Buying a Medicare Facility

If you want a Medicare facility, there are numerous questions that must be answered prior to beginning your project. First of all, who is going to own it? Chances are you will not. A good lawyer can assist in determining an ownership structure. As a general rule, I find it messy to have more than one provider number owned by a single entity. And the way around that is to create a separate entity to own any new provider numbers. You can even have existing entities be members of new entities for the sake of simplicity.

So, you are likely establishing a new entity. A tax ID number will be necessary to complete the remainder of the process so get one. It can be done online so you will have it handy for completion of applications. However, prior to submitting the application to Medicare, you must have written confirmation on IRS letterhead of your new Tax ID number. This can take a couple of weeks.

So, you have an entity that own the provider and a tax ID. Now it’s time to decide how you will actually procure your Medicare provider. Beware, any avenue you choose will cost you money. You must have an adequate budget to continue.

If you choose to buy an established facility, the process is generally faster. In the current regulatory world, CMS is authorizing no initial certification surveys. However, in order to buy an existing provider you must assume their provider agreement. That means that any outstanding overpayments are the new providers whether or not they are known at the time of purchase or not. Most lawyers will advise that certain amount of the sale price be put into an escrow account for a period of time to cover losses incurred as the result of prior ownership. The amount of money is often a hot topic of negotiation and even high dollar amounts may not offer full protection. Make no mistake; assumption of an existing provider number is a risk.

In business in general, there will always be risks. The key to risk taking in the Medicare world is to get as much information as you can in order to determine if the purchase falls within your acceptable level of risk. You do this by thorough clinical and financial due diligence. A good due diligence team costs money but can save your sanity in the long run. I have known buyers to get into a home health agency and find that most of the patients do not meet payment guidelines. Not only must they discharge the patients but since the price was dependent on prior documented revenue, it stands to reason that they greatly overpaid for the agency. Add to that the risk incurred if ever the provider number is investigated. The cost of a good due diligence team is small compared to the headaches and financial disasters it can save.

The other advantage of assuming a provider number as opposed to a full upstart is that billable services commence on the day of the transaction. Notice I did not say that billing would begin. In order to bill as the new owner, the entire change of ownership process must be complete at the state and CMS level. But that doesn’t mean that you can’t get paid. Again, with the assistance of a Medicare attorney, a ‘remittance agreement’ should be signed by both parties. This allows billing to continue uninterrupted by the seller with the money being transferred to the new owner.

If your pockets are deep, your tolerance for risk is low and you have unlimited patience, it may be a better idea to create an entity and apply for a brand new provider number. However, this process takes about six months or longer. Services are billable from the date of the certification survey which Medicare will no longer provide. Therefore you must pay an accrediting organization to complete a deemed status survey which Medicare will recognize. So, effective the last day of the survey, assuming it is a good survey, the provider begins to provide billable services. Several weeks to several months later, you will be able bill retrospective to the date of survey. This is painful for anyone but tight budgets make it almost impossible.

There is still a third way to assume a provider. It is the simplest which translates into the highest risk route. When an entity such as a corporation or an LLC changes out members, it is not recognized as a change of ownership for Medicare purposes. If XYZ Hospital, Inc. sells all of its stock to Joe Bleaux, Joe is not considered the new owner. XYX, Inc. continues to own the provider. The same principle applies to LLCs when members are changed out.

This is a particularly high risk transaction because the new members or stockholders are assuming all debts and liabilities of the prior owner in addition to the provider agreement. On the other hand, it only involves filing a couple of documents with the Secretary of State’s office and then notifying CMS and your state office of the changes. It does not interrupt billing. If the provider you are wanting to assume is new with very little history and if you perform exceptional due diligence, this is a simple option.

Of course, now that you have determined who owns your new business and how you will obtain it, the work is just beginning. Within the next couple of weeks, I will post an outline of the steps required. However, if you are anxious to get started now, please email us. We love Medicare Changes of Ownership!