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Highlights

Since 2007, attention has been focused on nursing home ownership by private investment (PI) firms. Nursing home providers are required to disclose parties with an ownership or control interest in order to participate in Medicare or Medicaid. CMS, the HHS agency responsible for managing these two programs, maintains ownership and chain data in its Provider Enrollment, Chain, and Ownership System (PECOS). GAO examined (1) the extent of PI nursing home ownership and firms' involvement in homes' operations, (2) whether PECOS reflects PI ownership, and (3) how HHS and states use ownership data for oversight. GAO identified PI ownership using a proprietary database and analyzed data from six PI firms about their interest and involvement in nursing homes. GAO examined PECOS data for selected PI-owned nursing home chains and discussed ownership data with officials from HHS, CMS, and six states that also collect data.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Health and Human Services 1. As the Secretary of HHS develops regulations to implement the expanded nursing home ownership reporting and disclosure requirements contained in the Patient Protection and Affordable Care Act, the Secretary, given the complex arrangements under which nursing homes can be acquired and operated, should consider requiring the reporting of the organizational structure and the relationships to the facility and to one another of all persons or entities with direct or indirect ownership or control interests in the provider (as defined in the act), such that the hierarchy of all intermediate persons and entities from the provider level up to the chain and the ultimate owner is described.
Closed - Not Implemented
On May 6, 2011, CMS published a proposed rule for implementing, among other things. sections of the Patient Protection and Affordable Care Act related to nursing home transparency (NPRM 1351-P: Medicare Program; Prospective Repayment System and Consolidated Billing for Skilled Nursing Facilities; Disclosures of Ownership and Additional Disclosable Parties Information). In the preamble to the rule, CMS noted GAO's findings that the ownership information CMS collected was not transparent. CMS proposed revising the ownership information that nursing home providers must report to participate in Medicare and Medicaid, specifically that they report information on the organizational structure of additional disclosable parties and on the relationship of such parties to the nursing home and one another. CMS did not issue a final rule but has taken steps to obtain more detailed information about nursing home owners by making changes to its provider enrollment application form. However, even with these changes, the information collected is not sufficiently detailed to identify the hierarchy of all intermediate entities and individuals from the provider level up to the chain and the ultimate owner. CMS has not indicated any plans to take further actions to address this recommendation, therefore we consider the recommendation to be closed and not implemented.
Department of Health and Human Services 2. As the Secretary of HHS develops regulations to implement the expanded nursing home ownership reporting and disclosure requirements contained in the Patient Protection and Affordable Care Act, the Secretary, given the complex arrangements under which nursing homes can be acquired and operated, should consider requiring the reporting for entities reported as having ownership or control interests, specify whether or not the entities have an operational role; for example, special purpose entities created solely for the purpose of acquiring the nursing home but having no operational role should be identified as such.
Closed - Implemented
On May 6, 2011, CMS issued a proposed rule implementing, among other things, sections of the Patient Protection and Affordable Care Act related to nursing home transparency (NPRM 1351-P: Medicare Program; Prospective Repayment System and Consolidated Billing for Skilled Nursing Facilities; Disclosures of Ownership and Additional Disclosable Parties Information). In this proposed rule, CMS did not specifically propose that providers specify whether ownership entities reported have an operational role. However, CMS has taken steps to collect more detailed information about nursing home owners by making changes to its provider enrollment application form. These changes included identifying whether an owner organization was solely created to acquire the provider. As this change is consistent with our recommendation, we consider the recommendation to be closed and implemented.
Department of Health and Human Services 3. As the Secretary of HHS develops regulations to implement the expanded nursing home ownership reporting and disclosure requirements contained in the Patient Protection and Affordable Care Act, the Secretary, given the complex arrangements under which nursing homes can be acquired and operated, should consider requiring the reporting of the percentage ownership interest in the provider for all entities and individuals who have an ownership or control interest (as defined in the act).
Closed - Implemented
In September 2010, we reported that while entities with at least 5 percent ownership were listed in PECOS, the database does not include information on their specific ownership percentage, adding to the difficulties determining the hierarchy and relationships among the owners listed. We recommended that the Secretary of HHS consider requiring the reporting of the percentage ownership interest in the provider of all entities and individuals with ownership or control interest. CMS agreed with this recommendation, and consistent with it, revised the Medicare provider enrollment application in July 2011. The enrollment application now asks providers to report the percentage ownership interest of entities and individuals with ownership or control interest.
Department of Health and Human Services 4. As the Secretary of HHS develops regulations to implement the expanded nursing home ownership reporting and disclosure requirements contained in the Patient Protection and Affordable Care Act, the Secretary, given the complex arrangements under which nursing homes can be acquired and operated, should consider requiring the reporting of the names and titles of the members of the chains' governing body.
