This transcript has been auto generated
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Bryan Nowicki
Hello and welcome to Hospice Insights: The Law and Beyond, where we connect you to what matters in the ever changing world of hospice and palliative care. What's New? CMS Provisional Period of Enhanced Oversight Application to New Hospices. Adam, how are you doing? Welcome to the podcast.
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Adam Royal
Well, Bryan, thanks for having me on.
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Bryan Nowicki
Great. I'm just getting used to being the host of the podcast. So,
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Adam Royal
Doing it right so far.
00;00;34;11 - 00;00;57;27
Bryan Nowicki
Yeah. So far, I take all sorts of constructive criticism. I just ask that you be nice. You know, it's hard to follow in Meg's footstop footsteps. I see I'm already missaying my word, but, I'm glad. I'm glad to have, folks like you to talk to who really, are deep into the issues and know what you're talking about, so we can provide some helpful information to, hospices out there.
00;00;57;27 - 00;00;58;28
Bryan Nowicki
So. Thanks.
00;00;59;01 - 00;01;00;11
Adam Royal
Yeah. Happy to be here.
00;01;00;13 - 00;01;30;18
Bryan Nowicki
Great. So, we're doing a series on enhanced enforcement efforts, and this is coinciding with the extension of the provisional period of enhanced oversight known as PPEO and expanded prepayment review, which we call EPR. There have been expanded into Georgia and Ohio as of December 2025. So it's a new set of states and hospices and providers in those states who now have to deal with that.
00;01;30;20 - 00;02;01;12
Bryan Nowicki
We've been as a team, we've been working on these for a couple of years now in those western states, Arizona, California, Nevada and Texas. So we bring a lot of experience to this, but it's going to certainly take on some new interest. And so we're doing a series on this. Today we're going to be talking about what does it take to become subject to the PPEO, which by its terms applies to, quote unquote, new hospices.
00;02;01;14 - 00;02;27;07
Bryan Nowicki
And there's a lot of ways to think about whether you're a new hospice or not. Adam, you you on our team are kind of the transactional, the enrollment, the, acquisitions, structural person who does a lot of that for hospices. So I think you are the person to help us unwind what this definition of new is because it involves a lot of your background.
00;02;27;11 - 00;02;52;05
Adam Royal
Help, and it's a broader definition than you would think. So they have essentially four types of providers that are included under the definition of new. The first one is what you would expect, which is an actually new hospice, a provider who has just enrolled in Medicare for the first time. The second one. And this and it gets into more of what I do.
00;02;52;05 - 00;03;23;20
Adam Royal
The transactional stuff is providers undergoing a CHOW, which is shorthand for a change of ownership, the functional test that CMS applies, and determining whether or not a CHOW has occurred is generally whether the in associated with the person or the provider number has changed. Customarily, this would include an asset deal in the transactional context. So that's the second category.
00;03;23;22 - 00;03;33;08
Bryan Nowicki
So EIN employment ident you're going to have to get me up to speed on some of the acronyms. Your employee employer identification number?
00;03;33;10 - 00;04;04;15
Adam Royal
Yeah. Employer identification number. That's your federal tax ID. That's essentially the corporate version of a Social Security number. So CMS has a crosswalk of those EINs, provider numbers and national provider identifiers, the NPI, those are kind of the three numbers that CMS looks at to identify a provider. And so a CHOW occurs when the federal tax ID, which is really the the designator for that corporate entity, changes. Which again would happen in and like an asset sale.
00;04;04;17 - 00;04;14;24
Bryan Nowicki
So you have a hospice and you're acquiring another hospice. And that other hospice has its own PTAN. Is the PTAN then the asset that's being acquired.
00;04;14;26 - 00;04;43;17
Adam Royal
Yes. In this case, yeah. And so you would, you would be acquiring a whole range of assets, but the PTAN would be one of those assets that you're acquiring in addition to the license, the Medicaid agreement. No. For CMS purposes, yes. The acquiring entity would be purchasing that provider number. And so it would transfer from selling entity to the buying entity.
