State Opportunities to Build on New Federal Regulations to Increase Nursing Home Transparency

Emma Rauscher and Carrie Graham, Center for Health Care Strategies
An elderly white woman sits on her bed white she knits a colorful blanket.

There are over 15,000 nursing homes (NHs) in the United States caring for 1.2 million people who need inpatient rehabilitation, skilled nursing care, and/or personal assistance services. While most NHs are for-profit and privately owned, they are primarily funded by taxpayer dollars. Medicare is the primary payer for Medicare beneficiaries who need rehabilitation after a hospital stay (often called “post-acute” or “short stay” residents). Medicaid is the primary payer for the majority of “long stay” NH residents, including those who have maxed out their Medicare days, and those who spend down personal savings to qualify.

Because of the very large public investment in NH care, U.S. policymakers, health care and aging stakeholders, residents, and advocates have all expressed interest in increasing operational transparency — in other words, making it easier to track where those taxpayer dollars are spent, who owns the nursing home, and how those dollars are impacting quality of care.

Historically, NHs that are reimbursed by Medicare and/or Medicaid must meet certain certification requirements and report their costs to the federal government and to states. Section 6101(a) of the Affordable Care Act of 2010 amended the Social Security Act to increase transparency by requiring NHs to report “disclosing entities,” defined as “persons with an ownership or controlling interest” in the facility. After this, Medicare cost reports required information about payments made by the NH to disclosed entities that had shared ownership or shared interest, with the intent of reducing “self dealing.” But certain information that the Centers for Medicare & Medicaid Services (CMS) was authorized to collect by the law was never required by regulation.

In 2022, the Biden-Harris Administration announced a package of NH reform recommendations that specifically called for increased transparency in NH ownership and operations. On November 15, 2023 CMS responded with a final rule requiring increased transparency in NH operations.

This Better Care Playbook blog post describes this new rule and explores the potential impact on NH operations. Since states bear a large responsibility for NH oversight, licensure, and certification, the blog post suggests opportunities for states to respond to this rule and further promote transparency.

New CMS Rule on Nursing Home Transparency

CMS’ final rule on NH transparency requires the disclosure of new information regarding the ownership, organizational structure, and financing of Medicare skilled nursing facilities (SNFs) and Medicaid NHs. This rule impacts ownership reporting but will also impact cost transparency and quality of care. New requirements for SNFs and NHs include:

  • Disclosing all information on ownership structures and trustees included in section 1124(c) of the Affordable Care Act. They must do this when they are initially enrolling in the Medicare/Medicaid program, within 30 days of a change in ownership, and 90 days for any other changes.
  • Disclosing “related parties” — these include companies or entities that are owned by the same NH owner, private equity company, or real estate trust that are then: paid to provide administrative or consulting services, own at least five percent of, lease, or sublease property to, and/or exercise financial control of the SNFs/NHs.
  • Publicly indicating when any NH facility owner or managing entity is a private equity company or real estate investment trust.

This rule also provides definitions for private equity company, real estate investment trust, and other terms to aid in consistent and accurate reporting. CMS will publicly publish newly required data within one year of reporting.

Nursing Home Ownership Transparency

Single ownership of nursing homes — when one person, family, company, or entity owns one nursing home — has become increasingly rare. Instead, large for-profit chains, real estate trusts, and private equity firms have become increasingly common. In particular, private equity now owns over 10 percent of NHs in the US. It is not uncommon for private equity-backed nursing homes to have complex business structures with multiple affiliates that have the effect of obfuscating ownership. According to a report from the Government Accountability Office, it is nearly impossible to identify private equity ownership or investment in NHs using the reporting and data systems that are currently available.

Research suggests that NH owners impact quality. For example, NHs with low Star quality ratings change ownership more frequently than those with higher ratings. Private equity ownership of NHs is associated with increased resident mortality, lower-quality care, lower staff-to-resident ratios as well as higher Medicare costs.

When a new nursing home opens, or an existing facility is sold, the state survey agencies are responsible for determining if that new owner meets the requirements for a nursing home operating license and certification to be reimbursed by Medicare and Medicaid. To do this, the applying owners’ track record must be very clear, including as it relates to other facilities owned. Complex ownership structures make it very difficult to make this assessment. For example, when a specific nursing home has a history of poor performance, poor quality, abuse and/or neglectful practices, the state survey agency has a responsibility to shut down that facility. But that owner may then open a new business with a different name and apply for a new license. Greater transparency about owners’ identities would help to address this issue. Ownership transparency is also important for nursing home residents and their families who want to avoid facilities owned by poor-quality chains.

