Healthcare providers and suppliers enrolled in Medicare are subject to a length list of regulatory and compliance requirements, among which is a duty to report information about a corporate provider’s ownership to the Centers for Medicare & Medicaid Services (CMS). A frequently misunderstood distinction in these reporting requirements is the difference between a “change of ownership” and a “change of information.”
Simply put, “change of ownership” has a specific regulatory definition which does not match up with the common understanding of the term. In the case of a partnership, the removal, addition, or substitution of a partner, unless the partners expressly agree otherwise, as permitted by applicable state law, generally constitutes a “change of ownership.” The lease of all or part of a provider facility generally constitutes a “change of ownership” of the leased portion. Transfer of title and property of an unincorporated sole proprietorship to another party also generally constitutes a “change of ownership.”
However, the most common and important part of the definition of “change of ownership” relates to corporations. The merger of a provider corporation into another corporation, or the consolidation of two or more corporations, resulting in the creation of a new corporation generally constitutes a “change of ownership.” On the other hand, transfer of corporate stock or the merger of another corporation into the provider corporation generally does not constitute a “change of ownership.”
Put another way, the most common type of purchase of a corporate provider, a stock transfer, is usually not a “change of ownership.” Instead, a stock transfer generally constitutes a “change of information” subject to different reporting requirements. While a stock transfer is often referred to colloquially as a change of ownership because, naturally, the owners have changed, that is usually inconsistent with how CMS and Medicare regulations would characterize the transaction.
Both “change of ownership” (often abbreviated CHOW) and “change of information” (often abbreviated CHOI) are subject to various reporting requirements and timeframes where they occur. Complex transactions may include elements that constitute both CHOWs and CHOIs. Further, “change in majority ownership” may have its own distinct meaning and requirements, usually for hospices and home health agencies. Parties to the sale or purchase of a Medicare-enrolled provider should be aware of how CMS characterizes the transaction and the accompanying compliance requirements. A misunderstanding of this distinction can lead to misguided compliance efforts and slow or hinder the transaction at issue.
For over 40 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters, and our attorneys can assist providers and suppliers in understanding new developments in healthcare law and regulation. If you or your healthcare entity has any questions pertaining to a CHOW, a CHOI, or healthcare compliance, please contact an experienced healthcare attorney at 248-544-0888 or wapc@wachler.com.