Closed - Not Implemented
On May 6, 2011, CMS published a proposed rule implementing, among other things, sections of the Patient Protection and Affordable Care Act related to nursing home transparency (NPRM 1351-P: Medicare Program; Prospective Repayment System and Consolidated Billing for Skilled Nursing Facilities; Disclosures of Ownership and Additional Disclosable Parties Information). In the proposed rule, CMS proposes to revise the ownership information that nursing home facilities must report to participate in Medicare and Medicaid, however, these changes do not fully address this recommendation. Specifically, CMS proposed that each member of the nursing home's governing body or each person who is an officer, director, member, partner, trustee, or managing employee of the facility be reported, including their name and title and period of service. However, members of the nursing home chain's governing body--who were the focus of this recommendation--may not be among those in this group and therefore may not be reported. CMS did not issue a final rule but has taken steps to obtain more detailed information about nursing home owners by making changes to its provider enrollment application form. These changes, however, do not include obtaining information on the names and titles of members of the chains' governing body. CMS has not indicated any plans to take further actions to address this recommendation, therefore we consider the recommendation to be closed and not implemented.
Department of Health and Human Services 5. As the Secretary of HHS develops regulations to implement the expanded nursing home ownership reporting and disclosure requirements contained in the Patient Protection and Affordable Care Act, the Secretary, given the complex arrangements under which nursing homes can be acquired and operated, should consider requiring the reporting of the organizational affiliation of individuals with an ownership or control interest (as defined in the act).
Closed - Not Implemented
On May 6, 2011, CMS published a proposed rule implementing, among other things, sections of the Patient Protection and Affordable Care Act related to nursing home transparency (NPRM 1351-P: Medicare Program; Prospective Repayment System and Consolidated Billing for Skilled Nursing Facilities; Disclosures of Ownership and Additional Disclosable Parties Information). In the proposed rule, CMS proposed revising the ownership information that nursing home facilities must report to participate in Medicare and Medicaid, however, these changes did not fully address this recommendation. Specifically, CMS proposed that each member of the nursing home's governing body or who is an officer, director, member, partner, trustee, or managing employee of the facility be reported, including their name and title and period of service. This group could include individuals with an ownership or control interest--which was the focus of GAO's recommendation--but this is not specified. Also, the intent of GAO's recommendation was for CMS to capture the affiliation of these individuals to the organizations they represent (e.g. partner of private equity firm that purchased the nursing home) as opposed to their title relative to the nursing home. CMS did not issue a final rule but has taken steps to collect more detailed information about nursing home owners by making changes to its provider enrollment application form. These changes, however, do not include obtaining information on the organizational affiliation of individual owners with a control interest. CMS has not indicated any plans to take further action to address this recommendation, therefore this recommendation is considered closed and not implemented.
Centers for Medicare and Medicaid Services 6. To ensure proper administration of current reporting requirements, the Administrator of CMS should issue guidance on the circumstances under which the holder of a security interest in a provider may be considered to have a reportable interest.
Closed - Implemented
As part of our review of private investment ownership of nursing homes, we examined nursing home ownership information collected by CMS in its Provider Enrollment, Chain, and Ownership System (PECOS). To be eligible for Medicare and Medicaid payments, nursing homes are required to submit information on individuals or entities that have a direct or indirect ownership or control interest in the provider. Also, owners of a whole or partial interest in any mortgage, deed of trust, note or other obligation secured by the nursing home or any of its property or assets, equal to 5 percent or more of the total property and assets, are among those required to be disclosed. Nursing homes report ownership information to CMS through the agency's Medicare enrollment application when they apply to participate in the Medicare program, and CMS stores this information in PECOS. In September 2010, we found that one private investment firm that leased nursing home real estate to a provider that had a security interest in the assets of the provider was not reported in PECOS. CMS officials noted that it may not be clear to providers that these entities must be reported, as the instructions on the application do not specifically indicate that a security interest is a reportable interest, and that going forward CMS may need to revise the application to make this explicit. To ensure proper administration of current reporting requirements, we recommended that CMS issue guidance on the circumstances under which the holder of a security interest in a provider may be considered to have a reportable interest. CMS agreed with this recommendation and said it anticipated addressing it by revising the Medicare enrollment application. Consistent with our recommendation and its planned action, in July 2011, CMS revised the Medicare provider enrollment application. The application now clearly indicates that all entities with a security interest in the provider or 5 percent or more must be reported.
Centers for Medicare and Medicaid Services 7. To ensure that all providers that belong to the same nursing home chain can be readily identified, the Administrator of CMS should require each provider to report the identity of other nursing homes that are part of the same chain.
