Report a Change of Ownership, Acquisition/Merger or Consolidation

Table of Contents

• Step 1: Determine You Are in the Right Place
• Step 2: Understand Type of CHOW
  • Change of Ownership
  • Acquisition/Merger
  • Consolidation
  • CHOW Reminders
• Step 3: Make Changes via Enrollment Application
  • Change of Ownership
  • Acquisition/Merger
  • Consolidation
  • Required and/or Supporting Documents
  • Important Information Completing the Application
  • Important Information about Cost Reports
• Step 4: Claim Process and Medicare Payments
• Step 5: Understanding the “Approval Recommendation” Process
• Related Content
• Best Practices for Change of Ownership, Acquisition/Merger or Consolidation

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Step 1: Determine You Are in the Right Place

If you are reporting a change of ownership, which includes CHOW, acquisition/merger or consolidation, you need to be an enrolled health care organization (buyer and/or seller). It is essential that you report changes of ownership/control within 30 days of the effective date of the change. CHOWs could be identified by the change of the tax identification number or when the assets of the company are sold.

Ownership changes that do not qualify as CHOWs, acquisitions/mergers, or consolidations should be reported as a change of information. The most common example involves stock transfers. For instance, assume that a business entity’s stock is owned by A, B and C. A sells his stock to D. While this is an ownership change, it is generally not a formal CHOW under 42 C.F.R. 489.18. Thus, the ownership change from A to D should be reported as a change of information, not a CHOW.

Because of the various situations in which a CHOW, acquisition/merger, or consolidation can occur, it is recommended that you contact your local Medicare Administrative Contractor or its CMS SOG if you are unsure as to whether such a transaction has occurred. You can also review the applicable federal regulation at 42 CFR. 489.18 for additional guidance.

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Step 2: Understand Type of CHOW

Change of Ownership

A CHOW typically occurs when a Medicare provider has been purchased or leased by another organization. This can result in the transfer of the old owner’s Medicare Identification Number and provider agreement (including any outstanding Medicare debt and liabilities) to the new owner. If the purchaser or lessee elects not to accept a transfer of the provider agreement, the old agreement is terminated and the purchaser or lessee is considered a new applicant.

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Acquisition/Merger

An acquisition/merger occurs when a currently enrolled Medicare provider is purchasing or has been purchased by another enrolled provider. Only the purchaser’s Medicare Identification Number and tax identification number remain.

Acquisitions/mergers are different from CHOWs in that the seller/former owner’s Medicare identification number dissolves. In a CHOW, the seller/former owner’s provider number typically remains intact and is transferred to the new owner.

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Consolidation

A consolidation occurs when two or more enrolled Medicare providers consolidate to form a new business entity. The TIN and Medicare identification numbers of both consolidating entities dissolve and a new TIN and Medicare identification number are assigned to the new, consolidated entity.

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CHOW Reminders

• As referenced in 42 CFR. 424.520(b), changes of ownership or control must be reported within 30 days of the effective date of the change.
• The transfer of corporate stock or the merger of another corporation into the provider corporation does not constitute a CHOW.
  • In the case of an acquisition/merger, the seller/former owner’s Medicare Identification Number dissolves.
  • In a CHOW, the seller/former owner’s provider number typically remains intact and is transferred to the new owner.
    • If the TIN changes, it is typically submitted as a CHOW
    • A CHOW generally occurs when the assets of the company are sold
  • The purchaser must be willing to accept terms and conditions of the provider agreement
  • Purchaser must accept responsibility for all liabilities of the current owner

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Step 3: Make Changes via Enrollment Application

Each party has to complete Medicare forms related to the CHOW, acquisition/merger or consolidation using PECOS or paper forms:

• To submit your application electronically, you will access PECOS. Here you will be able to submit your application. The system will guide you through the process and ensure that you complete the required forms.
• To submit your application by mail, you will fill out form CMS-855A instructions for completion and regarding where to mail the application are on the form.

Once the contractor has made its recommendation for approval to the state/CMS SOG, any inquiry from the provider regarding the status of its request for Medicare participation shall be referred to the state or CMS SOG. State/CMS SOG contact information can be found on the approval recommendation notice.

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Change of Ownership

• Seller/former owner: Complete sections 1A, 2B1, 2G, 13, and 15
• Buyer/new owner: Complete all sections except 2H and 2I
  • Skilled Nursing Facilities must complete Attachment 1

**If the buyer/new owner indicates “No” to the question in section 2G “Will the new owner be accepting assignment of the current “Provider Agreement”?”, the buyer will need to submit an initial application.

