Wednesday Feature: SNF Ownership Transparency

Happy Hump Day!  Only 12 more shopping days until Christmas!

In mid-November, CMS issued a final rule titled: “Medicare and Medicaid Programs; Disclosures of Ownership and Additional Disclosable Parties Information for Skilled Nursing Facilities and Nursing Facilities; Medicare Providers’ and Suppliers’ Disclosure of Private Equity Companies and Real Estate Investment Trusts“. The final rule is available here: Nursing Home Ownership Transparency Final Rule Nov 2023

What fascinates me about this rule and the rather lengthy title is that it truly is, much ado about nothing (borrowing Shakespeare). The rule basically requires nursing homes to report ownership structure and details at initial licensure and certification and at recertification (survey, annual). 

The ownership structure of SNFs is minimally comprised of REITs and private equity.  While private equity interest has grown, it remains about 5% of all facilities.  REIT ownership ticks in at 9%, though the majority of the REIT interest is in real estate, not operations.

Per the Fact Sheet describing the rule, CMS has become concerned that there is a negative correlation between certain types of ownership, predominantly private equity and investment firms, and quality of care.  They cite a working paper that reviewed 18,000 nursing home facilities over a 17-year period and found that private equity ownership was associated with increased excess mortality for residents by 10%, increased use of antipsychotic drugs for residents by 50%, decreased hours of nursing staffing by 3%, and increased taxpayer spending per resident by 11% (higher reimbursement via Medicare compared to peers). The working paper is here: NBER on Quality and Ownership Aug

Another study cited by CMS purportedly found that private equity-backed nursing homes had a COVID infection rate and death rate that were 30% and 40% above statewide averages, respectively. This study, however, was entirely based on results in New Jersey and it was printed in August 2020, the earliest part of the pandemic. The study is here: AFREF-NJ-Private-Equity-Nursing-Homes-Covid

And in another study, this one from JAMA, long-term residents in nursing homes acquired/owned by private equity were 11% more likely to have a preventable emergency department visit and 8.7% more likely to experience a preventable hospitalization, when compared to residents of for-profit nursing homes not associated with private equity. That study is available here: JAMA Private Equity and Quality in SNFs

What the rule relies on as basis for a needed change is data related to a small ownership segment of the industry, predominantly private equity and REITs.  The following data is cited.

• Between 2016 and 2021, 348 hospitals experienced a change in ownership, but 3,000 nursing homes experienced a change in ownership. The number of nursing homes sold each year has increased since 2016.
• The largest 10 nursing home chains own more than 10% of nursing homes — a disproportionate share that raises concerns about market concentration.
• Nursing homes with lower Star quality ratings are sold more often than those with higher Star quality ratings, raising concerns about the relationship between ownership changes and quality.
• Recently published research has found that in the 2-3 years after real estate investment trusts invest in nursing homes, registered nurse staffing levels decline by as much as 6%.

Ultimately, again, this is “much ado about nothing”.  I am not convinced directly, that private equity investment or REIT ownership necessarily correlates to all bad, all poor quality.  The industry is riddled with poor performing facilities that are not owned by REITs or private equity.  And, in the case of REIT ownership, it is primarily an asset/physical plant ownership, not an operating ownership.  Operations is where quality of care is determined, not the ownership of the physical plant.

The real “tell” for me with this rule is that it, frankly, uses a bit of a shell game to divert from the truth about quality of care in SNFs.  Ownership disclosure is fine, but it won’t mean much for patients and families that don’t understand it, or care. Patients are steered to facilities by location, by hospital discharge planners, by insurance/Med Advantage, etc. In the actual milieu that is a hospital to SNF transfer, the overwhelming paperwork and the quick turnaround will not include an in-depth look at ownership – by any party.

For long-term residents, relocation if desired, is not easy, especially if Medicaid is involved.  Anyone who has spent as much or half as much time as I have in the industry knows that long-stay residents typically, like their location and the facility.  Other factors besides ownership matter to the residents and to their families.  And in all honesty, few know what a REIT is or what private equity is.

I am a huge proponent of improving quality of care.  Much of my life’s work has been dedicated to creating environments and systems that deliver great care.  Want better care in SNFs?  Improve funding so that investment can occur, reduce regulations that have nothing to do with resident/patient care, restructure the survey process away from punitive except for bad apples, actually remove the bad players from the industry, and STOP the ongoing demonization of SNFs as places that give crappy care.  Some do, but lots don’t and in fact, I have seen far worse care given to older adults in hospitals than I have in many nursing homes. HAPPY HUMP DAY!