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The Commission On Affordable Housing And Health Facility Needs For Seniors In
The 21st Century
November 7, 2001
Mauro Hernandez
Assisted Living Concepts, Inc.
For the
Assisted Living Federation Of America

Good afternoon, Madam Co-chairs, Commission members and staff. On behalf of Assisted Living Concepts, Inc. (ALC) and the Assisted Living Federation of America (ALFA), I want to thank you for the opportunity to testify before you here today. I am Mauro Hernandez, Senior Policy Advisor for ALC. We are based in Portland, Oregon and operate 185 assisted living residences in 16 states throughout the country. I am also here today as co-chair of the ALFAcares Action Team of ALFA, the largest assisted living trade association, representing 41 state affiliates and 7,000 members, including the majority of assisted living providers in the U.S. I am here today to share my perspectives on aging in place, effective models and related regulatory reforms.

Our mission at ALC has been, "To provide affordable, quality housing and services which reflect and support independence, dignity, choice, privacy, and individuality in meeting the needs and preferences of all tenants in a homelike setting." Since developing a prototype model to serve moderate to low-income seniors in smaller communities during the early 1990's, we have been expanding that model since 1994. Part of our initial strategy was to target states where state regulations would allow our residences to provide services affordably and in a manner that would facilitate "aging in place" to the extent possible and as desired by residents. We were also interested in states where Medicaid reimbursement would make our services accessible to residents regardless of their income. Today, over 100 of our residences are contracted to serve Medicaid eligible residents in seven states.1 The remaining communities are located in states where Medicaid funding for assisted living is not yet available2 or reimbursement levels do not adequately cover the resident's housing and service costs-particularly as their needs increase.3

Since its own founding in 1990, ALFA has also been committed to enhancing consumer choice and promoting quality of life for assisted living residents. ALFA's members range from small family-owned businesses to large national operators like ours, both for-profit and not-for-profit, which specialize in assisted living or offer it in combination with other forms of senior housing and healthcare. While ALFA's early years were focused on growing this new segment of the long-term care industry, ALFAcares represents its newest affordable assisted living initiative by:

  1. Supporting federal legislation that promotes affordability
  2. Facilitating national replication of "best practice" models
  3. Promoting state reimbursement policies
  4. Removing regulatory barriers to affordability
  5. Encouraging partnerships between HUD & HHS

To that end, ALFA is working with HUD, HCFA and others to develop and promote affordable AL models. Recognizing the unique challenges of developing affordable assisted living facilities, ALFA is interested in putting together a "How-to" manual that draws on the experiences of successful ventures to help navigate an extremely challenging process. Given the wide range of environmental, financial, operational and local market factors, ALFA also plans to develop a "Best Practices" compendium of affordable AL projects. More recently, we co-sponsored a State Policy Summit on Assisted Living with the National Academy for State Health Policy to discuss model state regulations with various stakeholders including providers, state regulators and advocates.

State of Aging in Place:

First, I would like to make some general observations about "aging in place" in assisted living. In reviewing the literature and state regulations, the first thing that strikes any observer is the wide range of possibilities that exist in terms of "aging in place." For one thing, the terms "assisted living" and "aging in place" are defined differently depending on the state, organization, federal agency and research project. As you know, each state has developed its own approach to regulating assisted living or residential care and few, such as New Jersey, Texas, Hawaii, and Vermont refer to "aging in place" in their licensing regulations. As the first state to license "assisted living" in its own category, current regulations in Oregon say that "'Aging in place' refers to a philosophical approach to care and services which advocates for a person to remain in his/her living environment (home) despite the physical and/or mental decline that may occur with the aging process. For aging in place to occur, needed services are added, increased or adjusted to compensate for the physical and/or mental decline of the individual."4 That definition was reworked in 1999 in response to concerns that other state and national providers, policymakers and advocates are now facing as well.

