As the healthcare landscape continues to evolve, new regulations often present challenges for M&A activity within the industry. The 36-month rule, now encompassing hospice care within its purview, stands as one such hurdle.
The 36-Month Rule: An Overview
Previously applicable solely to home health facilities, the 36-month rule mandates re-enrollment for providers experiencing a change in majority ownership within 36 months of their initial Medicare certification. This extension to include hospice care, part of the 2023 home health final rule, intensifies the regulatory landscape for transactions in this sector.
The Temptation of Workarounds
While there are perceived workarounds to this rule, such as employing management contracts to navigate ownership changes, Andre Ulloa highlights some of the associated risks. Attempting to retain the previous owner in a passive capacity through management contracts until the 36-month threshold is exceeded may seem like a solution, but it flouts CMS regulations. Such tactics have been employed previously in home health transactions, yet they remain a contentious issue. Although some buyers may consider these maneuvers, legal implications often render them non-starters from the perspective of a buyer’s legal counsel. The risk of CMS catching wind of attempts to bypass regulations could lead to adverse outcomes, including heightened scrutiny or penalties.
Alternative Strategies and Prudent Choices
Despite these restrictions, avenues still exist within the confines of the 36-month rule in hospice transactions. Transactions involving changes in minority ownership remain viable, while major ownership shifts can occur after the initial 36-month enrollment period for Medicare.
M&A Healthcare Advisors
Navigating the complexities of healthcare M&A demands strategic planning and a meticulous understanding of the evolving healthcare regulatory landscape . With our expertise and commitment to compliance, M&A Healthcare Advisors stands ready to assist clients in executing transactions that prioritize adherence to regulations while achieving their business objectives.
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Source: McKnights Home Care, 2023