Medicare Provider Change of Ownership: Forms & Billing Procedures (CMS-855A Guide)

Navigating a medicare provider change of ownership (CHOW) is one of the most intricate and critical processes in healthcare administration, directly impacting an organization’s ability to bill and receive reimbursement from Medicare. This guide serves as your definitive resource, offering a deep dive into the CMS-855A application, the associated billing complexities, and the strategic maneuvers required to ensure uninterrupted revenue flow and compliance. As RCM experts, we understand that a misstep during a CHOW can lead to significant financial disruptions, claim denials, and even potential fraud allegations. Our goal is to equip you with the knowledge to manage this transition seamlessly, safeguarding your organization’s financial health.

Quick Reference Guide

Successfully managing a Medicare provider change of ownership requires meticulous attention to detail and adherence to specific timelines. This quick reference table outlines key aspects, forms, and rules essential for a smooth transition.

Key Aspect	Description	Relevant Form/Code	Critical Action/Rule
Definition of CHOW	Any transaction that results in a change of the entity holding the Medicare provider agreement.	CMS-855A, 42 CFR §489.18	Understand if your transaction qualifies as a CHOW requiring a new agreement.
Primary Application	Application for Institutional Providers (Hospitals, SNFs, Home Health, Hospices).	CMS-855A	Submit within 30 days of the effective date of the CHOW.
Effective Date	The date the CHOW transaction legally closes.	Section 2, CMS-855A	Crucial for determining billing responsibility and new PTAN activation.
Provider Transaction Access Number (PTAN)	Unique identifier for Medicare billing.	N/A (Assigned by Medicare)	New PTAN typically issued for asset sales; stock sales may retain existing PTAN.
National Provider Identifier (NPI)	Standard unique health identifier for healthcare providers.	Type 1 (Individual), Type 2 (Organizational)	Ensure Type 2 NPI reflects the new legal entity if applicable.
Billing During Transition	Interim period between CHOW effective date and new PTAN activation.	CMS-1450 (UB-04)	Old owner bills for services up to the CHOW date; new owner bills from CHOW date. Special rules for inpatient stays.
Revalidation	Periodic re-enrollment to maintain Medicare billing privileges.	CMS-855A/B/I	CHOW often triggers revalidation for the new entity. Monitor revalidation cycles.
Medicare Advantage (MA) Plans	Private health plans that contract with Medicare.	Individual MA contracts	Notify MA plans separately; CHOW with Medicare does not automatically transfer MA contracts.

Detailed Breakdown

The intricacies of a medicare provider change of ownership extend far beyond simply filling out a form. It demands a comprehensive understanding of regulatory requirements, precise timing, and strategic billing adjustments. This section delves into the critical components of managing a CHOW, ensuring your organization remains compliant and financially sound.

Understanding the Medicare Provider Change of Ownership (CHOW)

A CHOW is not a one-size-fits-all event. Its definition and implications vary significantly based on the nature of the transaction.

What Constitutes a CHOW?

Medicare defines a CHOW as an event where the entity holding the Medicare provider agreement changes. This can occur in several forms, each with distinct implications for medicare enrollment and billing:

• Asset Sale: This is the most common type of CHOW for institutional providers (e.g., hospitals, skilled nursing facilities). The buyer acquires the assets (buildings, equipment, licenses) but not the legal entity itself. This typically results in the termination of the seller’s Medicare provider agreement and the need for the buyer to obtain a new Medicare provider agreement and a new PTAN.
• Stock Sale/Merger: In a stock sale, the ownership of the existing legal entity changes, but the entity itself remains the same. Similarly, in a merger, one entity absorbs another, or two entities combine to form a new one. If the original legal entity (and its tax ID) remains, the existing Medicare provider agreement and PTAN usually transfer to the new owners. However, a new CMS-855A is still required to update ownership information.
• Lease Arrangement: When a provider leases its facility to another entity, it can also trigger a CHOW if the lessee assumes operational control and billing responsibilities.

Understanding the specific type of transaction is paramount, as it dictates the required forms, timelines, and billing procedures.

The Critical Role of CMS-855A

The CMS-855A is the cornerstone of the medicare provider change of ownership process for institutional providers. It’s not merely an application; it’s a declaration of your organization’s legal and operational structure to Medicare. Failure to submit it correctly and on time can lead to severe consequences, including delayed payments, claim denials, or even termination of billing privileges. This form is used for initial enrollment, revalidation, and updating information, including ownership changes.

