CMS Final Rule on Transparency Complicates REIT and Private Equity Company Investments in Nursing Facilities

December 6, 2023
8 minutes


On November 15, 2023, in response to governmental concerns over quality of care and operations in nursing facilities owned by private equity companies (“PECs”) and real estate investment trusts (“REITs”), as well as increased scrutiny of health care business investments, the Centers for Medicare and Medicaid Services (“CMS”) issued a final rule that requires Medicare skilled nursing facilities (“SNF”) and Medicaid nursing facilities (collectively referred hereinafter as “nursing facilities”) to disclose certain additional data on their owners, operators and management (the “Final Rule”).1 Through this national-scale data collection, CMS seeks to increase transparency of nursing facility ownership to facilitate accountability for the quality of care furnished to nursing facility residents. CMS also aims to promote competition among nursing facilities by allowing patients to choose facilities based on the publicly available data of their owners and operators. The disclosure and transparency requirements imposed by the Final Rule will complicate investments by REITs and PECs in nursing facilities.

The Final Rule becomes effective on January 16, 2024. CMS had already updated Form CMS-855A (Medicare Enrollment Application) as of September 2023 to require the disclosure of owners that are PECs or REITs,2 but CMS must make further updates to address the disclosure of additional data introduced by the Final Rule, as described in more detail below. Accordingly, based on guidance issued to date, SNFs enrolled in Medicare today do not need to immediately update their information but will need to update it upon the next revalidation, change of information (such as a change in 5% indirect or direct owners) or a change of ownership requiring the submission of a Form CMS-855A. CMS notes that once Form CMS-855A is revised, CMS will commence off-cycle revalidations of SNFs to obtain the requisite data that could not be provided during initial enrollment. Additionally, Medicaid nursing facilities will not be required to disclose the data until the relevant state Medicaid agency has established a process to collect it, which must be established promptly. The collected data will be publicly available within one year of reporting.


In recent years, an increased interest from the real estate and private equity investment community in owning health care businesses, such as nursing facilities, has resulted in a corresponding desire for heightened regulatory scrutiny of such businesses.

Health care facilities, such as nursing facilities, represent an increasingly appealing investment opportunity given investors’ appetite for relatively stable asset classes and increasing public demand for healthcare. For example, since 2022, the confluence of inflation, increased construction costs, global supply chain issues and interest rate hikes have created new challenges in the commercial real estate market. As a result, certain real estate investors are seeking stabilized asset classes that are less impacted by economic cycles. Health care properties have historically been a relatively stable asset class, most recently evidenced by its general resilience through the pandemic. One key factor driving a large influx of private equity capital into the health care space is the rising demand from today’s generation of active and healthy senior citizens for accessible and affordable health care providers. The elder population is forecasted to continue to drive demand for health care real estate as the number of people over 80 years old is expected to balloon by approximately 50% within the next 10 years. Hospital systems have also noticed private equity capital entering the market to build new health care businesses and are looking to form joint ventures with these organizations – and for good reason. Health care made up about 20% of the United States’ gross domestic product in 2020 and is forecasted to increase to 30% by 2030.3

Health care REITs, in particular, continue to be a popular choice for investors for several reasons. REITs are generally desirable investment products because of their “inflation-hedging” characteristics. As prices rise, landlords have the ability to adjust rents in response to inflation. Long-term leases also typically build inflation protection into the lease terms. The inflation protection provided by a REIT can be measured by comparing REIT dividend growth to inflation. Over the last 10 years, REIT dividend growth has averaged 4.5%, well exceeding the annual inflation average of 2.8% during the same period. As a result of this inflation hedging, during the high inflation year of 2021, REITs outperformed the S&P 500 by 12.6%. REITs also continue to be popular among investors because, as an asset class, REITs offer diversification within themselves. Health care REITs may include, among other real estate holdings, hospitals, primary care facilities, research labs and long-term care facilities. REITs can also generate income through a variety of activities, such as owning and operating a nursing facility, owning the underlying land while tenants operate the facility on a net basis and providing additional financing options outside of standard leases. Consequently, health care businesses and REITs form a “mutually beneficial relationship” that allows each business to focus on its respective area of expertise: REITs can care for and develop their properties, and health care businesses can focus on improving patient care and services.4

However, the influx of private capital into the nursing facility sector has generated increased public concern regarding the value of patient care. Responding to these concerns, the Biden-Harris Administration (the “Administration”) signaled its desire to regulate the nursing facility industry during President Biden’s 2022 State of the Union Address, where he stated that “as Wall Street firms take over more nursing homes, quality in those homes has gone down and costs have gone up.”5 Consequently, in the February 2022 Fact Sheet (the “Fact Sheet”), the Administration raised concerns regarding deficiencies in the quality of care received by residents of private equity-owned nursing facilities and corresponding increased costs to federal health care programs. In response, CMS planned to implement certain initiatives to enhance accountability and oversight, increase facility ownership transparency, create pathways to well-paying jobs and ensure pandemic and emergency preparedness in nursing facilities.6 More specifically, the Fact Sheet sets forth a blueprint for how the Administration sought to scrutinize corporate ownership of skilled nursing and Medicaid nursing facilities—e.g., by tracking and identifying owners and operators, enhancing Nursing Home Care Compare, implementing Affordable Care Act requirements requiring transparency in corporate ownership, improving staffing and workforce sustainability, and examining the role of private equity—which have become effectuated through subsequent efforts7 as well as the Final Rule.

