The nursing home industry has seen increased efforts by the federal government to enhance transparency, with a focus on ownership disclosures (both past and present ownership) of facilities enrolled in Medicare. The efforts continue, with the latest push in the form of the Linking Investors and Nursing Home Quality Act, a bill introduced in the House of Representatives on July 29, 2022 (the “Bill”). The Bill takes several approaches to increase transparency, including those listed below, and would add enforcement measures where providers do not make certain disclosures.
The Bill would:
- Suspend payments where facilities fail to timely disclose ownership. The Bill would require a facility that fails to submit specified information to the Secretary of Health and Human Services (including ownership information) “by the date that is 30 days after the date that such information is required to be submitted pursuant to regulations or contract provisions” to have its Medicare and Medicaid payments suspended.
- Add new quality of care reviews. Facilities would undergo, on a periodic basis, a review of the quality of care furnished. In order to implement these reviews, the Bill would require the secretary to establish quality metrics to evaluate each facility, which must include “a metric with respect to the average number of direct care hours furnished to residents.” When the secretary determines that a facility falls below established standards, the secretary must notify the facility, publish the name of the facility on the Care Compare website, and suspend Medicare and Medicaid payments until the facility meets the standards.
- Add disclosures where a facility owner also owns an entity that contracts with the facility for services. Where an owner of the nursing facility also owns an entity that contracts with the facility for services, the owner must submit to the secretary:
- A balance sheet detailing the assets, liabilities, and net worth of the entity.
- A statement of income, expenses, and operating surplus or deficit.
- A statement of cash flows, including ongoing and new capital expenditures and depreciation.
- Require annual updates to ownership disclosures. The Bill directs the secretary to amend regulations to require annual ownership disclosures.
- Create the Data Liaison Team. The secretary would be required to establish a task force, referred to as the Data Liaison Team, to:
- Identify any common ownership patterns with respect to facilities that (1) are at least 30 days delinquent in supplying ownership information; (2) in the preceding quarterly reporting period, failed to meet a payroll-based journal level of 4.1 hours of direct resident care hours per resident per day; or (3) in the preceding year of reporting, failed to meet any quality standard established by the secretary.
- Assess potential misuse of Medicare and Medicaid payments through review of data collected by the Treasury Department, facility organization charts, and cost reports.
- On a monthly basis, report disclosing entities with common ownership to the Interagency Board, the Office of Inspector General, and the Department of Justice.
- Regularly review facilities with a one-star rating on the Care Compare website, as well as facilities that are ranked among the lowest 20% of facilities on Care Compare.
- At its discretion, require facilities to submit information to the team on whether such facilities:
- do business (including business relating to laundry services, staffing agencies, food and beverage services, medical supplies, or consulting) with any other entity (including specification of such other entity);
- lease their building or property from another entity (including a specification of such other entity); or
- share an individual who has directly or indirectly (as determined by the secretary pursuant to a notice and comment rulemaking) any ownership interest of 5% or more in an entity described in the bullet directly above and the facility.
For more information, please contact Hedy Rubinger or Alex Foster.
The Arnall Golden Gregory Change of Ownership (CHOW) team leads all regulatory aspects of healthcare transactions for investors, operators, managers, capital partners, and developers of every size in all 50 states. The team streamlines the regulatory process so that clients close their transactions on or ahead of schedule. Whether obtaining licensure and Medicare/Medicaid approvals, structuring transactions to expedite closings, anticipating issues to minimize cash flow disruption, negotiating regulatory terms in deal documents, creatively resolving diligence issues, or advising on CHOW guidelines and compliance, the team provides extensive experience and practical solutions. To date, the CHOW team has served as primary regulatory counsel in transactions valued at more than $35 billion.