CLIENT ADVISORY: CMS Publishes Final Rules for Nursing Facility Requirements for Participation in Medicare and Medicaid


On October 4, 2016, the Department of Health and Human Services (HHS) Centers for Medicare and Medicaid Services (CMS) published a Final Rule to revise Medicare and Medicaid participation requirements for nursing facilities.1 The regulations are the first comprehensive revisions to skilled nursing and long-term care regulations since 1991 and include substantial changes and reorganization. The 184-page Final Rule phases in over a three-year period, with many requirements in effect as of November 28, 2016. Other requirements will go into effect within a year, with the remaining becoming effective November 2019. This article summarizes some of the key highlights in each implementation phase. A chart outlining the requirements by phase is available here.

PHASE ONE – Effective November 28, 2016

Admission & Administration

The Final Rule bans pre-dispute arbitration agreements with a resident, including those routinely included in admission agreements. Arbitration agreements entered into after a dispute arises will continue to be permitted.2

CMS has imposed several new requirements relevant to facility admissions, first imposing a new requirement that each facility establish an “admissions policy.”3 While the contents of such a policy are not specified, CMS noted that the policy must be compliant with the requirements for participation and must be implemented. New provisions also prohibit an admission agreement from requesting or requiring residents or potential residents to waive any rights to Medicare or Medicaid benefits or any other rights conferred by law.4 CMS will also prohibit a request for a resident to waive potential facility liability for losses of personal property.5 Additionally, each facility must expressly provide notice of any “special characteristics or service limitations” of the facility, which are undefined.6

Notice of Transfer & Discharge

The Final Rule requires that, before a facility transfers or discharges a resident, the facility must notify the resident and the resident’s representative of the transfer or discharge in writing, including the reasons for the move.7 The new regulation also requires that the facility send a copy of the notice to a representative of the Office of the State Long-Term Care Ombudsman.8 Significantly, the regulatory text does not appear to limit these requirements to involuntary discharges. In response to comments, CMS notes, “One commenter stated that it is unclear why the ombudsman’s office would need notification of every routine discharge or transfer and that such notification should be reserved for situations where the transfer or discharge is contested.”9 CMS responded to this comment, in pertinent part, “We consulted with the Administration for Community Living in the development of this proposal and believe that sending these notices to the State Long-Term Care Ombudsman will provide added protection to the resident and assist the State Long-Term Care Ombudsman to keep informed of facility activities.”10 Additionally, the regulations governing the timing of this notice specifically reference those situations in which “[a]n immediate transfer or discharge is required by the resident’s urgent medical needs,” thereby including unplanned hospital transfers/discharges in the new notice requirements.11

The Final Rule, therefore, seems to require that facilities provide prior written notice to the resident, resident representative, and LTC Ombudsman of all transfers and discharges, whether involuntary or voluntary, planned or unplanned. This is certain to place a significant burden on facility social workers/discharge planners, as well as inundate State LTC Ombudsman Offices with information pertaining to planned, voluntary discharges. While placing significant emphasis on discharge planning and resident choice throughout the Final Rule, CMS simultaneously seems incredulous of the fact that most planned discharges and transfers are voluntary and consistent with the resident’s goals and wishes.

Prevention of Abuse, Neglect, and Misappropriation of Resident Property

The Final Rule provides expanded definitions for terms relevant to facility investigations of allegations or suspicions of abuse, neglect, and misappropriation of resident property.12 Facilities should review and update their reporting and investigation policies and procedures and training materials to incorporate the expanded definitions.

The regulations now expressly prohibit a facility from employing or otherwise engaging individuals that have been found guilty of abuse, neglect, or mistreatment by a court of law.13 Prior regulations prohibited facilities from employing any nurse aides who have had a finding of abuse, neglect, mistreatment or misappropriation of property reported into a state nurse aide registry. The Final Rule expands that prohibition to any individual who has a disciplinary action “in effect” against his or her professional license by a state licensure body as a result of a finding of abuse, neglect, or misappropriation.[14] Little guidance has been provided regarding when a disciplinary action will be considered “in effect” and what types of past discipline will be a bar against employment. CMS has opined that the new bar will require facilities to check the licensure status of potential employees and contractors in the state where the facility is located and potentially bordering states or other states where an individual is known to have been licensed or has disclosed past licenses.15


