Background & Authority
On November 15, 2023, CMS published a final rule, Medicare and Medicaid Programs; Disclosures of Ownership and Additional Disclosable Parties Information for Skilled Nursing Facilities and Nursing Facilities; Medicare Providers’ and Suppliers’ Disclosure of Private Equity Companies and Real Estate Investment Trusts (the Ownership Transparency Rule). This publication finalizes, with minimal changes, a proposed rule that was published on February 15, 2023 and is effective January 16, 2024. CMS created the Ownership Transparency Rule because the Affordable Care Act Section 6101(a) created new requirements for nursing facilities to disclose ownership and oversight information.
The Ownership Transparency Rule also is consistent with the Biden-Harris administration’s agenda of increasing transparency surrounding nursing facility ownership and control, with the expected result of improving quality of care in Medicare-certified skilled nursing facilities (SNFs) and Medicaid-only certified nursing facilities, collectively “nursing facilities.” Consider the following previous activities by the administration:
- In April 2022, CMS made publicly available information about SNF and hospital changes of ownership from 2016 to 2022.
- In September 2022, CMS began including information about nursing facilities ownership and control on Care Compare, CMS’ platform for rating nursing facilities. CMS and state Medicaid agencies have been collecting ownership in conjunction with provider enrollment activities, and data files containing this information have previously been publicly available, but this action elevated availability of the information.
Overview of Current Reporting Requirements
Medicare-certified SNFs are currently required to report ownership and managing control information to CMS as part of the provider enrollment process on the Form CMS-855A. State Medicaid agencies use similar processes to collect this information for Medicaid-only nursing facilities; however, we will focus on the Medicare provider enrollment record, as most nursing facilities are Medicare-certified.
Disclosures include individuals or entities with 5% or more direct or indirect ownership in the licensed entity or facility operator and individuals or entities with managing control. Any changes to previous ownership, managing control, and managing employees are required to be reported within 30 days of the change. Entities governed by a board of directors or trustees are required to report changes in officers, members, and trustees within 30 days. Changes to a governing board are frequently overlooked and not reported timely. Information that is part of an initial enrollment or in connection with a change of ownership (CHOW) also has to be reported within 30 days of the change, or under the revalidation process, required at least every five years. Any change that is not considered a change in ownership, control, or managing employees is required to be reported within 90 days of the change.
What’s Changing Under the Ownership Transparency Rule?
Disclosure requirements will expand, both in terms of the parties that must be disclosed and the amount of information about those parties.
Managing Employees
Nursing facilities will see an updated definition of “managing employee” to include general manager, business manager, administrator, director, or consultant who directly or indirectly manages, advises, or supervises any element of the practice, finances, or operations of the facility. Nursing facilities will have to disclose the name, title, and period the individual has served. While the term “employee” is used, it is applied to both employees and contractors.
Additional Disclosable Parties
Perhaps the most significant change is the inclusion of disclosures about additional disclosable parties (ADPs).
ADPs include entities or individuals who:
- Exercise operational, financial, or managerial control over all or part of a nursing facility or provide policies or procedures for any of the facility’s operations or provide financial or cash management services to the facility.
- Lease or sublease real property to the nursing facility or own at least 5% of the total value of the real property.
- Provide management or administrative services, management or clinical consulting services, or accounting or financial services to the nursing facility.
The new disclosure requirements include entities that lease or sublease the brick and mortar of the SNF to the operator. Real estate holding companies, property companies, real estate investment trusts (REITs), and private equity investment companies (PECs) will have to be disclosed, along with all entities or individuals who own a 5% or more interest in the ADP.
Any entity, including the nursing facility operator, that is disclosed will be required to disclose their organization structure and relationship to the nursing facility. Organization structure options include corporation, general partnership, limited partnership, trust, individual, or any other person or entity deemed appropriate by CMS.
One concern voiced by commenters in the rule is the ability to obtain information about ownership and organization structure from ADPs who are not related to the provider. CMS acknowledges this challenge but appears unwavering regarding the requirement, noting that nursing facilities have typically been able to obtain such information and saying, “if a nursing facility wishes to receive Medicare or Medicaid payment, it must comply with all requirements for doing so, one of which is the disclosure of the information in question.”
In addition, CMS has expressed its concern over facilities operated by PECs or leased from REITs. Accordingly, the Ownership Transparency Rule defines both these terms and will require disclosures around these investor types for each facility. Nursing facilities affiliated with those investment structures are likely to see increased attention and scrutiny from CMS.
Certification Language
One final change of concern is the required change to the language included in the certification of the CMS 855-A to exclude a “to the best of my knowledge” qualifier. The signer of the CMS 855-A will now be required to certify that the data is “true, correct, and complete.”
What’s Next?
While the Ownership Transparency Rule is effective January 16, 2024, as a practical matter, CMS has to complete at least two additional steps to implement the provisions. First, CMS has promised subregulatory guidance, which it has indicated will provide clarification and examples around some of the more challenging issues noted above. Second, CMS will need to update the CMS-855A and instructions to be able to collect the required information. Look for additional articles when CMS makes those documents available.
Once the updated CMS-855A is released, any nursing facility with an initial enrollment, CHOW, revalidation, or change in previously reported information would be required to provide all the ownership and oversight disclosures required above. CMS has the authority and had indicated its intention to conduct off-cycle revalidations of the provider enrollment record.
We anticipate that shortly after the release of the CMS-855A, CMS will begin off-cycle revalidations. With those revalidations being required within 60 days of the notice, we strongly recommend nursing facilities educate themselves on the anticipated required disclosures and begin gathering the required information. With the change in the certification language, increased CMS scrutiny on the provider enrollment record, and consequences (including suspension of payments) of not completing a timely revalidation, this should be a priority for all nursing facilities. The consequences of overlooking these new requirements could be significant.
As a reminder, states have flexibility to require different or additional information from Medicaid-only participating nursing facilities.
What Do I Do Now?
The Ownership Transparency Rule will require information nursing facilities have not previously been required to disclose. With the uncertainty around the timeline for the off-cycle revalidations, we recommend nursing facilities use the information in the final rule to begin identifying disclosable parties and start to gather the required information.
In addition, we recommend nursing facilities make sure they can access their provider enrollment record electronically in the Provider Enrollment, Chain, and Ownership System (PECOS) by logging into the system and making sure credentials are current. We also recommend at least two people in any organization have access to PECOS.
We have resources available to assist you with the provider enrollment record. If you have questions or need assistance, please reach out to a professional at FORVIS.