Biden Admin: Improve Quality for Hospitals & Nursing Homes - McDermott

Biden Administration Takes Action to Improve Competition, Transparency and Quality for Hospitals and Nursing Homes


The Centers for Medicare & Medicaid Services (CMS) recently published detailed databases summarizing changes of ownership of Medicare-enrolled hospitals and skilled nursing facilities (SNFs). The databases currently include information from 2016 to 2022, but the data will be updated and released quarterly. CMS also released the skilled nursing facility prospective payment system (SNF PPS) proposed rule (the Proposed Rule), including proposed updates to payment based on quality and value-based care measures.

In Depth

Consistent with the Biden-Harris administration’s stated goals of improving transparency, safety, accountability and quality in healthcare, and specifically in nursing homes, on April 20, 2022, the White House issued the first-ever release of public data by the Centers for Medicare & Medicaid Services (CMS) on changes of ownership involving hospitals and nursing homes enrolled in Medicare. Relatedly, on April 11, 2022, CMS also issued the fiscal year (FY 2023) proposed rule for Medicare payment policies and rates for nursing homes under the Skilled Nursing Facility Prospective Payment System (SNF PPS) (the Proposed Rule). The Proposed Rule includes a number of potential metrics for the SNF Quality Reporting Program and the SNF Value-Based Program for FY 2023. We discuss these developments in turn in this alert.

I. Transparency on Hospital and Nursing Home Ownership

Providers that participate in Medicare are required to enroll and provide detailed ownership information of all direct and indirect owners, regardless of whether such owners are organizations or individuals. Providers are also required to update their ownership information within 30 days of a change of ownership. CMS generally uses the Provider Enrollment, Chain and Ownership System (PECOS), an electronic online system, to maintain and update this enrollment and ownership information. While CMS has long maintained this information internally, on April 20, 2022, CMS released for the first time data on mergers, acquisitions, consolidations and changes of ownership from 2016 to 2022 for hospitals and nursing homes enrolled in Medicare.

The database includes a Hospital Change of Ownership dataset and Skilled Nursing Facility Change of Ownership dataset, as well as an initial Summary Analysis from the HHS Office of the Assistant Secretary for Planning and Evaluation. The Hospital Change of Ownership dataset provides information on individual and organizational ownership interest and managerial control associated with the buyer and seller organizations, as well as the role of the owner, association date, address of the organizational owner and other ownership details. The SNF Change of Ownership dataset includes information on the buyer and seller organization’s legal business name, provider type, change of ownership type and the effective date of the change. CMS expects to release updated change of ownership data for both databases on a quarterly basis.

The newly released information will permit the public to identify when (1) a Medicare-enrolled hospital or SNF has been purchased or leased by another organization, (2) a Medicare-enrolled hospital or SNF purchases or has been purchased by another enrolled provider, or (3) two or more enrolled Medicare hospitals or SNFs consolidate to form a new business entity. In addition to providing change of ownership information, the data includes detailed information about the direct and indirect owners of Medicare-enrolled hospitals and SNFs.

The database was first announced in late February 2022 as part of the State of the Union Action Plan for Protecting Seniors by Improving Safety and Quality of Care in the Nation’s Nursing Homes. The data is intended to enable researchers, enforcement officials and the public to analyze trends and examine the relationship between ownership of healthcare facilities and variables such as costs and outcomes on patients. CMS noted that making change of ownership information public will permit researchers to identify trends and issues related to changes of ownership and consolidation, particularly in relation to healthcare prices, accessibility and quality. The release of the database is in furtherance of the Biden-Harris administration’s policy intentions stated in the 2021 Executive Order on Promoting Competition, wherein the administration expressed concerns that hospital consolidation has resulted in increased healthcare prices and inadequate options in some areas of the country. In the announcement accompanying its release, CMS indicated that publishing the database is “one of many” initiatives to increase transparency and boost competition in healthcare, and we expect to see further developments on this matter throughout the coming year.

CMS noted that making ownership information publicly available will permit researchers and policymakers to understand in more detail how healthcare facilities are owned and where ownership of healthcare facilities may be more concentrated. CMS also noted that the data may be used by the Justice Department and the Federal Trade Commission in connection with review of mergers and acquisitions for compliance with federal antitrust law.

In addition to promoting competition, CMS highlighted that making change of ownership data public may be useful in tracking healthcare quality. CMS pointed to academic research on acquisition of SNFs by private equity and other private investment firms to highlight potential quality of care concerns with these acquisitions. CMS is interested in understanding the impact of different ownership types on the quality of care furnished by healthcare entities.

