The Centers for Medicare & Medicaid Services (CMS) has published its final rule that requires nursing homes enrolled in Medicare and Medicaid to disclose additional ownership and management information to CMS and state Medicaid agencies. The rule finalizes CMS’s proposed rule from February, with just two differences, as we describe further below.

The rule implements Section 1124(c) of the Social Security Act, which was added by the Affordable Care Act to require the disclosure of additional information about ownership and oversight of nursing facilities. Medicare-enrolled skilled nursing facilities (SNFs) and Medicaid-enrolled nursing facilities (NFs) will soon be required to report many detailed aspects of their ownership and management structure, including both the executive leadership and any members of the facilities’ governing bodies.

CMS plans to gather the information in 2024, beginning when the revisions to the Form CMS-855A is completed, regardless of where a facility is on its current five-year revalidation schedule. The information will then be made publicly available within one year.

Of note in the final rule is that CMS declined to finalize a broad definition of “real estate investment trust” (also known an “REIT”) from its February proposed rule and instead has finalized a definition that it finds more consistent with current federal law and industry practice.

What does CMS want to know about the facilities’ ownership and oversight?

Under the final rule, SNFs enrolled in Medicare will be required to disclose the following information to CMS, and NFs will be required to report the same to the applicable state Medicaid agency (in addition to information they are already required to report):

(1) Each member of the governing body of the facility, including the name, title, and period of service for each such member.

(2) 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.

  • The final rule specifies that the definition of “managing employee” includes, but is not limited to, a hospice or SNF administrator and a hospice or SNF medical director.

(3) Each person or entity who is an “additional disclosable party” of the facility.

(4) 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.

For more information on the expansive definitions of  the terms “managing employee,” “additional disclosable party,” and “organizational structure,” see our post from February describing the proposed rule.

Private Equity Company definition clarified and REIT definition narrowed

The rule adds data elements to Form CMS-855A that will require owning and managing entities of SNFs to disclose whether they are a private equity company (PEC) or REIT. State Medicaid agencies will have the option to also collect this information about NFs.

Under the final rule, a PEC is broadly defined as a publicly traded or non-publicly traded company that collects capital investments from individuals or entities and purchases a direct or indirect ownership share of a provider.

This definition is slightly altered from the original proposed definition in that it includes the words “direct or indirect” before the words “ownership share.” This serves to clarify that a reportable PEC will include any investment company that has an ownership share, even if that ownership share is indirect. CMS stated that its intent in promulgating such a broad definition for a PEC was to “capture the universe of organizations needed to help us assess the extent of private equity involvement among nursing homes.” 

An REIT is defined by reference to the definition that currently exists within the Internal Revenue Code (IRC) at 26 U.S.C. § 856. That provision requires that, in order to qualify as an REIT, an entity would have to be a corporation, trust or association:

  • which is managed by one or more trustees or directors;
  • the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest;
  • which (but for its designation as an REIT) would be taxable as a domestic corporation;
  • which is neither a financial institution referred to in section 582(c)(2) of the IRC, nor an insurance company governed by Subchapter L of the same chapter of the IRC;
  • the beneficial ownership of which is held by 100 or more persons;
  • which is not closely held (subject to other limitations described in 26 U.S.C. § 856(k)); and
  • which meets certain gross income and total asset value thresholds and investment described in 26 U.S.C. § 856(c).

This definition is much more focused and restricted than the originally proposed definition, which would have defined an REIT as “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.” That definition would have disregarded the technical requirements laid out in the IRC definition and incorporated many more organizations than are currently considered REITs.

On a related note, the original proposed Fiscal Year 2024 Inpatient Prospective Payment System (IPPS) rule from CMS would have expanded these disclosure requirements to all providers and suppliers filling out a Form CMS-855A. While the final IPPS rule didn’t apply the definition across the board, it mentioned that this final SNF ownership rule may, and it has in fact done exactly that. As a result, these definitions apply to the required disclosure of PECs and REITs for all entities completing a CMS-855A, regardless of whether they are a SNF. That means that all providers and suppliers who are subject to the IPPS, including hospitals, will also be required to provide this new information about PEC or REIT ownership starting in 2024.

There are five types of Form CMS-855A transactions in which CMS has noted that providers and suppliers (including SNFs) will be required to report PEC and REIT data: (1) initial enrollment applications, (2) change of ownership applications, (3) revalidation applications, (4) reactivation applications, and (5) change of information applications.

CMS plans to require off-cycle revalidations to collect data

Facilities will be required to report the information upon initially enrolling in Medicare or Medicaid and when revalidating their enrollment. Further, once enrolled, SNFs will be required to disclose any changes to this information within the current timeframes specified in 42 CFR § 424.526(e), i.e., within 30 days for changes in ownership or control and 90 days for all other changes.

Additionally, the preamble to the final rule indicates that CMS plans to require off-cycle revalidations to get a baseline of ownership information from all SNFs. States could also potentially require off-cycle revalidation for NFs.

Data will be publicly posted

The Affordable Care Act requires the Secretary of HHS to make the information reported under the applicable regulations available to the public. The rule indicates that CMS intends to make the ownership data disclosed under this rule available to the public by November 17, 2024.  

A note on the effective date

Officially, the effective date of the final rule is January 16, 2024. However, SNFs will not have to disclose the new datapoints required under the rule until Form CMS-855A is both revised to collect the data and publicly available for use. Similarly, NFs will not be required to report the additional data until the applicable state Medicaid agency has established the means to collect it.

Reed Smith will continue to track developments related to this rule, including the issuance of sub-regulatory guidance, state Medicaid programs’ responses to this rule, and any other developments related to SNF and NF ownership disclosure requirements. Please reach out to the authors or other health care attorneys at Reed Smith if you have any questions about how this rule might impact your organization.