Buried within the 906 pages of the Patient Protection and Affordable Care Act of 2010 are new ownership disclosure rules that apply to SNFs. SNFs have always been required to disclose ownership information as part of state licensure laws and through the Form 855A that must be filed with CMS for Medicare and Medicaid certification. However, these new rules are broader and will require additional disclosures that may surprise operators. These include disclosure of:

• the owners of the real estate;
• the holders of certain secured debt owed by the operator;
• In the case of limited liability companies, owners of less than 5%; and
• Providers of management services, administrative services, clinical services, accounting or financial services.

Since March 23, 2010, the date of enactment, SNFs have been required to compile the
information required by the new law and make that information available on request to the state department of health, the ombudsmen, the Department of Health and Human Services and the Office of Inspector General. By March 2012, the Department of Health and Human Services is required to issue final regulations that create a standardized format for disclosure and by July 2012, SNFs must report that information on the standardized form to CMS. This information must then be made available by CMS to the public by March 2013.

There are significant gaps in the legislation that we hope will be clarified by regulation. For example, the statute says providers must disclose the holders of secured debt “that exceeds 5 percent of the total property or assets of the [entity].” It is not now clear how to value the debt or the total property. This is particularly true for a line of credit where the amount owed constantly changes as does the value of the receivables securing the line. It also is not clear if this would apply to a mortgage given by the landlord to a leased facility. The regulations may also explain disclosure with respect to “intermediate entities.”

Providers will need to make reasonable determinations now with respect to these open issues and begin to ask third parties, such as landlords and lenders, for disclosable information. Some landlords and lenders may not be willing to disclose this information. For example, a landlord that is a limited liability company will need to disclose all of its members to the provider which must then disclose them to CMS and the public.

If disclosure is a concern, limited liability companies may want to consider conversion to corporation (where there is a 5% disclosure threshold) or a limited partnership (where there is a 10% disclosure threshold).