[Federal Register Volume 85, Number 124 (Friday, June 26, 2020)]
[Rules and Regulations]
[Pages 38323-38325]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-13090]



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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 232

[Docket No. FR 6022-F-02]
RIN 2502-AJ46


Federal Housing Administration (FHA): Section 232 Healthcare 
Facility Insurance Program--Updating Section 232 Program Regulations 
for Memory Care Residents

AGENCY: Office of the Assistant Secretary for Housing, HUD.

ACTION: Final rule.

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SUMMARY: This final rule updates the requirements for the location of 
bathrooms in board and care and assisted living facilities insured 
under HUD's Section 232 program, which insures mortgage loans to 
facilitate the construction, substantial rehabilitation, purchase, and 
refinancing of nursing homes, intermediate care facilities, board and 
care homes, and assisted-living facilities. The rule will allow 
providers to configure the facilities to meet the needs of memory care 
residents and allow for flexibility of the bathroom requirement when 
financing or refinancing existing facilities. This final rule follows 
publication of a September 13, 2019 proposed rule and takes into 
consideration the public comments received on the proposed rule.

DATES: Effective Date: This final rule is effective July 27, 2020.

FOR FURTHER INFORMATION CONTACT: John M. Hartung, Director, Policy, 
Risk Analysis & Lender Relations Division, Office of Residential Care 
Facilities, Office of Healthcare Programs, Office of Housing, 
Department of Housing and Urban Development, 1222 Spruce Street, St. 
Louis, MO 63103-2836; telephone number 314-418-5238 (this is not a 
toll-free number). Persons with hearing or speech impairments may 
access this number through TTY by calling the toll-free Federal Relay 
Service at 800-877-8339 (this is a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Background--HUD's September 13, 2019 Proposed Rule

    Under Section 232, 223(a)(7), and 223(f) of the National Housing 
Act (12 U.S.C. 1715w 12 U.S.C. 1715n(a)(7), and 12 U.S.C. 1715n (f)(4), 
respectively), FHA insures mortgages to finance the purchase or 
refinance of nursing homes, intermediate care facilities, board and 
care homes, and assisted living facilities (collectively, residential 
healthcare facilities). On September 13, 2019, HUD published a proposed 
rule in the Federal Register, at 84 FR 48321,\1\ to revise the current 
regulation governing the Section 232 program. The proposed rule sought 
to amend the bathroom requirements to meet the needs of memory care 
residents. Memory care residents are those patients in assisted living 
or board and care settings that have cognitive impairments, such as 
Alzheimer's disease and other dementias who require care in a secure 
setting.
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    \1\ HUD also published a September 26, 2019 proposed rule 
supplement, 84 FR 50805, correcting certain references in the 
September 13, 2019 proposed rule publication.
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    As described in the proposed rule, memory care residents are a 
significant and growing proportion of the residential healthcare 
facilities population.\2\ Facilities must accommodate residents' 
cognitive and physical impairments, and appropriate design enhances the 
health and safety of persons with Alzheimer's disease or other forms of 
dementia. For insured facilities, HUD's Section 232 regulation requires 
a specific number of bathrooms per residents and specifies the physical 
configuration of a board and care home or an assisted living facility, 
prohibiting configurations where the access path from a bedroom to a 
bathroom passes through a public area. HUD's proposed rule, therefore, 
proposed revising the regulation to add flexibility for financing 
existing residential healthcare facilities where complying with Sec.  
232.7 requirements for number or configuration of bathrooms is not 
practicable or would not adequately serve memory care residents. This 
change would enable existing residential healthcare facilities that 
currently serve memory care residents to obtain Section 232 
refinancing.
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    \2\ See, Background on memory care residents at 84 FR 48321-
48322.
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    Specifically, HUD proposed an exemption from the current 
requirement for one full bathroom for every four residents, and from 
the current prohibition on bathroom access that passes through a public 
corridor or area. Additional details about the proposed rule may be 
found at 84 FR 48321 (September 12, 2019).

