Process involving change of ownership with Medicare

Provider Change of Ownership

Providers (as defined in 1861(u) of the Act, and institutional suppliers such as RHCs) that undergo a change in their ownership structure are required to notify CMS concerning the identity of the old and new owners.  They are also required to inform CMS on how they will organize the new entity and when the change will take place.  A terminating cost report will be required from the seller owner in all CHOWs for certification purposes.  There are five types of changes that can occur:

1.   A CHOW in accordance with 42 CFR 489.18;
2.   Changes in the ownership structure to an existing provider that do not constitute a CHOW;  
3.   A new owner who purchases a participating provider but elects not to accept the automatic assignment of the existing provider agreement, thus avoiding the old owner’s Medicare liabilities;
4.   An existing provider who acquires another existing provider (acquisition/merger); and  
5.   Two or more existing providers who are totally reorganizing and becoming a new provider (consolidation).

Providers that undergo a change of ownership will usually continue with the same FI that served the previous owner.  However, if the prospective owner does not wish to accept the automatic assignment of the existing provider agreement, this means that the existing provider agreement is terminated effective with the CHOW date.  The regional office must be notified in writing of the CHOW per instructions contained in section 3210.5 of the State Operations Manual. The prospective owner provides a notice 45 -days in advance of the CHOW to the CMS/RO to allow for the orderly transfer of any beneficiaries that are patients of the provider.  All reasonable steps must be taken to ensure that beneficiaries under the care of the provider are aware of the prospective termination of the agreement.  There may be a period when the facility is not participating and beneficiaries must have sufficient time and opportunity to make other arrangement for care prior to the CHOW date.

After the CHOW has taken place, the RO acknowledges the refusal to accept assignment in a letter to the new owner, with copies to the State Agency (SA) and the FI.  The RO completes a form CMS-2007 with the date the agreement is no longer in effect, noting that the termination is due to the new owner’s refusal to accept assignment of the provider agreement.

If the new owner refuses to accept assignment and also wishes to participate in the Medicare program, the RO will first process the refusal as indicated above and then treat the new owner as it would any new applicant to the program.  The RO will obtain and process the application documents, have the SA perform an initial survey and if all the requirements for participation are met, assign an effective date of participation.  The earliest possible effective date for the applicant is the date that the RO determines that all Federal requirements are met.  Once this is completed, a new provider agreement with a new provider number will be issued to the new owner.  The provider will be assigned to the local FI.

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