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Proposed Rule to Increase Transparency of Nursing Home Ownership

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The U.S. Department of Health and Human Services (HHS) announced 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. By making facility ownership and oversight more transparent, nursing home residents and their families will be more empowered to make informed decisions about care.

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 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.

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 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.

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