Rather than establishing staffing requirements based on the number of staff or number of resident care hours, the Final Rule requires that facilities have “sufficient nursing staff with the appropriate competencies and skill sets to assure resident safety and attain or maintain the highest practicable physical, mental, and psychosocial well-being of each resident.”16 These staffing requirements must be determined based on consideration of resident assessments, resident Care Plans, and the Facility Assessment.17 Notably, however, the Final Rule does not provide any methodology for determining sufficient nurse staffing from these documents. In the absence of some objective measure, what constitutes “sufficient” nursing staff remains subjective. Interestingly, although these and other Nursing Services requirements must be implemented as part of Phase One, the Facility Assessment (discussed in the following section) is scheduled for Phase Two implementation, leaving the determination as to what constitutes “sufficient” nurse staffing even more questionable.

CMS has not set minimum staffing ratios or required a 24/7 RN presence as part of the Final Rule.18 In response to comments, CMS did state, however, that if there were future rulemaking regarding staffing or the Facility Assessment, CMS would consider use of payroll-based staffing data or the current Five-Star rating system, which uses RUG scores and reported staffing levels to calculate expected staffing level, as methods for establishing presumptive staffing levels for the Facility Assessment.19 CMS also responded that it will consider a “phased-in” approach if they impose minimum staffing standards in the future.20

PHASE TWO – Effective November 28, 2017

The Facility Assessment

In the Final Rule, CMS requires that, as of November 2017, nursing facilities maintain a new, detailed, written Facility Assessment that would serve as a basis for determining compliance in key areas, such as the adequacy of nurse staffing, staff in-service training, Quality Assurance and Performance Improvement (QAPI) activities,21 compliance efforts, and emergency preparedness. The regulation requires facilities to engage in a “facility-wide assessment to determine what resources are necessary to care for its residents competently during both day-to-day operations and emergencies.”22 Facility- and community-based risk assessments will be components of the overall Facility Assessment. Each Facility Assessment must, at a minimum, also consider and address the following:

  • Resident population (including number of residents, types of care required, diagnoses, overall acuity, cognitive functioning, etc.);
  • Staff competencies required to meet the needs of the resident population;
  • Physical environment, equipment, and services needed to provide care;
  • Ethnic, cultural, or religious factors;
  • Facility resources, including buildings, vehicles, and equipment;
  • Services provided by the facility, including therapies and medications;
  • Personnel and their education and training;
  • Contracts and other third-party agreements for services and/or equipment; and
  • Health information technology resources.23

Facilities will need to review and update the Facility Assessment “as necessary, and at least annually,” as well as “whenever there is, or the facility plans for, any change that would require a substantial modification to any part of this assessment.”24 Nursing facilities should anticipate that the Facility Assessment will be a focus for surveyors. Unfortunately, the Final Rule includes only minimal information on expectations for the assessment’s content and level of detail, leaving much to “subregulatory guidance,” i.e., yet-to-be-published surveyor guidelines and discretion, once the Facility Assessment goes into effect in November 2017.25

Psychotropic Drugs & Medication Review

While CMS continues to target psychopharmacological interventions for increased scrutiny, the Final Rule adopts a more restrained approach to regulating certain medications and practices than those put forth in the Proposed Rule published in July 2015.26 The list of drug types included in the finalized definition of “psychotropic drugs” is more narrow in scope and the permissible duration of PRN orders for psychotropic drugs substantially longer than initially proposed.

The Final Rule will still define “psychotropic drug” as “any drug that affects brain activities associated with mental processes and behavior.”27 CMS states that this definition would specifically include, but not necessarily be limited to, the following:

  1. Antipsychotics;
  2. Antidepressants;
  3. Anxiolytics; and
  4. Hypnotics 28

Significantly, the Rule as finalized removes from the above list: “(5) opioid analgesic[s], and (6) any other drug that results in effects similar to the drugs listed above.”29

Initially, CMS also proposed to limit all PRN orders for psychotropic drugs—defined far more broadly, as discussed above—to a 48-hour duration.30 In its response to comments in the Final Rule, CMS acknowledges a 48-hour limitation could result in detrimental consequences to residents’ health and be overly burdensome on facilities.31 The Final Rule establishes a 14-day limit on the duration of PRN orders for psychotropic drugs, with two caveats:

