Massachusetts Approves Nursing Home Rules Scrutinizing Owners, Management Firms and Private Equity

The state's Public Health Council approved a set of long-term care regulations on Wednesday, according to WBUR. They come more than two years after Gov. Maura Healey signed a long-term care oversight law. The rules now go to Secretary of State William Galvin's office for promulgation. Public Health Commissioner Robbie Goldstein said that is expected in early November.

After that, the Department of Public Health will apply enhanced suitability reviews to nursing home applicants and those seeking license renewals. The reviews will also cover potential license transferees and management companies that want to contract with long-term care facilities. For operators and investors, the review now reaches beyond the license holder to the companies and people with a financial stake.

The rules define a management company as a person "engaged by a licensee to manage the operations of a long-term care facility for compensation." They also add a definition of a private equity company. Applicants, potential transferees and licensees must report changes in "financial status" to the department. According to a staff presentation, facilities can also face bigger penalties for non-compliance.

The rules list grounds for finding an applicant "neither suitable nor responsible." These include failing to show legal capacity, acting in a way that jeopardizes residents' health, safety or welfare, and failing to keep "sufficient" financial resources. They also include maintaining a "substandard" level of care. Another ground is holding at least a 50% interest or corporate ties to a facility whose license was suspended, denied or revoked.

Other factors would have a "significant bearing" on suitability. These include a lack of "competence and experience" in running a long-term care facility, and failing to report resident abuse, mistreatment or neglect. A conviction or guilty plea counts, as does obtaining a license by fraud or misrepresentation. So does being the subject of litigation related to operating a long-term care facility. Goldstein said officials will also look at staffing changes and quality metrics in Massachusetts and in other states where an applicant operates.

The rules also cover care standards, the role of certified medication aides, outbreak response plans and requirements for small house nursing homes.

The timing is tied to RegalCare. WBUR reports that a Boston Globe Spotlight report showed how the department allowed RegalCare CEO Eli Mirlis of New Jersey to keep buying Massachusetts nursing homes while quality worsened at his existing properties. The Globe reported that Mirlis cut nursing staff hours and spending on patient care while moving money into his other real estate and management businesses. On Tuesday, the department filed notice to revoke the licenses of all 12 RegalCare homes in the state. It argued that Mirlis is "neither suitable nor responsible to operate a long-term care facility."

Council member Stewart Landers drew a comparison to Steward Health Care, the hospital chain whose bankruptcy was fueled by private equity deals. He cited "the lifting and raising of exorbitant rents and essentially the sucking out of resource." Goldstein replied that regulators are "certainly increasing the evaluation of management companies and individuals with financial stakes within the facility."

Goldstein said the department can review suitability at any time, not only at licensing. It is developing procedures to engage with facilities that perform poorly or draw significant complaints. Tools include a temporary manager, a consultant with a corrective action plan, and an evaluation of the suitability of the owner, operator and related companies. Jaclyn Gagné, the department's chief deputy general counsel for healthcare licensure, said the department has sent owners a survey to find where management companies are used.

Council member Kahoney Anderson, who is executive director of a skilled nursing facility in Framingham, called the focus on ownership "reassuring." She said recent years have brought a lot of out-of-state ownership unfamiliar with Massachusetts law, and some of those owners made decisions that compromised resident safety and quality of care.

For the sector, the strategic reading is a matter of interpretation, not something the source states. Operators that rely on layered ownership, related-party management contracts or out-of-state expansion may face more questions on financial structure and track record. Operators with stable staffing and clean records elsewhere may find the process easier. How the department uses its discretion will decide which is true.

Goldstein said the rules are "not the beginning or the end of our work." What to watch next: the promulgation expected in early November, the department's first suitability decisions under the new standards, and how RegalCare responds to the revocation notice.