Biden Administration and CMS Propose New Rule to Provide Greater Transparency for Nursing Home Ownership
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Following the Biden administration's efforts to promote nursing home safety, transparency, accountability and quality, the US Centers for Medicare & Medicaid Services (CMS) announced a proposed rule governing nursing home ownership reporting, with a focus on private equity and real estate investment trust (REIT) ownership.
Following the second State of the Union where President Biden reiterated his administration's focus on nursing home reform, CMS proposed a new rule requiring nursing homes that participate in Medicare or Medicaid report if they are owned or managed by a private equity firm or REIT along with additional data elements not previously collected by CMS.
Data Reporting Requirements
Since the White House's initial announcement on February 28, 2022, that it is focused on improving the safety and quality of care in the country's nursing homes, the Biden administration has taken steps to ensure closer scrutiny when it comes to nursing facilities that are owned by private equity funds and other types of investment firms. The proposed rule would implement a portion of Section 6101(a) of the Affordable Care Act requiring nursing facilities to disclose additional information regarding the following:
- 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; and
- Each person or entity who has the following relationship(s) with the facility:
- Exercises operational, financial or managerial control over the facility, provides policies or procedures for the operations of the facility, 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 greater than or equal to 5% of the total value of the real property; or
- Provides management or administrative services, management or clinical consulting services, or accounting or financial services to the facility.
The proposed regulations would obligate disclosure of this data via a revised version of the CMS-855A (or equivalent state reporting forms), and facilities would not be required to disclose this information until the new form is finalized.
For purposes of the rule, a private equity company means "a publicly-traded or non-publicly traded company that collects capital investments from individuals or entities and purchases an ownership share of a provider." A REIT means "a publicly-traded or non-publicly traded company that owns part or all of the buildings or real estate in or on which a provider operates."
While Medicare regulations currently define managing employees, the proposed rule adds a separate definition of managing employees that applies only to skilled nursing facilities (SNFs) and would mean "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."
These new definitions represent an effort by CMS to gain greater oversight of the types of entities that directly or indirectly own nursing facilities as well as the individuals who provide services to these facilities.
Public Posting of Data
CMS intends to make public the data it collects under the new rule. After publicly releasing data on nursing home facility mergers, acquisitions, consolidations and ownership changes in April 2022, this provision continues the administration's push to increasing transparency in the nursing home industry. CMS believes this transparency will assist CMS and other regulators in holding nursing facilities accountable and will allow consumers to select facilities based on a better knowledge of their owners and operators.
While ownership and managerial control information is already required to be reported pursuant to existing CMS regulations and the current CMS-855A, the proposed rule includes a marked expansion in additional reporting obligations as well as identification of the types of ownership in these facilities. Failure to comply with enrollment reporting requirements can lead to adverse enrollment actions such as deactivation and revocation. As a result, nursing facilities should monitor the status of the proposed rule and any changes to the CMS-855A enrollment form implementing the heightened disclosure standards.
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