What the Senate Hearing on Assisted Living Foretells About Sector’s Future

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The Jan. 25 Senate Special Committee on Aging hearing on assisted living covered a lot of ground – which makes sense, considering that the committee’s last hearing dedicated to AL took place 20 years ago.

Given the variety of topics covered – including resident safety, affordability, private equity and REIT involvement, staff shortages and training requirements, the quality of memory care, and more – there has been a lot to reflect on since the hearing adjourned.

So, the hearing was still very much on my mind as I read Juniper CEO Lynne Katzmann’s piece about the six “mindshifts” needed in order for senior living to fulfill its promise, which we ran this week on Senior Housing News.

I found Katzmann’s piece a helpful lens through which to consider the hearing, bringing into sharper focus some of its important themes, as well as some of my concerns about what was said (and unsaid).

In this week’s exclusive, members-only SHN+ Update, I offer my analysis of the hearing and some key takeaways, including:

• Why assisted living providers should expect – and support – more disclosure and transparency requirements
• The risks that bipartisanship could stifle a nuanced approach to investigating and regulating assisted living
• How the hearing showed the problems with a siloed mentality regarding regulation

Competition and transparency

Adopting a “fair market” rather than a “free market” mentality was one mindshift that Katzmann proposed in her piece. She cited economist and former government official Alan Enthoven, who originated the concept of “managed competition” in U.S. health care.

“His thesis was that the U.S. health care system is inherently biased and unfair and that new policy will be needed to restore real competition. Hence the words: managed competition,” Katzmann wrote. “For me, managed competition is a mouthful. I prefer to think in terms of ‘fair markets.’”

As one step toward achieving fair markets in health care, Katzmann called for more pricing transparency. This same theme – the lack of true competition in U.S. health care, and the opacity of the market in terms of what consumers are paying for – came up repeatedly at the Senate hearing. The committee members are very focused on how the cost structure of assisted living relates to rates, and how transparently these rates are being communicated to residents and their families.

“We do not have transparency, we do not have competition,” said Republican Sen. Mike Braun of Indiana, the committee’s ranking member. “It’s almost like an unregulated utility, and you get your bill if you’ve had a significant health care scrape or a bad accident, you’ve got to hold your breath to see how much it’s going to cost or can you afford it.”

Already, many senior living providers are moving toward making their pricing more transparent, in large part responding to consumer expectations. But providers might eventually have no choice but to be more transparent, if the hearing is any indication.

“We’ve got to have transparency across the spectrum [of] health care, and when you get to the tail-end of life, I think it’s as important as it is along the way,“ said Braun. “And until the industry and everyone in health care embraces transparency and competition, don’t be surprised if there’s going to be more of an interest to show how to do it from the federal level.”

Transparency as a theme extended beyond just more transparency in pricing, to more transparency related to ownership structures and quality metrics, to bring assisted living more in line with other types of health care providers.

It’s true that the assisted living sector has historically existed tangentially to the health care sector, given that AL has been a private-pay and hospitality-forward model. But this is changing rapidly, with resident acuity drastically increasing – another hot topic at the hearing – and shifts in programs such as Medicare Advantage bringing more government payment streams into assisted living. Such trends are almost certain to accelerate, given the calls for greater public-private partnerships to support scalable middle-market assisted living models.

So, assisted living providers who are used to the arguably “free” markets of a purely private-pay model will increasingly see their ability to compete stymied by the “biased and unfair” nature of the U.S. health care market, to use Enthoven’s terms. With this as the backdrop, it certainly seems that the industry should push for greater transparency, not only for senior living providers but for all the health care providers and payers that they increasingly will be negotiating with, partnering with, and competing against.

Future regulations might take many forms, including more transparency around senior living ownership structures – consider that the Biden administration over the last year has implemented several policies to increase transparency related to who owns nursing homes, in part to enable more investigation into how different corporate structures might correlate to quality.

At the assisted living hearing, the lawmakers pressed witnesses on the role of private equity and REITs in senior living, and Democratic Sen. Elizabeth Warren of Massachusetts bemoaned the lack of information about what these ownership structures might mean from a quality and cost perspective.

“We just don’t know,” she said. “These are serious problems; they’ve been going on for years. But we hear so much less about what’s going on in assisted living facilities than we do in other facilities like nursing homes.”

Federal lawmakers also are showing acute interest in how the costs of delivering assisted living compare with the rates being charged consumers. Already, the Democratic members of the Senate Aging Committee have asked the Government Accountability Office to study assisted living costs, transparency and affordability.

I understand that the assisted living sector as a whole is resistant to the notion of greater federal oversight, but the absence of such information not only skews the competitive landscape but might be unfairly casting dark clouds over the sector. For instance, at the Senate hearing, Richard Mollot, Executive Director for the Long Term Care Community Coalition, offered this perspective:

“Unfortunately, we don’t have a lot of data directly on assisted living – we have some on senior care in general and, of course, nursing homes and other care settings. We know that when private equity comes into a sector, they often pillage it.”

Hopefully, having actual data would not allow for such aspersions to be cast on the sector. And if the data show that assisted living really is being pillaged by private equity, then the industry and society as a whole would be well served to know that and take appropriate action.

It’s worth noting that Katzmann is not the only leader within senior living calling for greater information sharing and transparency, whether that be on pricing or other matters. Leaders are arguing that more robust information sharing within the industry should help enable the innovations needed to rise to some of the challenges – such as rising acuity – that were flagged at the Senate hearing.

