Home Health & Hospice Week

The feds are trying to cut down on home health agency flips, but thanks to some new rules your agency could get stuck in a billing nightmare for something as innocent as a partner departing.

In regulations that took effect Jan. 1, the Centers for Medicare & Medicaid Services puts new restrictions on billing for agencies in certain change of ownership (CHOW) situations.

New: When an agency has undergone a CHOW in the last 36 months, a second CHOW will trigger a Medicare billing deactivation that the agency can remedy only with a state or deemed accreditation survey, CMS explains in Dec. 18, 2009 Transmittal No. 318 (CR 6750).

Once the agency successfully completes the survey, it must send the results to its intermediary, which will reinstate the provider's billing privileges, the transmittal says.

In other words: "HHAs whose CHOWs fall within the 36 month window will be required to undergo a new certification or accreditation survey, re-enroll in Medicare and sign a new Provider Agreement," says attorney Marie Berliner with Lambeth & Berliner in Austin, Texas. "While that process is pending, the HHA will have its billing privileges deactivated."

What deactivation means: "Deactivation does not affect the HHA's participation status but merely suspends claims filing pending approval," Berliner explains.

The change will "help ensure that HHAs remain in compliance with the Conditions of Participation," CMS maintains in the transmittal.

The new restriction aims to curb "the recent proliferation of start-up HHAs and high turnover rates in HHA ownership," Berliner says. It also addresses "unusual levels of fraud in certain parts of the country," she adds.

Bottom line: CMS "wants HHAs to enroll in Medicare in order to participate in health care delivery, and not to make a quick profit on resale," Berliner surmises.

The three-year window for the restriction is a surprisingly long one, says attorney Shirley Morrigan with Foley & Lardner in Los Angeles. And the key point that will make more HHAs subject to CHOW deactivations is CMS's newly liberalized definition of an ownership change. "CMS's definition of a CHOW for these purposes is broader than the traditional CHOW definition used by the program," points out attorney Joel Hamme with Powers Pyles Sutter & Verville in Washington, D.C.

In addition to the usual CHOW, acquisition and merger, and consolidation changes, the change in ownership provisions will also be triggered by "a 5 percent or greater ownership change (e.g., stock transfer, asset sale)" or "a change in partners, regardless of the percentage of ownership involved," CMS spells out in the transmittal.

This means if something happens such as one partner dying, the agency will be thrown into billing limbo, Morrigan notes.

"Medicare has historically excluded even 100 percent stock transfers from the definition of a CHOW," Berliner adds.

Another surprise is that the regulation does not grant any exceptions to the rule, Hamme tells Eli. For example, agencies can't qualify for hardship exceptions. And even CHOWs that were already in the pipeline are subject to the rule if CMS didn't process them by Jan. 1, Hamme observes.

Agencies shouldn't assume that getting surveyed and back on Medicare's billing rolls will happen quickly, experts warn.

A big backlog for surveys exists in many states, Morrigan cautions. These billing deactivations will likely go to the bottom of surveyors' priority lists, meaning it could be years before agencies see their reactivation survey.

Instead, HHAs will have to "seek the more costly accreditation, which can often take six months or more," Berliner says.

Trend: Medicare officials have been using billing privilege changes to combat program integrity issues lately, Morrigan notes. Now the home care industry is no exception.

Parts of this new regulation remain unclear, Berliner points out. For example, when providers' billing privileges are reinstated after a survey, the transmittal doesn't say whether the agency will get its old Medicare number back or be assigned a new one.

Other confusing issues, according to Berliner, include:

• for transactions already made as of Jan. 1 but not yet processed, what happens to billing for patients who are already on service as of the HHA sale date;

• what happens to billing for patients for whom a request for anticipated payment (RAP) has been paid, but a final claim has not;

• whether buyers will have to demonstrate financial security as if they are initial enrollees.

That's "especially burdensome if the CHOW consists of a mere 5 percent stock transfer," she judges.

If you're in the process of negotiating a sale, you may want to wait until the 36-month period has elapsed to finalize the transaction, Berliner offers. That way you can "avoid the deactivation and reenrollment process altogether."

But beware of potential pitfalls if you plan to use a management agreement to wait out the time, Berliner cautions. "The HHA owner/seller will continue to serve as the governing body, and ultimately will be responsible for the legal operation of the HHA." That includes designating the administrator, and making all high-level decisions, among other governing body duties.

The seller will also still have to file an 855A change of information reporting the new managing entity, Berliner adds.

Note: The transmittal is online at www.cms.hhs.gov/transmittals/downloads/R318PI.pdf. CMS will issue a MLN Matters article about the change soon, it says.