Connecticut Legislative Update—Recent Changes To The Connecticut Nursing Home Receivership Statute

December 4, 2003 Published Work
Journal of the Association of Longterm Care Financial Managers, Fall 2003

The downturn in the economy, coupled with unfavorable changes in Medicaid and Medicare reimbursements, have resulted in an increasing number of financially troubled nursing homes in Connecticut. Some of these nursing homes have filed for bankruptcy in federal court; others have been forced into statutory receiverships in state court. Concerned about the enormous financial burden imposed on the Department of Social Services ("DSS") by failed nursing homes in receiverships, the Connecticut legislature has recently enacted major amendments to the State's nursing home receivership law. The changes are part of "the Implementor Bill", formally known as Public Act No. 03-3, June Special Session, "An Act Concerning Public Health, Human Services and other Miscellaneous Implementor Provisions." Governor Rowland signed the bill into law on August 20, 2003, and the changes to the receivership law took effect upon passage.

The new law modifies the existing law in four important respects: 1) changing the qualifications to become a nursing home receiver; 2) establishing a strict timeline for receivers to complete their work; 3) imposing a maximum interim rate available to the purchaser of a nursing home from a receivership; and, 4) simplifying the process for a receiver to close a facility. These amendments, while designed to save the State money by streamlining the receivership process, are likely to hurt financially troubled nursing homes, and make it more difficult to sell a nursing home once it has been placed into a receivership.

QUALIFICATIONS TO BE A NURSING HOME RECEIVER

Prior to the passage of the new law, a state court judge had the freedom to appoint "any responsible individual" to be a nursing home receiver, as long as the receiver was not the owner, administrator, or otherwise financially interested in the facility. State employees, however, were disqualified from acting as receivers. As a practical matter, there have been only a handful of individuals in Connecticut who have served as nursing home receivers, and the courts repeatedly appointed these individuals because of their expertise in this area. Under the new law, two additional requirements are imposed, which limit the court's discretion in choosing a receiver.
Now, the receiver must be a licensed nursing home administrator, "with substantial experience in operating Connecticut nursing homes". This requirement effectively disqualifies from future appointments the majority of receivers currently serving, because they do not hold the requisite license.
Additionally, the new law also requires the court to appoint a person proposed by both the Commissioner of Public Health and the Commissioner of Social Services. DSS has been charged with adopting regulations by July 1, 2004 governing qualifications for receivers consistent with the new law. The new law also adds a five year prohibition on the acquisition of any financial interest in a facility by the receiver.

TIMETABLE FOR RECEIVERS

Under the old law, there were no timetables specified for receivers to complete their work; some receiverships successfully concluded within a few months, but a number of notable receivership cases have dragged on for years. The length of these receiverships was problematic both for the State, which advances the costs of the receivership (including the receiver's hourly fees and expenses), and for the owner, which is ultimately liable under the statute to reimburse the State for the expenses of the receivership.

The new law establishes several deadlines. First, the receiver has a duty to report to the court, within 90 days of his or her appointment, on whether the facility can continue to operate in compliance with state and federal law, given its existing Medicaid rate, Medicare payments and private pay income. If the receiver concludes that the facility cannot achieve this goal, he or she is now required to request that the court order the facility to be closed. There is a limited exception to this rule which allows the facility to remain open if the receiver expects to conclude a sale of the facility within 90 days of the report to the court.

Additionally, the receiver is now required to solicit purchase offers for the facility within the first 90 days after being appointed. Finally, the new law establishes 180 days as the drop dead date for the receivership. If the facility is not transferred to a qualified buyer within 180 days after the receiver's appointment, he or she must petition the court for an immediate order to close the nursing home and transfer its residents to other facilities.

RATE CEILINGS FOR NURSING HOMES PURCHASED FROM RECEIVERSHIPS

The new law limits the Medicaid rate which will be paid to the buyer of a nursing home purchased from a receivership. The interim rate paid to the new owner may not exceed the rate in effect when the receivership began, subject to annual increases. If the existing rate was below the median rate for the facility's peer group, DSS has the discretion to award a higher rate not to exceed the median, unless a higher rate is authorized by the Secretary of the Office of Policy and Management, after reviewing area bed availability and "other pertinent factors."

EASIER FOR RECEIVER TO CLOSE A NURSING HOME

To facilitate closure of a nursing home in receivership according to the timetables established by the new law, the General Assembly eliminated the requirement of obtaining permission from DSS before closing a nursing home in receivership. Under the new law, the receiver only has to seek permission from the court that appointed him or her before closing a facility. The receiver must still notify the office of the Long-Term Care Ombudsman of the planned closure.

CONCLUSION

While the revisions to the nursing home receivership statute are designed to increase the efficiency and decrease the costs associated with these proceedings, only time will tell if the law accomplishes these goals. In the meantime, the long term care industry can only hope that as the agencies responsible for regulating nursing homes implement the new law, that they are able to expand the field of qualified receivers, that facilities capable of being financially rehabilitated do not close prematurely due to rigid timetables, and that the new limitations on Medicaid rates paid to buyers of nursing homes from receiverships does not scare away potential purchasers.
Sharon Zuch is an attorney in the Hartford office of Wiggin & Dana.