The CMS 36-month rule, explained
If a home health agency or hospice changes majority ownership within 36 months of its initial Medicare enrollment or its last majority ownership change, the buyer generally cannot keep the existing Medicare provider agreement.
What the rule says
The rule is found at 42 CFR 424.550(b). When a home health agency undergoes a change in majority ownership within 36 months after its initial Medicare enrollment, or within 36 months after its most recent change in majority ownership, the provider agreement and billing privileges do not convey to the new owner.
The new owner must enroll as a new provider and go through a state survey or accreditation survey again. In practice, that can mean many months without Medicare billing.
CMS extended the same rule to hospices beginning January 1, 2024.
What counts as a change in majority ownership
A change in majority ownership occurs when an individual or organization acquires more than 50 percent direct ownership of the agency, including through a series of smaller transfers inside the 36-month window. Both asset purchases and equity purchases can trigger it.
Exceptions
The regulation lists limited exceptions. The most common:
- The agency has submitted two consecutive years of full cost reports since initial enrollment or its last majority ownership change.
- The parent company is undergoing an internal corporate restructuring, such as a merger or consolidation, and the agency has been a subsidiary for at least the preceding 36 months.
- The owners are changing the existing business structure, for example from an LLC to a corporation, without changing the owners.
- An individual owner dies.
How it affects price
An agency past its 36-month mark can transfer with its Medicare enrollment intact. That is often the main thing a buyer is paying for, especially in zero-census and license-only sales.
An agency inside the window is worth less to most buyers, or requires a structure the buyer and their counsel are comfortable with. Sellers close to the 36-month date often get a better result by waiting.
What we check before going to market
We confirm the initial enrollment date, any prior ownership changes, cost report history, and the planned deal structure before a listing goes out. Buyers will ask, and the answer should be documented in the teaser.
This guide is general information, not legal advice. Confirm your specific situation with healthcare counsel.