On November 17, 2023, the U.S. Department of Health and Human Services’ Centers for Medicare and Medicaid Services (“CMS”) will publish a final rule requiring Medicare skilled nursing facilities (“SNFs”) and Medicaid nursing facilities (“Facilities”) to provide more detailed ownership, managerial and other information on Form CMS-855A (the “Final Rule”).[1] The Final Rule also includes new definitions of “private equity company” and “real estate investment trust” for Medicare enrollment purposes for all Medicare institutional providers and suppliers.

More broadly, the Final Rule is an important step towards achieving the Biden-Harris Administration’s stated goal of increasing nursing home transparency and accountability. CMS and the Administration believe that additional ownership and managerial information will help families and residents make more informed choices about their care, increase competition and facilitate more effective oversight of nursing homes. In particular, CMS is interested in evaluating how certain ownership structures impact care and treatment outcomes.

The Final Rule includes three categories of changes:

1. Data to be Provided. All SNFs enrolled in Medicare will be required to disclose the following information to CMS, and all Facilities enrolled in Medicaid will be required to disclose the following information to the applicable state Medicaid agency:

• Each member of the facility’s governing body, including the name, title, and period of service of each member.
• Each person or entity who is an officer, director, member, partner, trustee, or managing employee of the facility, including the name, title, and period of service of each such person or entity.
• Each person or entity who is an “additional disclosable party” (or “ADP” as defined below) of the facility.
• The organizational structure of each ADP of the facility and a description of the relationship of each such ADP to the facility and to one another.

2. Timing of Reporting. CMS is updating the Form CMS-855A (the Medicare enrollment application for institutional providers) and will require Medicare-enrolled SNFs to begin reporting the newly required information when the revised form becomes publicly available (i.e., for purposes of Medicare or Medicaid enrollment (including reporting changes of ownership) or revalidation every five years).[2] 

The Final Rule also requires all Medicare providers and suppliers who are required to submit the revised Form CMS-855A to disclose whether an owning or managing entity is a private equity company (“PEC”) or real estate investment trust (“REIT”). Medicaid nursing facilities will also be required to report this information once the applicable state Medicaid agency has established a method to collect the required information.

CMS acknowledged that Medicare SNFs currently report some of this data via the Form CMS-855A, and confirmed that SNFs are not required to report the same data more than once on the same application. CMS also noted that in general, the Final Rule should be construed towards disclosure and, if in doubt about whether additional information should be released, SNFs are advised to disclose it. Information obtained from providers will be made publicly available within one year.

3. Definitions. In the Final Rule, CMS adopted the following definitions:

• Additional Disclosable Party (ADP). An ADP includes any person or entity who does any of the following: 
  
  • (i) Exercises operational, financial, or managerial control over the facility or a part thereof; (ii) provides policies or procedures for any of the operations of the facility; or (iii) provides financial or cash management services to the facility.
  • (i) Leases or subleases real property to the facility; or (ii) owns a whole or part interest equal to or exceeding 5 percent of the total value of such real property.
  • Provides (i) management or administrative services; (ii) management or clinical consulting services; or (iii) accounting or financial services to the facility.
• Organizational structure. An organizational structure includes:
  
  • A corporation. The officers, directors, and shareholders of the corporation who have an ownership interest in the corporation which is equal to or exceeds 5 percent.
  • A limited liability company. The members and managers of the limited liability company including, as applicable, what percentage each member and manager has of the ownership interest in the limited liability company.
  • A general partnership. The partners of the general partnership.
  • A limited partnership. The general partners and any limited partners of the limited partnership who have an ownership interest in the limited partnership which is equal to or exceeds 10 percent.
  • A trust. The trustees of the trust.
  • An individual. Contact information for the individual.
• Private Equity Company. A private equity company means a publicly traded or non-publicly traded company that collects capital investments from individuals or entities and purchases a direct or indirect ownership share of a provider.
• Real Estate Investment Trust. A real estate investment trust means a real estate investment trust as defined in 26 U.S.C. § 856.
• Managing Employees. Managing employees include a general manager, business manager, administrator, director, or other individual that exercises operational or managerial control over, or who directly or indirectly conducts, the day-to-day operation of the provider or supplier, either under contract or another arrangement, whether or not the individual is an employee of the provider or supplier. For purposes of this definition, this includes, but is not limited to, a hospice or SNF administrator and a hospice or SNF medical director. With respect to the additional requirements at 42 C.F.R. § 424.516(g) for SNFs, managing employees include an individual, including a general manager, business manager, administrator, director, or consultant, who directly or indirectly manages, advises, or supervises any element of the practices, finances, or operations of the facility.

CMS declined to define “operational, financial, or managerial control” (“OFMC”) and other terms, stating it believed the “ordinary meaning of these terms are clear.” However, CMS stated that it will provide examples of OFMC in sub-regulatory guidance, and also provide examples to help facilities understand which ADP data must be reported.

Providers should review the guidance when it becomes available to ensure that they provide full and accurate data on the CMS-855A. Failure to do so may jeopardize a provider’s Medicare and/or Medicaid enrollment application, and/or enrollment status. The bottom line is that CMS is taking a more focused approach to holding ownership and management accountable for healthcare outcomes, particularly substandard care for the nation’s elderly population, as well as for fraud, waste and abuse.

FOOTNOTES

[1] The Final Rule is currently on display at the Federal Register and is scheduled to be officially published in the Federal Register on November 17, 2023.

[2] CMS is authorized to conduct off-cycle revalidations; thus, Medicare-enrolled SNFs may experience revalidation reviews specifically to obtain this information in less than five years.