Navigating the CMS-855A Application Process

The CMS-855A application is notoriously complex. Precision and thoroughness are non-negotiable.

Key Sections and Required Documentation

The CMS-855A requires detailed information about the new ownership, management, and financial structure. Key sections include:

• Section 2: Application Type – Clearly indicate “Change of Ownership” and the effective date.
• Section 3: Provider Information – New legal business name, tax identification number (TIN), and NPI.
• Section 4: Ownership Information – Detailed disclosure of all owners, managing employees, and organizations with 5% or more ownership. This includes individuals and entities, requiring their NPIs, Social Security Numbers (SSNs), and dates of birth.
• Section 5: Final Adverse Legal Actions – Disclosure of any past or present adverse legal actions against the provider or its owners/managing employees.
• Section 6: Practice Location Information – Updated addresses for all service locations.
• Section 15: Certification Statement – Must be signed by an authorized official.

Required documentation often includes:

• Articles of Incorporation/Organization
• Operating Agreements/Bylaws
• State licenses (new or updated)
• Proof of IRS EIN (Form SS-4 confirmation letter)
• Purchase agreements or merger documents
• Resumes and background checks for key personnel

For a comprehensive list, always refer to the official CMS-855A instructions.

Timelines and Submission Strategies

The general rule for submitting the CMS-855A for a CHOW is within 30 days of the effective date of the change. However, for asset sales, it’s often advisable to submit the application before the effective date to expedite the new PTAN assignment.

Strategic Considerations:

• Pre-Submission Review: Before submitting, conduct a meticulous review of the entire application. Even minor errors can lead to delays or rejections. Consider utilizing a third-party expert for this critical review.
• PECOS Enrollment: While paper applications are accepted, using the Provider Enrollment, Chain, and Ownership System (PECOS) online portal can significantly streamline the process and reduce processing times. Ensure all associated individuals and entities are also enrolled or updated in PECOS.
• Follow-Up: Proactively follow up with your Medicare Administrative Contractor (MAC) to track the application’s status. Document all communications.

PTAN and NPI Implications Post-CHOW

The impact on your Provider Transaction Access Number (PTAN) and National Provider Identifier (NPI) is a crucial aspect of medicare provider change of ownership:

• PTAN: In an asset sale, the seller’s PTAN is terminated, and the buyer receives a new PTAN. This new PTAN is essential for billing services rendered on or after the CHOW effective date. For stock sales or mergers where the legal entity remains, the existing PTAN typically transfers.
• NPI: The Type 2 (organizational) NPI must accurately reflect the legal entity responsible for billing. If the CHOW results in a new legal entity, a new Type 2 NPI may be required. Individual NPIs (Type 1) for practitioners generally remain unchanged unless their individual enrollment status is affected. Always ensure your NPI record in the National Plan and Provider Enumeration System (NPPES) is current.

Billing Procedures During and After CHOW

The transition period for billing is fraught with potential pitfalls. Accurate billing during a medicare provider change of ownership is paramount to avoid denials and maintain cash flow.

Effective Date of Change and Its Billing Impact

The effective date of the CHOW is the dividing line for billing responsibility.

• Old Owner’s Responsibility: The selling entity is responsible for billing all services rendered up to and including the CHOW effective date.
• New Owner’s Responsibility: The acquiring entity is responsible for billing all services rendered on and after the CHOW effective date.

This distinction is critical for both institutional claims (UB-04) and professional claims (CMS-1500).

Interim Billing Strategies (Old vs. New PTAN)

For institutional providers, especially hospitals and skilled nursing facilities, inpatient stays that span the CHOW effective date require special handling.

• Inpatient Stays: For an inpatient admission that begins before the CHOW and ends after, the old owner typically bills for the entire stay. This is known as the “continuous stay” rule. The new owner then bills for any subsequent admissions. However, specific MACs or state regulations may have nuances, so always verify.
• Outpatient Services: Outpatient services are billed by the entity that provided the service on the date of service. If a patient receives services on October 31st (old owner) and November 1st (new owner), two separate claims will be generated.
• Professional Services: Physicians and other practitioners bill under their individual NPIs and the group’s NPI. If the group’s legal entity changes, the group NPI and associated PTANs must be updated.

