[UPDATED] CMS Issues Final Rule For Transparency in Ownership of Nursing Homes

The Biden-Harris Administration announced Wednesday a final rule requiring skilled nursing facilities (SNFs) to disclose additional ownership and management information.

The final rule, displayed on the Federal Register by the Centers for Medicare & Medicaid Services (CMS), implements portions of the Affordable Care Act. Nursing homes must submit ownership disclosures within a year of the rule becoming effective.

It mandates Medicare SNFs and Medicaid nursing facilities to disclose specific data related to ownership, management, and financial control upon initial enrollment, revalidation, or during any change of ownership.

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“CMS will soon provide more information regarding the timing, vehicle, and content of this publication,” CMS wrote in a press release. “CMS will be issuing sub-regulatory guidance to explain the new requirements to stakeholders, including examples of the types of data that must be disclosed.”

The final rule also establishes definitions for private equity companies and real estate investment trusts, setting the stage for identifying ownership types. This is part of a broader effort by the Biden-Harris Administration to improve nursing home safety.

Nursing home leaders welcomed the move.

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Rick Matros, CEO of Sabra Health Care REIT, who has long been an advocate for disclosing ownership of nursing homes, said he favors transparency.

“The REIT’s have never hidden their ownership. “Others have opaque ownership structures and I think it beneficial for it to be clear as to who owns what,” Matros said.

Industry leaders like Matros have also noted that CMS needed to distinguish between the different forms of ownership. In the past, private equity firms, private capital firms and REITs were being referred to all but interchangeably, even though they are distinct types of companies with very different structures and ability to influence operations.

One of the key elements of the new rule is the requirement for nursing homes to disclose information about individuals or entities providing administrative services, clinical consulting services, accounting or financial services, and policies or procedures for the facility’s operations. This includes entities exercising financial control over the facility and those involved in leasing or subleasing real property to the nursing home.

As of last year, private equity firms had ownership in 5% of nursing homes while REITs in 9%, according to a report issued by the Department of Health and Human Services (HHS).

The move comes in response to growing concerns regarding the quality of care in nursing facilities, particularly those owned by private equity companies and other investment firms.

Recent studies, including one released by the HHS’ Office of the Assistant Secretary for Planning and Evaluation, have linked private equity ownership to poorer staffing conditions and a decline in the quality of care.

“HHS continues to take action to improve the safety, quality, and accountability of nursing homes,” said HHS Secretary Xavier Becerra. “The Biden-Harris Administration believes that residents living in nursing homes should receive the dignity, care, and respect they deserve. Taking steps to help consumers to learn more about the owners of a nursing home will allow them to make the choice that best meets their needs.”

Katie Smith Sloan, president and CEO of LeadingAge, said LeadingAge supports the final rule.

“Our nonprofit mission-driven members disclose ownership and management information through Internal Revenue Service filings that are freely available to the public and we recognize the value of transparency and accountability of nursing home ownership in promoting nursing home excellence,” she said.

Adding to the paperwork burden

The disclosure requirements apply to nursing homes enrolled in Medicare or Medicaid, which constitute the majority of the country’s nursing homes. The information collected under the rule will be publicly reported within one year.CMS said the transparency requirements aim to empower families and other stakeholders to closely examine how different ownership types correlate with care outcomes.

“CMS is committed to leveraging our tools to improve safety and quality of care in nursing homes,” CMS Administrator Chiquita Brooks-LaSure said. “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.”

In addition to the public disclosure of ownership data, CMS will issue sub-regulatory guidance to explain the new requirements to stakeholders, providing examples of the types of data that must be disclosed.

The American Health Care Association/National Center for Assisted Living (AHCA/NCAL) said while they support transparency and appreciate the Administration’s efforts to assist families in making more informed decisions,more paperwork reporting will not drive quality.

“This has become a distraction from the real issues that impact the majority of providers, like Medicaid underfunding and workforce shortages,” (AHCA/NCAL) told SNN. “If we truly want to improve America’s nursing homes, we need policymakers to prioritize investing in our caregivers and this chronically underfunded health care sector.”

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