PROJECT: 36 Month Ownership Transfer Rule

Overview

This is a request for consideration of a research project that relates to the Proposed Rule issued by the Centers for Medicare and Medicaid Services (CMS) entitled “Home Health Prospective Payment System Rate Update for Calendar Year 2011; Changes in Certification Requirements for Home Health Agencies and Hospices.” The Proposed Rule is found at:______. The National Association for Home Care & Hospice, Inc. (NAHC) is seeking a proposal that would provide: A.) the potential design of the research project; B.) the estimated cost of the project; and C.) the projected completion date. Public comments are due no later than September 14, 2010. NAHC is interested in the receipt of a Final Report by September 1, 2010, if possible.

BACKGROUND

Prior to 2010, Medicare regulations provided that the change of ownership (CHOW) of a Medicare participating home health agency (HHA) resulted in the assumption of the Medicare provider agreement with all of its benefits and liabilities. 42 CFR 489.18. Under this rule, a CHOW did not include a stock ownership transfer.

In 2009, CMS promulgated a rule, 42 CFR 424.550(b), taking effect January 1, 2010, that limited the transfer of the Medicare provider agreement where the ownership of the HHA changed within 36 months of the provider’s initial Medicare enrollment. The new owner of an affected HHA cannot take on a Medicare provider agreement until the HHA passes an initial survey that determines compliance with the Medicare conditions of participation under 42 CFR Part 484. It is estimated that it will take several months to secure an initial survey following the ownership change. In the interim, the HHA will not qualify for Medicare payments for any services provided to Medicare patients.

CMS issued an interpretive Transmittal on December 18, 2009, CR 6750, ______that expanded application of the rule to include ownership changes within 36 months of a previous ownership change and included any ownership change, including stock transfers, of greater than 5%. In May 2010, CMS withdrew the Transmittal and explained that no replacement Transmittal would be issued. By way of informal communications, CMS indicated that it would still apply the rule and that it would limit “changes in ownership” under the rule to those defined in 42 CFR 489.18. In June 2010, a CMS official transmitted an email that provided that the 36 month transfer limitation would apply to 100% changes in ownership, including stock transfers, that occur with 36 months of initial enrollment or a previous 100% change in ownership.

The Proposed rule includes an amendment to 42 CFR 424.550(b) that incorporates exemptions the the transfer rule, but also provides a definition of changes in ownership: that appears to affect ownership changes that involve majority share of ownership/partnership. Further, while the Proposed Rule does not alter the original 424.550(b) as it relates to a limited application to change within 36 months of initial Medicare enrollment, the Preamble to the Proposed Rule also references application to changes within 36 months of a previous ownership change.

Essentially, the various iterations of the rule and CMS interpretations have left an impression that the regulatory environment for HHA ownership change is unsettled and unstable.

Research Project

The research project will answer the following questions:

1. What is the incidence of CoP survey deficiencies or accreditation citations for “deemed status” HHAs within 12 months of a change in 100% ownership, including stock transfers, within 36 months of initial Medicare enrollment or previous change in ownership in comparison to HHAs without a change in ownership?

2. What is the change in Home Health Compare score for HHAs within 12 months of a change in 100% ownership, including stock transfers, within 36 months of initial Medicare enrollment or previous change in ownership in comparison to HHAs without a change in ownership?

3. What has there been the impact on access to capital or loans to HHAs since January 1, 2010 that is directly related to the 36 Month Rule?