KEY TAKEAWAYS

1. Behavioral Health Placement Gap: Many SNFs function as de facto psychiatric facilities without proper infrastructure, increasing safety risks and financial strain. Expanding alternative placement options, such as psychiatric step-down units, is critical to ensuring appropriate care.
2. Regulatory Tensions and F600 Dilemma: SNFs must protect all residents from harm while facing high barriers to involuntary discharge, creating conflicts when managing dangerous behaviors. A standardized approach to behavioral discharge approvals is needed to balance safety and compliance.
3. Uncompensated Care Burden: Limited enforcement mechanisms force SNFs to provide care without payment, leading to unsustainable financial losses. Stronger controls over resident funds and a more efficient pathway for conservatorship can help mitigate this issue.
4. Need for Balanced Reform: Policy changes should clarify discharge criteria, streamline documentation, and establish alternative placements to protect residents while maintaining facility sustainability. Reform must recognize SNF operational limitations while preserving essential resident protections.

Executive Summary

Involuntary discharges from skilled nursing facilities (SNFs) represent one of the most pressing and complex issues in long-term care policy today. While existing regulations aim to protect residents from inappropriate evictions, they also impose significant operational burdens on facilities, leading to financial instability and safety concerns. The current regulatory framework fails to account for the growing number of residents with behavioral health needs, leaving SNFs in an untenable position: serving as makeshift psychiatric facilities without the necessary resources, staff training, or reimbursement to do so effectively.

The interplay between discharge restrictions and the F600 abuse prevention mandate creates a significant regulatory dilemma. Facilities must ensure all residents are free from abuse, including instances of resident-to-resident aggression, yet the legal barriers to discharge leave facilities unable to remove individuals who pose a danger. Additionally, many facilities are required to provide care indefinitely without payment due to limited enforcement mechanisms for collecting patient-pay amounts, further straining financial viability.

To address these challenges, policymakers must implement a balanced approach that maintains essential protections for residents while allowing facilities to operate sustainably. This policy brief outlines three critical areas of reform: regulatory clarification, expansion of alternative placement options, and improvements in financial accountability. Implementing these changes will create a long-term care system that protects vulnerable residents while ensuring SNFs remain viable providers of quality care.

Current Regulatory Framework & Challenges

Strict Discharge Limitations

Federal regulations set stringent criteria under which a nursing home may discharge a resident, including situations where the facility cannot meet the resident's needs, the resident’s health improves, the safety of others is endangered, nonpayment occurs, or the facility closes. Recent guidance from the Centers for Medicare & Medicaid Services (CMS) has strengthened these protections, requiring extensive documentation and demonstration of attempted interventions before a discharge is approved.

While these safeguards are critical in preventing improper evictions, they create significant operational challenges for SNFs dealing with residents who present serious safety risks or financial issues. In practice, facilities often face lengthy and unpredictable administrative processes before a discharge is approved, even in clear cases where a resident is no longer appropriate for SNF-level care.

Behavioral Health Placement Crisis

A growing number of SNF residents have behavioral health needs that exceed the facility’s capacity to manage safely. Without specialized psychiatric facilities or transitional housing options, SNFs become de facto psychiatric institutions, straining their resources and creating unsafe environments for both staff and residents. Recent reports indicate that behavioral health-related discharge appeals are on the rise, underscoring the urgent need for alternative placements.

Financial Burdens & Uncompensated Care

SNFs often provide care without compensation when residents fail to pay their required patient-pay amounts. While facilities can ultimately win a nonpayment discharge appeal, the process does not stop the financial bleeding when residents refuse to allow the facility to manage their finances. Many residents are legally entitled to make poor financial decisions, leaving facilities powerless to redirect funds even when those funds are explicitly designated for care. In some cases, family members misappropriate patient-pay funds, but because they are listed as joint owners on bank accounts, there is little recourse for recovery.

Moreover, even after a discharge is approved, SNFs often struggle to find an accepting location willing to admit a resident with outstanding payment issues. These legal and logistical barriers leave facilities trapped in a cycle of providing care without reimbursement, leading to significant financial strain. Reform is needed to ensure that facilities have mechanisms to enforce financial accountability and that courts recognize the need for conservatorship when a resident's financial mismanagement jeopardizes their continued care.

Policy Recommendations

1. Regulatory Reforms

• Develop clearer, objective standards for discharge decisions, particularly regarding safety risks and behavioral health cases.
• Align F600 abuse prevention mandates with reasonable discharge policies to ensure facilities can remove individuals who present a danger to others.
• Streamline documentation requirements to focus on substantive care quality rather than excessive administrative burdens.
• Establish an expedited process for addressing nonpayment cases, including a faster arbitration process for financial disputes.

2. Alternative Placement Solutions

• Expand specialized transitional housing and psychiatric care options, including step-down psychiatric facilities and Medicaid-funded crisis intervention programs.
• Develop SNF-adjacent facilities equipped to handle residents with serious behavioral health needs, ensuring that long-term care settings do not become default psychiatric institutions.
• Create standardized, expedited pathways for relocating residents who are not appropriate for SNF care, with state agencies facilitating placements rather than leaving the burden on facilities alone.

3. Financial Accountability Improvements

• Strengthen enforcement mechanisms for resident payment agreements, such as allowing facilities to place liens on misused patient-pay funds when appropriate.
• Implement third-party oversight for patient-pay funds while balancing resident autonomy, ensuring that funds designated for long-term care are not diverted.
• Work with probate courts to streamline conservatorship processes for cases of chronic financial mismanagement, reducing the burden on facilities when residents refuse to pay despite having the means.

Call to Action

Federal and state policymakers must address the growing crisis in SNF discharge policies. Without intervention, facilities will continue to struggle with balancing financial viability, resident safety, and compliance with conflicting regulations. Immediate steps should include:

• Engaging legislators to prioritize reforms that allow facilities to make reasonable discharge decisions while maintaining protections for vulnerable residents.
• Collaborating with mental health and long-term care advocates to expand alternative placement options, particularly for residents with complex behavioral health needs.
• Strengthening financial accountability measures to reduce the burden of uncompensated care on SNFs, ensuring that facilities are not forced to absorb financial losses indefinitely.
• Launching pilot programs to evaluate the effectiveness of psychiatric step-down units and other alternative placements, providing data-driven insights into better care models.

By adopting these reforms, we can create a long-term care system that ensures both sustainable facility operations and robust resident protections, fostering a more stable and equitable healthcare environment for all.