North Carolina Proposes Major Reform to the CCRC Act

As the North Carolina General Assembly prepares for its short session beginning April 24, 2024, one of the focal points will be Senate Bill 145 (House Bill 170), the Continuing Care Retirement Communities Act (the “Act”), which aims to overhaul the regulations for Continuing Care Retirement Communities (“CCRCs”) currently found in Chapter 58, Article 64 of the North Carolina General Statutes.

CCRCs are unique to the area of long-term care, as they provide a continuum of care within a single community of seniors, which typically includes a combination of independent living, assisted living, and/or skilled nursing care. Residents generally enter into contracts with the CCRC to provide care for a period longer than one year or for the life of that individual. These communities are also designed to meet the daily needs of residents by offering amenities, such as libraries, activity rooms, restaurant-like dining rooms, barber/beauty shops, swimming pools, and banking services.

The Act seeks to repeal the current laws regulating CCRCs and replace them with expanded legislation in a new Article 64A of Chapter 58 of the General Statutes. The North Carolina Department of Insurance (“DOI”) is the state agency charged with overseeing the operations of CCRCs, and current regulations focus mostly on financial regulation, such as the submission of audited financial statements and maintaining operating reserves equal to 50% of the forecasted operating expenses for the next 12 months. Among other things, the Act requires new disclosures, operating rules, and annual reporting. Some notable licensure changes under SB145 are summarized below:

• The Act includes several amendments that would require advanced notice of specific changes or transactions involving a CCRC. Specifically, as drafted, the Act would require 45 days advance notice to and approval by DOI when selling or transferring real property used in the operations of the CCRC (including a sale-leaseback transaction, or any interest in the CCRC, other than the sale of an independent living unit to a resident or other transferee). However, “any interest in the CCRC” is not defined within the Act.
• Further, the Act would require an unspecified amount of advance notice to and approval from the Commissioner of DOI (the “Commissioner”) for a party to merge with or otherwise acquire control of a provider holding a CCRC certificate/license. The Act defines “control” as “the direct or indirect ability to direct or cause the direction of the management and policies of a person.” The request for approval provided to the Commissioner would require significant disclosure of the acquiring entity’s and its directors/officers’ current and former business operations, description of any transaction where funds were or are to be obtained for the change of control, fully audited financial statements, etc.
• Other licensure related notification requirements to DOI include (1) 10-days’ advance notice before making any change to the provider’s name or name of the CCRC; (2) an unspecified amount of advance notice before the CCRC enters into a contract with a third party for management services of the CCRC; and (3) notice of material changes or deviations in any information submitted to the Commissioner within 10 business days after the CCRC or CCRC applicant becomes aware of the change/deviation.

Given the nature of the changes and increased oversight proposed by the Act, AGG will continue to monitor any developments at the North Carolina General Assembly. For additional information on the Act, please contact AGG Healthcare attorneys Greg Gaylis, Tom Kelly, or Kadeja Watts.¹

[1] The Arnall Golden Gregory CHOW team leads all regulatory aspects of healthcare transactions for investors, operators, managers, capital partners, and developers of every size in all 50 states. The team streamlines the regulatory process so that clients close their transactions on or ahead of schedule. Whether obtaining licensure and Medicare/Medicaid approvals, structuring transactions to expedite closings, anticipating issues to minimize cash flow disruption, negotiating regulatory terms in deal documents, creatively resolving diligence issues, or advising on CHOW guidelines and compliance, the team provides extensive experience and practical solutions. To date, the CHOW team has served as primary regulatory counsel in transactions valued at more than $35 billion.