For example, the issue came up during a panel at the NIC conference in 2022. There, RSF Partners Managing Partner and NIC Board Chair Kurt Read cited the hotel industry’s move toward “radical transparency” in the 1990s.

“Within five years, you had new brands, you had capital formation, you had loans, you had stunning innovation,” he said.

Silos and citizenship

The calls for greater transparency and information sharing about assisted living crossed party lines during the hearing, coming from the likes of Braun, Warren, Casey and others. And Braun pointed out that he and GOP colleagues have been working across the aisle, including with high-profile progressive Sen. Bernie Sanders of Vermont, on measures for greater transparency.

“To me, when you’re against that, you’re just trying to hide something,” Braun said, referring specifically to the concept of an Assisted Living Compare website, similar to the government’s existing “Compare” websites that share quality data on nursing homes and other care settings.

Casey voiced similar sentiments, saying that it’s “fundamental” that people should have access to an objective, independent source of information about the quality of particular health care facilities, including assisted living.

While I found it refreshing to see apparent bipartisanship at play, I am concerned that the unanimous and strenuous calls for transparency seemingly did not allow for a more nuanced discussion about the topic.

One issue that I think merited discussion is the fact that the Nursing Home Compare website is far from a perfect tool for transparency – and in fact, nursing home providers themselves argue that Nursing Home Compare, which includes the Five Star rating system for facilities, is deeply flawed and might actually be more harmful than helpful for consumers and providers alike. And their concerns have been backed up by independent research.

Concerns include the fact that the Five Star ratings are too often based on outdated data and punish nursing homes serving particular types of patients, such as those with behavioral health diagnoses. Another major concern is that the system does not reflect resident satisfaction with nursing homes, with no consideration given to elements beyond safety, including the quality of food, amenities, and staff friendliness.

During the hearing, not only was Nursing Home Compare held up as a model worthy of emulation for assisted living, the federal approach to nursing home regulation as a whole was put forward as a potential example for what is now needed in assisted living.

“Forty years ago, when nursing homes were in crisis, Congress took action,” Mollot said. “From numerous GAO reports to the growing chorus of local and national news reports of neglect; disastrous, quote unquote, elopements; and financial shenanigans, it is clear that we have reached that point now with assisted living.”

There was relatively little pushback from senators or other witnesses to this point of view. As I watched the hearing, I wanted to shout through my computer screen about the current state of the nursing home sector, where – despite being subjected to a massive federal regulatory regime – quality concerns are still very much in play (and driving ever more regulations), while facility closures are escalating, referral streams from hospitals are snarled, and the sector as a whole is arguably foundering more than flourishing.

If Congress does believe it is time to regulate assisted living, the approach taken for nursing homes arguably should give them more reason to hesitate than spring into action.

I also was struck by the fact that Gardant Co-President Julie Simpkins – the lone provider voice in the hearing – repeatedly framed assisted living as a type of home- and community-based service (HCBS). I was disappointed that this went without comment from the committee members, rather than spurring some discussion about whether home health care – not nursing homes – provides the better framework for thinking about assisted living.

Certainly, the parallels between assisted living and home health care are strong, notably the fact that a huge proportion of in-home care (mainly to support activities of daily living) is operating on a private-pay model, which co-exists with the more limited Medicare benefit for in-home rehabilitation.

The lack of discussion around this issue is especially glaring because the blending of private-sector business and public-sector health care dollars that exists in the home care market – and increasingly in assisted living – reflects the larger direction of the U.S. health care system that has been underway for years. The rise of managed care, and especially the public-private Medicare Advantage system, is among the megatrends shaping health care in this country, and stems largely from federal laws and policies.

I would also argue that HCBS provides a more natural context for considering the importance of resident autonomy in assisted living, which I think also was given short shrift in the Senate hearing. However, it was not totally ignored. Dr. Jennifer Craft Morgan, director of The Gerontology Institute at Georgia State University, highlighted the perspective of Christian Living Communities CEO Jill Vitale-Aussem, who has proposed that the hospitality model of assisted living creates an environment of resident passivity, and a change is needed in order to activate and empower residents.

I wish that Morgan had followed up on this concept later in her testimony, when asked about the role of providers in preventing residents from falling. Specifically, I hoped that she would mention the concept of residents having the “freedom to fall” – that is, while assisted living providers should create safe environments and offer care to help limit falls, residents also should have the same freedom they do in their own homes to weigh their risks of falling and make their own decisions regarding their ambulation.

In another parallel between the hearing and her piece on mindshifts, Katzmann also cited Vitale-Aussem’s critique of the “cruise ship” model of senior living and her arguments in favor of a “citizenship” model, in which residents have both rights and bear responsibilities for their health and wellbeing.

“Instead of an entitlement mindset, residents and operators alike must redefine rights and responsibilities of residency,” Katzmann wrote. “Most importantly, if we are going to move the needle on longevity and/or health care costs, we must all become health care citizens.”

Whether comparing assisted living to nursing homes or home care or other models, it seems to me that Capitol Hill lawmakers should make a more of a concerted effort to consider the place that assisted living occupies within the continuum of care, and how potential policies and regulations would fit within the larger goals that the federal government has been pursuing.

In other words, if this hearing was just a starting point for more federal action on assisted living, I hope that future conversations take a wider lens. Amid health care transformations that aim to create more integration across the continuum, Congress’ approach to regulation also has to become less siloed in order to truly drive toward a more person-centered and affordable system overall, which will improve health outcomes and lower costs for older adults no matter where they are living.