CMS Issues Final Rule on Ownership Transparency

The Centers for Medicare & Medicaid Services (CMS) announced on Nov. 17, 2023, a final rule requiring skilled nursing facilities (SNFs) to publicly disclose additional ownership and management information. The rule was implemented under the Affordable Care Act and reflects continued efforts by the Biden-Harris Administration to regulate long-term care facilities, including new minimum staffing standards announced in September 2023.

Ownership, Management and Financial Control

The rule mandates that SNFs participating in Medicare and Medicaid – which account for the majority of the country's SNFs – must disclose specific data related to ownership, management and financial control upon initial enrollment, revalidation and reactivation, as well as during any change of ownership (CHOW). Ownership under the rule includes any party that 1) exercises financial control over a SNF that leases or subleases property to the SNF, 2) has a 5 percent or greater stake in the value of SNF property, 3) provides administrative services, clinical consulting services, accounting or financial services, policies or procedures for any SNF operations, or 4) provides cash management services to a SNF. Form CMS-855A is to be updated to collect the forgoing information and, once the form has been updated, CMS plans to commence off-cycle revalidations of SNFs to obtain the same information.

The rule also establishes definitions for private equity firms and real estate investment trusts (REITs), which as of 2022 accounted for a combined 14 percent of SNF ownership (5 percent private equity and 9 percent REITs), according to a report issued by the U.S. Department of Health and Human Services (HHS). The rule was issued in part to address recent studies, including one released by HHS, that linked private equity ownership to poorer staffing conditions and a decline in quality of care. CMS advised that the furnishing of the required additional information will help CMS determine the prevalence of private equity company involvement within the Medicare or supplier universe and the extent to which resident care is negatively impacted by private equity involvement.

Differing Opinions on the Final Rule

Some industry leaders offered support for the rule, including Leading Age, a community of more than 5,000 providers, whose CEO and President Katie Sloan Smith "recognize[s] the value of transparency and accountability of nursing home ownership in promoting nursing home excellence." Sabra Health Care REIT also offered support, stating "REITs have never hidden their ownership."  However, critics of the rule expressed concern for the paperwork burden on SNF owners and operators, many of which are already struggling with workforce shortages and other issues. According to the American Health Care Association/National Center for Assisted Living (AHCA/NCAL), "more paperwork reporting will not drive quality. This has become a distraction from the real issues that impact the majority of providers … If we truly want to improve America's nursing homes, we need policymakers to prioritize investing in our caregivers in this chronically underfunded healthcare sector. "

CMS is expected to issue additional guidance on how collected data will be posted, as well as to further explain the new requirements and provide examples of the types of data that must be disclosed. The information collected under the rule is expected to be publicly reported within one year.

For additional information, please contact the authors or a member of Holland & Knight's Long-Term Care Facilities Team.

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