New CMS Guidance Encourages Facility Buyers to Accept Automatic Assignment of Medicare Provider Agreements

Earlier this month, the Centers for Medicare and Medicaid Services (“CMS”) released a policy memorandum announcing stricter Medicare certification practices for buyers of Medicare-participating providers opting to reject the automatic assignment of the seller’s Medicare provider contracts. When a purchaser is considering opting out of automatic assignment, it must carefully weigh the risk of reimbursement gaps with the benefit of reduced liability exposure.  

A seller automatically assigns existing Medicare provider contracts to a buyer under enrollment Form CMS 855. This benefits the purchaser because it receives seamless reimbursement from Medicare and is not necessarily subjected to a survey by the state survey agency (“SA”) or accrediting organization (“AO”). CMS prefers that buyers automatically take assignment of provider agreements because the buyer then receives the agreements subject to all applicable statutes, regulations, terms, and conditions. This includes overpayments and civil monetary penalties, even those arising prior to the date of sale.

To avoid assuming liability from existing Medicare provider agreements, new owners can choose to reject the automatic assignment of the existing agreements on the Form CMS 855. When a buyer rejects automatic assignment, the provider under new ownership is considered an initial applicant to Medicare. Rejecting assignment severs liability on the seller’s existing provider agreements, but also stops Medicare reimbursement until the new application for initial certification meets all Federal requirements. Included in this review process is a full compliance survey conducted by the SA or AO.

The new guidance makes it clear that initial Medicare applications for certification, including the survey, will not receive special or expedited treatment where a buyer opts out of the automatic assignment of Medicare provider agreements. The policy memorandum expressly provides, (1) a prohibition against any survey for initial certification purposes before the date of sale; (2) a prohibition against any survey until the Medicare Administrative Contractor (MAC) has recommended approval for the buyer’s new enrollment application; (3) the survey must take place when the facility is fully operational under new ownership; and (4) the survey must be a full, standard, and unannounced survey. Fully operational is defined as “serving a sufficient number of patients or residents so compliance with all requirements can be determined.” Essentially, CMS wants to ensure that applications for Medicare certification by buyers rejecting the assignment of provider agreements are not treated with greater urgency than other initial applications, thus resulting in very short periods of uncompensated Medicare care. The smaller the Medicare reimbursement gap, the more attractive it is for buyers to reject automatic assignment of provider agreements and for providers with potential liability to sell without consequence.

CMS will be looking critically at the initial survey timing and priority for buyers opting out of automatic assignment of provider agreements. It is CMS’s policy that these initial surveys be both unannounced and given low SA workload priority. A purchaser rejecting automatic assignment of provider agreements, but receiving an initial survey within around two weeks of the date of sale, will warrant closer scrutiny from the CMS Regional Office (RO). The RO will be responsible for examining whether the provider and SA impermissibly communicated to arrange a survey near the date of sale, thereby effectively announcing the survey. Further, the RO will consider whether the SA has inappropriately prioritized an initial application over higher priority activities such as complaint investigations or re-certifications.

This policy guidance applies similarly to scenarios where a buyer rejects the automatic assignment of Medicare supplier approvals and where a hospital acquires a satellite facility or another campus, but rejects the automatic assignment of the seller’s existing provider agreement even though the purchased facility will not be separately enrolled in Medicare.

The CMS policy memorandum S&C: 13-60 is available here.

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