Summary of the Final Rule

The Final Rule furthers the directives set forth in the Fact Sheet and accompanies research studies released on November 15, 2023 by the U.S. Department of Health and Human Services (“HHS”) Office of the Assistant Secretary for Planning and Evaluation (“ASPE”).8 Under current law,9 Medicare providers and suppliers are already required to disclose in Form CMS-855A any direct or indirect ownership interests of 5% or greater in a nursing facility (except partnerships, which do not have a minimum threshold) and must identify whether any organizations with an ownership interest in or managing control over the nursing facility is a PEC or REIT. Additionally, current law requires that SNFs provide in Form CMS-855A a diagram identifying the organizational structures of the facility’s owners, including owners not required to be disclosed under Section 6 of Form CMS-855A.10 With respect to these requirements, the Final Rule merely codifies the definitions of PEC,11 REIT,12 and “organizational structure”13 and encourages state Medicaid agencies to collect data identifying whether an organization reported pursuant to current statutory requirements14 is a PEC or REIT.

Importantly, however, the Final Rule requires SNFs to now disclose to CMS the below additional data upon initial enrollment, revalidation and reactivation (i.e., when form CMS-855A is required), and that Medicaid nursing facilities disclose the same data to the applicable state Medicaid agency upon initial enrollment and revalidation. Furthermore, the Final Rule requires that SNFs also report such data listed below to CMS as part of any change of ownership under 42 C.F.R § 489.18 and report any change to this data within the timeframe specified in 42 C.F.R. § 424.516(e).

  1. Each member of the facility’s governing body, including the name, title and period of service;
  2. Each person or entity who is an officer, director, member, partner, trustee or managing employee of the facility, including the name, title and period of service for each such person or entity;
  3. Each person or entity who is an additional disclosable party of the facility;
  4. The organizational structure of each additional disclosable party of the facility; and
  5. A description of the relationship of each such additional disclosable party to the facility and to one another.

Notably, the inclusion of “additional disclosable parties” makes the disclosure burden more expansive and captures any person or entity exercising operational, financial or managerial control over the facility (e.g., parent companies), leasing or subleasing real property to the facility, owning 5% or more of the real estate, or providing management, administrative, clinical consulting, accounting, cash management or financial services to the facility.

CMS plans to issue guidance to explain the new requirements to industry stakeholders, including (i) whether the data will link to other CMS information such as nursing facility quality measures or cost reports, (ii) examples of potential operational control, (iii) the specific requirements for reporting PEC and REIT data and (iv) specific examples of the types of data that must be disclosed. CMS will also update Form CMS-855A and provide additional information regarding the timing, manner and content of the published data.


In 2024, SNFs that are enrolling in Medicare or are revalidating will need to use the updated Form CMS-855A and disclose ownership data, and those enrolled or who are enrolling in Medicaid will disclose such data in the means prescribed by the state Medicaid agency. However, the Final Rule has broader implications than just filling out additional paperwork. By collecting and publishing the ownership data required by the Final Rule, CMS seeks to allow “families to make more informed choices about the care of their loved ones,” and “determine which environments are more likely to deliver better care for residents and patients.”15 The Final Rule is designed to make public which nursing facilities are owned by PECs or REITs. It follows, therefore, that the Fact Sheet’s directive for increased oversight and accountability of nursing facility ownership may consequently lead to increased targeted audits of PEC- and REIT-owned nursing facilities by the federal government. Taken together, these consequences add an additional calculus to a traditionally attractive investment opportunity for PECs and REITs.

If you have any questions about interpreting or complying with the Final Rule or preparing for its implications, please do not hesitate to contact one of the authors or your Ropes & Gray advisor.

