The Devil in the Details: Behind the Scenes of Government Efforts for Care Home Financial Transparency

0
6

While industry leaders have criticized many of the proposals in the Biden administration’s nursing home reform package, improving public transparency of SNF ownership may be the best blueprint for the White House to limit those they consider “bad actors”.

However, the details will be important to iron out, with concerns about the impact transparency measures will have on investment in the space – and consumer access to skilled nursing – in the future.

New Jersey, California, Florida and Illinois are among the states that have proposed their own nursing home financial transparency bills in the past year, even before the White House proposal. The subject has become an area that lawmakers and lobbyists have sought to address.

California Governor Gavin Newsom signed the Corporate Transparency in Aged Care Act, or Senate Bill 650, into law in October last year, requiring operators to report their finances to the state and to the public.

Biden’s nursing home reform calls on the Centers for Medicare & Medicaid Services to create a database that will track and identify owners and operators in all states to better highlight some of the issues associated with care.

Using information collected during supplier registration and health and safety inspections, the registry will provide more information about potential owners and operators.

CMS will also be responsible for implementing the Affordable Care Act’s requirements for transparency in nursing home business ownership. This initiative aims to improve transparency by collecting and publicly reporting more robust data on business ownership and operations. It will also make it easier to find this information on the nursing home care comparison website.

Brian McGovern, a healthcare attorney and partner in Crowell & Moring’s New York office, believes that any disclosure requirements that result in greater exposure for buyers and operators of the space could have far-reaching implications.

“If they identify [private equity investors] it could be at least a basis to hold them accountable both from a regulatory and a litigation standpoint,” he said.

The role of private investors is one that the White House intends to explore further. The Biden administration plans to investigate the growing role that private equity firms are playing in the nursing home sector, with their ownership now reaching 11% of the sector according to data recently released by MedPAC. Some studies have shown that having EP leads to poorer patient outcomes.

While some in the SNF space view this crackdown as misguided, others are concerned about the impact of the push for more scrutiny and transparency over investments in the space going forward.

CON process may hold clues to push national financial transparency

While both Sabra Health Care REIT (Nasdaq: SBRA) and Summit Healthcare REIT have declared their intention to remain active in the skilled nursing business despite potentially having a new target on their backs, all investors in space may not be as open.

McGovern remains concerned that focusing on financial transparency will drive investors away from skilled nursing, especially in certificate-of-need states. With shrinking margins for nursing homes and more nonprofits exiting the space altogether, now may not be the right time for such an overhaul.

McGovern thinks “the devil is in the details” in how the financial transparency elements of the care home reform package will unfold.

On the positive side, McGovern thinks there is a need to hold more investors accountable through regulation or litigation, as some investors are essentially not exposed to litigation because they are not the licensed operator.

He said previous Justice Department investigations into private equity firms that have been actively involved in management decisions in violation of the False Claims Act could set “a precedent” for how greater transparency and greater disclosure could lead to better accountability.

“A remedy for this is through the licensing process at the state level. Depending on how stringent the certificate of need laws are, this is a way of exposing the underlying investors in these retirement homes and making them more vulnerable to litigation or regulation,” he said.

According to McGovern, private equity ownership will likely be more common in states that don’t have certificates of need (CON) laws or licensing requirements to disclose ownership.

“Some states don’t even have certificates of need laws in place, but the federal government can strengthen disclosure requirements to expose ownership of retirement homes that are now disguised in some states and make them more accountable” , did he declare.

McGovern felt the CON process, or a similar permit-requiring process, could help the process.

“But in states without CON laws, it’s more like the Wild West,” he said.

CON requests can be denied if the principles underlying the property have shoddy performance at other facilities, McGovern added, but in states without CONs, there’s no way to eliminate those. “so-called bad actors” in the licensing process.

McGovern worried that the pendulum was swinging too far to the other side and that further scrutiny would discourage investment and the opening of new facilities in the area.

“The pendulum may swing in that direction where there might be a need for beds, but because the CON process is so laborious, and if it requires disclosure, it may deter investors. There may be an unmet need in the future to meet the long-term care needs of the aging population that will peak in 2030,” he predicted.

Thus, financial reporting and transparency may become too stringent to the point that the market no longer responds to the emerging needs of long-term care in the future.

Still, some active investors in the space, such as Summit Healthcare REIT, would support some improvements in financial transparency.

“I’m all for transparency,” Elizabeth Pagliarini, chief operating officer and chief financial officer of Summit Healthcare REIT, told SNN. “But I think, as part of that transparency, there should be a clear overview of who owns the facility and who manages the facility.”

She added that clarity and explanation of who owns and who is involved in the operations of the facility can clear up some of the administration’s confusion about the role of REITs versus private equity.

Least-staffed state prioritizes transparency

Some lawmakers have already made increased control of care home ownership a priority in 2022.

In Illinois, the Compromise Nursing Home Rate Reform Bill (House Bill 4678) seeks to require notification of any change in ownership to expand reporting requirements for Illinois long-term care facilities.

High-Medicaid for-profit nursing homes represent 95% of all understaffed facilities in the state, according to a recent report from the Department of Health and Family Services.

Staffing levels for the third quarter of 2021 fell 7.8% from the first quarter of 2021, and no state had staffing levels worse than Illinois, according to a national report from the Long-Term Care Community Coalition (LTCCC).

At 2.98 total nursing hours per resident day (HPRD), Illinois nursing homes rank last in the nation, according to the report.

While Angela Schnepf, executive vice president of LeadingAge Illinois, admitted that staffing shortages continue to be the pressing issue facing nursing home operators, data from the Department of Health and Human Services family (HFS) reinforce the findings of LTCCC and show that they vary considerably depending on the ownership of the institution.

Schnepf worked with HFS to look back on years of data regarding RNs and CNAs in the state. Illinois has generally been the last to be able to secure and retain CNAs, as the LTCCC report indicates.

What LeadingAge Illinois found was that staffing is much worse at for-profit nursing homes, which actually “brought down” the numbers statewide.

According to HFS data, Illinois nonprofit and public facilities had 4.10 hours per resident per day, compared to 2.84 nursing staff hours per resident day. Figures are adjusted to include CNAs, LPNs and RNs.

“Illinois has much better numbers when you only look at nonprofit and government-owned entities, but when you go to for-profit entities, we’re last and that’s indicative statewide. “, she said.

For caregivers, Illinois’ nonprofit and public nursing homes still struggle to compete with other states at 2.29 hours of aide per resident day, but for-profit facilities are dropped to 1.61 hours of help per resident day, according to HFS data.

Nationally, LeadingAge represents more than 5,000 nonprofit aging service providers, and Schnepf said when it comes to the element of transparency in Biden’s reform package, she supports “the general concept.”

“We believe that as not-for-profit organizations we publish our audited financial statements and we believe that everyone being held to the same level would be helpful in having a better understanding of the costs and revenues associated with operating nursing home communities,” Schnepf said.

“We think it’s nothing an organization should feel they should hide or not share,” she added.

As a for-profit provider operating in Illinois and a board member of the Illinois Health Care Association, John Vrba, CEO of Burgess Square Healthcare and Rehabilitation Center, would welcome the new financial reporting requirements for retirement homes.

“If you’re trying to hide things or cheat the system or make more money without providing quality care, then that’s a problem and I’m all for those entities that go bankrupt,” he said. -he declares.

Richard Mollot, executive director of the LTCCC, said the general public would benefit from having more information about where the money goes and how it is used to better ensure a level playing field for suppliers.

“For consumer groups like ours, we would be much more willing to support and work with providers to increase funding if we knew where that money is really going,” he said.