Home Health & Hospice Week

State official accuses hospice buyers and sellers of trying to find a loophole.

If you thought you were in the clear on the 36-month rule because you bought or sold a hospice agency before the rule’s Jan. 1 implementation, you may have to think again, depending on when you filed the paperwork.

Background: In the 2024 home health final rule, the Centers for Medicare & Medicaid Services finalized “several provider enrollment regulatory changes to prevent and address hospice fraud, waste, and abuse in the future,” CMS said in a fact sheet about the rule released on Nov. 1, 2023. “These provider enrollment provisions related to hospice ownership and management will strengthen protections against hospice fraud schemes and improve transparency,” the agency maintained.

In particular, CMS celebrated finalizing the so-called 36-month rule for hospice changes of ownership (CHOWs).

Under the rule, “effective Jan. 1, 2024, CMS will prohibit any change in majority ownership of a hospice provider during the 36 months after the hospice’s initial Medicare enrollment or most recent change in majority ownership,” explain attorneys Jason Wallace, Harte Elena Brick, and Meagan Dimond with law firm Barnes & Thornburg.

This includes acquisitions, stock transitions and/or mergers, consulting firm SimiTree points out in its blog.

A Year’s Revenues Hang In The Balance

If a hospice sells inside of that 36-month time frame, “the buyer will be unable to take assignment of the seller’s existing Medicare provider agreement, resulting in a loss of billing privileges upon the closing of the acquisition,” Wallace, Brick, and Dimond detail in online analysis of the rule. “The buyer will instead be required to undergo the initial Medicare enrollment and credentialing process, including a state survey or accreditation. The full enrollment process can take 12 months or more, thereby causing a considerable delay in operations and billing,” they say.

With this requirement, which already applies to home health agencies, CMS aims to “prevent providers from enrolling in Medicare exclusively to sell the [hospice] rather than to provide services and as a method to circumvent the Medicare survey process,” note attorneys Alexander Foster and Hedy Silver Rubinger with law firm Arnall Golden Gregory. In other words, CMS wants to prevent so-called “flipping” of hospice agencies.

CMS also aims to increase scrutiny on new owners of hospices, Foster and Silver Rubinger add in online analysis of the rule.

Experts predict a major impact on hospice transactions due to the regulatory change.

Not surprisingly, a number of buyers and sellers rushed to take advantage of the period between the final rule’s issuance and the Jan. 1 deadline for it to take effect.

But now at least one state official is questioning whether the CHOW can escape the 36-month rule if its paperwork wasn’t submitted by Jan. 1.

“We are being inundated with CHOW requests” submitted in the last days of December and first days of January, for purchases that are dated in the last quarter of 2023, the unidentified state official complained. “I just want to know … does the 36-month rule still apply” if the paperwork for the CHOW was filed Jan. 1 or later, she asked CMS.

“I think they’re just trying to find a loophole,” the official told CMS. “The state that I’m in, we’re getting everybody who has been kicked out of California and Nevada and all the other states,” she vented.

CMS promised to get her “some resolution” on the issue.

FYI: The Medicare Program Integrity Manual update that includes the change, which was issued on Dec. 7, 2023, notes an effective date of Jan. 1 and an implementation date of Jan. 2. “Unless otherwise specified, the effective date is the date of service,” CMS says in CR 13333.

“These provisions impact only those hospice ownership transactions whose effective date is on or after January 1, 2024,” CMS says elsewhere in the transmittal. “However, the provisions can apply irrespective of when the hospice first enrolled in Medicare.”

CMS also notes that “the contractor shall verify the effective date of the reported transfer by reviewing a copy of the transfer agreement, sales agreement, bill of sale, etc., rather than relying upon the date of the sale as listed on the application,” according to the CR.

Note: The PIM update is in CR 13333 at www.cms.gov/files/document/r12393PI.pdf.