How The 36-Month Rule’s Implementation Will Affect Home Health Agencies

Posted July 14, 2023

CMS included so many provisions and changes in its proposed 2024 proposed rules, that many missed that the 36-month rule will be applied to hospice.

Home health and hospice M&A experts see it as a significant development that could affect both subsectors.

CMS is proposing a ban on hospice owners from selling their businesses within 36 months of Medicare enrollment. The proposal mirrors a regulation that has existed for several years in home health care.  Right now, “these large companies will go out and pay $200,000 to $400,000 for these licenses depending on geography and the market,” Luke James, President of VitalCaring said. “It’s supply and demand. So, this rule is going to prevent that from happening.”  This essentially will eliminate license flipping and will lower the amount of fraudulent behavior.

When CMS proposed the rule for home health, providers and advocates pushed back against some of the stipulations. In that case, industry leaders were able to persuade CMS to include exceptions to allow legitimate transactions and consolidation.

For instance, if a home health agency submitted two consecutive years of full cost reports – excluding low-utilization or no-utilization cost reports – following enrollment in Medicare or within the first 36-month window, a deal could be made.

Transactions are allowed within the first 36 months if an agency’s parent company is undergoing a corporate restructuring or if an individual owner of an agency dies, for example.

Experts agree that CMS will likely make the same exceptions for hospice so that the effect on M&As should be minimal.

Source: Home Health Care News

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