legitimate business interests and confidential information. The rule will become effective 120 days after it is published in the Federal Register. For more information about the ban, please see an article published by our AFS colleagues, available here.

6. Increased Occupancy Levels

As discussed in our January article, “2024 Senior Housing Market Outlook,” the National Investment Center for Seniors Housing & Care (NIC), along with NIC MAP Vision, projected that the senior living market could achieve pre-pandemic occupancy levels by 2024, as occupancy levels rose in the third and fourth quarters of 2023. While the increase is positive news for the industry, the rise in occupancy will have to be balanced against the staffing shortages and minimum staffing requirements and could lead to significant regulatory challenges for operators.

7. The Introduction of New Technology

One potential answer to the ongoing staffing concerns is the proliferation of new technology in the senior living space, including artificial intelligence- (AI) powered health care technology. AI offers a real opportunity to long term care and senior living operators to significantly improve patient and resident outcomes and increase the productivity of its workers in both administrative tasks and care needs. While the technology could significantly benefit operators, whether state licensing agencies are willing to adopt the technology, particularly as it relates to the provision of care, remains to be seen. In any event, operators will need to carefully prepare policies and procedures to fuse the benefit of the technology and the regulatory requirements.

8. Nursing Home Industry Segment-Specific Compliance Program Guidance Expected in 2024

As discussed by our colleagues in “10 Legal Challenges for the Health Care Industry in 2024,” the HHS Office of Inspector General (OIG) issued its first-ever general compliance program guidance applicable to all health care providers and suppliers. For 2024, the OIG expected to begin publishing industry segment-specific compliance program guidance aimed at addressing industry segment-specific risk areas. On February 21, the OIG announced that it expects to release the first two sets of compliance guidelines. These guidelines will be specific to different industry segments, including nursing facilities.

9. Growing Importance of Mental Health Services

We expect to see demand for memory care programs continue to rise as the number of older adults living with Alzheimer’s or other forms of dementia increases. Long term care and senior living operators face myriad considerations when implementing memory care programs. These considerations center around providing a safe environment with a quality of life that respects the dignity of residents. Adhering to physical plant standards, training staff to handle the unique challenges of this population, and navigating the increased financial costs of specialized care are top considerations for operators. Legal and regulatory compliance, including patient rights and privacy, are also key considerations.

10. Affordable Care

The US Senate Special Committee on Aging focuses on issues related to older Americans. One of the major concerns of this committee is the cost of assisted living, which is prohibitive for many seniors. Many states have initiated affordable programs for assisted living, mainly through home- and community-based waiver programs. For example, Minnesota offers the Elderly Waiver (EW) program, which provides financial assistance for services in an assisted living setting for those who qualify. Similarly, California’s Assisted Living Waiver (ALW) program covers the cost of care services in licensed residential care facilities for low-income older adults. The Committee has expressed its commitment to exploring ways to make assisted living more affordable, and we expect that the Committee will propose policy and regulatory changes in the near future to alleviate the financial burden for lower-income seniors.

[1] 88 FR 80143.