Specific CPT/HCPCS Codes and Modifiers for CHOW Scenarios

While there aren’t specific CPT/HCPCS codes for a CHOW itself, the CHOW impacts how existing codes are billed.

• Facility Fees: For hospitals and SNFs, the facility component of services (e.g., room and board, nursing care, supplies) is tied directly to the institutional provider’s PTAN. Ensure the correct PTAN is used based on the date of service.
• Professional Component: Physicians billing for their professional services (e.g., CPT codes like 99203 for new patient E/M, 99213 for established patient E/M) will use their individual NPI and the group’s NPI/PTAN. If the group’s legal structure changes, ensure the new group NPI/PTAN is correctly linked.
• Global Periods: For surgical procedures with global periods (e.g., 90-day post-operative care), if the CHOW occurs mid-global period, the original billing entity is generally responsible for the entire global period. However, arrangements for the new entity to provide follow-up care and receive payment must be clearly defined in the purchase agreement.
• Modifiers: While not directly CHOW-related, modifiers like -26 (Professional Component) and -TC (Technical Component) are crucial for separating facility and professional billing, which can be impacted by CHOWs if the facility and professional entities are distinct and undergo separate ownership changes.

Fee Schedule Adjustments and Reimbursement Considerations

A medicare provider change of ownership can also affect reimbursement.

• New Provider Status: A new PTAN for an asset sale might initially be treated as a “new provider” by some MACs, potentially affecting initial payment rates or requiring additional documentation.
• Cost Reports: Institutional providers must submit cost reports. A CHOW necessitates specific final cost reports from the old owner and initial cost reports from the new owner, covering their respective periods of operation.
• Managed Care Contracts: Medicare Advantage (MA) plans and other commercial payer contracts are not automatically transferred with a Medicare CHOW. Each contract must be individually reviewed, negotiated, and assigned or re-contracted by the new entity. This is a common oversight that can severely impact revenue.

Ensuring Billing Compliance and Avoiding Pitfalls

Compliance is not just about avoiding penalties; it’s about establishing a robust foundation for your organization’s future.

Revalidation Requirements Post-CHOW

A medicare provider change of ownership often triggers a revalidation requirement for the new entity. Even if the previous owner was recently revalidated, the new owner will likely need to undergo the process. Monitor your MAC’s revalidation schedule and respond promptly to any requests to avoid deactivation of billing privileges. This is a critical aspect of ongoing medicare enrollment.

State-Specific Licensing and Enrollment Considerations

Beyond federal Medicare requirements, each state has its own licensing and enrollment mandates.

• State Licensure: The new entity must obtain or transfer all necessary state licenses (e.g., hospital license, nursing home license, home health agency license) before the CHOW effective date. Medicare enrollment is contingent upon valid state licensure.
• Medicaid Enrollment: If the provider participates in Medicaid, a separate CHOW application or notification will be required for the state Medicaid agency. Medicaid rules often differ significantly from Medicare.
• Other State Programs: Consider other state-specific programs or waivers that may require separate notification or re-enrollment.

Failing to address state requirements can halt operations and billing, even if Medicare enrollment is progressing.

Maintaining Accurate Patient Records and Financial Data

Post-CHOW, the continuity of patient care and financial records is paramount.

• Medical Records: Ensure a clear transition plan for patient medical records, including access for ongoing care and compliance with HIPAA.
• Financial Records: Segregate financial records for the old and new entities clearly. This is vital for accurate cost reporting, audits, and resolving any billing discrepancies.
• Credentialing: All individual providers (physicians, nurses, therapists) must be re-credentialed with the new entity’s payer contracts, including Medicare and Medicaid, if the group’s legal entity changes.

The Importance of Due Diligence in Medicare Enrollment

Thorough due diligence during the acquisition phase is critical. This includes reviewing the seller’s Medicare enrollment history, compliance records, and any outstanding audits or investigations. A clean medicare provider change of ownership starts long before the CMS-855A is submitted.

Real-World Billing Scenarios & Patient Status Changes

Understanding the theory is one thing; applying it in real-world billing scenarios during a medicare provider change of ownership is another. Here are detailed examples:

Scenario 1: Hospital Asset Sale with Inpatient Stay

Situation: Community Hospital (Seller) sells its assets to New Horizon Medical Center (Buyer) on November 1st. A patient is admitted to Community Hospital on October 28th and discharged from New Horizon Medical Center on November 5th.

CHOW Type: Asset Sale (new PTAN for New Horizon).

