CMS Proposes Expansion of 36-Month Rule to Include Hospice Providers

The Centers for Medicare & Medicaid Services (“CMS”) issued a Proposed Rule on July 10, 2023, that, if finalized, will revise the Medicare Provider Enrollment requirements to expand the current Home Health Agency (“HHA”) 36-Month Rule to hospice providers (the “Proposed Rule”).

Under the current HHA 36-Month Rule found at 42 C.F.R. § 424.550(b), if an HHA undergoes a change in majority ownership by sale (including asset sales, stock transfers, mergers, and consolidations) within 36 months after the effective date of the HHA’s initial enrollment in Medicare or within 36 months after the HHA’s most recent change in majority ownership, the provider agreement and Medicare billing privileges do not convey to the HHA’s new owner. The new owner must instead enroll in Medicare as a new provider and obtain a state survey or an accreditation from an approved accrediting body. A “change in majority ownership” is currently defined as follows and is expanded under the Proposed Rule to include hospice providers:

When an individual or organization acquires more than a 50 percent direct ownership interest in an HHA during the 36 months following the HHA’s initial enrollment into the Medicare program or the 36 months following the HHA’s most recent change in majority ownership (including asset sale, stock transfer, merger, and consolidation). This includes an individual or organization that acquires majority ownership in an HHA through the cumulative effect of asset sales, stock transfers, consolidations, or mergers during the 36-month period after Medicare billing privileges are conveyed or the 36-month period following the HHA’s most recent change in majority ownership.

42 C.F.R. § 424.502.

The following exceptions apply to the HHA 36-Month Rule, which would also apply to hospice providers if the Proposed Rule is finalized:

  • The HHA submitted two consecutive years of full cost reports since initial enrollment or the last change in majority ownership, whichever is later;
  • The HHA’s parent company is undergoing an internal corporate restructuring, such as a merger or consolidation;
  • The owners of an existing HHA are changing the HHA’s existing business structure (for example, from a corporation to a partnership (general or limited)), and the owners remain the same; or
  • An individual owner of an HHA dies.

CMS states that the Proposed Rule is intended to “strengthen and clarify certain aspects of the provider enrollment process” and includes the following:

  • Subjecting a greater number of providers and suppliers, such as hospices, to the highest level of screening, which includes fingerprinting all 5% or greater owners of these providers and suppliers; and
  • Reducing the period of Medicare nonbilling for which a provider or supplier can be deactivated under § 424.540(a)(1) from 12 months to six months.

The deadline to submit comments to CMS on the Proposed Rule is August 29, 2023. If the Proposed Rule is finalized, providers and their counsel will need to be mindful of this rule in structuring future hospice transactions and reorganizations. The full text of the proposed rule is available here.