Key Points

• CMS will require skilled nursing facilities to disclose additional information about any entity that exercises operational, financial, or managerial control over the facility, including any entity that provides policies or procedures for any of the facility's operations.
• While the final rule will become effective January 16, 2024, facilities will not be required to disclose this information until CMS updates the CMS form 855A and publicly releases the newly updated form.
• The final rule also updates the definitions of "real estate investment trust" and "private equity company" to clarify previous overlap and confusion between these terms.

On November 17, 2023, Centers for Medicare & Medicaid Services (CMS) published a final rule which will implement portions of Section 6101 of the Patient Protection and Affordable Care Act. The newly issued final rule requires skilled nursing facilities to disclose additional ownership and managerial information. It also expands the definition of "managing employee", defines who qualifies as an "additional disclosable party," and clarifies the definitions for private equity companies (PECs) and real estate investment trusts (REITs).

The official effective date of the new rule is January 16, 2024. However, skilled nursing facilities will not be required to report this information until CMS revises the CMS 855A form to collect this data. Critically, CMS has not provided an estimate for when the revised CMS 855A form will be available. In addition, the final rule states that the newly disclosed ownership information will be made publicly available by November 17, 2024.

Once the revised CMS 855A form becomes publicly available, a skilled nursing facility enrolled in Medicare must disclose the name, title, and period of service for each person or entity who is an officer, director, member, partner, trustee, or managing employee of the facility, and information on any person or entity who is considered an "additional disclosable party." An "additional disclosable party" is a person or entity that "exercises operational, financial, or managerial control over the facility. This includes any entity that provides policies or procedures for any of the facilities operations, including financial or cash management services ." A disclosable party also includes any entity that leases or subleases real property to the facility. In addition, skilled nursing facilities must disclose any entity that provides management or administrative services, including clinical consulting, accounting, or financial services.

When disclosing these parties, facilities must also identify their organizational structure and describe the relationship between each disclosable party and the facility, and any relationship the entities have to one another. As outlined in the Social Security Act at section 1124(c)(5)(D), disclosing the organizational structure includes identifying all officers, directors, and shareholders of a corporation with a five percent or more ownership interest, disclosing all managers and members of a limited liability company (and their respective ownership interests), identifying all partners in a general partnership, all general partners and any limited partners in a limited partnership with a ten percent or more ownership interest, any trustees of a trust, and the contact information for any individuals who meet the definition of an additional disclosable party above.

The new rule adds a second part to the definition of "managing employee" which now includes an individual who directly or indirectly manages, advises, or supervises any element of the practices, finances, or operations of the facility. Notably, this now includes the general manager, business manager, administrator, director, or a consultant to the facility.

Facilities must report this information as part of an initial Medicare application, revalidation, or change of ownership application. They must also report changes to this information under the same timeframes currently outlined at 42 CFR §424.516(e), meaning within 30 days for a change in ownership or control and 90 days for all other changes. To the extent there is overlap between the parties and entities to be disclosed, each disclosable party need only be reported once.

Lastly, as noted above, the new rule clarifies the definitions of "private equity company" and "real estate investment trust." Real estate investment trusts are defined at 42 CFR §424.502 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." A private equity company (PEC) is now 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." These definitions were added to clarify previous confusion about the overlap between the two entity types.

Hanson Bridgett will continue to follow up regarding the release of the newly updated CMS 855A form. Notably, existing facilities with no change in ownership will only need to report this information via a revalidation application. Although revalidation applications are typically due from a facility every five years, CMS indicated it will issue off-cycle revalidations to collect this information.

A link to the complete final rule can be found here.