Home Health & Hospice Week

With so much on their plates, it’s easy for home health and hospice providers to lose track of regulatory updates. But it’s crucial to stay on top of enrollment changes, which can make or break an agency’s participation in Medicare.

For example: The so-called 36-month rule that has applied to home health agencies for years now also applies to hospices, as of Jan. 1.

The 36-month rule is important because acquiring an agency’s provider number means “I can start operating this business right away and I don’t need to start from square one,” pointed out attorney Meg Pekarske with law firm Husch Blackwell in the firm’s Hospice Insights podcast. “If you can assume someone else’s provider number, it’s sort of a plug and play and … there’s a lot of value in that,” Pekarske elaborated in the episode covering the 36-month rule.

“The 36-month rule prohibits the transfer of a home health or hospice agency’s Medicare provider agreement and Medicare billing privileges to a new majority owner within 36 months of either the provider’s initial Medicare enrollment or the provider’s most recent change in majority ownership,” explains consulting firm FORVIS in online analysis. “For purposes of this rule, a ‘change in majority ownership’ means when more than 50 percent direct ownership interest in a home health or hospice agency is transferred in a transaction, including asset sales, stock sales, mergers, or consolidations,” it details in a Feb. 5 post to its website.

The Centers for Medicare & Medicaid Services finalized the rule and its effective date in the 2024 home health final rule (see HHHW by AAPC, Vol. XXXII, No. 39-40).

“The rule is intended to strengthen the integrity of the Medicare hospice program by preventing hospice providers from selling hospices to avoid surveys and accreditation review, and by increasing oversight of hospice owners,” observe attorneys Sonya Penley and Christopher Gottfried with law firm Greenberg Traurig in online analysis of the regulation.

How it works: “Once a home health or hospice agency’s Medicare Administrative Contractor (MAC) receives a Form CMS-855A application for an ownership change, the MAC will follow a process to determine if the 36-month rule applies to such transaction,” FORVIS says. “If the 36-month rule is found to apply, then the MAC will refer the case to its Provider Enrollment Oversight Group (PEOG) Business Function Lead (BFL) for review. After the PEOG BFL review, if it is concluded that the 36-month rule does apply, a ‘36-Month Rule Voluntary Termination Letter’ will be sent to the home health or hospice stating that the provider agreement and Medicare billing privileges do not convey to the new owner, and instead, the prospective owner must go through the process to enroll as an initial application and obtain a new state survey or accreditation survey,” the firm shares.

Thanks to the new 36-month rule application, “the new owner would be required to undergo the initial Medicare enrollment and credentialing process, including obtaining a state survey or accreditation from an approved accredi­tation organization,” caution attorneys Trey Andrews, Varsha Gadani, and Kelly Bauer with law firm McGuireWoods in online analysis. “This can create a gap in reimbursement for the hospice because it cannot bill Medicare for services rendered until it receives new Medicare billing privileges and cannot retroactively bill for services provided prior to receiving Medicare billing privileges,” Andrews, Gadani and Bauer emphasize.

Bottom line: “If a transaction triggers the 36-month rule, the Medicare provider agreement and billing privileges of the hospice will not transfer to the new owner,” Penley and Gottfried stress.

However, these exceptions apply to the 36-month rule, FORVIS points out:

• The agency has submitted two consecutive years of full cost reports since its initial Medicare enrollment or the most recent change in majority ownership (low-utilization or no-utilization cost reports do not qualify).
• The agency’s parent entity is going through an internal corporate restructuring, such as a merger or a consolidation. “When the parent company of the licensed company is the one changing and … that’s where the change in stock or assets is occurring, that won’t trigger the 36-month rule,” confirms Husch Blackwell attorney Ragini Acharya in the podcast. “That’s an indirect change.”

Pointer: Hospices, particularly nonprofits, may want to consider forming a parent corporation, with different business lines under it, for this and other reasons, Pekarske suggested.

• The agency is changing its business structure (from one entity type to another, including corporation, partnership, LLC, etc.) and the actual owners remain the same.

Plus: If the change is due to the owner’s death, an exception would apply to hospices, the McGuireWoods attorneys highlight.

“Agencies should be mindful of the new regulations impacting hospice change of ownership transactions in 2024,” FORVIS counsels.

“It is important to understand and consider 36-month rule implications in the preliminary stages of structuring a transaction involving a Medicare-enrolled hospice,” Andrews, Gadani and Bauer advise. “Certain transaction structures can be utilized to navigate this rule,” they add.

“Structuring transactions and acquisitions with hospices is critical in navigating compliance with the 36-month rule,” the Greenberg Traurig attorneys stress.

The “36-month rule presents another obstacle for hospice transactions,” acknowledges mergers and acquisitions firm Mertz Taggart in online analysis of the change. But buyers should “play by the rules rather than push the boundaries of the new regulation,” it advises.