  1. If the attending physician or prescriber believes it is appropriate to continue the PRN order beyond 14 days, documents the rationale, and provides a duration for the order, the PRN order may extend beyond 14 days; and
  2. PRN orders for antipsychotic medications cannot be renewed beyond 14 days “unless the attending physician or prescribing practitioner evaluates the resident for the appropriateness of that medication.”32

These requirements for psychotropic drugs will need to be integrated with the requirements for monthly drug regimen reviews (DRRs) for all residents. While the Proposed Rule sought to require a medical chart review as part of monthly DRRs for residents on certain classes of medications (including psychotropics), the Final Rule requires this be a part of all residents’ DRRs.33

Transfer & Discharge (Additional Requirements)

The Final Rule does not include certain provisions of the Proposed Rule that would have further complicated resident transfer and discharge requirements by facilities. Unlike the Proposed Rule, the Final Rule does not include a requirement that a physician, physician assistant, nurse practitioner, or clinical nurse specialist conduct an in-person assessment of a resident prior to any unscheduled, non-emergency transfer to a hospital. Instead, the Final Rule expressly requires that the transfer or discharge be documented in the resident’s medical record.34

As expected, however, the Final Rule sets further hurdles to removing inappropriate residents. If a facility asserts that a transfer or discharge is necessary for a resident’s safety and welfare, the facility would have to document the specific needs it is unable to meet, efforts made to meet the resident’s needs, and what services are available at the receiving setting that will meet those needs.35, 36

Baseline Care Plans

The Final Rule revises regulations governing resident Care Plans (“CP”) to focus heavily on those participating in its development, incorporation and documentation of discharge planning, and the integration of any PASARR recommendations (i.e., if the resident received a Level II evaluation that includes recommendations for specialized services).37 While those requirements will be effective as part of Phase One, the Final Rule reserves a significant change to CP requirements for Phase Two.

Effective November 2017, facilities are required to develop an interim “baseline” CP for each resident within 48 hours of admission. While CMS does distinguish this baseline CP from the comprehensive CP, the Rule includes very little guidance on how closely the interim CP would be required to adhere to existing CP requirements. The text of the Final Rule listing the required content of a baseline CP states that it must include the minimum healthcare information necessary to properly care for a resident including, but not limited to:

  1. Initial goals based on admission orders;
  2. Physician orders;
  3. Dietary orders;
  4. Therapy services;
  5. Social services; and
  6. PASARR recommendation, if applicable.38

The 48-hour timeframe and minimum required content suggest that the regulation does not account for the fact that few facilities have a social worker in the building seven days per week to develop the initial Social Services CP, which may affect the timing of certain admissions.


The Final Rule will phase in the long anticipated requirement that facilities develop and implement a QAPI program.39 During Phase I, all providers must retain the substance of existing QAA requirements, with the bulk of QAPI implementation required in Phase II and III. Facilities will be required to develop their QAPI plan by November 27, 2017 and to submit it to the State Agency or federal surveyor at the first annual recertification survey. Facilities would subsequently provide surveyors with a QAPI plan during each standard health survey, as requested during other surveys, and to CMS upon request.

According to CMS, QAPI programs must be data-driven, address all systems of care and management practices, and focus on “clinical care, quality of life, and resident choice.”40 The QAPI program must be designed to monitor and evaluate performance of all services and programs of an organization, including contractual services. Elements of the program must include: 1) design and scope; 2) governance and leadership; 3) feedback, data systems and monitoring; 4) performance improvement projects; 5) systematic analysis and systemic action.41

One significant aspect of the QAPI regulations is that they will require the QA committee to coordinate and evaluate the QAPI program and report directly to a facility’s governing body.42 Current regulation governing QA committee activities states that “A State or the Secretary may not require disclosure of the records of such committee except in so far as such disclosure is related to the compliance of such committee with the requirements of this section.”43 This effectively limits surveyors to records showing meeting dates and attendance, the general issues discussed, and any action plans developed. Significantly, the Final Rule does not include a proposed regulation that would have given surveyors the ability to request “documentation considered necessary by a State or Federal surveyor” in assessing an ongoing QAPI program.44

