United States: North Carolina General Assembly Enacts Major Reforms To Adult Care Home Deficiency And Penalty Laws

Last Updated: July 6 2016
Article by Kenneth L. Burgess and Iain M. Stauffer

The North Carolina General Assembly has passed House Bill 667 which enacts major changes to the state's adult care home (and mental health) survey deficiency and penalty laws. The legislation was signed by the Governor on June 30, 2016 and became effective immediately.

In 2015, the N.C. Assisted Living Association began conversations with the Department of Health and Human Services (the Department), urging the Department to define the parameters of A2 violations, described in current law as "a violation of the regulations, standards or requirements set forth in G.S. 131D-21 or applicable state or federal laws and regulations governing the licensure or certification of a facility which results in substantial risk that death or serious physical harm, abuse, neglect or exploitation will occur." The General Assembly in 2001 enacted a law requiring the Department to define certain terms in the penalty statute, including "substantial risk" as used in the A2 definition. However, the Department never defined the term. Through NCALA's efforts, a group of stakeholders met with the Department in early 2016 and, via House Bill 667, the term has now been defined, along with other substantial changes. Specifically, they include:

  1. "Substantial risk" for purposes of the A2 definition is now defined as "the risk of an outcome that is substantially certain to materialize if immediate action is not taken." This is important because after the law was changed in 2011 to divide A level citations into A1 and A2 categories, in addition to a B level violation category, many providers have noted that violations which were previously cited as a B level were being widely cited as A2, and the vagueness of the term "substantial risk" that serious physical harm, abuse, neglect or exploitation would occur made it tough to challenge the citations. The language was just too subjective. Now, the Department arguably has a much higher burden to sustain—not just that a risk of serious injury or death will occur but that it's substantially certain to occur without immediate intervention. We predict this will increase the number of providers willing to challenge A2 citations, especially given their impact on a facility's star rating.
  2. The violation classification "Past Corrected Type A1 or Type A2 Violation" is deleted. Under current law, a provider which was at risk of having a penalty imposed for a violation could escape that by demonstrating that the violation had been corrected. To do so, the provider had to demonstrate five specific things, essentially demonstrating that the provider found and fixed the deficiency before survey, and had maintained compliance. If so, then the Department had the option of not assessing a penalty. In our experience, very few providers were able to persuade the Department they met all "past corrected" requirements and so the concept was of limited use. Under House Bill 667, that concept has been eliminated and replaced as described in item 3 below.
  3. Under the new law, a type A1, A2 or B violation does not include a violation of N.C.G.S. § 131D-21 or other applicable state or federal laws governing licensure and certification if:
    • The facility discovered the violation;
    • The Department determines the violation was abated immediately;
    • The violation was corrected prior to inspection by the Department;
    • The Department determines that reasonable preventative measures were in place prior to the violation; and
    • The Department determines that subsequent to the violation, the facility implemented corrective measures to achieve and maintain compliance.
    • In other words, if a provider can demonstrate that it found and fixed its own noncompliance, and has maintained compliance, then the Department cannot cite the facility at all because "corrected" violations are not violations at all. This is consistent with the notion that penalty statutes are, or should be, designed to incentivize providers to find and fix their own potential compliance issues.
  4. The new law also provides that an assessed penalty commences on the date of the notification letter regarding the penalty amount, instead of when the violation was identified. This will potentially shorten the number of days a penalty runs and thus the total amount of the penalty. Depending on how the Department implements this section, it may also reduce fines for certain repeat deficiencies.
  5. House Bill 667 also changes the "training in lieu of penalty" option which has been part of the statute for several years. Under that provision, the Department could permit training rather requiring the facility to pay a monetary penalty, and all or part of the penalty that otherwise would have been imposed as a penalty could instead be used to pay for training. However, training a provider may already have conducted, even if it fully met all the requirements for otherwise approvable "training in lieu of penalty," could not be considered as a replacement for a penalty. The revised language clarifies training that a provider has already conducted can be considered in lieu of a penalty if it met all of the requisite statutory elements. This, however, is still discretionary on the part of the Department and there is no mandate for the Department to select this option over a penalty.
  6. Finally, but certainly not least important, the new law abolishes entirely the Penalty Review Committee (PRC), effective immediately. Many providers felt the PRC was not very valuable in obtaining a fresh, objective look at assessed penalties. Others thought it worthwhile. Regardless, it clearly slowed down the regulatory process. It often took months after a survey was completed, and a penalty recommended, for the PRC to receive and act upon the recommendation. During that period, the facility and the Department were in "regulatory limbo" and unable to complete the normal regulatory process, including the initiation of appeals by providers who disagreed with an assessed penalty. In theory, the abolition of the PRC should mean that providers will be aware sooner of penalties assessed by the Department and be able to appeal them where appropriate and either try the case or seek informal resolution or settlement. It may also mean that penalties that are not reduced must be paid sooner by providers.

We will have to wait and watch carefully to see how the Department implements these significant changes and what their impact will be. But at a minimum, we believe more providers may be willing to challenge cited deficiencies at the A2 level and/or to challenge violations they believe were corrected, and thus should not have been cited at all.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Kenneth L. Burgess
Iain M. Stauffer
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