Assisted living comes under fire in the states

Hospitals thinking about branching out into the assisted living environment — or that already have a foothold there — can take comfort that Congress still is taking a hands-off regulatory approach to this rapidly growing area. But they also should closely scrutinize a wave of activity under way at the state level, experts warn.

"Fraud and abuse is going to be a huge issue in assisted living in the years to come," warns Ken Burgess, a partner with Hooper, Lundy and general counsel to the Assisted Living Federation of America (ALFA) in Fairfax, VA.

According to Burgess, the root of the problem lies in the relationship these facilities have with outside vendors such as pharmacy, nursing, therapy, and durable medical equipment.

Facilities often contract with outside entities for these services. "The whole issue of how facilities screen them and choose them and supervise them is going to be a large and difficult issue," he asserts.

The reason is that to date only a handful of states offer Medicaid funding for assisted living, and there is no Medicare reimbursement at all. "It is still largely a private-pay market or commercial market, and because of that you do not have the hook into the fraud and abuse laws," explains Burgess.

But when outside vendors sell their goods and services in a facility, assisted living providers are sometimes seen as enabling those vendors to commit fraud.

ALFA spokeswoman Whitney Redding says the assisted living industry is not opposed to regulation, but wants to be certain that it takes place at the state level rather than the federal level. "Some people would address concern over quality of care by taking us down the same road as nursing homes," she warns.

Indeed, some states simply have adopted existing nursing home regulations already on the books for assisted living. That isn’t happening everywhere, Burgess says, but in the area of transfer or discharge and resident assessment, state legislators often lift the nursing home regulation almost verbatim.