Antibiotic Stewardship Program

The Final Rule requires that facilities establish and maintain an Infection Prevention and Control Program (IPCP) during Phase One that includes “[a] system for preventing, identifying, reporting, investigating, and controlling infections and communicable diseases for all residents, staff, volunteers, visitors, and other individuals providing services under a contractual arrangement based upon the facility assessment … and following accepted national standards.”45 During Phase Two, facilities must establish an “antibiotic stewardship program” as part of the IPCP, and the program must include antibiotic use protocols and a system for monitoring such use.46 One commenter expressed concern regarding state surveyors’ practice of citing an adverse event in situations where the facility did not start a resident with an asymptomatic UA on ABT, in accordance with SHEA guidelines, but the resident later developed an infection.47 CMS responded that it “will be working on developing subregulatory guidance and training for the surveyors that should address situations that the commenter described.”48

PHASE THREE – Effective November 28, 2019

Infection Control

CMS previously proposed that the IPCP would require oversight by an Infection Prevention and Control Officer for whom the IPCP would be a “major responsibility.”49As finalized, CMS has eliminated the “major responsibility” requirement and permitted the designation of more than one individual to fill the role of what is now called “infection preventionist” or “IP.”50 The Final Rule requires that the IP:

  1. Have primary professional training in nursing, medical technology, microbiology, epidemiology, or other related field;
  2. Be qualified by education, training, experience or certification;
  3. Work at least part-time at the facility; and
  4. Have completed specialized training in infection control.51

While many of the required elements of the IPCP policies and procedures are likely already reflected in facilities’ existing infection control plan, some of the requirements will almost certainly be new for many facilities. Furthermore, it may be difficult to determine whether existing practices will be interpreted as sufficient, given that—once again—much is left to yet-to-be-developed guidance and training.

Compliance and Ethics Program

The final regulations require each facility’s operating organization to have a compliance and ethics program in effect within three years of the effective date of the Final Rule.52 The Deficit Reduction Act of 2005 required only those facilities receiving $5 million or more per year in Medicaid funds to have fraud detection and prevention programs. The Patient Protection and Affordable Care Act (ACA) extended the compliance and ethics program requirement to all providers enrolled in Medicare, Medicaid, or the Children’s Health Insurance Program and the Final Rule puts into regulations an enforcement mechanism for the ACA’s statutory mandate.53

As the ACA required, 54 each facility’s operating organization must:

  1. Establish “written compliance and ethics standards, policies, and procedures to follow that are reasonably capable of reducing the prospect of criminal, civil, and administrative violations under the Act and promote quality of care,” and disciplinary standards for violations.
  2. Assign “specific individuals within the high-level personnel of the operating organization with the overall responsibility to oversee compliance with the operating organization’s compliance and ethics program” such as the CEO, board, and division directors.
  3. Allocate sufficient resources and authority to allow the committee to reasonably assure compliance with the standards, policies, and procedures developed.
  4. Exercise due care to avoid delegating substantial discretionary authority to individuals the organization knows or should know have “a propensity to engage in criminal, civil, and administrative violations under the Social Security Act.”
  5. Take steps to effectively communicate the standards, policies, and procedures of the compliance and ethics program to all staff, contractual service providers, and volunteers.
  6. Employ procedures reasonably calculated to achieve and ensure compliance, such as self-auditing and monitoring systems and publicizing the organization’s anonymous reporting system.
  7. Apply enforcement and disciplinary actions consistently.
  8. Ensure all reasonable steps are taken to respond appropriately to any detected violation and to prevent similar violations from occurring in the future.
  9. Review and revise the compliance and ethics program annually and as needed to reflect any applicable organizational changes or changes in applicable law and regulation.55

The following additional requirements would apply to operating organizations with five or more facilities:

  1. Conduct annual mandatory training on the organization’s compliance and ethics program;
  2. Designate a compliance officer for whom the program will be a “major responsibility” and who will report directly to the organization’s governing body and not be subordinate to the general counsel, chief financial officer, or chief operating officer; and
  3. Designate compliance liaisons at each facility.56

