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For a glimpse of where the assisted living industry in New York may be headed, take a look inside three upstate homes for the aged operated by the biggest company in the business. 

The decade-old industry started out to offer housing and basic care to elderly people who no longer were comfortable living on their own. But for the last two years, under an unusual arrangement with the state, the upstate centers have been allowed to house residents so enfeebled by Alzheimer's disease that they would normally have to be discharged to nursing homes, which are much more closely regulated.

The approach, known as "aging in place," holds that the elderly, no matter how frail, should be free to live — and die — in a setting of their choosing. It has quickly become a cornerstone of the assisted living industry's public appeal, and of its profits. Politicians like Gov. George E. Pataki, regulators in the State Health Department and advocates for the aged support the strategy as offering a dignified alternative to nursing homes. 

But a close look at New York's experiment with aging in place, based on interviews and documents obtained under the state's Freedom of Information law, highlights the confusion that prevails as the state tries to decide whether to view the assisted living industry as a housing alternative, a part of the health care system or something in between. It shows, too, the role that political connections and subjective judgments can play when government operates without clear standards.

Consumer groups and adult home operators said that the state never publicized the arrangement, which it called a demonstration project and awarded to the industry giant, the Alterra Healthcare Corporation. Had it publicized it, the experiment could have been independently monitored and competitors could have sought similar arrangements. 

These critics also voiced concern that Alterra and its joint venture partner, a Syracuse development company with ties to Governor Pataki, won the state's approval while Alterra's homes faced serious charges of endangering some residents.

State officials said no favoritism had been shown to Alterra, adding that the Health Department would have considered similar proposals from other operators.

Alterra and its partner said they had a private understanding with Albany about how the state's rules for adult homes would be relaxed to accommodate an aging-in-place philosophy. But a clash ensued when a by-the-books regulator persistently cited Alterra's homes for providing inadequate care and ignoring the state's rules requiring frail patients to be discharged.

The companies complained to the governor's office and the Health Department, and the regulator's activities were restricted. Officials said the homes had been carefully policed, but advocates for the elderly said the episode sent a message that companies could choose their regulators.
Some families of Alterra residents complained to the state about strict enforcement of state discharge rules, while others sued or settled with the company over incidents in which frail residents may have received inadequate care. Experts say the lack of rules governing assisted living in New York fuels bitter differences about the industry's performance.
"We are in favor of aging in place," said Cynthia Rudder, the director of the Nursing Home Community Coalition of New York State, an advocacy group for the elderly. 

"What is missing is government oversight to create a uniform assessment of both individual needs and a facility's capacity to care for them," she said. 
The fast-growing industry has found a frontier in New York, where the number of assisted living centers has grown from zero to more than 100 in a decade.

A proposal by Governor Pataki in 1999 to regulate the industry was attacked by various interest groups and died. So oversight is spotty. Alterra has 19 homes in the state, the most of any operator, and half are unlicensed; the adult-home rules governing its residences for Alzheimer's patients were formulated long before the assisted living industry was born. 
Similar conflicts have developed in other states, with families fighting to keep aging parents out of nursing homes, and officials objecting that assisted living centers were fast turning into unregulated nursing homes. Yet assisted living also intrigues many politicians, not least because it can keep people affluent enough to pay for it out of nursing homes, where most of the tab is picked up by taxpayers.

Alterra, then known as Alternative Living Services, entered New York in 1996, joining forces with Pioneer Development of Syracuse to take over several existing facilities. It soon built homes under the name Clare Bridge near Rochester, Syracuse, Buffalo and other cities, specifically for people with Alzheimer's. 

State rules for such homes say that residents whose condition deteriorates past certain guideposts — if they need 24-hour nursing care, for example, or substantial help getting out of bed — must be discharged. And before long, inspectors working for Jay F. Dorney, who supervises the Health Department's adult home inspectors in Rochester, were citing Alterra for violating these discharge guidelines.

They also cited Alterra homes in 1998 and early 1999 for serious quality-of-care violations, such as understaffing and endangering resident welfare, inspection reports show.

One report followed a complaint from the family of Virginia Hennigan, 72, an Alzheimer's patient whose husband, Robert, removed her from the Alterra home in Manlius, near Syracuse, after finding that she had a festering bedsore.

"It never should have happened," said Mr. Hennigan, adding that the wound required three months of treatment. Alterra, he said, paid him $30,000 in 1999 to withdraw a threatened lawsuit. Company officials said they settled the claim without acknowledging liability.

