CMS Finalizes Transparency Rule for Nursing Home Ownership Including Private Equity and Real Estate Investment Trusts
By Steven Lavenda, CPA, Partner, Advisory Services & Michael Smith, Senior, Assurance Services
The Centers for Medicare and Medicaid Services (CMS) has taken a definitive step to enhance the transparency of ownership and management in Medicare skilled nursing facilities (SNFs) and Medicaid nursing facilities, commonly referred to as nursing homes (NHs). On November 17, 2023, CMS finalized a rule that will go into effect on January 16, 2024, as announced in the Federal Register. This rule is a part of the ongoing implementation of section 6101 of the 2010 Affordable Care Act, mandating the disclosure of comprehensive ownership, managerial, and other significant details concerning these facilities.
The finalized rule defines a private equity company for Medicare provider enrollment as “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.” This broad definition captures direct owners and those with indirect ownership stakes, ensuring a more complete disclosure than previously required.
CMS Administrator Chiquita Brooks-LaSure emphasized the agency’s commitment to using its authority to bolster the safety and quality of care in nursing homes, stating, “By strengthening our ability to examine nursing home ownership, including private equity and real estate investment trusts, we can improve transparency for the people we serve and their loved ones, researchers, and regulators, and enable better-informed decisions about nursing home care.” The new reporting requirements will allow CMS to scrutinize how different types of ownership, including private equity and real estate investment trusts, correlate with the quality of care provided.
According to a CMS fact sheet, research has shown that residents in nursing homes acquired by private equity were 11.1% more likely to have a preventable emergency department visit and 8.7% more likely to experience a preventable hospitalization, when compared to residents of for-profit nursing homes not associated with private equity. These findings suggest that ownership by private equity and similar investment entities can be associated with negative resident outcomes, thus meriting closer monitoring.
The new disclosure requirements extend to various entities and individuals, necessitating reports on those who exercise financial control, lease or sublease property to SNFs and NHs, hold a 5% or greater interest in the property’s value or provide critical services such as administrative, clinical consulting, accounting, or financial services. These requirements apply not just to new enrollments but also to currently enrolled facilities, which must update their enrollment records to comply with the new standards upon revalidation or ownership change. For facilities that are not Medicare-certified or cater exclusively to Medicaid residents, state-level mechanisms will be established to collect the required information.
While the specific forms or methods for reporting this information have yet to be released by CMS, the implications of these new transparency rules are clear. They aim to hold nursing home owners accountable for the services provided and enhance the quality of care through informed decision-making by all stakeholders involved.
The Department of Health and Human Services (HHS) Office of the Assistant Secretary for Planning and Evaluation supports the move, citing studies that show a negative correlation between increasing private equity ownership and the quality of care. The new requirements align with the Biden-Harris Administration’s long-term objectives to address safety and quality issues in nursing homes nationwide.
The industry awaits further guidance from CMS on implementing these reporting requirements, and stakeholders are encouraged to prepare for compliance with the new rule set to take effect in early 2024.