Under the Final Rule, the compliance and ethics requirements are subject to enforcement by state survey teams with no prior training and experience in compliance plans. CMS’ rules repeat the statutory requirements and leave the details on enforcement to subregulatory guidance yet to be disclosed. The reasonableness of a compliance plan and how the information developed should be used in the QAPI process remain unclear. The only clue is in CMS’ reference to eight-year-old OIG guidance.57


The most challenging aspect of implementing the requirements set forth in the Final Rule is likely to be the significant amount of detail left to subregulatory interpretive guidance that will follow the Final Rule. With the majority of the requirements going into effect on November 28, 2016, it is unclear how some of these new requirements will be interpreted in surveys that predate more detailed guidance to facilities and specific training of surveyors. The phased implementation of the Final Rule is also likely to present practical challenges due to many of the requirements being split among different implementation timetables.

Should you or your organization have any questions regarding implementation of this Final Rule, please contact Peter Mellette ( or Harrison Gibbs ( at Mellette PC at (757) 259-9200.

This Client Advisory is for general educational purposes only. It is not intended to provide legal advice specific to any situation you may have. Individuals desiring legal advice should consult legal counsel for up-to-date and fact-specific advice.

1 Reform of Requirements for Long-Term Care Facilities, 81 Fed. Reg. 68688 (October 4, 2016) [hereinafter Final Rule] (to be codified at 42 C.F.R. pt. 483).

2 Final Rule at 68867.

3 Id. at 68855.

4 Id.

5 Id. at 68856.

6 Id.

7 Id.

8 Id.

9 Id. at 68734.

10 Id.

11 Id. at 68857.

12 Id. at 68848.

13 Id. at 68855.

14 Id.

15 Id. at 68728.

16 Id. at 68861.

17 Id. at 68861.

18 This is reiterated throughout the comments and responses on pages 68753-59 of the Final Rule.

19 Final Rule at 68758 and 68788.

20 Id. at 68758.

21 While most of the QAPI requirements are scheduled for implementation during Phase Three, facilities must develop an initial QAPI plan and provide an initial QAPI plan to state surveyors at the facility’s annual survey during Phase Two. See Final Rule at 68697.

22 Final Rule at 68866.

23 Id. at 68866

24 Id. at 68786-87.

25 See the comments and responses regarding the Facility Assessment at 68785-88 of the Final Rule.

26 Reform of Requirements for Long-Term Care Facilities, 80 Fed. Reg. 42167 (proposed July 16, 2015) [hereinafter Proposed Rule] (to be codified at 42 C.F.R. pt. 483).

27 Final Rule at 68863.

28 Id.

29 Proposed Rule at 42204.

30 Id. at 42202.

31 Final Rule at 68773.

32 Id. at 68863.

33 Note also that monthly DRRs are part of Phase One implementation. Only the concurrent medical chart view (§ 483.45(c)(2)) and provisions related to psychotropic drugs (§ 483.45(e)) are reserved for Phase Two.

34 Final Rule at 68856.

35 Id.

36 Note that in the Proposed Rule, CMS suggested that facilities could face potential civil liability under the Americans with Disabilities Act and the Rehabilitation Act unless they can provide documentation establishing the facility’s inability to meet the resident’s needs and that the receiving location is equipped with services that will meet those needs. Proposed Rule at 42189-90.

37 Discussion of comprehensive CP requirements begins on page 68737 of the Final Rule.

38 Final Rule at 68858.

39 See the QAPI discussion beginning on page 68802 of the Final Rule. (The authors have yet to tire of making QAPI jokes.)

40 Final Rule at 68867.

41 Id. at 68867-68.

42 Id. at 68868.

43 42 C.F.R. 483.75(o)(3).

44 Proposed Rule at 42266.

45 Final Rule at 68868.

46 Id. at 68868.

47 Id. at 68809.

48 Id. at 68809.

49 Proposed Rule at 42216.

50 Final Rule at 68868.

51 Id. at 68868.

52 Id. at 68697. Note that this is a change from the one-year implementation in the Proposed Rule.

53 See 42 USC § 1320a-7j (2010) (requiring promulgation of regulations by 2012).

54 See 42 USC § 1320a-7j(b).

55 Final Rule at 68869-70.

56 Id. at 68870.

57 See OIG Supplemental Compliance Program Guidance for Nursing Facilities, 73 Fed. Reg. 56832 (2008) ( ).

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