The most common types of Medicare provider enrollment events for home health and hospice agencies are acquisitions, sales, and newly certified or terminated provider numbers. Each of these provider enrollment events has an impact on your Medicare cost reporting requirements. In most cases, Medicare cost reports (Cost Reports) are due five months after your fiscal year-end, but what if your agency falls into one of the four categories outlined above?
If you purchase or sell a home health or hospice agency, and it is an asset purchase transaction, separate buyer and seller period Cost Reports, commonly referred to as Change of Ownership (CHOW) Cost Reports, must be filed. The seller and buyer can plan on moving directly to the separate filings on one condition: the CHOW has been approved by the respective Medicare Administrative Contractor (MAC) before the selling agency’s Cost Report otherwise would have been due. If the CHOW is not approved within five months following the selling agency’s fiscal year-end, CMS will require submission of a 12-month Cost Report as though the change in ownership did not occur. Once the CHOW is approved, the 12-month Cost Report is thrown out and the separate short period buyer and seller Cost Reports will be required to be filed, usually four to six weeks after approval notification is received.
If you purchase or sell a home health or hospice agency via an equity, or stock, purchase transaction, the buyer submits a 12-month Cost Report that combines buyer and seller periods. In an equity transaction, the legal entity that owns the agency remains unchanged but the person(s) or business(es) that owns the legal entity changes. Therefore, this is not a change in ownership as defined by CMS and only one Cost Report is required to be filed for that year.
Newly certified agencies are required to file a Cost Report for the period of the year the agency is certified. The Cost Report period spans from the date of Medicare certification to the end of the fiscal year. The amount of net reimbursement the agency receives from Medicare during this period will determine whether a full, low, or no utilization Cost Report is required.
Agencies that terminate or close also must file a Cost Report for the period spanning the start of the fiscal year to the date of termination. Again, the amount of net reimbursement the agency received from Medicare will determine whether a full, low, or no utilization Cost Report is required. Until a provider number is formally terminated with CMS, a Cost Report will continue to be required in future periods as well.
What happens if an agency doesn’t file a Cost Report when one is required? First, Medicare payments will be stopped, usually within two weeks of the filing deadline. Second, Medicare will send a demand letter to recoup the amount of Medicare reimbursements received during the period of the missing Cost Report. Therefore, closing an agency doesn’t relieve you of the Cost Report requirement. In addition, if you are a buyer and the seller doesn’t file their seller period Cost Report, your current Medicare payments will stop. So, it is wise to be in communication with the seller to confirm they are aware of the Cost Report requirement, and they are taking care of getting their final Cost Report filed.
Cost Reports are certified by the agency’s chief financial officer or administrator, stating the information included is complete and accurate. The Cost Reports become public information and are used by CMS for analysis and help establish future reimbursement rates. If you have any questions or need assistance, please reach out to a Home Care & Hospice team member at Forvis Mazars.