In October 1998, the chairman of Pioneer, Michael J. Falcone, wrote to James Natoli, Governor Pataki's director of state operations, complaining that state inspectors working out of Mr. Dorney's office had a "bureaucratic resistance" to the concept of aging in place, according to one of the documents obtained by The New York Times. 

Mr. Falcone was on Mr. Pataki's transition team after the 1994 election. He and his son, Michael P. Falcone, Pioneer's chief executive, contributed about $100,000 to candidates or committees, principally Republicans in New York, from 1994 to 2000.

The inspectors' attitudes, Pioneer warned, could jeopardize completion of the company's plan to invest up to $250 million in assisted living facilities in New York. That investment, it said, was based on a consensus reached with officials two years earlier about how the state's adult- home rules would apply to its expansion program. 

"The current overzealous enforcement actions of certain regional personnel have highlighted the need for immediate resolution of these issues," Pioneer said.

Michael McKeon, a spokesman for Governor Pataki, said that Pioneer's letter was forwarded to the Health Department as standard practice. In response to written questions, Michael P. Falcone referred all questions to Alterra and the state. Mr. Dorney declined to be interviewed.

Early in 1999, Mr. Dorney's duties were curtailed. Among other restrictions, his superiors barred him from entering any adult home operated by Alterra. Shortly afterward, the Health Department approved the aging-in-place demonstration program at Alterra facilities in Pittsford, near Rochester; Williamsville, a suburb of Buffalo; and Manlius. Under the plan, each home could reserve five of its 50-some beds for Alzheimer's patients whose conditions had deteriorated beyond the discharge guidelines. 

Wayne M. Osten, the Health Department's director of health systems management, said the agency had received complaints about inspectors' insistence on enforcing the discharge guidelines. "We had families saying, `Why are you making my parent move?' " he said.

In a half-dozen interviews, adult home operators in Mr. Dorney's region and consumer advocates described him as a strict but fair regulator. "No one likes to see inspectors coming in your place," said Nancy Smyth, executive director of the Rochester Presbyterian Home, which runs a large program for Alzheimer's patients. "But they are advocates for the elderly." 

John Richter, director of assisted living for the New York Association of Homes and Services for the Aging, which represents operators of nonprofit adult homes, said homes often sought waivers from the discharge rules for individual residents. What makes Alterra's arrangement unusual, he said, is that it provides an open-ended exemption not for individuals but for a certain number of beds.

"It is carte blanche for a number of slots to be used to give continual medical care," Mr. Richter said. "Which is essentially a nursing home, if you think about it." 

Records show that Alterra at first sought much broader waivers than the state approved, including permission not just to retain residents whose condition had deteriorated but also to admit people so frail they would not otherwise meet the standards for living in adult homes.

The Health Department, following discussions with the company, decided that the request "would not be entertained until their track records and complaints etc. have improved significantly," a memo said.

Ms. Rudder, of the nursing home coalition, said she was troubled that Alterra's experiment — which she learned of from a reporter — was approved without public input while the company faced serious charges about residents' care. The restrictions on Mr. Dorney, she added, sent the message that companies could choose their own regulators.

"This is outrageous," Ms. Rudder said. "This whole episode is a betrayal of the public trust, as far as I'm concerned." 

Last April, 13 months after the demonstration program was approved, individuals or companies affiliated with Alterra and Pioneer agreed to pay $52,700 in fines to settle state charges arising mostly from inspections conducted under Mr. Dorney's watch. State officials suspended $9,200 of those penalties and withdrew all pending allegations of patient endangerment.

The Health Department cites the penalties as evidence that it has been tough in its oversight of Alterra. Still, questions remain about the company's performance.

John Signor, a department spokesman, said that the agency, based on its monitoring, had denied Alterra's request to expand the demonstration project. And state inspectors have continued to find problems at the company's homes, reports show.

Last April, an Alzheimer's patient at an Alterra home in the Rochester suburb of Greece got a softball-size burn on her back after staff members failed to remove a hot water bottle, inspectors said.

Another Alzheimer's patient at the center wandered off and was found unharmed about two miles away. In June, inspectors charged that staff at the Pittsford home might have waited an hour before calling an ambulance for a resident who broke her hip.

Alterra officials have disputed some findings in recent reports and said they had moved to correct others.