Author: Will Humble

Summary

• In 2009 the state legislature ended funding to support regulation of nursing homes, assisted living, behavioral health and other care facilities, instead authorizing them to pay for those regulatory functions with license fees.
• ADHS set those fees in 2009. For the first few years the fees provided enough revenue to do a decent job. By 2016 it was clear those fees were not sufficient, and the agency began falling behind on inspections and especially complaint investigations.
• The result was catastrophic for patients. Thousands of complaints were never investigated or investigated way too late. The Arizona Auditor General documented ADHS’ nonfeasance and professional misconduct several times, filing scathing reports that were ignored by the agency during the Ducey era: See Auditor General’s Office Produces Scathing Review of ADHS’ Nursing Home Complaint Investigations During the Ducey Era
• The state legislature held hearings trying to hold the agency accountable, with some success. General fund appropriations of $3.4M were infused into the agency’s licensing program in an attempt to improve their performance.
• Under new leadership (and with the added funds) the agency finally began to improve their performance. With the state budget now at serious risk, the Department is seeking to finally raise their fees such that if the GF appropriation is cut they will be able to keep status quo.
• The modest fee increases the agency is proposing are still not enough to meet their full regulatory responsibilities at medical and care home facilities. Additionally, the fee increases will not ensure good future performance. That will require continued improved agency leadership.

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For the first time in more than 15 years, the ADHS is planning to raise the fees it charges licensed healthcare and residential facilities. These licensing fees fund regulatory activities, including inspections, complaint investigations, and enforcement actions, across a wide array of facilities like assisted living and skilled nursing facilities, hospitals, residential behavioral health centers, group homes, and outpatient treatment centers.* Without adequate funding, ADHS can’t fulfill its mission to protect the public.

The revenue shortfall has been unsustainable for nearly a decade, and AzPHA has consistently urged the Department to increase its licensing fees since 2017. Sadly, Directors Cara Christ and Don Herrington ignored our pleas.

We’re delighted Interim Director Sjolander finally proposed the Rulemaking, taking a critical step toward ensuring that ADHS has the basic resources to regulate care environments.

The consequences of underfunding (and of unethical leadership during the Ducey Administration) have been dangerous. With resources stretched thin and a “head count cap” imposed by Ducey, former Director Christ and Assistant Colby Bower refused to acknowledge the Auditor General’s findings of major performance failures.

Instead, they reclassified more than 95% of high-risk complaints as “low risk,” effectively cooking the books to make the agency look competent. It wasn’t.

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These decisions delayed complaint investigation by up to a year – or even worse – closing hundreds of complaints (even serious ones) with no investigation… indefensible decisions that contributed to tragic and even lethal outcomes for vulnerable Arizonans.

While these outcomes were mainly the result of unethical director-level leadership decisions, it’s also clear inadequate funding contributed significantly to the Department’s failures.

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After learning about the astonishing nonfeasance by the Department via the Arizona Auditor General’s Office (AZ Auditor Summary Letter), the state legislature appropriated $3.5M in state general funds to provide the ADHS with emergency resources, money that could easily disappear in next year’s budget.

This ADHS rulemaking essentially raises fees such that if state general funds are removed in FY2026, the Department won’t again be grossly understaffed and fail at their mission to protect the most vulnerable in our state.

Notice of Final Rulemaking

Economic Impact Evaluation

The proposed rulemaking (on the GRRC docket next Tuesday) looks to restore self-funding so ADHS can keep their current staffing levels even if the legislature removes their licensing fund GF appropriations. It doesn’t provide the agency with the ability to increase staffing levels (which they need to do), it just prevents them from losing inspectors.

The final approval of the new licensing fees will be considered by the Governor’s Regulatory Review Council on Tuesday, November 4, at 10 a.m. AZPHA will provide testimony in support of the fee adjustments.

GRRC Meeting Agenda – November 4, 2025

Our participation is important, as 14 entities sent in arguments complaining about the fee adjustments. AZPHA was the only organization that weighed in support.

It’s important to remember that the adjusted fees won’t guarantee ADHS will do their job regulating care facilities. It also requires an engaged governor’s office, talented and ethical director & assistant director leadership, quality staff and continued oversight from the Auditor General’s Office.

After all, we saw firsthand how quickly things can unravel when there’s unethical and poor-quality agency and 9^th floor ‘leadership’.