Chiaravalloti, Conaway & Downey Bill to Revise Licensure, Operational & Reporting Requirements for Nursing Homes Becomes Law

(TRENTON) – In New Jersey, 74 percent of long-term care facilities are under for-profit ownership. Many facilities owned by private equity and investment firms have suffered financial losses for years, often struggling to attract new residents and manage aging buildings in disrepair.

To address longstanding issues in nursing home ownership, Governor Phil Murphy on Wednesday signed legislation into law to ensure owners are able to operate nursing homes that meet safety standards, increase transparency in management and ensure the appropriate use of public funds, which pay for the majority of nursing home care. The measure previously received final legislative approval in March, passing the full Assembly 72-0 and the Senate 37-0.

To turn a profit, many private investors in the nursing home industry created new companies to hold real estate assets because the buildings were more valuable than the businesses. In some cases, investors would buy a nursing home from an operator only to lease back the building and charge the operators significant management and consulting fees, among other strategies. These practices have resulted in frequent changes in ownership in nursing homes, which can have a negative impact on resident care.

The new law (formerly bill A-4477), sponsored by Assembly Democrats Nicholas Chiaravalloti (D-Hudson), Herb Conaway, M.D. (D-Burlington) and Joann Downey (D-Monmouth), codifies current State regulations regarding the review of transfer of ownership applications, and implements recommendations made in Manatt Health’s review of New Jersey’s long-term care system. This includes requiring the Department of Health (DOH) to identify facilities which may be in financial distress on an as-needed basis, and strengthening the transfer for nursing homeownership disclosure requirements, including submitting a projection of losses and profits for the next three years and requiring applications be posted online on the DOH’s website.

The law’s sponsors released the following joint statement:

“In New Jersey and across the nation, we have seen a scrambling of changing ownership at many for-profit nursing homes. These troubling patterns call into question the intentions of for-profit facility owners, who may be putting the expectations of shareholders over the needs of elderly, disabled and vulnerable nursing home residents. No resident should ever receive poor care because of a facility’s financial mismanagement.

“By codifying strict licensure, operating and reporting requirements, we are ensuring owners of nursing homes are held to the highest standards. These changes will hold owners accountable for keeping their finances in check and delivering high-quality care to all residents.”