Hazardous Conditions

Hazardous Conditions and Commissioner-Directed Actions

Article 64A of Chapter 58 of the North Carolina General Statutes authorizes the Commissioner to take supervisory action when a continuing care provider is in, or may be approaching, a hazardous condition.

A hazardous condition exists when a provider’s financial condition, operating practices, or other circumstances pose a risk to the provider’s ability to meet continuing care obligations or protect the interests of residents. The purpose of hazardous-condition oversight is to identify and address risks at an early stage and to support corrective action before resident services are impaired.

Identification of Hazardous Conditions

N.C. Gen. Stat. § 58-64A-285

The Commissioner may determine that a provider is in a hazardous condition based on factors including, but not limited to:

  • Deterioration in financial condition, liquidity, or solvency
  • Failure to maintain required reserves or meet financial thresholds
  • Persistent operating losses or negative cash flow
  • Material violations of statutory, contractual, or regulatory requirements
  • Other conditions that threaten the provider’s ability to meet continuing care obligations

A hazardous condition determination may be based on information obtained through financial filings, actuarial studies, examinations, audits, notifications, or other information available to the Department.

Commissioner-Directed Filings and Corrective Actions

If the Commissioner determines that a provider may be in a hazardous condition, the provider may be required to take one or more corrective or protective actions, which may include:

  • Submission of additional financial, actuarial, or operational information
  • Development and implementation of a corrective action or remediation plan
  • Compliance with enhanced reporting or monitoring requirements
  • Restrictions on specified transactions or activities
  • Other actions necessary to protect the interests of residents and the public

Any corrective action requirements will be communicated to the provider in writing and may be subject to timelines or conditions specified by the Commissioner.

Resident Notifications

If required by the Commissioner, a provider may be directed to notify residents of matters related to a hazardous condition, including the nature of the condition and steps being taken to address it.

Resident notifications, when required, must be provided in the form and manner directed by the Commissioner and within any timeframe specified.

Relationship to Other Reporting and Approval Requirements

A hazardous condition determination may result in additional reporting obligations or may affect the timing or approval of transactions that would otherwise require prior Commissioner approval under Article 64A.

Providers remain responsible for complying with all applicable reporting, notification, and approval requirements unless and until otherwise directed by the Commissioner.

Important Note

A determination that a provider may be in a hazardous condition does not necessarily mean that resident services are impaired or that enforcement action has been taken. Hazardous-condition oversight is intended to support early identification of risk and timely corrective action.

Questions

Questions regarding hazardous conditions or Commissioner-directed actions should be directed to the Department’s Financial Oversight and Special Entities Division.

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