II. Skilled Nursing Facility Prospective Payment System (SNF PPS) Proposed Rule

Further building upon the White House’s stated commitment to improving safety and quality in nursing homes, CMS recently published its annual SNF PPS Proposed Rule. In addition to proposed rate adjustments, the Proposed Rule discusses a number of elements showcasing CMS’ continued efforts to prioritize the value, rather than volume, of certain services patients receive in nursing homes. A summary of these elements is outlined below.

1. Updated Payment Rates and Recalibrated Parity Adjustment

CMS estimates that the SNF PPS will result in a net decrease of approximately $320 million in Medicare Part A payments to SNFs in FY 2023 compared to FY 2022. This estimate reflects a $1.4 billion (3.9%) increase in the FY 2022 SNF PPS unadjusted federal per diem rates and a $1.7 billion (4.6%) proposed reduction in aggregate SNF spending. The reduction in SNF spending, in turn, reflects a proposed recalibration of the parity adjustment initially used under the Patient Driven Payment Model (PDPM). The PDPM, which CMS expected to be budget-neutral and neither increase nor decrease aggregate SNF spending, went into effect on October 1, 2019. However, the PDPM instead caused an unintended increase in SNF payments of approximately 5%, or $1.7 billion, in FY 2020. As a result, and after considering stakeholder feedback received in the FY 2022 SNF PPS rulemaking cycle, CMS is proposing a parity adjustment to the PDPM that would reduce SNF spending by 4.6% in FY 2023.

2. Minimum Staffing Requirements

CMS is soliciting input in the Proposed Rule to guide its establishment of minimum staffing requirements (e.g., nurses, aides and other professionals) for long-term care facilities to ensure resident needs are met and to improve resident function and quality of life. CMS intends to issue additional proposed rules on minimum staffing level requirements for nursing homes within the next year.

3. SNF Quality Reporting Program Proposed Measures

Pursuant to the SNF Quality Reporting Program, CMS publishes quality measures that SNFs must report on an annual basis. Beginning with the FY 2025 program year, CMS is proposing the adoption of the Influenza Vaccination Coverage among Healthcare Personnel (HCP) measure, which would report the percentage of HCP who receive an annual influenza vaccine from the time the vaccine first becomes available through March 31 of the following year. Monitoring and reporting influenza vaccination rates among HCP is essential because HCP are at risk for (1) acquiring influenza from residents and (2) exposing influenza to residents, given the fact that influenza vaccination coverage among HCP is typically lower in long-term care settings relative to other care settings. CMS proposes to reduce by 2% the annual rate update of SNFs that fail to meet the reporting requirements.

4. SNF Value-Based Purchasing Program Proposed Measures

CMS is proposing four measures as part of the SNF Value-Based Purchasing Program to incentivize SNFs paid under the SNF PPS based on the quality of care they provide to Medicare beneficiaries.
First, the Nursing Home Staff Turnover measure would identify staff turnover levels in nursing homes by reporting the percentage of total nurse staff that left the SNF over the last 12-month period. This measure is supported by data from CMS showing that as the average staff turnover decreases, a facility’s overall rating on CMS’ Nursing Home Five Star Quality Rating System increases. This purportedly suggests that lower turnover results in higher overall quality. Through a Request for Information, CMS is requesting stakeholder input on this measure for future inclusion in the Value-Based Purchasing Program.

Second, the Skilled Nursing Facility Healthcare Associated Infections Requiring Hospitalization measure would assess SNF performance on infection prevention and management, which CMS proposes implementing during the FY 2026 program year.
Third, the Total Nursing Hours per Resident Day measure would use auditable electronic data to calculate total nursing hours per resident, which CMS proposes to implement as part of the FY 2026 program year.

Finally, the Adoption of the Discharge to Community – Post Acute Care Measure for SNFs would assess the rate of successful discharges to community from a SNF setting, which CMS is proposing to implement during the FY 2027 program year.

III. Key Takeaways

The Biden-Harris administration is taking numerous steps to achieve its goals of improving safety, accountability, oversight and transparency in the hospital and senior-services industry for patients and staff. CMS highlighted that it will be publishing minimum staffing levels for SNFs and will continue explicitly tying payment for SNF services to staff-turnover levels.

While CMS has previously released provider enrollment files to the public, the release of change of ownership information will permit researchers and the public to more closely scrutinize acquisitions and sales of Medicare hospitals and SNFs. The release also includes more detailed ownership information than has previously been released. CMS has explicitly noted that it is hoping for closer scrutiny of this information to inform policymaking, including research on the impact of ownership on the quality and cost of healthcare furnished by Medicare providers. Medicare-enrolled hospitals and SNFs should be aware that this information is now publicly available and may prompt public scrutiny.

This remains an extremely active regulatory space, and we will continue to monitor it and report on further developments.