On the one hand, misuse of the term "aging in place" has led some to feel that it may be a liability to the industry.5 Insurance providers reportedly dislike the term and prefer that providers drop it from their admission contracts or disclosure statements. Overstating it has also caused problems in terms of marketing activities. Regulatory problems have led to problems with surveyors for inappropriate retention of residents or challenges to discharge notices. In Oregon, regulators, providers and advocates worked together to address these concerns in regulatory changes that would:

  • redefine "aging in place" as a philosophical goal rather than an absolute guarantee by improving our disclosure and contract requirements
  • clarify the move-out and appeals process
  • beef up training and service delivery requirements
  • enhance provider monitoring and enforcement activities

However, these are just a few of the steps that Oregon and other states have been taking. "Aging in place" has also been characterized as a story of competing tensions-between state licensing regulations, federal mandates such as the Supreme Court's Olmstead decision and federal fair housing law, consumer preferences and the provider's ability to meet consumer needs.6

The most recent research shows that residents in assisted living do have variable service needs and that some are very impaired, while raising numerous questions about the ability of assisted living facilities to allow most residents to "age in place."7 Judging by private-pay rates and national census figures, this study also suggests that assisted living facilities are too costly for the middle and low-income elderly. But to what extent are state and federal policies influencing these findings? There is little if any national research that begins to answer this critical question.

One national study8 showed that Medicaid and state pay residents also have longer stays in assisted living than self-pay residents and those receiving financial assistance from family. However, only a small number of the assisted living residents sampled rely on public sources to pay for their care, such as SSI (9%); Medicaid (7%); state plan benefits (3%); veteran's assistance (0.5%). Few facilities seem to be targeting low-income residents partly because of the lack of funding available and/or low reimbursement levels. Providers also seem skeptical about public reimbursement due to valid concerns about insufficient payment, increased regulatory requirements and higher levels of client service dependence.

Supporting Aging in Place:

Meeting consumer preferences to age in place in assisted living is not easy but we have found it helpful to incorporate some basic approaches in developing ALC's own model:

  • First, one needs to be able to maintain a flexible service capacity for providing personal care and intermittent nursing services. Our buildings usually have about 40, private apartments and are located in smaller communities. Service needs vary by state licensing requirements, local market factors and experience. As a result, personal care and nursing hours vary by community size, impairment levels, staff skills and the ability of our nurse to delegate simple, routine tasks like glucometer checks to unlicensed caregivers.

  • We believe that barrier free design also maximizes accessibility to the environment while promoting resident self-reliance and minimizing dependence on others. Many states also incorporate such features as roll-in showers, grab bars, emergency response and secured or monitored egress systems into their physical plant requirements. However, we recognize that these features can add to unit costs and that other approaches may also be effective.

  • A flexible scope of services and permissive rather than restrictive move-in / move-out criteria are also important. As noted previously, we initially targeted states that would allow us to provide as many personal and supportive services as possible in house. As we expanded into other states, we found it necessary to either modify our service mix or work with other providers and the state to help change the rules. In many states, permissive move-out criteria have allowed us to define our upper limit on services without having to prematurely move residents to a more expensive, institutional setting.

  • Finally, being able to coordinate effectively with third party service providers like home health, hospice and others has allowed to enhance the community's scope of services without incurring unnecessary costs to other tenants who do not need such intensive health-related services.


Even with the best intentions we need to set realistic expectations and not expect that everyone will necessarily be able to age in place. For one thing, we can expect that some portion of our tenants will, at some point, require the continuous skilled nursing needs that a nursing facility is equipped to provide. Short of that, our administrators still face numerous ongoing operational obstacles to facilitating aging in place. Although many can be overcome, these can include regulatory / surveyor interpretations; staff attitudes, skills and experience; other residents and neighbors who have an aversion to high levels of frailty; unsupportive or conflicted family members; health professionals with a bias towards more institutional approaches to care.

Creating public policy that facilitates aging in place affordably is also a tall order. There are conflicts between how much (and for how many people) taxpayers and individuals are willing to spend and the ideal level of services that can or should be provided. We also seem to have a difficult time managing safety and autonomy priorities-our high regard for consumer autonomy can be compromised by a low tolerance for risk by state agencies, providers, payers, and insurers. We also have conflicting perspectives on the role of assisted living--whether it has a defined role between independent and nursing home care or a broader role to serve individuals regardless of their care needs.