00;04;43;22 - 00;04;58;26
Bryan Nowicki
So do we know if when that happens? So you have an entity, the acquiring entity now might have two PTANs. Right. They had they had one to begin with. They acquired one. Yeah. Which one of those or is both of them now a new hospice.
00;04;58;28 - 00;05;27;11
Adam Royal
That very well could be a case. And we've seen that before of providers who already have a PTAN, acquiring another one for whatever reason, it could be expanding into a different state or, a different area within the same state. In that case, the way this definition is drafted, I would expect only that the transferring PTAN to be subject to PPEO, not any PTANs associated with that EIN.
00;05;27;15 - 00;05;56;24
Bryan Nowicki
Yeah. And I think we have seen generally that these PPEOs are PTAN specific. Although when we when we worked on these, I think in California, we've seen situations where they'll do a PPEO on a certain PTAN, but there are regulations that then allow them to extend the consequence of that PPEO to other PTANs owned by the same entity.
00;05;56;26 - 00;06;09;24
Bryan Nowicki
So we have, in the association with a new PTAN buy an existing PTAN causes some exposure. There's a separate regulation allowing them to extend that. So you want to be wary of that.
00;06;09;27 - 00;06;36;25
Adam Royal
Yeah. It's definitely not without risk. And that's also kind of part of the broader guidance we've been giving clients. And what we're seeing a lot of clients doing, which is, sort of corporate restructurings that help isolate the liabilities of one PTAN from the liabilities of another, or the assets of one PTAN from the liabilities of another by splitting those PTANs into different EINs in different entities.
00;06;36;25 - 00;06;47;23
Adam Royal
So whether that happens in the restructuring context or in the acquisition phase, where you maybe form a new entity to acquire assets, it certainly kind of serves that purpose.
00;06;47;26 - 00;06;55;26
Bryan Nowicki
Is that where a holding company might come into play? We're creating a holding company or making use of an existing holding company. How how does that work?
00;06;55;28 - 00;07;30;07
Adam Royal
Yeah, that's exactly the way we're we're implementing this most of the time is is having a holding company that's sort of like a parent company that would would be the sole owner, for example, of multiple operating assets. Each operating entity would then have its own plan. So the liabilities from a corporate liability perspective and generally how CMS enforces liabilities as liabilities would not flow from one EIN of one corporation or LLC to another.
00;07;30;09 - 00;07;43;16
Bryan Nowicki
Okay, great. I think I took us on a bit of a digression there. There's these four, these four ways to be a new provider. You talked about the brand new enrollees. You talked about the CHOW. There's two more to go. What do we have left?
00;07;43;23 - 00;08;14;29
Adam Royal
The third prong to this test is, providers undergoing a 100% change and ownership information. That's not a channel. And so what what CMS is getting at here is, a change of information, which is often triggered by an equity transfer. So transfer of ownership of a hospice where the in would would be remaining the same. But the owners are changing.
00;08;14;29 - 00;08;40;08
Adam Royal
And in this case the threshold is, 100% of ownership. And so to contrast that with a CHOW which is an asset deal, an equity deal, the same in one would be associated with the PTAN both pre and post closing. But you would have a new owner. So let's say you're trying to acquire a hospice. You have an existing company.
00;08;40;10 - 00;08;58;28
Adam Royal
The acquiring company would acquire 100% of the equity of the hospice and would become the sole owner. So whether that shares or membership interests, if that transfer is 100% of the ownership, then you would be considered a new provider under this PPO regulation.
00;08;59;01 - 00;09;22;15
Bryan Nowicki
Have we seen transfers of ownership of, let's say, 99.9% of the ownership or 51% or something less that allows for control, but that is something less than 100% is a CMS as far as we know. Sticking with 100% or is there risk involved in these less than 100% type of transactions?
