CMS Proposes Augmented Nursing Facility Ownership Disclosure Targeting Private Equity and REITs

Investors, owners, and operators of Nursing Facilities should consider the following key takeaways related to the Proposed Rule:

• The definitions proposed by CMS, including the definitions of PE companies and REITs, are very broad. Stakeholders should consider submitting comments to CMS to guide revisions to these proposed definitions, due April 14, 2023. 
• The Proposed Rule did not make any specific proposals or statements regarding potential enforcement activity. However, the disclosures provided could lead to additional scrutiny of the Nursing Facilities owned by PE companies and REITs.

Proposed Disclosure Requirements

Under the Proposed Rule, Nursing Facilities would be required to disclose the following information to CMS or, for Medicaid Nursing Facilities, the applicable state Medicaid agency:

• each member of the governing body of the facility, including the name, title, and period of service of each member
• each person or entity who is an officer, director, member, partner, trustee, or managing employee of the facility, including the name, title, and period of service of each such person or entity
• each person or entity who is an additional disclosable party of the facility
• the “organizational structure” of each additional disclosable party of the facility and a description of the relationship of each such additional disclosable party to the facility and to one another, including identifying whether any entity is a private equity company or REIT
  • CMS has proposed defining “organizational structure” to include: (1) for a corporation, shareholders with a 5% or greater ownership interest; (2) for a limited liability company, all members (regardless of the ownership percentage) and managers; and (3) for a partnership, all general partners and all limited partners with a 10% or greater ownership interest

CMS is seeking comment on the definition of certain key terms, including, without limitation, organizational structure, managing employee, additional disclosable party, PE company, and REIT.

The proposed additional disclosures would have to be made upon (1) initial enrollment into Medicare or Medicaid, (2) change of ownership, (3) change in enrollment information, (4) reactivation, and (5) revalidation, which, for SNFs, occurs every five years. However, CMS emphasized in the Proposed Rule that it can perform off-cycle revalidations “at any time and need not wait until the arrival of [SNF’s] 5-year revalidation cycle.”

The Proposed Rule indicates CMS’s intention to make compliance with these disclosure requirements conditions of payment under both Medicare and Medicaid.

As required by the ACA, CMS stated that data reported pursuant to these requirements would be made publicly available no later than one year after the final rule is promulgated, although CMS will not release specific details regarding how such publication will occur until after such final rule is released.

Identification of PE Company and REIT Owners and Managers

Although not required under the ACA, CMS has also proposed that owners and managing entities of Nursing Facilities be required to disclose whether they are a PE company or REIT.  The Proposed Rule includes the following definitions:

• PE Company: “a publicly traded or non-publicly traded company that collects capital investments from individuals or entities (that is, investors) and purchases an ownership share of a provider (for example, SNF, home health agency, etc.).”
• REIT: “a publicly traded or non-publicly traded company that owns part or all of the buildings or real estate in or on which the provider operates.”

Comment Period and Timing

As noted, comments must be submitted by April 14, 2023. If finalized, these additional disclosure requirements will go into effect 60 days after the release of the final rule. Stakeholders with an interest in these requirements should consider developing a perspective on these proposed rules and engaging with the Agency to share their views.

¹https://www.whitehouse.gov/briefing-room/statements-releases/2022/02/28/fact-sheet-protecting-seniors-and-people-with-disabilities-by-improving-safety-and-quality-of-care-in-the-nations-nursing-homes/.