Billing Implications:

Community Hospital (Seller): Will bill for the entire* inpatient stay from October 28th to November 5th using its old PTAN. This is due to the “continuous stay” rule for inpatient services spanning a CHOW. New Horizon Medical Center (Buyer): Will begin billing for any new* admissions or outpatient services rendered on or after November 1st, using its newly assigned PTAN.

Key Action: The purchase agreement must clearly outline the financial responsibility for this “continuous stay” claim, as the payment will go to the seller, but the buyer provided a portion of the care.

Scenario 2: Skilled Nursing Facility (SNF) Stock Sale

Situation: Evergreen SNF undergoes a stock sale on December 15th. The legal entity (and its Tax ID) remains the same, but ownership changes hands. Several residents are receiving ongoing Part A SNF services.

CHOW Type: Stock Sale (existing PTAN transfers).

Billing Implications:

Evergreen SNF (New Ownership): Continues to bill for all services, including ongoing Part A SNF stays, using the same* PTAN. The change is internal to Medicare’s records, not a change in the billing entity.

CMS-855A: A CMS-855A must be submitted to update the ownership information within 30 days of the December 15th effective date. Failure to do so could lead to revalidation issues or even revocation.

Key Action: Ensure the new ownership understands the existing residents’ benefit periods and remaining days for Part A coverage.

Scenario 3: Home Health Agency (HHA) Merger

Situation: BrightCare HHA merges with Compassionate Home Health on January 1st, forming a new legal entity, “United Home Health.” Both original HHAs had active Medicare provider agreements.

CHOW Type: Merger (new legal entity, new PTAN for United Home Health).

Billing Implications:

BrightCare & Compassionate (Old Entities): Each will submit final claims for all services rendered up to December 31st using their respective PTANs.

United Home Health (New Entity): Must obtain a new Medicare provider agreement and PTAN. It will then bill for all services rendered on or after January 1st.

Episode-Based Billing (HHAs): For home health episodes spanning the CHOW, the old HHA typically bills for the entire episode if the start date was before the CHOW. The new HHA would then bill for any subsequent episodes. This requires careful coordination and patient transfer documentation.

Key Action: Proactive application for the new entity’s PTAN is crucial to minimize billing gaps. All existing patients must be formally transferred to the new entity’s care plan and billing system.

Common Denial Codes & Step-by-Step Appeal Instructions

Even with meticulous planning, denials can occur during a medicare provider change of ownership. Understanding common denial codes and the appeal process is vital for revenue recovery.

Common Denial Codes Related to CHOW

• CO-16: Claim/service lacks information which is needed for adjudication.
  • Reason: Often occurs when the billing provider’s information (PTAN, NPI, legal name) on the claim does not match Medicare’s records for the date of service. This is common if the CHOW was not processed correctly, or if the old PTAN was used for services after the CHOW effective date for an asset sale.
  • RARC: M86 (Missing/incomplete/invalid information on the claim).
• CO-4: The procedure code is inconsistent with the patient’s gender, age, or diagnosis.
  • Reason: Less direct, but can arise if patient demographic data was not accurately transferred or updated post-CHOW, leading to system mismatches.
  • RARC: N/A (Often requires claim correction).
• PR-204: This service/equipment/drug is not covered under the patient’s current benefit plan.
  • Reason: Could indicate an issue with the new provider’s enrollment status, suggesting that Medicare billing privileges were not fully activated or lapsed during the CHOW transition.
  • RARC: N/A (Requires verification of enrollment status).
• CO-109: Claim not covered by this payer/contractor. You must send the claim to the correct payer/contractor.
  • Reason: If the CHOW involved a change in MAC jurisdiction, or if the claim was sent to the old MAC after the new MAC took over.
  • RARC: N/A (Requires resubmission to correct MAC).

Step-by-Step Appeal Instructions

When a claim is denied due to CHOW-related issues, a structured appeal process is essential.

