HHS Announces Rule to Increase Transparency in Nursing Home Ownership

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The U.S. Department of Health & Human Services recently announced additional action to increase the transparency of nursing home ownership and management. The Department issued a proposed rule to require nursing homes to disclose to CMS and states additional ownership and management information. The rule also includes private equity and real estate investment trust definitions, setting the stage for the disclosure of whether nursing home owners are private equity investors or real estate investment trusts. The proposal marks an important step in continuing to implement President Biden’s initiative to improve the quality and care available at nursing homes. By making facility ownership and oversight more transparent, nursing home residents and their families will be more empowered to make informed decisions about care.

“President Biden has made clear: improving our nation’s nursing homes is an urgent priority, and this Administration is not afraid to take bold action to tackle this head-on,” said HHS Secretary Xavier Becerra. “We are continuing our unprecedented efforts to increase nursing home ownership transparency – because it’s what the public deserves. We are pursuing all avenues to shine a light on this industry. We will keep doing everything we can to ensure all Americans receive the dignity, care, and respect they deserve.”

“CMS is committed to using every tool at our disposal to improve nursing home care and identify trends that enhance residents’ quality of life,” CMS Administrator Chiquita Brooks-LaSure said. “If finalized, this rule would strengthen our ability to examine ownership types, including private equity and real estate investment trusts.”

The proposed rule would implement portions of Section 6101(a) of the Affordable Care Act. This would require nursing homes enrolled in Medicare or Medicaid — the majority of this country’s nursing homes — to disclose additional information regarding owners, operators, and management; for example, nursing homes would disclose individuals or entities that provide administrative services or clinical consulting services to the nursing homes.

Nursing homes frequently use other companies to provide major services or support, but families currently have no way of knowing which different companies or firms provide care to their loved ones and how they might be connected to the owners of a nursing home. The proposed rule would also require additional information about entities that lease or sublease property to nursing homes, since the facilities and property owners may be set up as different corporate entities even though the entities work hand-in-hand.

In addition to the Section 6101(a) disclosures, the proposed rule would provide definitions of “private equity company” and “real estate investment trust” to assist nursing homes when reporting this data.

These key definitions will lead to the disclosure of whether direct and indirect nursing home owners are private equity companies or real estate investment trusts via an updated nursing home enrollment application expected to be ready for public use in the summer of 2023.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. Recent research has found that resident outcomes are significantly worse at private equity-owned nursing homes:

  • 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.
  • One working paper examining 18,000 nursing home facilities over a 17-year period found that private equity ownership 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%. The study implies an additional 20,150 lives were lost as a result of private equity ownership. 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.

Research also suggests that private equity ownership of nursing homes may lead to an uptick in Medicare costs, too.

The additional data required to be reported under the rule would be publicly reported pursuant to section 6101(b) of the Affordable Care Act. This transparency will, among other things, allow families to make more informed choices about the care of their loved ones, and it 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.

These new data and analysis support President Joe Biden’s Executive Order on Promoting Competition, and advance the Biden-Harris Administration’s goal of improving transparency around nursing facility ownership and improve competition of the overall industry. Greater transparency will help both the Administration and external parties better understand how the nursing home market is changing and whether the market is becoming more concentrated, which could potentially disrupt market competition and affect quality of care. For example, data analysis has shown:

  • Between 2016 and 2021, 348 hospitals experienced a change in ownership, but 3,000 nursing homes experienced a change in ownership. The number of nursing homes sold each year has increased since 2016.
  • The largest 10 nursing home chains own more than 10% of nursing homes—a disproportionate share that raises concerns about market concentration.
  • 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.
  • Recently published research exit disclaimer icon has found that in the 2-3 years after real estate investment trusts invest in nursing homes, registered nurse staffing levels decline by as much as 6%.

The proposed rule builds on the Department’s historic releases of data and unprecedented efforts to increase transparency. 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. In September 2022, CMS released additional data publicly on the ownership of approximately 15,000 nursing homes certified as a Medicare Skilled Nursing Facility, regardless of any change in ownership, including providing more information about organizational owners of nursing homes. In December 2022, CMS released ownership data publicly — for the first time ever — for all Medicare-certified hospitals.

The proposed rule is available at the Federal Register. Comments are due by April 14.

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