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Acquisition/Merger

• Seller/former owner: Complete sections 1A, 2B1, 2H, 13, 15 and section 6 for the signer if that authorized or designated official has not been established for this provider.
• Buyer/new owner: Complete sections 1A, 2H, 3, 4, 13, and section 6 for the signer if that authorized or delegated official has not been established for this provider
  • Skilled Nursing Facilities must complete Attachment 1

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Consolidation

• Former organizations: Complete sections 1A, 2B1, 2I, 13 and 15
• New organization: Complete all sections except 2G and 2H
  • Skilled Nursing Facilities must complete Attachment 1

Seller/former owner CMS-855A CHOW application does not require a recommendation for approval or denial; any recommendation will be based on the CHOW application received from the buyer/new owner.

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Required and/or Supporting Documents:

It is imperative that you submit the proper documentation along with your enrollment application regarding changes to your business structure.

• CMS-588 Electronic Funds Transfer Agreement with a copy of a voided check or bank confirmation letter
• IRS CPC 575, CP147c and/or 501c3 to confirm legal business name and TIN
• Articles of incorporation
• Organization diagram/flowchart of relationship between owner/manage control entity with the applicant and each other
  • Required to identify the relationship of all entities listed in Section 5 organizational control
• SNFs must submit three additional diagrams/flowcharts to identify the organizational structure of all its owners.
  • One chart must identify all the entities listed in Attachment 1, Section A and show their relationships with the provider and each other.
  • One chart must identify the organizational structures of all its owners, including owners not listed I Attachment 1 (e.g., less than 5% direct or indirect owners).
  • A chart outlining the organizational structures of each ADP of the facility. This must include a written description of the relationship of each ADP to the facility and to all the SNF’s and other ADPs.
• Sales agreement, purchase agreement and/or lease agreement
  • Submit one copy of the bill of sales with the application. A copy of the final sales agreement must be submitted once the sale is executed.
• Stock transfer agreement
• Licenses/certifications required by the state

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Important Information Completing the Application

• Obtain NPI if a new NPI number is required.
• Subunits with separate provider agreement; the seller/buyer/new owner must report its CHOW on a separate CMS-855A (HHA subunits) separate enrolled entity.
• Subunits with separate CCN, but same provider agreement; the seller/buyer/new owner, its CHOW can be disclosed on the main CMS-855A (hospital psychiatric unit, HHA branch). This is because the subunit is a practice location of the main provider and not a separately enrolled entity.
• CHOW may occur in conjunction with a change in the facility’s provider subtype. All information (including the change in hospital type) should be reported on the CHOW application; the entire application should then be processed as a CHOW. However, if the facility is changing from one main provider type to another (e.g., hospital converting to a skilled nursing facility) and also undergoing a CHOW, the provider must submit its application as an initial enrollment. For Medicare purposes, a CAH is a separately-recognized provider type. Thus, a general hospital that undergoes a CHOW while converting to a CAH must submit its Form CMS-855A as an initial enrollment, not as a CHOW.
• Until the tie-in notice is issued, the seller remains the owner of record. Hence, the seller or buyer has no standing to submit a CMS-855 or CMS-588 EFT change using the buyer’s information including:
  • Electronic funds transfer or special payment address information
  • Practice location or base of operations
  • Ownership or managing control
  • Legal business name, TIN, or “doing business as” name

All other “pre-tie-in notice” CMS-855 change requests from the seller can be processed normally.

• New owners CMS-855A must be received within 14 days of receipt of the old owners application – If the new owner fails to: (1) submit a Form CMS-855A and (2) indicate that it accepts assignment of the provider agreement, within 30 calendar days after the contractor contacted it, the contractor shall stop payments unless the sale has not yet taken place per the terms of the sales agreement. Payments to the provider can resume once this information is received and the contractor ascertains that the provider accepts assignment.
• If sales/lease agreements not received within 90 days after the receipt of application, the application will be rejected.
• Any application received more than 90 days before the projected sale date will be returned.
• Unreported CHOW – MAC will request CMS-855A application from both the old and new owners. If the new owner fails to submit a Form CMS-855A within the latter of: (1) the date of acquisition, or (2) 30 days after the request, the contractor shall stop payments to the provider. Payments may be resumed upon receipt of the completed Form CMS-855A.