00;09;22;17 - 00;09;52;17
Adam Royal
I've not seen this applied to anything less than 100% transfer, but those transfers certainly take place. But in theory, you could conduct a 99% transfer of equity. And that that wouldn't trigger this. The way the regulation is written, there are other thresholds and related kind of anti-fraud regulations. The the 36 month rule comes to mind, which are triggered by a greater than 50% transfer and ownership interest.
00;09;52;17 - 00;09;59;27
Adam Royal
So we've seen CMS apply different thresholds in the regulations, but this one is 100%.
00;10;00;00 - 00;10;18;29
Bryan Nowicki
And the 36 month rule, that means you need to hold on to something. This is my non transaction attorney interpretation. You need to hold on to something for 36 months before you're able to transfer it. Intended to stop this churning and quick turnover of PTANs essentially that am I getting that right?
00;10;19;02 - 00;10;24;15
Adam Royal
Yep. That's a either 36 months from your initial certification or the last transfer.
00;10;24;21 - 00;10;44;10
Bryan Nowicki
And what's the I kind of throughout this hypothetical of a 99% transfer. So you know, you don't avoid the 36 month rule because that is a different threshold. Maybe you avoid a PPEO. Why wouldn't someone or two parties engage in this 99% transfer? What's the problem with those?
00;10;44;17 - 00;11;04;12
Adam Royal
Yeah, if it's an arm's length deal, the issue could be you would just have an owner that still owns 1%. So an albeit small interest, but an interest in your company. And if you don't want to work with that seller, then that would be a reason not to do it. I mean, you could you could limit authority and governing documents to a large extent.
00;11;04;12 - 00;11;12;19
Adam Royal
But at the end of the day, there's still that seller that's entitled to 1% profits and has a 1% ownership stake in the company. Yeah.
00;11;12;22 - 00;11;26;04
Bryan Nowicki
Yeah. And I guess why would the seller want to hang on to 1% and all the potential liabilities that might go on with that? So maybe it's good for the buyer, but why would a seller do that unless they're given extra money or something.
00;11;26;11 - 00;11;30;22
Adam Royal
Right. Yeah. Most sellers are one to get out these days to stay.
00;11;30;25 - 00;11;35;24
Bryan Nowicki
All right. What's that fourth category of what makes a hospice a new hospice.
00;11;35;27 - 00;12;01;26
Adam Royal
Yeah. The fourth category is providers reactivating their billing privileges. And so this would be in response to a deactivation, which is we talked about this on the on the podcast before, but it's a sort of remedy or enforcement tool CMS has that is short of actually terminating a provider from the Medicare program, and instead they deactivate your billing privileges.
00;12;01;26 - 00;12;28;19
Adam Royal
So you still have a PTAN, you're still enrolled in Medicare, but you can't bill. And so the the remedy to that for a provider is to reactivate. And, and so that's the fourth prong is if you've been deactivated and you are reactivating even if, you know, you've been in the Medicare program for years and having undergone any transactions, that reactivation could trigger PPEO.
00;12;28;21 - 00;12;54;01
Bryan Nowicki
Are there any grounds for deactivation that might sneak up on people or that might be might you be deactivated for what some could consider a relatively minor reason, but because of that, now you're on the PPEO radar again. I mean, how what what are some deactivation circumstances that maybe don't seem as consequential in the big scheme of things?
00;12;54;04 - 00;13;20;28
Adam Royal
Yeah, certainly. I mean, and as a matter of fact, we've seen an uptick in the activations recently. It seems like, CMS is kind of turning to this mechanism more than they have in the past. But one one reason for deactivation that could come up often, and that we've seen is not keeping your Medicare enrollment information up to date.
00;13;20;28 - 00;13;52;16
Adam Royal
And along those lines, not responding to the Medicare Administrative Contractor. If you are updating your provider enrollment information, not responding to the MAC under development requests to provide any documentation or clarification that they may ask for in connection with those, enrollment applications. And so it's common for providers to let their enrollment information lapse. Think about nonprofits who have boards that are turning over.