Closed - Not Implemented
The Centers for Medicare & Medicaid Services (CMS) agreed with this recommendation and stated it would incorporate this change into a future version of the Medicare provider enrollment application. In July 2011, CMS revised the enrollment application (CMS 855A - Medicare Enrollment Application for Institutional Providers), however, we did not observe any changes made to how chain information is collected. The form still does not require each provider to report the identify of other nursing homes that are part of the same chain. Nonetheless, based on CMS's concurrence with this recommendation, we are leaving it open. In 2012, CMS said that upon further review it determined that requiring the provider to report information on all other nursing homes that are part of the chain would pose an undue burden on the provider. The agency said that the provider enrollment system (PECOS) enables CMS to query Medicare enrollments and identify specific chains associated with other enrollments. CMS stated that it has no further updates on this and considers the matter closed.
Centers for Medicare and Medicaid Services 8. To improve the usability and accuracy of the ownership and control information collected and stored in PECOS, the Administrator of CMS should expand the scope of CMS's existing workgroup intended to make PECOS data available within the agency by developing a comprehensive strategy for disseminating PECOS data to HHS, states, and the public; for example, CMS could develop and make available standardized reports on nationwide ownership data and could include ownership information on its Nursing Home Compare Web site.
Closed - Implemented
According to the Centers for Medicare and Medicaid Services (CMS), the agency released an update to PECOS that allows states to view nearly all provider enrollment data fields in PECOS. CMS also reported that CMS regional office staff have been provided access to PECOS, as well as other components within CMS on an as needed basis. In addition, in 2012, consistent with our recommendation, CMS began to include information identifying the individuals and entities with an 5 percent or more ownership interest in or managing control of nursing homes on its Nursing Home Compare web site.
Centers for Medicare and Medicaid Services 9. To improve the usability and accuracy of the ownership and control information collected and stored in PECOS, the Administrator of CMS should examine state systems to identify best practices for the collection and public dissemination of nursing home ownership and chain information, including ways in which states make the hierarchy among owners more apparent.
Closed - Not Implemented
CMS stated that it is currently engaged with states on the exchange of provider information required to implement new provider enrollment screening requirements, and according to CMS, it plans to use these interactions to gain information and feedback from the states on best practices in the collection and public dissemination of nursing home ownership and chain information. We will follow up next year to see if CMS has made progress in its plans to examine state best practices. In 2012, CMS stated that it had recently implemented an automated provider screening system, which will allow the agency to screen all providers including nursing homes. The agency said that it is continuing to have internal discussions and explore data sources for the automated provider screening system that can provide nursing home information. CMS stated that it had no further updates relative to this recommendation and considered the matter closed.
Centers for Medicare and Medicaid Services 10. To improve the usability and accuracy of the ownership and control information collected and stored in PECOS, the Administrator of CMS should more closely monitor the activities of CMS contractors that review the ownership and control information submitted by providers that participate in Medicare and Medicaid to help ensure its accuracy and completeness.
Closed - Implemented
CMS's Provider Enrollment Operations Group (PEOG) is currently evaluating the contractor Quality Assurance Surveillance Plans (QASP) criteria that are currently used to assess contractor performance as it relates to timeliness and accuracy of processing provider enrollment applications. CMS stated that PEOG expects to include the information in our finding as one of the elements which to be evaluated. Further they plan to evaluate this as part of focused or other reviews of the contractors' provider enrollment operations. CMS has a number of steps planned that will address this recommendation; we will follow up next year to see what actual changes CMS has made to its process for monitoring contractors' activities to review the ownership information submitted by providers. In 2012, CMS reported taking several actions to improve their oversight of its contractors since we made our recommendation. First, CMS officials reported that beginning in January 2012, the agency modified its audit procedures to increase the frequency with which it reviews contractors' processing of enrollment applications of Medicare Part A providers, which include nursing home providers. According to CMS officials, formerly CMS would pull a sample of the Medicare part A applications processed by a contractor for review once every 5 years, now a sample is reviewed every year. In addition, CMS officials reported that the agency is now pulling applications specific to nursing home providers for review purposes. Finally, CMS included more detailed language in a checklist reviewers use in conducting their evaluations to better ensure that they thoroughly check whether all information from the application, including ownership information, was completely and accurately entered into the Provider Enrollment, Chain, and Ownership System (PECOS).
Centers for Medicare and Medicaid Services 11. To help ensure that the requirements for the collection of ownership and control information from nursing home providers that participate in Medicare and Medicaid keep pace with evolving ownership structures, the Administrator of CMS should periodically review the requirements related to reporting on the agency's provider enrollment form to ensure that it promotes accurate and complete reporting of nursing home ownership information consistent with the statute.
Closed - Not Implemented
CMS has made some changes to the form used to collect ownership and control information from nursing home providers (in accordance with provisions in the Patient Protection and Affordable Care Act). However, not enough time has passed to warrant the agency reviewing its reporting requirements for the purposes of adjusting them to evolving ownership structures. In 2012, CMS stated that it has no further updates and considers the matter closed.

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