Repositioning of Nursing Homes to Alternative Models of Care

31 March 2015 Health Care Law Today Blog

The juncture of the increasing drive to lower health care costs, consumer preferences for at home care or care in more residential environments, and the ability to deliver care as needed in portable and flexible ways, all have combined to produce an acceleration in the closure and repositioning of traditional SNFs to alternative uses. All of this is creating occasional access issues for residents even in States where there is a surplus of beds or a moratorium in place on new construction.

Why are we seeing an acceleration of closures and sales? First, operators and capital seek to  build new facilities with shorter term stay and higher acuity capability to be responsive to ACOs and discharge sources seeking capable network partners who will reduce readmission risk. Second, in certain markets opportunities exist to reposition a facility to assisted, independent or combined use — this is especially true in over-bedded markets that are in particularly good demographic locations. Third, and as a  by-product of the above, operators can monetize the value of certificate of need beds in markets that are bed constrained.

However, headwinds are building on the regulatory side. Recently, the Boston Globe reported in its headline (3/23/15) story “As Nursing Homes Close, Residents Scramble To Find Alternatives,” that unlike hospitals, SNFs are not required to go through a public notice and hearing process to close—merely filing a closure plan with The Department of Public Health (DPH) and advance notice to DPH suffices. Recently, Massachusetts has enacted legislation which would require such a hearing, but regulations are yet to be implemented enforcing this law. After many years of over-bedded States, moratoria and low Medicaid rates, it would indeed be ironic if a shrinkage of available beds makes new construction more attractive to investors. Whatever the future, it is reasonably likely that regulators will more carefully watch closure and repositioning projects to ensure access to SNF beds, possibly implementing conditions to closure or relocation that will impact operators’ strategies in an evolving and uncertain reimbursement market.

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