Ounce of Prevention: Is a Selling Hospice or Home Health Agency Ready for the 36-Month Rule?

March 4, 2024
Applicable Provider Types: Hospice; Home Health Agency

Is Your Entity in Compliance?

The Centers for Medicare & Medicaid Services (CMS) finalized and expanded its so-called 36-month rule with certain changes applicable to Medicare-enrolled hospices. As of Jan. 1, 2024, CMS generally prevents Medicare-enrolled hospices and home health agencies (HHAs) from undergoing a “change in majority ownership” within 36 months of the hospice’s or HHA’s initial enrollment in Medicare or its most recent change in majority ownership. A “change in majority ownership” means a change in more than 50% of the hospice’s or HHA’s direct ownership interests. Such a change may be triggered by acquisitions involving asset sales, stock transfers, consolidations or mergers that have the cumulative effect of changing more than 50% of the hospice’s or HHA’s direct ownership interests.

If a hospice or HHA attempts to change ownership in violation of the 36-month rule, its Medicare provider agreement and billing privileges would not convey to the new owner, and 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, triggering a significant delay in operations and billing. Notably, there are limited exceptions to the 36-month rule, including when the change is due to the owner’s death.

It is important to understand and consider 36-month rule implications in the preliminary stages of structuring a transaction involving a Medicare-enrolled hospice or HHA because certain transaction structures can be utilized to navigate this rule.

How to Confirm?

Medicare-enrolled hospices and HHAsshould take the following steps toassess and avoid triggering the 36-month rule:

  1. Because indirect changes do not trigger the 36-month rule, it is important to be mindful of this when setting up the organizational structure for a hospice or HHA because it can be structured to avoid 36-month rule issues, making it easier to sell a hospice or HHA.
  2. When buying or selling a hospice or HHA, consult legal counsel to determine whether the transaction can be structured to avoid triggering the 36-month rule.

Ounce of Prevention is a McGuireWoods series that details healthcare laws and regulations and offers tips on how providers can ensure they are in compliance. To recommend a topic for a future installment, email Gretchen Heinze Townshend at [email protected] or Tim Fry at [email protected].