On February 15, 2023, the Centers for Medicare and Medicaid Services (CMS) published a proposed rule that would require nursing homes enrolled in Medicare and Medicaid to disclose new information about their ownership and management structures. If finalized, the rule would require nursing homes to disclose any ties to private equity companies or real estate investment trusts (REITs) (defined below), as well as the names and information of individuals and entities that provide certain administrative, management or consulting services.

Background

The proposed rule is part of the Biden administration’s broader attempt to improve nursing home care, while increasing transparency and accountability. Citing research that certain types of nursing home owners, particularly private equity companies and REITS, are correlated with a decline in the quality of care and an increase in government spending, CMS wants to ensure that regulators and the public have access to clear and accurate ownership information. CMS believes that more transparency will help the public evaluate and compare facilities, and help regulators monitor bad actors.

Proposed Disclosure Requirements

As proposed, the rule would require Medicare and Medicaid enrolled nursing homes to disclose additional information regarding their owners, operators, and management, including:

• Each member of the governing body of the facility, 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” of the facility, which would include any person or entity that:

  • Exercises operational, financial, or managerial control over the facility or a part thereof, provides policies or procedures for any of the facility’s operations, or provides financial or cash management services to the facility;

  • Leases or subleases real property to the facility, or owns a whole or part interest equal to or exceeding 5% of the total value of such real property; or

  • Provides management or administrative services, management or clinical consulting services, or accounting or financial services to the facility.

• The organizational structure of each additional disclosable party of the facility and a description of the relationship of each such additional disclosable party to the facility and to one another.

Targeting Private Equity and REIT Ownership

The proposed rule also seeks to require nursing home owners and managers to disclose whether or not they qualify as a “private equity company” or a “REIT,” as part of CMS’s strategy to publicize direct and indirect owning or managing relationships. CMS stated that the data reported pursuant to these requirements would be made publicly available no later than one (1) year after the final rule is promulgated.

CMS has proposed a number of definitions that are likely to elicit significant stakeholder feedback, particularly its definitions of a “private equity company” and “REIT”:

• Private Equity Company: A publicly traded or non-publicly traded company that collects capital investments from individuals or entities (that is, investors) and purchases an ownership share of a provider (for example, a skilled nursing facility, a home health agency, etc.).

• REIT: A publicly-traded or non-publicly traded company that owns part or all of the buildings or real estate in or on which the provider operates.

CMS recognizes that these definitions may be different from definitions of the same terms used in other settings, and has welcomed input from stakeholders, particularly on whether the proposed definition of private equity company should include publicly-traded private equity companies. CMS intends to add data elements to the Medicare Enrollment Application Form CMS–855A through which owning and managing entities of nursing homes would have to disclose whether they are either a private equity company or a REIT. CMS also welcomed public feedback regarding any other types of private ownership – besides private equity companies and REITs – about which CMS should consider collecting information from nursing homes as part of the enrollment process. Finally, CMS proposed a number of other definitions (e.g., for “managing employee,” “organizational structure,” etc.) that will likely elicit stakeholder comments.

The proposed disclosures would be required to be made upon: (1) initial enrollment into Medicare or Medicaid, (2) change of ownership, (3) change in enrollment information, (4) reactivation, and (5) revalidation. Notably, although revalidation for nursing homes occurs every 5 years, CMS emphasized that it can perform off-cycle revalidations at any time.

The comment period for the proposed rule ends on April 14, 2023. As governmental scrutiny of nursing home ownership intensifies, stakeholders should consider submitting comments to CMS to guide modifications to the proposed rule. If finalized, these additional disclosure requirements will be effective 60 days after the release of the final rule.