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Adam Royal
Often board members have managing control over the entity, but are not really day to day operators in most cases. So it's it's kind of easy to let that information get out of date. And then when you go to update it or make other updates, if there's information that the MAC needs, if you don't respond to the MAC in the 30 day time frame that they give you, they can deactivate you for that, which is a pretty draconian remedy, especially if the provider is actually taking good faith efforts to provide that information.
00;14;28;15 - 00;14;48;10
Adam Royal
But we've seen situations where development requests don't get to the right people or are overlooked or lost, and then the time period lapses and the client gets deactivated. So definitely something to be aware of. In addition to just the already existing problems of deactivation.
00;14;48;16 - 00;15;14;05
Bryan Nowicki
Yeah, I guess so. Don't, you could be a hospice for 30 years, but then the right, the right mix of circumstances occurs and all of a sudden you're a new hospice as it relates to PPEO. And that's a place you don't want to be. So knowing about your transactions, knowing about for nonprofits, your enrollment information and keeping that updated, a lot to monitor to stay out of that new hospice category.
00;15;14;08 - 00;15;41;27
Adam Royal
Yeah. And for for three of those four categories, it's pretty easy to avoid. Or you should know whether you're potentially going to trigger PPEO or not. You're either enrolling or doing a transaction. So if you want to avoid PPEO you can just not do the transaction. The fourth prong though, can happen, and people who are going about their ordinary business running a hospice, irrespective of transactional context.
00;15;41;29 - 00;16;09;26
Bryan Nowicki
Okay. So as far as these transactions, you know, I understand there's lots of steps in the transaction process. There's the actual business side of it where you have purchase agreements or stock purchase agreements, asset purchase agreements. You need to submit updated 855s, the CHOW you are referring to that gets approved. You know, there could be a number of kind of identifiable steps along the way.
00;16;09;26 - 00;16;22;01
Bryan Nowicki
Which one of those are are there multiple ones, that is the significant one to to deem you a new hospice, at which point in time or upon which event are you deemed a new hospice?
00;16;22;03 - 00;16;47;20
Adam Royal
Yeah. So CMS is using the actual approval date of the application. Which is a little bit strange because that's a date that the provider has no control over. It's within the MAC and CMS’s discretion about whether that gets approved and how quickly they can process the application. And right now it's taking them a long time to process applications, but it is the approval date.
00;16;47;20 - 00;17;12;19
Adam Royal
So, you know, in theory, if a, the Georgia and Ohio were just added to PPEO in December of 2025, if there was a transaction that occurred November of 2025 before this even was announced, but that application is still processing. It's possible that those providers could be subject to PPEO, when that application is actually approved.
00;17;12;27 - 00;17;44;15
Bryan Nowicki
Yeah. And we saw, you know, CMS puts out these bulletins, the MLN bulletin that they put out back when it was originally, imposed on those four Western states, they revised it slightly to add Georgia and Ohio. But something that I thought was noteworthy was when they issued this updated MLN in December 2025, the date that they noted that they identified as the significant one kind of the
00;17;44;20 - 00;18;20;18
Bryan Nowicki
are you before or after this date in terms of triggering events? It was still July 2023. And so there seems to be maybe a little uncertainty about is December 2025 at all significant, or is that just the next time they rolled it out to more states? And beyond that, it doesn't mean anything. Have we seen enough activity in this area to to kind of discern is December 2025 significant or is it all July 2023?
00;18;20;24 - 00;18;22;21
Bryan Nowicki
What's your observation on that?
00;18;22;24 - 00;18;50;05
Adam Royal
Yeah, it's kind of early to, to see any trends around that and how they're enforcing it. It is sort of a a strange issue. It's not clear whether that 2023 date was just an oversight and kind of the updated MLN notice, and that, in fact, they're going to be applying the December 2025 date. And that would be the most sensible application of the rule.
