• Owners May Not "Flip" Home Health Agencies
  • March 11, 2010 | Author: Edgar C. Morrison
  • Law Firm: Jackson Walker L.L.P. - San Antonio Office
  • Purchasing an existing home health agency (“HHA”) is often preferable to trying to start one from scratch.  Because of the backlog of HHA applications, and the de facto moratorium in approving new HHAs by the Centers for Medicare and Medicaid Services (CMS) over the last several years, acquiring an existing agency is an increasingly common transaction.  In a continuation of its efforts to curtail HHA services, CMS is trying to put a dent in such transactions.

    In the final rule updating the HHA payment rates for 2010, CMS expressed its increased concern over the proliferation of new HHAs and spending on home health services above that which normal population and demographic changes would warrant.  In addition to the sheer increase in home health services, the Office of Inspector General has prosecuted numerous instances of fraud and abusive billing by HHAs.  CMS noted, “The problem of fraudulent activity has been especially acute in the States of Texas and California.”

    As just one small part of a concerted effort to slow down the growth rate of HHA services,  CMS has published a new rule and manual provision which may slow down the pace of HHA acquisitions. In the HHA prospective payment final rule for 2010, CMS provides that it will not approve a change of ownership (“CHOW”) if it has been less than thirty-six (36) months since the HHA was enrolled in Medicare, or since the last CHOW.  Thus a prospective purchaser of an existing HHA must operate it for at least three years before selling the agency with its provider number.  CMS noted, “We believe that this change will help to ensure that individuals establishing a HHA are doing so with a long-term view of furnishing services, rather than establishing a business for the purpose of selling it a short time later.”

    Although the change will not slow down the growth rate of new HHAs (the growth rate ironically will increase as some potential purchasers of existing HHAs instead will elect to form a new HHA), it will give CMS an opportunity to survey each such new agency to ensure that HHAs meet all conditions of participation.

    The new rule was effective January 1, 2010, to be applied to all existing as well as new CHOW applications.