Nursing homes would have to disclose whether private equity firms or real estate investment trusts own or help operate their facilities under a proposed rule the Centers for Medicare and Medicaid Services issued Monday.
President Joe Biden's administration contends that promoting transparency in nursing home ownership would improve safety and quality. Research has linked private equity and REIT ownership to lower staffing levels and subpar quality care.
“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,” Health and Human Services Secretary Xavier Becerra said in a news release. Biden unveiled a slate of nursing home proposals during his State of the Union address in 2022 but few of them have come to fruition.
HHS debuted a public database of skilled nursing facility ownership information in September that draws from what facilities that treat Medicare and Medicaid beneficiaries are already required to disclose to regulators. The proposed rule lays out stricter reporting requirements: Nursing homes would have to disclose outside investors with ownership stakes in their facilities as well as any entities that provide administrative or clinical consulting services.
Long-term care industry groups offered a mixed initial response to the CMS plan.
“We agree with the administration that ownership and financing of nursing homes should be transparent to help ensure that owners or associated businesses do not profit at the cost of quality care,” LeadingAge President and CEO Katie Smith Sloan said in a news release.
While the American Health Care Association and National Center for Assisted Living supports transparency, there are more pressing matters facing the industry, President and CEO Mark Parkinson said in a news release.
“Focusing on ownership and private equity is a red herring,” Parkinson said. Less than 5% of nursing homes are owned by private equity firms and roughly 12% are owned by REITs, and they typically have no influence on daily operations, he said. “This has become a distraction from the real issues that impact the majority of providers, like Medicaid underfunding and workforce shortages.”
More cash-strapped nursing homes have been selling their real estate assets to investment trusts, which then lease back the spaces to operators. Registered nurse staffing levels decline by as much as 6.3% within three years of a REIT investment, according a study published in Health Affairs last month.
Nursing homes also frequently turn to private equity firms amid financial distress. Despite an increase in corporate investment, roughly 400 nursing homes closed between 2020 and last month, according to CMS data. Nursing and residential care facilities shed more than 210,000 jobs over that span, Bureau of Labor Statistics data show.
Researchers and policymakers have warned that quality declines when private equity firms invest in nursing homes. A JAMA study published in November found that residents of nursing homes acquired by private equity firms were 11.1% more likely to have preventable emergency department visits and 8.7% more likely to experience preventable hospitalizations.
CMS is accepting comments on the proposed rule, which is scheduled to appear in the Federal Register on Wednesday, through April 14.
Lauren Berryman contributed to this story.
