On February 28, 2022, the Biden-Harris administration announced initiatives designed to improve care and accountability at skilled nursing facilities (SNF). Since that announcement, the Centers for Medicare and Medicaid Services (CMS) has undertaken the responsibility to investigate and publish new rules regarding transparency of certain ownership, management, and financially controlling persons involved with SNFs.

Earlier this year, CMS published its proposed rules regarding updated disclosures. Today, CMS published the final rule. The final rules amend 42 CFR Parts 424 and 455 by including new definitions of persons and entities that must be disclosed on CMS-855A forms with respect to changes of ownership, revalidations, and initial enrollments. The final rule and corresponding comments and response can be found in the Federal Register published on November 17, 2023.

While the initial premise of the Biden-Harris administration’s focus was predicated on a perceived concern that SNFs owned or affiliated with Private Equity Companies (PECs) and Real Estate Investment Trusts (REITs) have poor clinical performance for residents and poor conditions for staff, this final rule extends far beyond to cover additional relationships. CMS is requiring disclosures of an expansive group of SNF administrative parties including, without limitation, consulting companies, medical directors, landlords, sublessees, and their direct or indirect owners.

In addition to the above changes, 42 CFR 424.516 was amended to require SNFs, during initial enrollment (including changes of ownership) and revalidation, to disclose the following to CMS:

1. Governing Body – Each member of the governing body of the facility, including name, title, and tenure;
2. Managing Employee – Each person or entity who is an officer, director, member, partner, trustee, or Managing Employee of the SNF, including name, title, and tenure;
   1. Managing Employee was defined to mean the manager, administrator, director, or any other individual who exercises operational or managerial control, directly or indirectly, of the SNF, including a medical director and administrator; and
3. Additional Disclosable Party (ADP) – Each person who is an ADP, along with the organizational structure of each ADP and a description of their relationship to the SNF; this includes any person or entity that:
   1. Exercises operational, financial or managerial control over the SNF;
   2. Provides policies or procedures for any of the operations of the SNF;
   3. Provides financial or cash management services to the SNF;
   4. Leases or sublease real property to the SNF;
   5. Owns a whole or part interest equal to or greater than five percent in the real property where the SNF is located; and
   6. Provides, management, administrative, clinical consulting, accounting, or financial services to the SNF.

The Organizational Structure to be disclosed requires an SNF to outline the following for each ADP:

1. For any corporation: all officers, directors, and shareholders of the corporation who have an ownership interest in the corporation equal to or greater than five percent of the ADP. It is unclear if this is intended to be direct or indirect ownership.
2. For any limited liability company: the members and managers of the limited liability company and their applicable percentage. It is unclear if this is intended to be direct or indirect ownership.
3. For a general partnership: the partners.
4. For a limited partnership: the general partners and any limited partner who has an ownership interest equal to or greater than 10 percent.
5. For a trust: the trustees of the trust. Note that the CMS commentary to this amendment expressly states that the beneficiaries of the trust will not need to be disclosed. In addition, CMS confirms that additional rulemaking would be required to include beneficiaries as part of these disclosures.

Finally, CMS added two new definitions regarding entities that are required to be disclosed on the CMS-855A. The definitions are for Private Equity Companies (PECs) and Real Estate Investment Trusts (REITs).

1. PEC shall mean 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 an SNF.
2. REIT shall mean a real estate investment trust as defined in 26 U.S.C. 856.

The amended regulations leave much to be interpreted regarding these disclosures. CMS intends to present sub-regulatory guidance with clear examples of each disclosure in the near future; however, CMS has stated that in the absence of doubt as to whether additional information should be included in the CMS-855A, their expectation is that SNFs should disclose it.

Similar revisions were made to the Medicaid disclosure requirements; however, those will need to be implemented by each state to the extent not already included their enrollment and revalidation processes.