CMS is Lifting the Curtain on Private Equity Ownership in Long-Term Care
Wednesday, November 22, 2023

Private equity (PE) in long-term care has been the subject of regulatory scrutiny after the publication of recent studies suggesting poorer resident outcomes in PE-backed facilities.  

The Centers for Medicare & Medicaid Services (CMS) recently finalized a rule focusing on enhancing transparency in nursing home ownership for facilities enrolled in Medicare and Medicaid.  This rule is part of the Biden-Harris Administration's broader strategy to improve the quality of care in nursing homes and has far-reaching consequences for PE-backed ventures. 

The final rule mandates the disclosure of specific ownership, managerial, and other information regarding Medicare skilled nursing facilities (SNFs) and Medicaid nursing facilities (including persons who merely furnish cash management services). For PE firms, this means a heightened level of transparency is required, particularly in disclosing relationships and operational details of nursing homes they own or manage.

CMS will make the reported data publicly available within one year, emphasizing the need for PE firms to be transparent and accountable in their nursing home operations. This public disclosure could influence public perception and market dynamics, making it crucial for PE firms to proactively manage their nursing home investments with an emphasis on quality of care and operational efficiency.

PE firms must adapt to increased transparency and reporting requirements, maintain high standards of care, and be prepared for public scrutiny of their operations and investment strategies in this sector.

 
In addition to disclosures around ownership and other operational partners, nursing homes will be required to share further details around entities that either lease or sublease property. The facilities and the property owners may be set up as different firms even though they "work hand-in-hand," CMS said in the release. "Nursing homes frequently use other companies to provide major services or supports within a facility, but families currently have no way of knowing which different companies or firms provide care to their loved ones and how they might be connected to the owners of a nursing home," CMS said.
 

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