II. Final Rule

    This final rule adopts the proposed rule without change. The final 
rule provides an exemption from the current requirement of one full 
bathroom for every four residents, and from the current prohibition on 
bathroom access that passes through a public corridor or area, only for 
memory care facilities whose financing is being insured pursuant to 
Section 223(f) or 223(a)(7) of the National Housing Act, and only when 
four considerations are satisfied: (1) Memory care residents must 
reside in a separate, secured, and locked area of the board and care 
home or assisted living facility; (2) any bathroom access from a memory 
care resident's bedroom or sleeping area that passes through a public 
corridor or area must be in that separate, secured, and locked area of 
the board and care home or assisted living facility; (3) memory care 
residents of such areas require full assistance or supervision when 
bathing; and (4) wards serving memory care residents have no more than 
two beds per unit and a half-bath in each unit. This exemption would 
not apply to new construction or substantial rehabilitation insured 
under Section 232, and those projects must continue to follow the long-
standing bathroom requirements for board and care home or assisted 
living units.
    This final rule does not change the requirement in Sec.  232.2 that 
all facilities must still comply with any applicable Federal, State or 
local standards and requirements, including requirements specific to 
memory care facilities.\3\
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    \3\ Federal civil rights statutes and regulations also contain 
accessibility and nondiscrimination requirements that apply, 
including regulations under the Fair Housing Act (24 CFR part 100), 
the Americans with Disabilities Act (28 CFR parts 35 (Title II) and 
36 (Title III)), and Section 504 of the Rehabilitation Act (24 CFR 
part 8), as applicable.
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III. Discussion of Public Comments Received on September 13, 2019, 
Proposed Rule

    The public comment period for the rule closed on November 12, 2019. 
HUD received two public comments in response to the proposed rule. 
These comments were submitted by a private citizen and an independent 
living specialist who works with the residential healthcare facility 
industry. Commenters were generally supportive of HUD's rule, but one 
commenter recommended the rule be expanded to address the Section 232 
program as it relates to other Federal and State programs and 
requirements, particularly Medicaid. The commenter requested that HUD 
work with the Department of Health and Human Services, Centers for 
Medicare and Medicaid Services (CMS) and States to implement CMS 
requirements for settings that are eligible for reimbursement for 
Medicaid home and community-based services. The commenter also 
requested that HUD clarify whether Medicaid enrollees will be able to 
use HUD programs to pay fair market rent or participate in rental

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assistance; and that HUD should address institutional bias related to 
Medicaid and housing systems. While HUD appreciates the comments, this 
final rule is limited to removing an impediment to providing needed 
mortgage insurance for existing memory care facilities.

IV. Findings and Certifications

Regulatory Review--Executive Orders 12866 and 13563

    Under Executive Order 12866 (Regulatory Planning and Review), a 
determination must be made by the Office of Management and Budget 
regarding whether a regulatory action is significant and therefore 
subject to review in accordance with the requirements of the order. 
Executive Order 13563 (Improving Regulations and Regulatory Review) 
directs executive agencies to analyze regulations that are ``outmoded, 
ineffective, insufficient, or excessively burdensome, and to modify, 
streamline, expand, or repeal them in accordance with what has been 
learned.'' Executive Order 13563 also directs that, where relevant, 
feasible, and consistent with regulatory objectives, and to the extent 
permitted by law, agencies are to identify and consider regulatory 
approaches that reduce burdens and maintain flexibility and freedom of 
choice for the public. This rule allows additional flexibility for the 
financing of residential healthcare facilities.

Executive Order 13771

    Executive Order 13771, entitled ``Reducing Regulation and 
Controlling Regulatory Costs,'' was issued on January 30, 2017. This 
final rule is expected to be an Executive Order 13771 deregulatory 
action by providing additional flexibility for healthcare facilities, 
as discussed above.

Environmental Review

    A Finding of No Significant Impact (FONSI) with respect to the 
environment was made prior to publication of the proposed rule, in 
accordance with HUD regulations at 24 CFR part 50, which implement 
Section 102(2)(C) of the National Environmental Policy Act of 1969 (42 
U.S.C. 4332(2)(C)). The FONSI remains applicable, and is available for 
public inspection between the hours of 8 a.m. and 5 p.m. weekdays in 
the Regulations Division, Office of General Counsel, Department of 
Housing and Urban Development, 451 7th Street SW, Room 10276, 
Washington, DC 20410-0500. Due to security measures at the HUD 
Headquarters building, please schedule an appointment to review the 
FONSI by calling the Regulations Division at 202-708-3055 (this is not 
a toll-free number). Individuals with speech or hearing impairments may 
access this number via TTY by calling the Federal Relay Service at 800-
877-8339.

Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1531-
1538) establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on state, local, and tribal 
governments and on the private sector. This final rule does not impose 
any Federal mandate on any state, local, or tribal government, or on 
the private sector, within the meaning of UMRA.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities.
    HUD believes that this final rule imposes no additional 
requirements on small businesses. Currently, HUD has a total of 3,738 
residential healthcare facilities in its portfolio and completes 
approximately 300 firm commitments each year for 223(f) and 223(a)(7) 
refinances. HUD is providing waivers on 3 percent of those applications 
and waiver requests continue to increase. As noted in the preamble of 
the final rule, applicants have advised that the requirement regarding 
the number and location of bathrooms presented barriers to properly 
serving memory care residents, who need specialized support. HUD 
believes this final rule will resolve the inadequacy of the current 
bathroom requirements, thus, easing the existing burden on those 
entities seeking to accommodate memory care residents and entities 
seeking to finance or refinance facilities. Additionally, both owners, 
small and large, and memory care residents will benefit from the 
opportunity to finance their facility in compliance with this new 
framework.
    Accordingly, the undersigned certifies that this final rule will 
not have a significant economic impact on a substantial number of small 
entities.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits to the 
extent practicable and permitted by law, an agency from publishing any 
rule that has federalism implications if the rule either imposes 
substantial direct compliance costs on state and local governments and 
is not required by statute, or preempts state law, unless the relevant 
requirements of Section 6 of the Executive Order are met. This rule 
does not have federalism implications and does not impose substantial 
direct compliance costs on state and local governments or preempt state 
law within the meaning of the Executive Order.

Congressional Review of Final Rules

    The Office of Information and Regulatory Affairs has determined 
that this final rule is not a major rule, as defined by 5 U.S.C. 804, 
for purposes of congressional review of agency rulemaking pursuant to 
the Congressional Review Act, Public Law 104-121, sec. 251, 110 Stat. 
868, 873 (codified at 5 U.S.C. 804). This rule will not result in an 
annual effect on the economy of $100 million or more; a major increase 
in costs or prices; or significant adverse effects on competition, 
employment, investment, productivity, innovation, or the ability of 
U.S.-based companies to compete with foreign-based companies in 
domestic and export markets.

Catalogue of Federal Domestic Assistance

    The Catalogue of Federal Domestic Assistance Number for the 
Mortgage Insurance Nursing Homes, Intermediate Care Facilities, Board 
and Care Homes and Assisted Living Facilities is 14.129.

List of Subjects in 24 CFR Part 232

    Fire prevention, Health facilities, Loan programs--health, Loan 
programs--housing and community development, Mortgage insurance, 
Nursing homes, Reporting and recordkeeping requirements.

    Accordingly, for the reasons stated above, HUD amends 24 CFR part 
232 as follows:

PART 232--MORTGAGE INSURANCE FOR NURSING HOMES, INTERMEDIATE CARE 
FACILITIES, BOARD AND CARE HOMES, AND ASSISTED LIVING FACILITIES

0
1. The authority citation for 24 CFR part 232 continues to read as 
follows:

    Authority: 12 U.S.C. 1715b; 1715w; 1735d, and 1735f-19; 42 
U.S.C. 3535(d).


0
2. Revise Sec.  232.7 to read as follows:


Sec.  232.7   Bathroom.

    (a) General requirement. For a board and care home or assisted 
living facility to be eligible for insurance under this part:

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    (1) The board and care home or assisted living facility must have 
no less than one full bathroom provided for every four residents; and
    (2) Bathroom access from any bedroom or sleeping area must not pass 
through a public corridor or area.
    (b) Exemption for existing projects providing memory care. The 
following applies to a board and care home or assisted living facility 
that provides housing for residents in need of memory care, i.e., care 
for residents who have cognitive impairments, such as Alzheimer's 
disease or other dementias:
    (1) Subject to paragraph (b)(2) of this section, a project seeking 
insurance under subpart E, pursuant to section 223(f) or 223(a)(7) of 
the National Housing Act, may be eligible for insurance without meeting 
the general requirement in paragraph (a) of this section, if the 
project meets the following four requirements:
    (i) Memory care residents are in a separate, secured, and locked 
area of the board and care home or assisted living facility;
    (ii) Any bathroom access from a memory care resident's bedroom or 
sleeping area that passes through a public corridor or area is in a 
separate, secured, and locked area of the board and care home or 
assisted living facility prescribed in (b)(1)(i) of this section;
    (iii) Memory care residents receive full assistance or supervision 
while bathing; and
    (iv) Memory care residents reside in wards that contain no more 
than two beds per unit and have a half-bath in each unit.
    (2) If a facility serving memory care residents also serves 
residents who are not in a separate, secured, and locked area of the 
board and care home or assisted living facility, this exemption applies 
only to the separate, secured, and locked area in which solely memory 
care residents reside.

    Dated: June 11, 2020.
Brian D. Montgomery,
Deputy Secretary.
[FR Doc. 2020-13090 Filed 6-25-20; 8:45 am]
BILLING CODE 4210-67-P