Understanding CMS' New Reporting Requirements for Nursing Facilities

Nursing facilities will soon face a heavier reporting burden under a new CMS Final Rule released Wednesday, November 15, 2023. CMS and other Federal regulators have expressed concern with the increasing trend of Private Equity and Real Estate Investment Trust (REIT) involvement in the ownership and management of nursing facilities—alleging that for-profit ownership results in poorer quality outcomes for skilled nursing patients. In an effort to gather additional data about the link between Private Equity/REIT involvement and quality measures, CMS has released a 93-page Final Rule augmenting the information nursing facilities must report.

What New Information Must Nursing Facilities Report?

In addition to the current management and ownership information that nursing facilities already report to Medicare and Medicaid, the Final Rule will require that nursing facilities also report the following:

• Each member of the nursing facility’s governing body, 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 nursing 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 nursing facility.
• The organizational structure of each additional disclosable party of the nursing facility and a description of the relationship of each such additional disclosable party to the nursing facility and to one another.

An “additional disclosable party” is a person or entity that (i) exercises operational, financial, or managerial control over the facility or a part thereof, or provides policies or procedures for any of the facility’s operations, or provides financial or cash management services to the facility; (ii) leases or subleases real property to the facility, or owns a whole or part interest equal to or exceeding 5 percent of the total value of such real property; or (iii) provides management or administrative services, management or clinical consulting services, or accounting or financial services to the facility.

Several comments to the Final Rule point out that the term “operational, financial, or managerial control” lacks a definition leaving providers to guess at what qualifies under the vague phrasing. CMS plans to issue sub-regulatory guidance at some point in the future to better flush out who would qualify as exercising these types of control.

When reporting the “organizational structure” of each additional disclosable party, the organizational structure is defined by how the additional disclosable party is organized:

• A corporation - The officers, directors, and shareholders of the corporation who have an ownership interest in the corporation which is equal to or exceeds 5 percent;
• A limited liability company - The members and managers of the limited liability company (including, as applicable, what percentage each member and manager has of the ownership interest in the limited liability company);
• A general partnership - The partners of the general partnership;
• A limited partnership - The general partners and any limited partners of the limited partnership who have an ownership interest in the limited partnership which is equal to or exceeds 10 percent;
• A trust - The trustees of the trust;
• An individual - Contact information for the individual; and
• Any other person or entity, such information as the Secretary determines appropriate.

The Final Rule emphasizes that a nursing facility’s medical director falls within the definition of a “managing employee” while also noting that an individual need not be a W-2 employee to be considered a managing employee.

When Must Nursing Facilities Report This Information?

Nursing facilities must report this information (i) when initially enrolling in Medicare or Medicaid (which also includes changes of ownership applications), (ii) when revalidating Medicare or Medicaid enrollment, and (iii) pursuant to a change of information application whenever previously reported information changes.

In November of 2023, CMS released a new CMS-855A application for institutional providers to report additional ownership information, including reporting Private Equity and REIT involvements. Although this Final Rule will become effective 60 days after the date it is published in the Federal Register, CMS will not accept the 07/11 version of the 855A Medicare after December 17, 2023.

What is the Immediate Impact?

While most nursing facilities are not required to immediately report these additional categories, providers should nonetheless examine how the new requirements implicate their reporting obligations going forward. Nursing facilities that are already enrolled in Medicare, not planning on undergoing a change of ownership, and are not facing an upcoming revalidation could still be affected by the Final Rule in the very near future as CMS has signaled its intention to perform off-cycle revalidations at any time to help catalyze the Final Rule’s implementation.

If you have any questions about the information in this alert, please contact, Gerald Aben (gaben@dykema.com or 734-214-7648), David Padalino (dpadalino@dykema.com or 734-214-7616), Hannah Zaskiewicz (hzaskiewicz@dykema.com or 734-214-7607), or your Dykema relationship attorney.