Invest in or acquire a medical provider? the Costs of Incorrectly Reporting Medicare Ownership Changes (CHOW) | PilieroMazza SARL

When an investor wishes to invest or acquire a medical provider, they must understand how the transaction may affect the provider’s enrollment in Medicare. Depending on the structure of the transaction, the provider must report certain changes in ownership of the provider to the Centers for Medicare & Medicaid Services (“CMS”). Meeting CMS notification requirements allows the provider to continue participating in the Medicare program under their provider agreement with a minimum, if any, of delays or problems. However, if current and new owners do not properly report a change in ownership, they may experience delays in receiving Medicare payments, penalties, or disabling the provider’s Medicare billing number, which can result in significant financial loss. .

A supplier must notify CMS when a change in ownership (“CHOW”) occurs. If the provider is organized as a partnership under state law, a CHOW occurs whenever a partner is removed, added, or replaced, unless applicable state law allows partners to agree otherwise. If the supplier is organized as a company under state law, a merger of the supplier into another company or the consolidation of the supplier with one or more other entities constitutes a CHOW. On the other hand, a transfer of shares in the supplier and the merger of another entity in the supplier (with the supplier as a surviving entity) is not considered as CHOW. While limited liability companies (“LLCs”) have characteristics of both partnership and corporation, CMS often treats LLCs the same as corporations under CHOW regulations. Accordingly, a transfer of an interest in a supplier organized as an LLC under state law is not considered a CHOW. In addition, the transfer by a supplier of its assets to another entity is qualified as CHOW. If a transaction is considered a CHOW, current and new owners must submit a CMS 855A form and other documents to CMS for approval prior to the CHOW. Even if a transaction does not trigger CHOW notification requirements, the change in ownership must be reported to CMS as a change in the provider’s Medicare information within 90 days.

Following the approval of CHOW, the supplier’s supplier agreement with CMS will automatically be assigned to the new owner, unless the new owner rejects the assignment in their Form 855 filings. If the supplier agreement is assigned, the new owner rejects the assignment. new owner will then be subject to the terms and conditions of the provider agreement and will be subject to Medicare penalties and penalties under the agreement. The new owner will begin receiving payments once CMS approves the assignment of the supplier agreement. On the other hand, if the agreement is rejected by the new owner, they will not receive Medicare payments for the services provided after the agreement is rejected. The new owner can apply to participate in the Medicare program, although the provider may not be able to bill and receive payment for services provided during the period in which they are not enrolled in the Medicare program.

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