Others have testified already about the need for adequate funding to provide a quality-housing component for assisted living. Providing quality services is something that most of us seem committed to doing. However, public reimbursement levels in many states do not seem adequate to do so. I have heard more than one person point out how we pay more to board a pet than an older, disabled adult in need of comprehensive housing and services. Even when more funding is available, some states pay more to meet the service needs of the same client for a portion of the day in adult day health care than for 24 hours a day in an assisted living facility. We already know that many states are unwilling or unable to invest more in home and community based services. Previous witnesses before this Commission and other publicly funded research have reported a variable but significant amount of unmet needs in home and community services like assisted living. Fortunately, promoting aging in place in assisted living is possible-existing state and provider models demonstrate this. Doing so while serving individuals with limited income is much more difficult but still possible if all the key elements are in place.

Key Components / Models:

As we have seen, the wide range of provider approaches and state policies has resulted in a very diverse industry.
  • On one end of the spectrum are those that represent a hospitality model with hotel-like services (meals, housekeeping, laundry, activities) along with possible coordination with third party providers for personal and nursing care. Impairment levels are generally low but may increase significantly for some with adequate supports.

  • Probably more common is the more traditional personal care model, which is equipped to provide scheduled ADL assistance and may have 24-hour coverage although extensive assistance with toileting, transferring and behavioral needs may not always be provided. Limited on-site nursing services may be available with more use of third party, resident contracted providers. Impairment levels are moderate on average though some tenants may also be fairly impaired depending on individual characteristics and resources available.

  • A more enhanced service model is characterized by barrier-free design, more extensive personal care, dementia-related and in-house nursing-related care through some combination of licensed and unlicensed caregivers. Residents may still have a mixed range of needs but the community can manage those with regular incontinence, moderate to severe levels of dementia, and/or intermittent skilled nursing needs.9

To facilitate aging in place through licensing regulations, we see several possible model approaches operating at the state level:

  1. High Service Capacity & Retention: Individual communities set move-in criteria according to their own service capacity. Such states place primary responsibility on the provider to manage the services to be provided and to assess the appropriateness of an individual for residency. This approach does not create the same administrative burden of processing requests for exceptions or waivers that exists under approach 2. This approach has been very effective when coupled with meaningful consumer disclosure. Examples include Oregon, New Jersey, Hawaii, Vermont and others.

  2. Flexible Waivers & Exceptions: Individuals are permitted to remain in an assisted living community even though they no longer meet the requirements of continued residency. The community must seek a resident-specific waiver or exception in order to provide a higher level of care and must be able to demonstrate that it has the capability of meeting the needs of the resident. Exceptions to residency limitations are an extension of the regulations of many states that allow an individual to remain within an assisted living community so long as the individual qualifies for hospice care. Regulators and legislators are asking why an individual's wishes should be respected when they are faced with a terminal illness but not when they are only experiencing a decline in condition. With appropriate safeguards, the individual's wishes can be respected and his or her needs can be met in a meaningful way. Examples include California and Maryland.

  3. Licensure Levels: States create different levels of assisted living licensure or sub-classifications, which allow providers to determine which level of services they are capable of offering. Each level or sub classification has physical plant design and service delivery requirements to provide safeguards to accommodate the particular level of impairment served. States that opt for this method of determining the propriety of admission or continued residency normally contend that such schemes provide greater prospective certainty for providers, regulators, and consumers. In other words, criteria for who can and cannot be admitted or remain in the community are clear and known up front. Under such a system, providers can elect the level of services they choose to offer, and can increase the acuity of services by changing categories, i.e., modifying their service packages "up to" the higher level of care. Examples include Arizona, Florida and Maryland.

  4. Informed Choice / Individually Negotiated: An alternative approach being proposed by ALFA uses the existing regulatory approach with additional continued residency provisions when an individual exceeds the normal scope of permitted services or residency criteria. It requires the coordinated involvement of the resident and/or the resident's representative, the resident's physician and the assisted living community. It is based upon full disclosure of the relevant facts regarding the care of the resident and puts greater emphasis on input and involvement of the resident, the physician, family, and the provider. Rather than requiring an exception or waiver, the approach includes a physician certification of continued appropriateness based on a multi-disciplinary negotiated service plan. Licensing staff may evaluate the individual at any time to determine if the assisted living community is meeting the individual's needs. See Attachment A for a copy of ALFA's Informed Choice Act.

