Over the last decade, nursing home ownership and operating structures have continued to evolve, including the development of more complex structures and an increase in private investment ownership of nursing homes. The federal government plays an important role in funding nursing home care and ensuring that residents in the nation’s approximately 16,000 nursing homes participating in the Medicare or Medicaid programs receive appropriate care; collection of nursing home ownership information is one part of this effort. Nursing homes must be licensed by the states in which they operate in order to participate in Medicare or Medicaid. The entity that is licensed to operate the facility is known as the provider. A provider can be an independent company that operates one facility or the provider can be part of a multiprovider chain organization. Some providers contract with separate entities to manage nursing homes. In addition, the provider may or may not own the real estate where care is delivered and any associated medical or other equipment. Nursing home real estate assets can be separated from nursing home operations for a number of reasons, including to limit liability or to obtain financing. The ownership and control relationships among these various entities can be complex. For example, the provider may own all or part of the entity it contracts with to operate the nursing home. Providers can be one of three business types—for profit, nonprofit, or government. The majority of nursing home providers—about two-thirds— are for-profit businesses. For-profit nursing home providers include a wide range of business ownership types from sole proprietorships to large publicly traded corporations. Within the for-profit provider type, private investment firms—generally investment firms whose ownership interests are not publicly traded on a stock exchange—have been acquiring both entire nursing home chains as well as individual homes since at least the late 1990s. Restructuring of the nursing home industry following bankruptcies among several large nursing home chains, as well as increased liability litigation in states such as Florida and Texas, which prompted some chains to sell their homes in these states, created an opportunity for private investment firms to acquire nursing homes that were being sold by these chains. In addition, reliable income streams from nursing home ownership made investment in the industry attractive for PI firms. In general, PI firms use a combination of investment capital and borrowed capital to acquire companies with the goal of making a profit and eventually returning that profit to investors and the firm. In contrast to publicly traded firms, PI firms generally are not subject to periodic disclosure and other SEC requirements, including public reporting of income, assets, and information about company operations and leadership. Consequently, information on the operations of PI firms— including a firm’s acquisition and sale of companies—is generally not as readily available as that of publicly traded firms. PI firm managers say this advantage allows them to make business improvements their publicly traded competitors may be less willing to make, such as developing investment strategies that are not tied to producing profits on a quarter-by- quarter basis. In recent years, attention has been given to a subclass of private investment called private equity. One investment strategy undertaken by private equity firms is the “leveraged buyout.” In a typical leveraged buyout, a private equity firm establishes a fund and obtains capital commitments from investors. These investors often include public and corporate pension plans, endowments and foundations, insurance companies, and individuals. The fund’s capital is then used in combination with borrowed capital to acquire majority or complete ownership of a company. However, most of the necessary financing for the acquisition comes from this borrowed capital, with the fund’s capital representing only a small portion of the total acquisition cost. After attempting to improve the financial performance of the company (which can be over a 3- to 5-year period but may be longer), the fund sells the company; any profits from the sale are returned to the fund and generally distributed to fund investors and the private equity firm. (See fig. 1.) To be eligible for Medicare and Medicaid payments, nursing homes are required to submit information on individuals or certain entities, such as corporations, that have an ownership or control interest in the provider. The Social Security Act requires all Medicare and Medicaid nursing homes to disclose information on the identities of persons who have an ownership or control interest in the nursing home in order to participate in the programs. Specifically, the act and related regulations define “a person with an ownership or control interest” to include a person (including certain entities) who has a direct or indirect ownership interest of 5 percent or more in the is the owner 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; is an officer or director of the nursing home, if it is organized as a corporation; or is a partner in the nursing home, if it is organized as a partnership. In addition, the act specifies that, to the extent determined feasible under regulations of the Secretary of HHS, nursing home providers must disclose for each person with an ownership or control interest, the name of any other provider with respect to which that same person has an ownership or control interest. The Patient Protection and Affordable Care Act, enacted in March 2010, expanded the ownership and control reporting requirements for Medicare and Medicaid nursing homes by adding a new subsection to the statute. Within 2 years of enactment (March 2012), the act will require nursing home providers to report additional information on the nursing home, including the name and title of each member of the governing body of the nursing home; each person or entity who is an officer, director, member, partner, trustee, or who directly or indirectly manages, advises, or supervises any element of the practices, finances, or operations of the facility; and persons or entities—referred to as “additional disclosable parties”—that with respect to the facility exercise operational, financial, or managerial control; provide policies or procedures for operations; provide financial or cash management services; provide management, administrative, clinical consulting, accounting, or financial services; lease or sublease real property to the facility; or own an interest of 5 percent or more in the real estate. Moreover, the additional disclosable parties must report information on their organizational structure (including the legal structure by which the disclosing entity operates) and describe their relationship to the nursing home and to one another. For example, an additional disclosable party that is a (1) corporation must report its officers and directors and any shareholders whose ownership interest is equal to or exceeds 5 percent of the corporation, and (2) limited liability company, must report the percentage ownership interest for its members and managers. Within 2 years of the enactment of these new provisions, HHS is required to promulgate final regulations that require facilities to report the information to HHS in a standardized format. The act also requires the Secretary to establish procedures to make such information available to the public within 1 year after the date the final rules are promulgated and published. Until the date the information is made available to the public, nursing homes must have this information available for HHS and other parties, including the state in which the nursing home is located, upon request. Nursing homes report ownership and managing control information to CMS through the agency’s Medicare enrollment application when they apply to participate in the Medicare program. CMS stores this information in a national database called PECOS. The Medicare enrollment application requires nursing homes to report identifying information, such as their legal business name, licensure information, tax identification number, and any chain affiliation. Nursing homes must also report their ownership (by both individuals and organizations) and managing control information, as well as any adverse legal action taken against these entities. To report chain affiliation, nursing homes are asked to identify their “chain home office”—the entity responsible for providing centralized management and administrative services to homes under common ownership and common control. Nursing homes are required to submit updated information if they undergo a change of ownership or when there are any changes to ownership or other information previously provided on the Medicare enrollment application. (See table 1.) Nursing homes are required to sign the application, to certify, among other things, that the information in it is “true, correct, and complete.” CMS stores information collected through the Medicare enrollment application in the PECOS database. According to CMS, PECOS, implemented in 2002, was designed to serve three purposes: (1) collect information for a provider and record the associations between a provider and entities that have an ownership or control interest in the provider, including any chain associations; (2) allow CMS to make informed enrollment decisions based on a provider’s past and present business history, any reported exclusions, sanctions, and felonious behavior; and, (3) ensure that CMS makes correct payments under the Medicare program. PECOS replaced the multiple contractor systems that previously housed provider enrollment data, facilitating the nationwide screening of providers billing Medicare. The database contains information on nursing homes that have submitted a Medicare enrollment application to CMS since 2002. As of July 2010, about 81 percent of active Medicare- participating nursing homes were in PECOS. Statutes and CMS regulations indicate that certain ownership information must be provided to the public upon request. In a Federal Register announcement about PECOS, CMS noted its plan for the data to be shared with federal and state agencies as necessary to ensure proper payment of Medicare benefits, to assist with the administration of other federally funded health programs, or to assist with other activities within the state. Provider enrollment and oversight of nursing homes are managed by two different entities within CMS; state entities also have an oversight role. CMS’s Division of Provider and Supplier Enrollment, within the Office of Financial Management, is responsible for the Medicare enrollment process. CMS uses contractors to handle administrative tasks related to enrollment, including the collection and verification of enrollment applications and associated information submitted by providers.