Nursing Homes: Complexity of Private Investment Purchases Demonstrates Need for CMS to Improve the Usability and Completeness of Ownership Data

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.

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.

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.

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.

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).