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Federal bill targeting private equity would have ‘chilling effect’ on assisted living investment, access, leaders say

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Proposed federal legislation targeted increased transparency and accountability for private equity in healthcare, if passed, would have a “chilling effect” on future investment in assisted living and would jeopardize access to the setting, according to senior living industry leaders.

Sen. Ed Markey (D-MA) solicited stakeholder comments on a draft of the Health Over Wealth Act, which industry experts said inappropriately lumps assisted living in with more clinical healthcare settings. 

The proposal comes after the Federal Trade Commission, the Department of Health and Human Services and the Department of Justice launched a cross-government public inquiry into private equity’s role in healthcare, specifically mentioning home- and community-based services providers, nursing homes, home health agencies, hospice providers and other types of service providers.

In a joint letter to Markey, the American Seniors Housing Association and Argentum said that they were “very concerned” about the approach taken with his legislation, which they said would have “catastrophic consequences” for older adults and their families. The associations said the act “creates unnecessary restrictions and an overly burdensome regulatory process to rein in the participation of specific capital sources in certain for-profit healthcare entities.”

“Excessive reporting, unrealistic escrow reserves, licensing, agency approval process, devastating changes to the tax code for REITs [real estate investment trusts], government control of critical decision-making, and other restrictions will jeopardize access to quality assisted living with grave national consequences,” the letter read, adding that the effect will be to decrease market efficiency and liquidity with extended time frames, increase diligence costs and limit the pool of investors.

The American Health Care Association / National Center for Assisted Living similarly submitted comments noting that the senior living and healthcare sectors need significant investments to expand access and support the workforce, services and infrastructure.

“With a rapidly growing elderly population, now is the time for federal policymakers to incentivize investment in long-term care and advance public-private partnerships,” AHCA / NCAL Senior Vice President of Government Relations Clif Porter wrote. “We fear this bill would do the opposite, repelling investors and restricting access to high quality care.”

The value of assisted living

Among their “key reasons” that assisted living should be excluded from the proposal, ASHA and Argentum said that assisted living is a private-pay residential environment that creates value for residents and the overall health system and does not rely on Medicare or Medicaid reimbursement.

The two organizations said that the bill would deter investments in assisted living and would make it less affordable. The proposed legislation, they said, would result in the “virtual elimination” of private, for-profit investment in assisted living at a time when demand is projected to increase dramatically. 

Although all of the associations said that they support financial transparency and accountability, ASHA and Argentum argued that the proposed bill threatens the market-driven nature of assisted living, which encourages innovation and quality improvement. The requirements that the proposed bill places on private equity firms and REITs would risk the ability of the assisted living setting to maintain efficiencies and address social determinants of health, they said.

“Not-for-profit and government-funded assisted living will be unable to meet the expected demand and the proposed legislation will result in a dramatic shortage of supply and concomitant decrease in affordability,” ASHA and Argentum wrote in their letter. “If investors are deterred from supporting this industry due to unrealistic demands of the proposed bill, the existing supply will soon be out of reach of average Americans.”

A valuable partnership

The associations called private equity and REITs “necessary capital partners” in creating high-quality assisted living communities. 

“For the past three decades, REITs and private equity investors have been effective, efficient and indispensable participants in this industry, ensuring adequate capital investment is accessible and available to address the necessary growth driven by the aging population,” the ASHA/Argentum letter read. “Assisted living is a capital-intensive business, and private investment is critical to ensure the continued availability of housing and care for seniors in need of this lifestyle option.”

Porter added that REITs can help operators with group purchasing. During the pandemic, for example, REITs provided reduced rent collection, assisted communities in sourcing personal protective equipment and helped communities access information about COVID-19 and regulatory updates.

“Long-term care is on the precipice of a crisis where demand for long-term care will exceed supply,” Porter wrote. “We believe a strong public-private partnership is part of the solution, one where the federal government encourages investments to ensure access to care.”

In assisted living, where little government funding is available, Porter said that private capital is crucial to developing high-quality services and communities. He encouraged Congress to find a balance between oversight and encouraging more investments in the healthcare system. 

“With the proper incentives, we can ensure investors are coming into the healthcare space for the right reasons, producing great outcomes for residents and patients, modernizing our services and buildings, and expanding access to a growing elderly and individuals with intellectual disabilities/developmental disabilities population,” Porter wrote.

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