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Important Information about Cost Reports:

• If the buyer assumes the seller’s Medicare provider agreement, it is typically treated as a CHOW for cost reporting purposes. The Tie-In Notice (CMS form 2007) will specifically state that it is a CHOW. Once the Tie-In is received, the cost report tracking system will be updated to include the Buyer’s information and the date of the sale. From that point forward, all cost report correspondence is sent to the Buyer. This change will also update the cost reporting periods that are required.
• A cost reporting period that covers information from the first date after the last cost report FYE to the last day the facility was owned by the seller is created. There will also be a Buyer’s cost report with a period that covers the effective date of the sale to the FYE. It should be noted that the effective date of the sale taken from the sale’s agreement and entered on the CMS tie-in notice is interpreted as the first date the buyer owns the facility.
  • For example, if the effective date of the sale is 12/31/2023, the seller’s cost report will go from the FYB date to 12/30/2023 and the buyer’s cost report will go from 12/31/2023 to FYE.
• It is recommended that the buyer and seller address the cost reporting timing and responsibilities as a part of the sale negotiation. The cost report is due 150 days after the date of the sale. If the Tie-in notice is not received until after that date, the cost report is due 37 days after processing the Tie-in notice. A cost report reminder letter is sent to indicate the due date.
• Overdue cost reports are placed on payment withhold and there are no exceptions if the seller does not file.
• Stock transfers can be either considered a COI or a CHOW. The verbiage on the CMS Tie-In form will dictate how it is handled for cost reporting purposes. If it is identified as a COI, the names and contact information are updated but the cost reporting stays the same as before. If it is deemed a CHOW, then the buyer and seller cost reporting periods are established.

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Step 4: Claim Process and Medicare Payments

• The contractor shall continue to pay the seller/former owner until it receives the Tie-In notice from the CMS SOG.
• Provider agreement is automatically assigned to the buyer/transferee. If the buyer/transferee does not explicitly reject automatic assignment before the transfer date, the provider agreement is automatically assigned, along with the CCN, effective on the transfer date. The assigned agreement is subject to all applicable statutes and regulations and to the terms and conditions under which it was originally issued. Among other things, this means that the contractor will continue to adjust payments to the provider to account for prior overpayments and underpayments, even if they relate to services provided before the sale/transfer.
• If the buyer rejects assignment of the provider agreement, the buyer must file an initial application to participate in the Medicare Program. In this situation, Medicare will never pay the applicant for services the prospective provides before the date on which the provider qualifies for Medicare participation as an initial applicant.
• After CHOW processing is complete, the seller/transferor will no longer be allowed to bill for services (i.e., services furnished after CHOW processing is complete) and only the buyer is permitted to submit claims using the existing CCN. It is ultimately the responsibility of the old and new owners to work out between themselves any payment arrangements for claims for services furnished during the CHOW processing period.

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Step 5: Understanding the “Approval Recommendation” Process

• The applicant completes and submits a CMS-855A enrollment application and all supporting documentation to its fee-for-service contractor.
• The fee-for-service contractor reviews the application and makes a recommendation for approval or denial to the state survey agency, with a copy to the CMS SOG.
• The state agency or approved accreditation organization conducts a survey. Based on the survey results, the state agency makes a recommendation for approval or denial (a certification of compliance or noncompliance) to the CMS SOG. Certain provider types may elect voluntary accreditation by a CMS-recognized accrediting organization in lieu of a state survey.
• A CMS contractor conducts a second contractor review, as needed, to verify that a provider continues to meet the enrollment requirements prior to granting Medicare billing privileges.
  • A site visit shall be ordered after the contractor receives the tie-in notice from the CMS SOG but before the contractor conveys Medicare billing privileges.
• If provider is granted Medicare billing privileges welcome letter will be sent to the contact person identified on application.
• Upon receipt of a welcome letter with Medicare, you can begin the Electronic Data Interchange (EDI) enrollment process to electronically submit claims.
• The CMS SOG makes the final decision regarding program eligibility.

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Related Content

• 42 Code of Federal Regulations (CFR) 489.18
• CMS-855A Medicare Enrollment Application
• MLN^® Educational Tool Medicare Provider Enrollment
• MLN Matters^® SE1617: Timely Reporting of Provider Enrollment Information Changes
• CMS IOM Publication 100-08, Medicare Program Integrity Manual, Chapter 10, Medicare Enrollment
• MLN Matters^® SE17012: Updated Manual Guidelines for Electronic Funds Transfer (EFT) Payments and Change of Ownership (CHOW)

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Best Practices for Change of Ownership, Acquisition/Merger or Consolidation

• Take advantage of PECOS to complete your enrollment application.
• PECOS submissions, either e-sign or upload (PDF or TIFF) the signed and dated certification statement.
• Ensure that your application is complete and that all supporting documentation is included.
• Be sure to pay the application fee or submit a hardship request
• If you are mailing in your application, verify that you are using the correct version of the CMS-855 and CMS-588.
• Ensure that the Legal Business Name entered matches the name located on your IRS tax document.
• Respond quickly to any requests for additional information or changes required to process your application.

Revised 11/4/2024