On July 10, the Centers for Medicare & Medicaid Services (“CMS”) issued a Proposed Rule that would extend the “36-Month Rule” to Hospice providers.
The 36-Month Rule refers to 42 C.F.R. § 424.550(b), which currently prohibits a home health agency (“HHA”) from undergoing a change in majority ownership during the 36 months after the HHA’s initial enrollment in Medicare or within 36 months after the HHA’s most recent change in majority ownership. A “change in majority ownership” occurs when an individual or organization acquires more than 50% direct ownership in an HHA, whether by asset sales, stock transfers, consolidations, mergers, or a combination thereof.
If finalized, the Proposed Rule will expand these 36-Month Rule provisions to Hospice providers.
The 36-Month Rule is generally designed to discourage “flipping” practices: selling an enrolled facility quickly after enrollment or purchase for the purpose of circumventing any CMS survey. Explaining the impetus behind the Proposed Rule’s expansion to Hospices, CMS cited growing concerns about improper behavior and compliance violations within the hospice community. Meanwhile, CMS’ data indicate that hundreds of hospice ownership changes have occurred since 2018, a growing number of which have occurred within a 36-month time frame. The Proposed Rule would address the “significant vulnerability” caused by these practices: that CMS may not know whether the facility under its new ownership and leadership is compliant with Hospice Conditions of Participation.
Exceptions to the 36-Month Rule would also apply to Hospice Providers. Specifically, the prohibition does currently apply if: the HHA submitted 2 consecutive years of full cost reports since initial enrollment or the last change in majority ownership, whichever is later; an 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.
The proposed modifications to 42 C.F.R. 424.550(b) simply substitute “HHA or hospice” for every reference to “HHA.” There is no additional language that clarifies or delays the applicability of the 36-month time frame.
CMS is soliciting comments on the Proposed Rule until August 29, and specifically encourages stakeholders to provide feedback on any information collection requirement costs (e.g., costs incurred during the survey, accreditation, or certification processes) that may be associated with the 36-Month Rule expansion.
Ultimately, CMS is anticipated to adopt this proposal, and current and prospective hospice owners should anticipate the subsequent procedural hurdles to future transactions involving hospice providers.
A full text of the proposed rule can be found here.
