Assisted Living Removed from Private Equity Legislation at Urging of Argentum

Last Thursday, Senator Ed Markey (D-MA) introduced S. 4804, the Health Over Wealth Act, a bill to place new requirements on private investment in the health care industry. A House companion bill, H.R. 9156, was introduced by U.S. Representative Pramila Jayapal (D-WA).

After months of sustained advocacy efforts in which Argentum called for assisted living to be exempted from any private equity legislation, the final version of the legislation as it was introduced does not include assisted living in the primary definition of covered health care entities subject to the bill's requirements.

This is significant because, while the legislation has little chance of passage in the closing weeks of the 118th Congress, it was critical that assisted living be exempted from the definition in the event that provisions of the bill are added to other legislation in this Congress or, as is likely, it is reintroduced in the next Congress.

Argentum worked directly with Senator Markey's office and key members of the Senate Health Education Labor and Pensions (HELP) Committee since the discussion draft was first released in April. In addition, Argentum along with its State Partner, the Massachusetts Assisted Living Association, held meetings with Senator Markey’s office to discuss why assisted living did not belong with other entities that were initially included in the legislation, as well as the positive impact private finance has on the senior living sector that has yielded quality care and high resident satisfaction.

Assisted living communities are fundamentally different from clinical health care settings, and in a comment letter Argentum submitted with the American Senior Housing Association prior to the bill’s introduction, we called assisted living to be removed from the definition of a “health care entity” for the following reasons:

• Assisted Living is a market driven, private pay residential living environment that, contrary to the health care entities outlined in the initial draft legislation, does not rely on Medicare, Medicaid, or commercial health insurance reimbursement;
• Private investment in assisted living is needed to meet rapidly growing demand; curtailing investment would result in critical access shortages for millions of seniors for decades to come and almost certainly make assisted living less affordable;

In June, the prestigious Journal of Health Affairs published an editorial by a team of academic researchers studying private equity investment in assisted living. The authors urged policymakers to pause and consider the unique structure, financing and history of assisted living before applying the same regulation as other healthcare sectors, stressing that it would be premature to assume that examples of private equity acquisitions in other healthcare sectors is directly applicable to assisted living. The authors also noted that there is no evidence to date that private capital investment in assisted living negatively impacts resident care.

According to the researchers, “the assisted living sector is in a time of change. High interest rates have made the economics of selling and renovating riskier and the demand for memory care and assisted living is increasing. At the same time, there has never been systematic federal investment in assisted living infrastructure; rather, this care setting exists solely because of private investment.

Private investment will be needed to meet the projected surge in demand for senior care. The most recent Senior Housing Outlook released in June found that, at current levels, there will be a shortage of some 550,000 senior living homes by 2030 and a $275 billion investment shortage that will grow to $1 trillion by 2040. To meet the projected needs over the next six years, development of new senior housing must accelerate to more than 3.5 times the current pace.

We are continuing to analyze the legislation, and its potential impacts on assisted living, and will provide further information as we learn more. We note that assisted living may be inadvertently included in the final section of the bill relating to REIT taxes because it references an IRS definition of covered entities. We believe this to be an error and will confirm with Senator Markey’s staff as soon as possible.