On February 13, 2023, the Centers for Medicare & Medicaid Services (“CMS”) proposed a long-delayed regulation that would implement a provider enrollment provision of the Affordable Care Act that expands the information required to be disclosed by skilled nursing facilities (“SNFs”). The law requires that SNFs report detailed information to CMS regarding SNF relationships with private equity companies, real estate investment trusts and other real estate lessors, clinical consultants and providers of accounting and financial services during the provider enrollment process. The proposed rule was published in the Federal Register on February 15, 2023¹. The proposed changes are subject to comment; comments must be received by CMS by April 14, 2023. To become final, CMS would respond to these comments and issue a final rule thereafter.

Proposed rules implementing the changes were originally released in 2011 but were not implemented. CMS indicated that it is now proposing updated regulations due to recent alarming reports about private equity ownership of SNFs and concerns regarding the quality of care provided in these facilities.

Under the proposed rules, Medicare providers would need to report the following information as a part of provider enrollment activities:

1. Persons or entities that provide operational, financial or managerial control over the facility or that provide policies or procedures for any of the operations of the facility, or that provide financial or cash management services to the facility;
2. Owners of real estate on which the SNF sits;
3. Providers of management or administrative services, clinical consulting services or accounting or financial services to the facility;
4. A broader definition of “managing employee” than is currently required for enrollment applications. Providers would be required to include a “general manager, business manager, administrator, director or consultant who directly, indirectly manages, advises or supervises any element of the practice, finances or operations of the facility;” and
5. Each such disclosing entity would need to disclose whether it is a private equity company or a REIT.

This information would be disclosable at the time of initial enrollment and revalidation, and changes would be reported within the existing legal timeframes for reporting enrollment changes.

There are proposed regulatory definitions for both the terms “private equity company” and a “real estate investment trust” as follows:

• “Private equity company” means a publicly-traded or non-publicly traded company that collects capital investments from individuals or entities and purchases an ownership share of a provider.

• “Real estate investment trust” means a publicly-traded or non-publicly traded company that owns all or part of the buildings or real estate in or on which a provider operates.

The proposed rule provides for companion requirements as a part of Medicaid enrollment activities.

This proposal signals increasing alarm by legislatures and regulators to consolidation within the healthcare industry. For example, California recently enacted a law to require advance notice to a new California Department of Health Care Access and Information for most healthcare transactions, with public input required if the new department believes the transaction will trigger issues with healthcare competition, prices, access, quality or equity². There is a currently pending bill in California, AB 616, that would require providers and physician organizations to provide audited financial statements as a part of that process.

These legal developments, in addition to increasing consolidation and private equity investment in healthcare, suggest that these matters may be early developing laws regulating private equity investment in healthcare. Compliance with these kinds of requirements is highly technical.

SNFs and other providers who want to provide agency feedback to be considered in the adoption of the first provider enrollment rules specifically targeting private equity should consider commenting on the proposed federal rules.

[1] Federal Register: Medicare and Medicaid Programs; Disclosures of Ownership and Additional Disclosable Parties Information for Skilled Nursing Facilities and Nursing Facilities

[2] See Chapter 48, Senate Bill 184, enrolled June 30, 2022; Cal. Health & Safety Code 125706.