South Florida Hospital News
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October 2010 - Volume 7 - Issue 4


Federal Integrity Regulation Makes Sale of Home Health Agency Difficult

For hospitals and health care systems with Medicare-certified home health agencies, buying or selling these agencies was once a fairly routine process. However, more recently, a regulation issued by the Centers for Medicare and Medicaid Services (“CMS”) imposed onerous limitations on the sale of a Medicare-certified home health agency (“New Rule”).

CMS issued the New Rule as a program safeguard provision to address “certificate mills,” a term referring to an owner who creates a home health agency for the primary purpose of selling it as soon as it is certified by the Medicare program without having seen a single Medicare beneficiary or hired a single employee. Effective for transfers of Medicare-certified home health agencies occurring after January 1, 2010, the New Rule states:
(1) If an owner of a home health agency (HHA) sells (including asset sales or stock transfers), transfers or relinquishes ownership of the HHA within 36 months after the effective date of the HHA’s enrollment in Medicare, the provider agreement and Medicare billing privileges do not convey to the new owner. The prospective provider/owner of the HHA must instead:
(i) Enroll in the Medicare program as a new HHA
(ii) Obtain a State survey or an accreditation from an approved accreditation organization.
In other words, someone who wants to purchase a home health agency that has not been enrolled in the Medicare program for 36 months will not be able to buy the agency and obtain the agency’s Medicare provider number. As is sometimes the case with new laws or regulations, the scope of the New Rule’s limitation on the transfers of Medicare home health agencies is broader than many in the industry believe is necessary to remedy the perceived problem with certificate mills. The New Rule has implications for a wide range of bona fide transactions that do not raise any integrity concerns.
Further expansion of the New Rule’s impact occurred on December 18, 2009 when CMS issued an implementing policy (“Policy”) that extended the New Rule’s limitation to the sale or transfer of a Medicare-certified home health agency that involved “5 percent or greater ownership change (including, stock transfer or asset sale).” The Policy also interpreted the New Rule to limit the transfer of Medicare billing privileges if the date of the last ownership change of the home health agency was within the previous 36 months. After much objection from the industry about the Policy’s breadth, CMS rescinded the Policy in May 2010 but has not replaced the Policy with any official guidance that, with any degree of certainty, advises providers about how the limitation will be interpreted.
The latest development in this saga is a proposed regulation issued on July 23, 2010 that creates exceptions to the New Rule’s prohibition on the sale or transfer of billing privileges for Medicare-certified home health agencies. Such exceptions include publicly-traded companies or parent companies undergoing internal corporate restructuring and transfers that occur because of a death a shareholder. While the July 23rd proposed rule indicates CMS’s intent with regard to enforcement of the New Rule, the proposed revisions to the New Rule have not been made final and can not be relied on to structure transactions.
Health care providers desiring to acquire home health agencies, sell their existing home health agencies or undergo a corporate restructuring that involves the ownership of a Medicare-certified home health agency must proceed cautiously to avoid the deactivation of the agency’s Medicare billing privileges. If a prohibited transfer occurs, agency’s billing privileges are deactivated and the provider must reapply for Medicare certification, a process that can take as long as one year to complete. With careful planning, the purchase of a Medicare certified home health agency can go smoothly and allow the purchaser to obtain the Medicare provider number.
Anne Novick Branan is Of Counsel with the Fort Lauderdale office of Broad and Cassel. She can be reached at (954) 745-5243 or
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