Headshot of CMS Administrator Chiquita Brooks-LaSure
CMS Administrator Chiquita Brooks-LaSure

Nursing homes will be required to report more details about their ownership structure and type under a final rule issued today by the Centers for Medicare & Medicaid Service.

The rule imposes many of the ownership transparency measures outlined in a February proposal and defines both private equity and real estate investment trust owners. Nursing homes will have to disclose the involvement of such owners upon initial enrollment and revalidation and during any change of ownership.

Other ownership involvement that will now be tracked by CMS includes any party that exercises financial control over the SNF; leases or subleases property to the SNF; has 5% or more stake in the value of SNF property; or provides a SNF administrative services, clinical consulting services, accounting or financial services, policies or procedures for any of the SNF’s operations, or cash management services.

In a fact sheet on the rule published this morning, CMS officials said the agency had become “increasingly concerned about the quality of care at nursing homes, especially those owned by private equity companies and other types of investment firms.”

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

CMS cited academic research that “suggests that ownership of nursing facilities by private equity companies and other types of investment firms can be associated with worse resident outcomes, and merits closer scrutiny.”

In addition to the new transparency rule, the Department of Health and Human Services Office of the Assistant Secretary for Planning and Evaluation released its own research paper today that links private equity ownership to “poorer staffing conditions and resulting decreases in quality of care.”

The paper showed that both private equity and REIT investment in the sector had cooled off by 2022, to include about 5% and 9% ownership, respectively, of all nursing facilities nationwide.

“Over the study period, PE and REIT invested facilities are similar to other for-profit facilities in terms of their size, resident acuity, and payer mix,” the HHS authors reported. “However, PE facilities appear to be lower quality on average, based on star ratings. In our difference-in-differences analyses examining the impact of PE and REIT investment in nursing homes, we find that PE investment results in a 12% relative decline in registered nurse (RN) hours per resident day (HPRD) compared to other for-profit facilities and a 14% relative increase (i.e., worsening) in their deficiency score index.”

They reported a similar pattern for REIT invested facilities, with a 7% relative decline in RN hours and a 14% relative increase in deficiency score index.

HHS Secretary Xavier Becerra said in a statement the new rule is another step toward helping consumers learn more about the owners of a nursing home and “make the choice that best meets their needs.”

“The Biden-Harris Administration believes that residents living in nursing homes should receive the dignity, care, and respect they deserve,” he added.

The administration has been putting increasing pressure on private owners of nursing homes through a variety of tools, most of them involving new ways for the public to understand who runs nursing homes and how they do it. This latest rule is expected to increase transparency into related party transactions, in which facilities own related companies that they pay for services such as rent and administrative services.

Under the new rule, providers will be required to submit ownership either on a Medicare enrollment application or through means developed by individual states, in the case of Medicaid-only nursing homes.

CMS said it would begin publicly posting the collected data and would provide information later on how it plans to do so. The agency said it also will issue sub-regulatory guidance to explain the new requirements to stakeholders, including examples of the types of data that must be disclosed.

This is a breaking news story. Check back later for more details.