On Nov. 17, 2023, the Centers for Medicare and Medicaid Services (CMS) published a new rule for “nursing facilities” and “skilled nursing facilities” (collectively, the “Facilities”), as those terms are defined by the Social Security Act. The final rule implements Section 1124(C) of the Social Security Act, which requires disclosures related to the Facilities’ ownership and control. By improving transparency and accountability surrounding these Facilities, the new rule is intended to advance the quality of care offered to residents.1
Currently, the Code of Federal Regulations (the “Code”) imposes general disclosure duties on Medicare and Medicaid providers. For Medicare providers and suppliers, the Code sets forth prerequisites for maintaining active enrollment status in the Medicare program. These conditions include, but are not limited to, certifying compliance with legal directives, providing reports, and maintaining and supplying access to documentation related to the furnishing of prescribed services or drugs. Additionally, Medicaid providers and fiscal agents must release certain disclosures related to ownership and control. Despite these basic requirements, the current regulations did not mandate detailed ownership and governance disclosures specific to nursing and skilled nursing facilities. In promulgating these new rules, CMS said the additional data will help the agency and others “to scrutinize more closely how ownership types correlate with care outcomes and to determine which environments are more likely to deliver better care for residents and patients.” The new rules were issued, in part, to address the perception that private equity and real estate investment trust (REIT) ownership of Facilities is correlated with a decreased quality of care.
Final Rule Updates
Effective in early 2024, the new rule impacts three main regulatory matters: relevant definitions, data to be reported by nursing and skilled nursing facilities, and the appropriate timing for reporting new information.
The rule modifies the definitions referenced in the disclosure requirements. Specifically, it adds definitions for an “additional disclosable party,” for “organizational structure,” for “private equity company,” and for “real estate investment trust,” while it also broadens the meaning of a “managing employee.” Particularly relevant is the broad new definition for an “additional disclosable party,” which now encompasses, among others, individuals or entities connected to a Facility by exercising control, developing policies, providing financial management, leasing real property, or providing consulting or administrative services. Of note is that the owners of Facilities who lease to unrelated operators will be required to disclose their ownership of the leased Facility. Because the new reporting requirements refer back to this definition for an “additional disclosable party,” Facilities will now have to disclose data regarding qualifying individuals and entities, as further described in the below paragraphs.
B. What To Report
The rule requires that the Facilities disclose additional information related to their ownership and control. This information includes the following: (1) the name, title, and period of service for each member of the Facility’s governing body; (2) the name, title, and period of service for each individual or organization who functions as an officer, director, partner, managing employee, trustee, or member of the Facility; (3) every individual or organization who is an additional disclosable party of the Facility; (4) for every additional disclosable party, the organizational structure and the relationship of that party to the Facility and to other such additional disclosable parties. Notably, the same information need not be disclosed more than once on the same enrollment application.
C. When To Report
The rule also modifies the timing for data reporting. A Facility must report the above data upon initial enrollment in Medicaid or Medicare and upon revalidation of that enrollment. For Medicare skilled nursing facilities, initial enrollment includes a change of ownership. Medicare skilled nursing facilities must also disclose changes to enrollment data within 30 days for a change of ownership or control, and within 90 days for all other changes to enrollment. This will create a more burdensome and time-consuming application process for all Facilities undergoing a change of ownership.
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1 The Federal Register describes these updates within the final adopted rule. A full summary can be found here: Disclosures for Medicare and Medicaid Programs, 88 Fed. Reg. 80141 (Nov. 17, 2023) (to be codified at 42 C.F.R. 424, 455). Relevant provisions are also codified in 42 C.F.R. Chapter IV.