State opportunities to further improve ownership transparency include:

  • Incorporate private equity ownership information into state datasets.
  • Align federal and state systems, data sets, and common ownership and operatorship definitions as outlined in the Moving Forward Coalition’s Transparency Action Plan.

Nursing Home Cost Transparency

Cost transparency is important for policymakers to understand how nursing homes are spending their money and make informed decisions about reimbursement rates. Currently, policymakers make these decisions using Medicare and Medicaid cost reports. NHs are required to submit Medicare cost reports to CMS detailing their yearly expenditures. Medicare cost reports are published by CMS, but they are not audited and contain data that is widely considered to be inaccurate and incomplete. States also require NHs to submit Medicaid cost reports. These vary by state but have many of the same limitations.

Complex business structures and contracts can create separation between the owners of NH facilities and the facilities’ operations, allowing true costs and profits to be masked. Related party transactions (where a facility owner pays another company that they own to provide services to the NH) are perfectly legal, but can obfuscate the facility’s bottom line. For example, one entity may own two companies — one that owns the NH and another that owns the real estate, with the former paying rent to the latter. While identifying these related party ownership structures is difficult due to the aforementioned limitations in cost reporting, deep dives into the practices of particular NH owners have revealed that payments to “related parties” tend to be greater than fair market rates. This practice results in much higher profits for the parent company than are revealed in cost reports.  There is a planned investigation by the Office of the Inspector General to assess the profit implications of related party transactions that will come out in 2024.

State opportunities to increase cost transparency include:

  • Pursue direct care spending ratios mandating what portion of NH revenue must be spent on direct patient care, as have been implemented by states such as New Jersey, New York, and Massachusetts.
  • Require reporting of aggregated costs across all NH facilities and related companies that share the same owner (known as consolidated cost reports), as is required by California, Virginia, and Pennsylvania.
  • Improve audits of cost reports to ensure accurate reporting. Changes to auditing can be made at the NH level and legislated at the state and federal level.

Nursing Home Quality of Care Transparency

The quality of care in U.S. NHs varies widely, with significant racial disparities. The federal Care Compare website assigns Star ratings to NHs based on health inspection, staffing, and quality measures data. As of September 2023,, 3,483 (23%) NHs received the lowest quality rating of 1 star, and 2,740 (18%) received the highest rating of 5 stars. An additional 88 facilities are designated as Special Focus Facilities (SFF) indicating they are potentially dangerous for residents and are being inspected twice as often as other facilities, and 441 facilities are SFF candidates. In 2022, 22 percent of NHs received an “immediate jeopardy” deficiency, meaning that the surveyor observed a situation in which resident health and safety is at severe risk.

Care Compare relies on federal-level surveys and quality indicators to assign its Star rankings, omitting data obtained by state-level surveys. It is also challenging to access the actual data sets used to assign these quality rankings, so detailed quality information is not readily available. Additionally, facility deficiencies can be subjective based on the surveyor completing the assessment, and quality measures in the Minimum Data Set (MDS) that are used in Star ranking calculations are self-reported and able to be manipulated. Improving the transparency and usability of quality data is important for policymakers to inform quality-related policies and incentives both within states and at a national level; for consumers to make informed decisions on which facility to choose for themselves or their loved ones; and for payers to guide funding and network decisions.

State opportunities to increase quality transparency include:

  • Develop state-level, consumer-friendly quality comparison websites, such as in California, which includes information from state-level quality data on a public site.
  • Validate quality data and take enforcement actions when facilities submit incorrect information.

Aggregate all public quality data by affiliated owner, so that consumers can make informed decisions including how that owner operates across all the facilities they own, as CMS has done at the federal level.

The new federal regulations on ownership and cost transparency are a first step for ensuring that NH residents are getting high quality care and that NHs are receiving appropriate reimbursement. States can use the momentum of these new federal regulations and the increasing national attention on transparency to ensure all stakeholders can make informed decisions regarding NH care.