00;18;50;05 - 00;18;55;09
Adam Royal
But I would not hold them to being sensible based on some past experiences.
00;18;55;12 - 00;19;16;07
Bryan Nowicki
Yeah. And I think technically, you know, this this was applied effective PPEO became effective July 2023. So I think, to be conservative, assuming that anything happens after that date could be a trigger until we get maybe some more clarity from CMS on that. That would be the conservative approach.
00;19;16;10 - 00;19;36;04
Adam Royal
Yeah. And they have regulatory authority to conduct PPEO very broad authority, sort of outside of these notices that have been published that are not limited to these specific states or to a specific time frame. So I suppose they could rely on that authority regardless.
00;19;36;07 - 00;19;56;01
Bryan Nowicki
All right. Well, one thing about not not for profits that I'm familiar with are members substitution. That's kind of a way that not for profits might change. Who is in control of the organization. How does that fit into this whole PPEO new hospice structure?
00;19;56;04 - 00;20;25;25
Adam Royal
This is sort of adjacent to but just outside of the PPEO structure. The member substitutions are sort of the most common way that we see nonprofits doing transactions. And so a member substitution in the nonprofit space is closely analogous to an equity deal in the for profit space. But the key difference is nonprofits generally don't have owners the same way for profits do.
00;20;25;25 - 00;20;58;06
Adam Royal
And so what a member substitution is doing is making another entity, the member of the nonprofit entity, which is not an ownership interest. It's generally sort of a role that gives the member the ability to appoint board members and that kind of thing. So exercised control over the nonprofit, but not own it. And so in the context of member substitutions, there's there's no actual ownership change taking place.
00;20;58;06 - 00;21;22;11
Adam Royal
So it it should fall outside of this PPEO and it should be reported as such on the 855, meaning you would report the owner, in Section 5 as having managing control but not having an ownership interest. If you reported them as an ownership interest, that would not or as having an ownership interest that we know would be inaccurate.
00;21;22;11 - 00;21;26;05
Adam Royal
But it it may also trigger a PPEO just because of how they're reported.
00;21;26;07 - 00;21;36;20
Bryan Nowicki
Okay. Well that's a good good heads up, Adam. Any final words to to those listening relating to this new hospice definition that, everybody should be aware about.
00;21;36;23 - 00;22;06;09
Adam Royal
Just to be cognizant of these definitions, what triggers them and, and whether you're potentially going to fall within the definition, a new provider, particularly in the context of reactivation, just yet another reason to avoid being deactivated. And then specifically in the transactional context, if you're doing a transaction that is going to be subject to PPEO, you can expect some cash flow disruptions because this is prepayment review.
00;22;06;09 - 00;22;28;13
Adam Royal
So we've seen buyers wanting sort of higher working capital targets at closing potentially to absorb that cash flow disruption pre-closing. So there are certain but a lever you can pull in the transactional context subject to of the parties negotiations that can lessen that blow. But yeah, something to be aware of.
00;22;28;16 - 00;22;36;21
Bryan Nowicki
Well, this has been wonderful, Adam, thanks so much. As I'm easing into the host chair, a guest like you makes it very easy. Guest, partner, colleague.
00;22;36;21 - 00;22;39;23
Adam Royal
You're too kind. If it's a pleasure being on.
00;22;39;23 - 00;22;58;14
Bryan Nowicki
Yeah, you set a, you set a high standard for everybody else, so. But thank you so much. And, to all the folks who are listening, thank you very much for listening. This topic is of interest to you or you have any questions? Feel free to reach out to me or Adam or anybody else on the Husch Blackwell Hospice, home care, palliative care team.
00;22;58;14 - 00;23;25;10
Bryan Nowicki
We're happy to help and we know what we're doing. So we'll be able to help you. Take care. That's it for today's episode of Hospice Insights: The Law and Beyond. Thank you for joining the conversation. To subscribe to our podcast, visit our website at huschblackwell.com or sign up wherever you get your podcasts. Until next time, take care.