Nursing homes are required to disclose more ownership information in final rule

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In a final rule released today, the Centers for Medicare and Medicaid Services is requiring greater transparency and disclosure of nursing home ownership. 

Private equity ownership is associated with poorer staffing conditions and resulting decreases in quality of care, according to research released by the Department of Health and Human Services' Office of the Assistant Secretary for Planning and Evaluation.

The final rule requires nursing homes enrolled in Medicare or Medicaid – the majority of this country's nursing homes – to disclose additional information regarding their owners, operators and management.

For example, nursing homes must disclose individuals or entities that provide administrative services or clinical consulting services. They will also be required to disclose entities that exercise financial control over the facility, such as an organization the nursing home hires to manage its finances.

Also, the rule requires additional information about entities that lease or sublease property to nursing homes, since the facilities and property owners may be set up as a different corporate entity. 

The rule will empower nursing home residents and their families to make informed decisions about care and to hold nursing homes accountable for the service they provide by requiring the disclosure of additional ownership and management information to CMS and states, and by making this information public. 

Today's final rule includes definitions of private equity and real estate investment trusts, setting the stage for identifying whether a nursing home belongs to one of these types of owners. 

The additional data required to be reported will be publicly reported within one year. CMS said it will soon provide more information regarding the timing, vehicle and content of this publication.

WHY THIS MATTERS

Nursing homes frequently use other companies to provide major services or support within a facility, but families currently have no way of knowing which companies provide care to their loved ones and how they might be connected to the owners of a nursing home. 

Concerns about the quality of care and operations of nursing facilities owned by private equity companies and other types of investment firms have increased since 2011, CMS said. 

The sector continues to attract robust sales.

Recent research has found that resident outcomes are significantly worse at private equity-owned nursing homes, and in the two to three years after real estate investment trusts invest in nursing homes, registered nurse staffing levels decline by as much as 6%, CMS said. 

One working paper examining 18,000 nursing home facilities over a 17-year period found that private equity ownership was associated with increased excess mortality for residents by 10%, increased prescription of antipsychotic drugs for residents by 50%, decreased hours of frontline nursing staffing by 3%, and increased taxpayer spending per resident by 11%. Another study found that private equity-backed nursing homes had a COVID-19 infection rate and death rate that were 30% and 40% above statewide averages, respectively.

A recent study found that residents in nursing homes acquired by private equity were 11.1% more likely to have a preventable emergency department visit and 8.7% more likely to experience a preventable hospitalization, when compared to residents of for-profit nursing homes not associated with private equity.

Private equity ownership of nursing homes may also lead to an uptick in Medicare costs.

Additionally, the 10 largest nursing home chains own more than 10% of nursing homes – a disproportionate share that raises concerns about market concentration.

The number of nursing homes sold each year has increased since 2016, greatly outpacing that of hospitals. Between 2016 and 2021, 348 hospitals experienced a change in ownership, but 3,000 nursing homes experienced a change in ownership – four times more than hospitals. CMS said.

Nursing homes with lower star quality ratings are sold more often than those with higher star quality ratings, raising concerns about the relationship between ownership changes and quality.

The additional data in the final rule will enable CMS 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 LARGER TREND

The rule implements portions of the Affordable Care Act, requiring the disclosure of certain ownership, managerial and other information regarding Medicare skilled nursing facilities (SNFs) and Medicaid nursing facilities, commonly known as nursing homes. It supports President Biden's Executive Order on Promoting Competition.

A proposed rule was issued in February. 

In April 2022, CMS released data publicly – for the first time ever – on mergers, acquisitions, consolidations and changes of ownership from 2016-2022 for hospitals and nursing homes enrolled in Medicare. Additional data was released in September 2022 on the ownership of approximately 15,000 nursing homes.

In December 2022, CMS released ownership data publicly – also for the first time – for all Medicare-certified hospitals. This April, CMS publicly released ownership information regarding Medicare-certified hospices and home health agencies.
 
In addition, the Fiscal Year 2024 Inpatient Prospective Payment System Long-Term Care Hospital Prospective Payment System proposed rule proposed to apply the private equity company and real estate investment trust definitions.

ON THE RECORD

"HHS continues to take action to improve the safety, quality, and accountability of nursing homes," said HHS Secretary Xavier Becerra. "The Biden-Harris Administration believes that residents living in nursing homes should receive the dignity, care, and respect they deserve. Taking steps to help consumers to learn more about the owners of a nursing home will allow them to make the choice that best meets their needs."

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

Twitter: @SusanJMorse
Email the writer: SMorse@himss.org