Lawmakers hear early results of Pennsylvania's assisted-living 'in-lieu-of-services' pilot; enrollment growing but provider uptake slow

A joint hearing of the House Aging and Older Adult Services Committee and the Human Services Committee examined the implementation of an assisted-living "in-lieu-of-services" (ILOS) option in Pennsylvania's Community HealthChoices program, with officials reporting early growth but continuing network and operational challenges.

Juliette Marsalis, deputy secretary for the Office of Long-Term Living at the Department of Human Services, told lawmakers the option allows managed care organizations to offer assisted-living residences as an alternative to nursing-facility placement, subject to federal rules requiring medical necessity, cost-effectiveness and individual choice. "As of 06/01/2026, we have 64 assisted living residences or ALRs across the Commonwealth," Marsalis said, adding that those residences represent about 5,384 licensed spots and that roughly 69 percent of those spots are currently filled.

Marsalis said the Department had enrolled 18 assisted-living residences as Medicaid providers for the ILOS option by 05/01/2026 to allow contracting with CHC managed-care organizations (MCOs). She reported 28 participants had chosen the assisted-living ILOS option (15 in calendar 2025 and 13 in the first quarter of 2026): "Out of the 28 participants currently participating in the assisted living in lieu of services, 12 individuals transitioned directly from a nursing facility and 16 individuals were diverted from going into a nursing facility," she said.

Marsalis emphasized limits on what Medicaid can pay: "In lieu of services cannot violate any applicable federal requirements," including prohibitions on paying for room and board; county assistance offices determine CHC eligibility and calculate a participant's patient-pay portion that covers room and board.

MCO witnesses described how they implement the option. Heather Hallman, vice president for managed long-term services and supports at UPMC Health Plan, said the MCO pays only for services provided inside an assisted-living residence (personal care, emergency response systems, nonmedical transportation, chore services). "We are paying for those services that we would have also paid for if that individual was in a nursing facility," Hallman said, adding that UPMC was the first MCO to place a participant and that the plan conducts outreach and contracting with providers.

Joseph (Joe) Elliott, director of care management for long-term services and supports at PA Health & Wellness, said assisted living can improve socialization and quality of life and confirmed slow provider uptake: PHW had attempted to contract with all 18 enrolled residences, successfully contracting with 15, and supported 22 participants to date. Elliott offered a May 2026 example of a member with behavioral-health needs who transitioned from a nursing facility to assisted living and reported improved stability and community engagement.

On budget questions, Marsalis said the assisted-living option is funded within existing CHC MCO capitation ("it falls under the CHC MCO capitation line, so there's no new funding"). Members pressed whether the option could expand Medicaid rolls as individuals spend down assets; Marsalis said the pilot is designed to serve people who would otherwise be served in CHC (those already eligible or becoming eligible through spend-down) rather than creating a new population.

Lawmakers asked why more assisted-living providers had not enrolled as Medicaid providers. Marsalis identified administrative barriers: a detailed Medicaid enrollment and vetting process, background and ownership checks, and the need to align provider policies and procedures with Medicaid requirements. "There is a learning curve," she said, and the Department is providing education, outreach, and technical assistance to prospective providers.

Marsalis and the MCOs said program integrity protections are in place: provider vetting, claims-data monitoring, special investigative units, and licensing oversight through the Department's Bureau of Human Services Licensing. Marsalis said the Department has engaged the University of Pittsburgh Medical Research Center to conduct an independent satisfaction and outcomes evaluation of participants and providers; the evaluation will examine member experience and whether the option is cost-effective compared with nursing-facility care.

Industry groups urged continued development. Susan Saxinger, executive director of the Pennsylvania Assisted Living Association, said results are encouraging and urged more provider education and partnership with the Department and MCOs to expand network adequacy.

Why it matters: lawmakers and MCOs said the ILOS option could give eligible Pennsylvanians an alternative to institutional care while potentially reducing state costs if participants can be safely served in less restrictive settings. But access depends on expanded provider participation, a clear enrollment pathway, and sufficient evaluation of outcomes and costs.

Next steps: the Department continues outreach to providers, the University of Pittsburgh will conduct an independent evaluation, and the committees signaled continued legislative oversight as the pilot grows.