1. Identify the Denial:
   • Review the Explanation of Benefits (EOB) or Remittance Advice (RA) for the CARC and RARC codes. Understand the specific reason for the denial.
   • Verify the date of service, the PTAN/NPI used, and the effective date of the CHOW.
2. Gather Documentation:
   • Copy of the denied claim.
   • Copy of the EOB/RA.
   • Proof of CHOW effective date (e.g., purchase agreement, CMS-855A submission confirmation).
   • Confirmation of new PTAN/NPI activation.
   • Any correspondence with the MAC regarding the CHOW.
   • Relevant patient medical records to support the medical necessity of the service.
3. Level 1: Redetermination (First-Level Appeal)
   • Action: Submit a written request for redetermination to your MAC within 120 days of the initial denial. Use the CMS-20027 form or a similar MAC-specific form.
   • Content: Clearly state why the claim should be paid, referencing the CHOW documentation and explaining how the billing was correct given the transition.
   • Timeline: MACs typically have 60 days to issue a decision.
4. Level 2: Reconsideration (Second-Level Appeal)
   • Action: If the redetermination is unfavorable, request a reconsideration from a Qualified Independent Contractor (QIC) within 180 days of the redetermination decision.
   • Content: Provide all documentation from Level 1, plus any new information or arguments.
   • Timeline: QICs typically have 60 days to issue a decision.
5. Level 3: Administrative Law Judge (ALJ) Hearing
   • Action: If the QIC decision is unfavorable and the amount in controversy meets the threshold, request an ALJ hearing within 60 days of the reconsideration decision.

   FAQ: Common Questions Answered

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   What is the CMS-855A application and why is it mandatory for a Medicare CHOW?

   The CMS-855A is the primary enrollment application specifically designed for institutional providers, such as hospitals, skilled nursing facilities (SNFs), home health agencies, and hospices, to enroll or re-enroll in Medicare. It is mandatory for a Medicare Change of Ownership (CHOW) because a CHOW signifies a transaction where the legal entity holding the Medicare provider agreement changes. Medicare requires a new provider agreement with the new owner to ensure they meet all program requirements and are eligible to bill for services. Without a successfully processed CMS-855A, the new entity cannot legally bill Medicare, leading to immediate and severe disruptions in revenue flow and potential claim denials for services rendered post-CHOW.

   How do NPI and PTAN identifiers change during a Medicare provider change of ownership?

   During a Medicare CHOW, the handling of NPI (National Provider Identifier) and PTAN (Provider Transaction Access Number) is critical for billing continuity. For institutional CHOWs, if the transaction results in a new legal entity, a new Type 2 NPI (organizational NPI) will typically be required for the new owner. However, if the CHOW involves a change of ownership of an existing legal entity that retains its identity, the existing Type 2 NPI may be retained. The PTAN, which is directly tied to the Medicare enrollment and provider agreement, will almost always change. The previous owner’s PTAN becomes inactive with the termination of their provider agreement, and the new owner will be issued a new PTAN upon the successful approval of their CMS-855A application and the establishment of their new Medicare provider agreement. Ensuring these identifiers are correctly updated and linked is paramount; any misstep can lead to claims being rejected or denied, halting reimbursement.

   What are the typical timelines and potential delays for a Medicare CHOW application?

   The initial timeline for a Medicare CHOW application mandates that the CMS-855A be submitted within 30 days of the effective date of the CHOW. However, the processing time by CMS and its Medicare Administrative Contractors (MACs) can vary significantly, often ranging from 90 to 180 days, and sometimes even longer. Potential delays are common and can stem from various factors: incomplete or inaccurate application submissions, missing supporting documentation, discrepancies found during background checks, required site visits, or simply MAC backlogs. Each request for additional information or correction can add weeks or months to the process. Proactive, meticulous preparation and timely responses to MAC inquiries are essential to mitigate these delays and minimize the period of financial uncertainty.

   How can organizations ensure uninterrupted revenue flow during a Medicare CHOW?

   Ensuring uninterrupted revenue flow during a Medicare CHOW is paramount to an organization’s financial health. The most critical step is the timely and accurate submission of the CMS-855A application within 30 days of the CHOW effective date. Organizations must meticulously complete all sections, attach every required document, and proactively address any potential discrepancies. Where applicable and allowed by the MAC, applying for provisional billing privileges can be a lifeline, allowing the new owner to bill Medicare for services rendered during the application processing period. Maintaining open and consistent communication with the MAC, tracking the application’s progress, and promptly responding to any requests for information are also vital. Leveraging RCM experts, as highlighted in the article, can provide invaluable guidance, ensuring compliance and strategic maneuvers to navigate complexities and safeguard against financial disruptions and claim denials.

External Resources & Authority Links

• For more detailed insights, refer to the official CMS Medicare guidelines.
• For more detailed insights, refer to the CMS guidelines.