As appeared in the American Health Lawyers Association's Healthcare Liability & Litigation Health Briefs, on 6/21/2010.

Since passage of the Patient Protection and Affordable Care Act (PPACA) on March 23, 2010,1 many healthcare providers have dedicated substantial time and resources to determine how this newly enacted legislation affects their particular segment of the healthcare industry. What many healthcare providers have realized, though, is that this legislation not only imposes a vast amount of new obligations on healthcare providers but also exposes providers to new, and sometimes hidden, risks.

Of particular concern to long term care providers is the requirement under PPACA that nursing homes disclose detailed ownership and organizational structure information to the Secretary of the Department of Health and Human Services (Secretary) in a purported effort to improve transparency in the nursing home industry. Specifically, the PPACA requires facilities to disclose:

1. Members of the governing body of the facility, including the name, title, and period of service of each member;

2. All officers, directors, members, partners, trustees, or managing employees of the facility, including the name, title, and period of service; and

3. The organizational structure of "each additional disclosable party of the facility" and a description of the relationship between "each such disclosable party to the facility and to one another."2

The PPACA broadly defines "additional disclosable party" to include any person or entity which: (1) exercises operational, financial, or managerial control over the facility; (2) provides policies and procedures for any of the facility's operations; (3) provides financial or cash management services to the facility; (4) leases or subleases real property to the facility; (5) owns or controls 5% or more of the value of real property leased to the facility; (6) provides management or administrative services to the facility; (7) provides clinical consulting services; or (8) provides accounting services to the facility.3 Thus, under the PPACA, facilities are required to identify the organizational structure of each additional disclosable party, including the officers, directors, and shareholders, if a corporation; or the members and managers, including the percentage of ownership, if a limited liability company.4

By requiring information about the organizational structure of entities which merely provide policies and procedures, or accounting/clinical consulting services, or lease property to facilities, the PPACA disclosure requirements go far beyond the current disclosures required in the Medicare Provider Enrollment Application (CMS 855A).5 For example, the PPACA would require disclosure of the organizational structure of an entire health system if that health system happened to draft policies and procedures that nursing homes within the health system ultimately implemented in their operations. Compare these new and extensive disclosure requirements under the PPACA to the CMS 855A application, which simply requires disclosure of those organizations or persons with a 5% or more ownership/partnership interest or managing control of the facility.6 Even then, the disclosure is limited to the name and tax identification number of the entity and not the individual officers, directors, or members of that entity.7

Thus, the PPACA imposes quite an onerous reporting obligation on the long term care industry, which necessarily creates risks for facilities in the event organizational structure information is not properly disclosed for each "additional disclosable party." Arguably, even more risky for long term care companies is the fact that the organizational information disclosed pursuant to the PPACA is ultimately made available to the public.8 In so doing, plaintiffs' counsels and others will now have a detailed corporate roadmap for pursuing litigation against multiple corporate defendants and individuals, including directors, officers, and even shareholders. The extent of exposure from such detailed disclosures remains to be determined, but what is highly likely is that plaintiffs' counsels ultimately may use these detailed organizational disclosures to attempt to pierce the corporate veil and hold additional entities and individuals potentially liable.

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