Acquisitions of Providers/Suppliers with Rejection of Automatic Assignment of the Medicare Provider Agreement: Implications for Timing of Surveys and Participation Effective Date

• The Centers for Medicare & Medicare Services (CMS) Encourages New Owners of a Provider/Supplier to Accept Automatic Assignment of the Seller’s Medicare Agreement:
o 42 CFR 489.18(c) provides for automatic assignment of the current Medicare agreement to a new owner. However, new owners have the option to reject automatic assignment, resulting in termination of the prior Medicare agreement in accordance with 42 CFR 489.52.
o If the new owner rejects assignment, the facility must be treated as an initial applicant if it seeks to participate in Medicare. Like all initial applicants the facility will experience a period (of uncertain duration) with no Medicare payments. This policy also applies in the case of hospitals that acquire another hospital, reject assignment, and make the acquired hospital a provider-based campus.
• State Survey Agency (SA) & Accreditation Organization (AO) Surveys Must Be Unannounced:
o All surveys conducted for Medicare certification purposes must be unannounced in accordance with Section 2700A of the State Operations Manual (SOM).
o If an initial survey of an applicant that acquired a provider/supplier but rejected assignment is conducted shortly after the acquisition date, it raises significant doubts that the survey was unannounced. At a minimum, the appearance is created that the SA or AO collaborated with the new owner on the timing of the survey.
o CMS may refuse to accept a survey for certification purposes if the survey timing creates reasonable doubt that the survey was unannounced.
• SAs Must Prioritize Initial Surveys in Accordance with CMS Workload Priorities:
o Unless the CMS Regional Office (RO) directs the SA to conduct an initial certification survey as soon as possible, SAs must not conduct initial surveys unless they are able to complete their higher priority workload. For initial applicants that have an accreditation option, initial certification surveys are the lowest SA priority.
o When an SA conducts an initial certification survey of an applicant that acquired a provider/supplier but rejected assignment, the RO must review the facts of the case carefully to determine whether the SA deviated from CMS workload priorities as well as the SA’s typical practice for initial applicants. Such deviation may raise reasonable doubt that the survey was unannounced.
• Determination of the Medicare Agreement Effective Date: ROs determine the effective date of each Medicare provider agreement or supplier approval in accordance with 42 CFR 489.13. While the effective date can be the last day of an initial Medicare survey conducted by the SA or AO as part of the certification process, this is not always the case. SAs and AOs must not speculate to prospective providers/suppliers on what the likely effective date will be.
• Non-Long Term Care Survey Procedures When An Initial Survey Finds Substantial Noncompliance: We are reiterating the existing policy and process to be followed when an initial certification survey of a non-long term care applicant results in condition-level deficiency citations.