Medicaid waiver programmatic issues:

  1. Limited Medicaid coverage in AL: As noted by previous witnesses before this commission, there were reportedly only 60,000 seniors in 38 states.10 Low rates and fear of additional regulations are significant barriers to higher rates of provider participation. Additionally, many states do not have an adequate number of slots to meet the demand for services. Below are a few possible federal policy options for Medicaid HCBS statutes as reported in several HCBS waiver reports. 11,12 , 13

  2. a) Make the HCBS program an optional state plan benefit or a mandatory benefit. Or increase the federal financial participation (FFP) rates (over the current levels) to states with low incomes as a means of encouraging these states to increase state waiver expenditures.

    b) Require states to remove the limits on the total number in each waiver.

    c) Remove the link between HCBS waivers and the need criteria for institutional care (States view these as too rigid and cumbersome). Expand the HCBS program as a preventive measure to those who do not need institutional care

    d) Remove the state financial reporting requirements for cost neutrality. Give states financial incentives to reduce the ratios of institutional expenditures for HCBS.

    e) Offer special short-term or long-term grants to low-income states to help expand the number of participants and/or to build their HCBS waiver programs.

  3. Payment lags: Some residents who are admitted due to an emergency have not completed Medicaid application process and are unable to access Medicaid wavier until completed

  4. Lack of retroactivity: Many Medicaid waiver programs will not include retroactive payments to ALFs that accept Medicaid eligible clients before the application is completed; usually they will be retroactive only to the effective date of eligibility rather than their actual move-in date.

  5. Inability to supplement waiver: Many state policymakers cite federal rules as not allowing families of Medicaid clients to pay extra funds to purchase services and amenities that are not covered by the waiver. Otherwise, the added family resources reportedly may need to be counted as income available to the applicant for Medicaid coverage. Family contributions could also jeopardize eligibility for SSI.

  6. Lack of bed holds: In most states, providers are required to hold a Medicaid resident's unit during extended absences for hospitalization, rehabilitation, etc. This period can extend for up to thirty days or more in some cases. Very few states provide even a discounted service payment to providers who continue to incur most of the same costs. This puts Medicaid ALF providers at risk of losing significant revenues if and when Medicaid residents are in the hospital. In contrast, some state nursing home regulations provide for a bed reservation payment to the facility per hospitalization.

  7. Inadequate payment rates: This is perhaps the most significant barrier to serving low-income seniors.

  1. Flat rate reimbursement can encourage skimming of lighter care need residents or put too much risk on providers in managing resident case mix. Tiered rates can ensure that individual client payments are more in line with actual costs.

  2. State funded room and board supplements can provide better coverage for that portion not covered by Medicaid in HCBS programs though included in nursing home payment.

Increasing the availability of assisted living to lower income seniors, particularly as their needs continue to change, depends on each state's willingness to make public policy decisions regarding the allocation of limited state dollars with respect to a set of financing and funding resources. As I noted earlier, there are a significant number of states and different models to allow for alternative approaches. As I understand it, one of the key questions before this Commission will be: how to encourage other states to adopt more equitable practices to provide a more balanced long-term care system? I know that ALFA and ALC look forward to supporting this Commission's efforts to do so.

Attachment A

The Informed Choice Act

An Act to strengthen the disclosure of essential information regarding assisted living to consumers and to strengthen the consumer's ability to make informed choices regarding assisted living;


  1. The purpose of this Act is to empower consumers in two ways. First, to empower consumers by describing an assisted living community's services in a uniform manner. This disclosure gives prospective residents and their families consistent categories of information from which they can compare assisted living communities and services. By requiring this disclosure, the state is not mandating that all services listed should be provided, but provides a format to describe the services that are provided. The disclosure is not intended to take the place of visiting the assisted living community, talking with residents, or meeting one-on-one with assisted living community staff. Rather, it serves as additional information for making an informed decision about the care provided in each assisted living community.

  2. Second, to empower consumers by identifying how the resident would be able to remain in an assisted living community if their acuity exceeds the statutory or regulatory discharge criteria, if, all parties (resident, resident representative, physician, and assisted living community) agree and the resident has been evaluated, understands and accepts the health, safety, and financial impact of the decision.