  1. The Final Rule implements provisions of section 6101 of the Affordable Care Act that require disclosure of ownership interests or managerial connections to nursing facilities, and is largely identical to the proposed rule, which was published on February 15, 2023, except the Final Rule inserts “direct or indirect” before “ownership share” in the definition of “private equity company” set forth in 42 C.F.R. § 424.502 and maintains the definition of “real estate investment trust” as appears in 26 U.S.C. § 856.
  2. Medicare Enrollment Application for Institutional Providers, CMS-855, available at (last updated Sept. 2023).
  3. Brian A. Lee, Healthcare Real Estate Closes in to Open Up Greater Opportunity, (Jul. 29, 2022),; Ciara Long, As 2023 Recession Predictions Mount, Healthcare Real Estate Rises On CRE’s Most-Wanted List, Bisnow (Dec. 16, 2022),; Kimberly Steele, Outpatient Healthcare Services and Facilities Set for Enormous Growth, JLL (Feb. 8, 2023),
  4. Nareit, REITS and Inflation Protection,, (last visited Apr. 20, 2023); Rohan Reddy, REITs as a Potential Income Solution Amid Persistent Inflation, Globalx (Sept. 7, 2022),; Nicole Funari, How Does Inflation Affect REIT and Stock Performance?, (Jan. 13, 2022),; Laurel Durkay, Why REITs? And Why Now?, MorganStanley (June 29, 2022); Colton Hoisager, What are Healthcare REITs?, Realized (Dec. 7, 2021),; Thomas P. Roussel, Guide to Healthcare REITs, 1031 Crowdfunding (May 17, 2022),
  5. Joseph Biden, President of the United States, State of the Union Address (Mar. 1, 2022).
  6. The White House, Fact Sheet: Protecting Seniors by Improving Safety and Quality of Care in the Nation’s Nursing Homes (Feb. 28, 2022),
  7. For instance, in April 2022, CMS began publicly releasing data on nursing facility ownership monthly, and on changes of ownership quarterly. Then, in August 2022, the HHS Office of Inspector General announced that it added an audit of “Skilled Nursing Facilities’ Medicare Payments to Related Parties” to its current Work Plan. U.S. Dep’t Health & Hum. Servs. Off. of Inspector General, Skilled Nursing Facilities’ Medicare Payments to Related Parties, (last visited Nov. 28, 2023). In September 2022, CMS released additional data on the ownership of around 15,000 nursing facilities certified as SNFs, irrespective of any changes in ownership. Furthermore, in June 2023, CMS amended its Care Compare Website to identify and provide performance data on nursing facilities under common ownership. Memorandum from Quality, Safety & Oversight Grp. (QSPG) and Survey & Operations Grp. (SOG) to State Survey Agency Directors re Posting of Nursing Home Ownership/Operatorship Affiliation Data on Nursing Home Care Compare Website and, Ctrs. for Medicare & Medicaid Servs. (June 28, 2023), More recently, in August 2023, CMS issued a final rule similarly addressing ownership transparency of hospice services, and in September 2023, CMS issued a proposed rule that would impose federal requirements for nurse staffing in Medicare- and Medicaid-certified long-term facilities. 88 Fed. Reg. 51164 (Aug. 2, 2023),
  8. See W. Pete Welch et al., Change of Ownership of Hospital and Skilled Nursing Facilities: An Analysis of Newly-Released CMS Data, U.S. Dep’t Health & Hum. Servs., Off. of Health Pol’y (Apr. 20, 2022),; U.S. Dep’t Health & Hum. Servs., Off. of Behavioral Health, Disability & Aging Pol’y, Changes in Ownership of Skilled Nursing Facilities from 2016 to 2021: Variations by Geographic Location and Quality (July 7, 2022),; W. Pete Welch et al., Ownership of Skilled Nursing Facilities: An Analysis of Newly-Released Federal Data, U.S. Dep’t Health & Hum. Servs., Off. of Health Pol’y (Dec. 15, 2022),; see also Robert Tyler Braun et al., Association of Private Equity Investment in US Nursing Homes With the Quality and Cost of Care for Long-Stay Residents, Jama Health F. (Nov. 19, 2021),; Robert Tyler Braun et al., The Role of Real Estate Investment Trusts in Staffing US Nursing Homes, 42 Health Affairs 2 (Jan. 25, 2023),
  9. Social Security Act Section 1124(a).
  10. Social Security Act Section 1124(c)(2)(iii).
  11. Private Equity Company means a publicly traded or non-publicly traded company that collects capital investments from individuals or entities and purchases a direct or indirect ownership share of a provider.
  12. Real Estate Investment Trust means a corporation, trust, or association—(1) which is managed by one or more trustees or directors; (2) the beneficial ownership of which is evidenced by transferable shares, or by transfer able certificates of beneficial interest; (3) which (but for the provisions of this part) would be taxable as a domestic corporation; (4) which is neither (A) a financial institution referred to in section 582(c)(2), nor (B) an insurance company to which subchapter L applies; (5) the beneficial ownership of which is held by 100 or more persons; (6) subject to the provisions of subsection (k) of 26 U.S.C. 856, which is not closely held (as determined under subsection (h) of 26 U.S.C. 856); and (7) which meets the requirements of subsection (c) of 26 U.S.C. 856.
  13. Organizational structure means, with respect to a skilled nursing facility defined at section 1819(a) of the Act, in the case of any of the following: (1) A corporation. The officers, directors, and shareholders of the corporation who have an ownership interest in the corporation which is equal to or exceeds 5 percent; (2) A limited liability company. The members and managers of the limited liability company including, as applicable, what percentage each member and manager has of the ownership interest in the limited liability company; (3) A general partnership. The partners of the general partnership; (4) A limited partnership. The general partners and any limited partners of the limited partnership who have an ownership interest in the limited partnership which is equal to or exceeds 10 percent; (5) A trust. The trustees of the trust; and (6) An individual. Contact information for the individual.
  14. Social Security Act Section 1124(c).
  15. Biden-Harris Administration Continues Unprecedented Efforts to Increase Transparency of Nursing Home Ownership, U.S. Dep’t of Health & Hum. Servs. (Nov. 15, 2023),