CMS Announces Enhanced Oversight for New Hospices in Four States

Effective July 13, 2023, the Centers for Medicare & Medicaid Services (“CMS”) announced a period of enhanced oversight for new hospices in Arizona, California, Nevada, and Texas. According to the Medicare Learning Network (“MLN”) Fact Sheet, CMS has received several reports over the past year of hospice fraud, waste, and abuse, which CMS aims to reduce with the enhanced oversight period.¹ CMS has also identified a concern of market oversaturation due to a significant increase in enrolled hospices in the above-referenced states. Therefore, any new hospices in those states will be subject to a period of enhanced oversight, which can range from 30 days to one year. According to CMS, “The provisional period of enhanced oversight will include medical review such as prepayment review.”

For the period of enhanced oversight, “new hospices” include those hospices that are:

• Newly enrolling in the Medicare Program (starting July 13, 2023)
• Submitting a change of ownership (“CHOW”) that meets all the regulatory requirements under 42 CFR 489.18
• Undergoing a 100% ownership change that doesn’t fall under 42 CFR 489.18

Under 42 CFR 489.18, the following ownership structure changes constitute a change of ownership:

• Partnership. In the case of a partnership, the removal, addition, or substitution of a partner, unless the partners expressly agree otherwise, as permitted by applicable State law, constitutes change of ownership.
• Unincorporated sole proprietorship. Transfer of title and property to another party constitutes change of ownership.
• Corporation. The merger of the provider corporation into another corporation, or the consolidation of two or more corporations, resulting in the creation of a new corporation constitutes change of ownership. Transfer of corporate stock or the merger of another corporation into the provider corporation does not constitute change of ownership.
• Leasing. The lease of all or part of a provider facility constitutes change of ownership of the leased portion.

Affected hospices will include hospices that (1) receive final approval for an initial Medicare enrollment or approval of a CHOW on or after July 13, 2023; or (2) started the enrollment or certification process before July 13, 2023, but haven’t received a final approval letter from their respective Medicare Administrative Contractor (“MAC”).

If a hospice is placed in a period of enhanced oversight, the hospice will receive a letter sent to the correspondence address on file in PECOS, which will include the following information:

• Effective date of the enhanced oversight period.
• Duration of the enhanced oversight period.
• Notice that CMS may do a medical review of all claims. If the hospice does not respond to the requests, CMS may deny claims or revoke the Medicare enrollment.

For more information, please contact CHOW team attorneys Jessica Grozine, Hedy Rubinger, or Kadeja Watts.

The Arnall Golden Gregory CHOW team leads all regulatory aspects of healthcare transactions for investors, operators, managers, capital partners, and developers of every size in all 50 states. The team streamlines the regulatory process so that clients close their transactions on or ahead of schedule. Whether obtaining licensure and Medicare/Medicaid approvals, structuring transactions to expedite closings, anticipating issues to minimize cash flow disruption, negotiating regulatory terms in deal documents, creatively resolving diligence issues, or advising on CHOW guidelines and compliance, the team provides extensive experience and practical solutions. To date, the CHOW team has served as primary regulatory counsel in transactions valued at more than $35 billion.

[1] CMS MLN7867599, available at https://www.cms.gov/files/document/mln7867599-period-enhanced-oversight-new-hospices-arizona-california-nevada-texas.pdf.