UPDATE: CMS Finalizes Hospice 36-Month Rule

The Centers for Medicare & Medicaid Services (“CMS”) has finalized 2024 home health rules to include application of the home health “36-month rule” to hospice providers. The revised rule will forbid any change in majority ownership of a hospice provider during the 36 months after initial Medicare enrollment or its most recent change in majority ownership. The updated rule, at 42 CFR 424.550, will read:

. . . if there is a change in majority ownership of a home health agency (HHA) or hospice by sale (including asset sales, stock transfers, mergers, and consolidations) within 36 months after the effective date of the HHA’s or hospice’s initial enrollment in Medicare or within 36 months after the HHA’s or hospice’s most recent change in majority ownership, the provider agreement and Medicare billing privileges do not convey to the new owner.

The final rule comes after its initial proposal on July 10, 2023.

CMS stated that there were two primary objectives behind the initial home health agency 36-month rule:

1. Prevent providers from enrolling in Medicare exclusively to sell the home health agency rather than to provide services and as a method to circumvent the Medicare survey process
2. Increase scrutiny on new owners of home health agencies

CMS is now implementing the 36-month rule for hospices with the same objectives.

The new regulations are effective on January 1, 2024. Providers should be mindful of the rule, especially in future hospice acquisitions. The stakes of failing to abide by the 36-month rule are high. If a change in majority ownership occurs within 36 months of an initial enrollment or previous change in majority ownership, the Medicare provider agreement will not be assigned to the purchaser. Additionally, the purchaser will be required to go through the initial enrollment process, which can take up to a year or more to complete.

For more information, please contact AGG Healthcare partners Hedy Rubinger or Alex Foster.

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.