Earlier this year, CMS proposed a number of changes in the Home Health PPS Proposed Rule that were aimed at program integrity. In the Final rule, CMS announces that it will be finalizing two of those rules, one related to CHOWs and one related to deactivation of billing privileges.
As of January 1, 2010, a home health agency that has been in existence for less than three years cannot have its provider agreement transferred as part of a CHOW. Instead, the new owners will need to reapply as Medicare providers and undergo an accreditation survey or a state survey. This means you cannot start up a Medicare home health agency with the idea of later selling it as a "turn-key" agency, unless you operate it for at least thirty six months from the "effective date of enrollment in Medicare."
The regulations specifically states that this prohibition on transfers applies to stock or asset sales. That is an interesting change, because prior to this statement, no one considered a stock sale a CHOW. The definition of CHOW specifically excludes stock sales. It seems that this may create a conflict within CMS's own regulations.
The comments to the rule state CMS' belief that the rule applies not only to CHOW's submitted after January 1, 2010, but also to CHOW's pending on January 1, 2010. Of course, court's generally frown upon retroactive applications of the law such as that. Applying this rule to CHOW's that are pending on January 1, 2010 creates a huge number of problems for providers, because it effectively eliminates the benefit of the bargain the parties struck. A bargain that everyone understood to be acceptable at the time of the closing. Now, CMS comes along months after the deal closed and says you can't do that. It will be interesting to see how that plays out, because I imaging a number of companies will challenge CMS on this issue.
One other point, this rule change does not mean you cannot sell your agency during that first thirty-six months. It means that the agency will be worth less to a potential buyer, because you cannot transfer the provider agreement through the CHOW process.
Another change CMS made was to require home health agencies whose billing privileges have been deactivated due to inactivity to undergo a state survey or an accreditation survey before the privileges are reactivated. This means that if you have not billed Medicare in the previous twelve months, you will need to undergo a survey before you can bill. This may delay billing for Medicare services significantly. If you are a low volume Medicare provider, you need to be certain that you are providing some Medicare services at all times (or at least a few times a year). If you do not, you should avoid taking a new Medicare case until you have undergone the resurvey. (Otherwise you will find you are providing services for free.)
CMS had made some other proposals in the rule, including a prohibition on HHAs sharing, leasing, or co-locating with other providers. CMS has withdrawn all of its proposals related to this prohibition. CMS received a large volume of comments in opposition to these proposals that pointed out the many legitimate practices the rule would have outlawed. CMS will continue to look at this issue, as they continue to suspect these arrangements are abusive.
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