  3. All assisted living communities shall make the following information available to consumers, upon inquiry, in a form designated by the Department:

    1. A list of all services provided by the assisted living community;

    2. The current charges for all services provided by the assisted living community;

    3. Whether a resident may contract with a third party to receive services;

    4. Whether the assisted living community has licensed nurses or registered nurses on staff;

    5. Whether the assisted living community requires a payment prior to admission, and if so, the amount of the payment;

    6. The circumstances or conditions which may require that the resident move out;

    7. Whether the assisted living community allows residents to remain if they are receiving hospice services;

    8. The process for establishing and updating the resident's service plan;

    9. The number of daily meals offered or provided and whether specialized or therapeutic diets are offered;

    10. The sources of payment that are accepted by the assisted living community including Medicaid, state grants or public funding; and

    11. Whether the assisted living community offers programs specifically for individuals with Alzheimer's or related dementia and/or has a secured unit for individuals with Alzheimer's and related dementia.

  4. Assisted living communities shall post information regarding the appropriate state agencies for addressing complaints and grievances.

  5. All assisted living communities shall provide a detailed residency agreement to residents.

  6. If a resident's condition or care needs exceed those allowed by section [insert reference] the resident shall be allowed to remain a resident of an assisted living community if all of the following conditions are met:

    1. The resident and/or his/her designated representative desires that the resident remain in the assisted living community;

    2. Prior to a physician's assessment, the assisted living community has disclosed to the physician the services that it will provide or make available to the resident;

    3. The resident is assessed by a physician to determine whether the resident is appropriate to remain in the assisted living community. The physician's determination should be based upon the resident's condition, the services available at the assisted living community, and the resident or the resident or his/her designated representative's wishes that the resident be allowed to remain within the assisted living community;

    4. The assisted living community agrees that continued residency is appropriate;

    5. The assisted living community must disclose the cost of additional services that it will provide;

    6. Sufficient financial resources are available for the resident to pay for the additional services to be provided;

    7. The resident, his/her representative, and the assisted living community shall agree upon when the resident shall be reassessed to determine the appropriateness of continued residency. The reassessment shall be completed as scheduled or upon a significant change in the resident's condition, but in no event shall be later than six months after the agreement pursuant to this part;

    8. The agreement of the resident, his/her designated representative and the assisted living community shall be in writing and constitute an addendum to the Residency Agreement; and

    9. The assisted living community must develop a service plan which reflects the assessment, the resident's wishes regarding continued residency, the services to be provided to the resident, and the resident's wishes regarding services.

  7. Nothing in this section shall be deemed to require a resident to remain in an assisted living community.

  8. Nothing in this section shall be deemed to require an assisted living community to provide a higher level of care to residents unless expressly agreed to by all of the parties.

1Arizona, Idaho, Nebraska, New Jersey, Oregon, Texas, Washington

2Georgia, Indiana, Louisiana, Ohio, Pennsylvania, South Carolina

3Florida, Iowa, Michigan

4Oregon Administrative Rules 411-056-0005 (4) Revised 4/99.

5Burgess, K. (2001) Aging in Place: An Old Term with New Consequences and Meanings. Legal and Operational Issues Impacting Aging in Place, presented at ALFA Fall National Conference, Washington, D.C.

6Burgess (2001)

7Hawes, C., Rose, M., & Phillips, C. D. (1999). A National Study of Assisted Living for the Frail Elderly: Results of a National Survey of Facilities. Beachwood, OH: Myers Research Institute.

8Wylde, M. (1998). National Survey of Assisted Living Residents: Who is the Customer? Annapolis, MD: National Investment Conference.

9Wilson, K.B. 1997. Assisted Living: Doing It Well; Doing It Poorly, Presented at the Annual State Health Policy Conference of the National Academy for State Health Policy, Aug. 1997.

10Mollica, Robert. 2000. State Assisted Living Policy: 2000. Portland, ME: National Academy for State Health Policy

11Harrington, C., et al., Review Of Federal Statutes And Regulations For Personal Care And Home And Community Based Services: A Final Report. 2000, Department of Social & Behavioral Sciences, University of California, San Francisco: San Francisco, CA. p. 1-169.

12Harrington, C., et al., Predicting State Medicaid Home And Community Based Waiver Participants And Expenditures, 1992-1997. Gerontologist, 2000. 40(6): p. 673-686.

13Harrington, C., et al., Met And Unmet Need For Medicaid Home And Community Based Services In The States. 2000, Department of Social and Behavioral Sciences, University of California, San Francisco: San Francisco, CA. p. 1-31

The page was last modified on November 15, 2001