New CMS Rule Calls for Nursing Home Ownership Transparency, After Linking Poor Care to Private Ownership

Nursing homes owned by private equity firms are more likely to have lower staffing levels and provide worse care than other privately owned facilities, according to new government research.

A new federal rule will require greater transparency about nursing home ownership, following the results of a new study that shows residents living in facilities that are privately owned are more likely to receive a lower quality of care, putting them at risk of nursing home neglect.

The Biden Administration issued a press release on November 15, announcing new requirements for nursing homes receiving Medicare reimbursements, which require them to disclose ownership and management information to the Centers for Medicare and Medicaid Services (CMS).

The agency indicates that information will be made available to the public and families making care decisions for their loved one. A final rule (PDF) regarding the new requirements was published in the federal register on November 17.

“CMS is committed to leveraging our tools to improve safety and quality of care in nursing homes,” CMS Administrator Chiquita Brooks-LaSure said in the press release. “By strengthening our ability to examine nursing home ownership, including private equity and real estate investment trusts, we can improve transparency for the people we serve and their loved ones, researchers, and regulators, and enable better informed decisions about nursing home care.”

New Nursing Home Ownership Transparency Rules

The final rule calls for nursing homes receiving Medicare and Medicaid reimbursement to disclose any changes in ownership of a facility. In addition, it requires information on all trustees, those who exercise financial control, lease or sublease property to a nursing home, own at least 5% of the total value of a facility, or provide a nursing home with administrative services or clinical consulting services.

The new rule also calls for detailed information on the organizational structure, such as board members. It will affect the majority of U.S. nursing homes, according to CMS and the Biden Administration.

“The additional data required to be reported under the rule will be public, allowing families to make more informed choices about the care of their loved ones,” the press release states. “This will also 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.”

The new regulations will go into effect 60 days after the rule has been officially published in the Federal Register.

Private Nursing Home Ownership Study

The final rule was announced alongside a new federal report (PDF), which indicates privately owned nursing homes are more likely to have nursing home staffing problems, and are also more likely to provide a lower quality of care.

According to the research, conducted from 2013 to 2022, about 5% of all nursing home facilities are owned by private equity (PE) firms. That number rose steadily from 2013 to 2017, but has since leveled off. Nearly 10% of nursing homes are owned by real estate investment trusts (REITs).

“Over the study period, PE and REIT invested facilities are similar to other for-profit facilities in terms of their size, resident acuity, and payer mix,” the report states. “However, PE facilities appear to be lower quality on average, based on star ratings.”

Private equity ownership translated to a 12% lower amount of nursing hours per resident per day compared to other for-profit facilities, the report indicates. In addition, those same facilities were found to have a 14% higher deficiency score, meaning they provided worse care. REITs were linked to a 7% lower nurse staffing level and also received a 14% higher deficiency score than other for-profit nursing homes, according to the findings.

A 2021 study published in JAMA Health Forum came to similar conclusions, determining that PE-owned nursing homes experienced increased hospitalizations among long-term residents and increased Medicare costs.

In April of this year, eighteen state attorneys general sent a letter to the U.S. Department of Health and Human Services (HHS) and CMS, calling for a nursing home ownership transparency rule.

The states attorneys general indicated the most effective way to reduce instances of nursing home neglect in these privately owned facilities is for CMS to implement an ownership transparency requirement, which will allow regulators to identify “bad actors” and hold them accountable.

“HHS continues to take action to improve the safety, quality, and accountability of nursing homes,” HHS Secretary Xavier Becerra said in the press release announcing the new rule. “The Biden-Harris Administration believes that residents living in nursing homes should receive the dignity, care, and respect they deserve. Taking steps to help consumers to learn more about the owners of a nursing home will allow them to make the choice that best meets their needs.”