Home Health & Hospice Week

Get to know these new CHOW rule exceptions.

Your chances of selling your home care business unencumbered have increased, thanks to the 2011 PPS final rule.

"Changes to the 36-month rule are very helpful," cheers attorney Robert Markette Jr. with Gilliland & Markette in Indianapolis. The rule requires agencies sold within 36 months of start-up or a previous sale to undergo another initial survey to retain billing privileges.

The Centers for Medicare & Medicaid Services issued on Nov. 2 the revisions to the rules about changes of ownership (CHOWs) in the 2011 prospective payment system final rule.

Change #1: "CMS amended the definition of 'change in majority ownership' to make it clear that changes in indirect ownership are not covered by the rule," Markette explains. "This means a change in ownership of a holding company that holds stock in companies that own and operate HHAs would not trigger the 36-month rule."

Uncertainties over that definition had been keeping some investors out of the HHA market, industry experts say. The rule's clarification "opens up the potential for careful corporate structuring to eliminate the 36-month rule as a concern," Markette points out.

Change #2: CMS has expanded its exceptions to the 36-month rule. The final rule makes clear "that the 36-month rule does not apply to any HHA that has submitted two consecutive years of full cost reports," Markette points out. "Agencies that are two years or older and have submitted a full cost report every year are effectively no longer subject to this rule."

Change #3: "The death of an owner does not trigger the 36-month rule," CMS says in the PPS final rule. Formerly, CMS had applied that exception only when the deceased owner had a 49 percent or less interest in the company.

"So if an individual opens an HHA as the sole owner, and then dies within 36 months of being certified, the agency may change ownership without losing its Medicare billing privileges," Markette says.

Bottom line: "The wholesale revisions of the exceptions may be viewed as a wholesale revision of the rule," believes the National Association for Home Care & Hospice. "The final 36-month rule may allow most bona fide transactions to take place and permit lenders and investors to stay involved with home health care with a reasonable degree of security that their collateral or investment does not become worthless," NAHC praises. 

Note: The 550-page PPS Final Rule is on display at the Federal Register at http://www.ofr.gov/OFRUpload/OFRData/2010-27778_PI.pdf