Home Health & Hospice 36-Month Ownership Rule

What the 36-month rule changes

The rule determines whether a new owner can take over the existing Medicare agreement and billing rights. Under 42 CFR 424.550(b), a covered majority-ownership change within the relevant period can require the buyer to enroll as a new provider. The buyer must also obtain a state survey or accreditation from an approved organization unless a specified exception applies. (Source: 42 CFR 424.550)

The provision covers home health agencies and hospices. It should not be treated as a generic rule for every business serving older adults. It also does not say that an agency can sell its Medicare number separately from the regulated provider and its obligations.

This review was completed September 6, 2026 using eCFR text current through September 3 and the retrieved CMS manual. The article explains the questions to resolve. Counsel and the Medicare Administrative Contractor, or MAC, should assess the facts of a proposed change.

Identify the enrolled provider and its direct owners

CMS’s manual describes a majority change as acquiring more than 50 percent direct ownership in the HHA or hospice within the relevant period. Add up the relevant purchases; do not look at each one alone. It is not limited to one document transferring more than half the business at once. (Source: CMS Program Integrity Manual, section 10.6.1.1.5)

For example, a fictional buyer that already holds 35 percent directly could acquire another 20 percent and reach 55 percent. Looking only at the latest 20-percent purchase would miss the change to majority ownership. Whether the full rule applies still depends on timing, exceptions, and the remaining facts.

Identify the provider named in the enrollment record before tracing the ownership chart. If the enrolled provider is a corporation, its shareholders are direct owners of that provider. Do not insert the provider corporation as an extra ownership tier and mistakenly call every shareholder an indirect owner.

CMS distinguishes a mere indirect ownership change from a direct change for this particular test. That distinction does not erase other reporting, state-control, contract, or legal requirements. The chart should show both levels so the correct rule can be applied to each change.

Build the timeline from Medicare records

The key dates are the effective date of initial Medicare enrollment and the most recent majority-ownership change. The proposed transaction is reviewed against the applicable 36-month period. The legal entity's formation date and the seller's length of time in the industry do not replace those dates.

CMS instructs the contractor to verify transfer dates against documents such as the sale or transfer agreement. A date typed into an application is not the only evidence. Resolve any conflicting dates. Use the verified timeline in the offer, loan request, and cash forecast.

Understand why a prior exempt change still matters

An exception can allow a change to proceed without requiring new enrollment. It does not erase that ownership event from the history. CMS expressly says an exempt majority change still counts when determining the next 36-month period. (Source: CMS Program Integrity Manual, section 10.6.1.1.5.C)

Consider this fictional chronology. It illustrates timing only and assumes the listed prior event was a majority-ownership change. It does not establish that any real provider qualifies for an exception.

The provider's older initial enrollment does not end the analysis. The proposed change is only 20 months after the more recent event. Review whether a current exception applies and whether the required enrollment path remains available; do not assume the old exception carries forward.

Review all four exceptions with their conditions

The regulation lists four exceptions. Each needs supporting facts. Calling a deal an internal restructuring does not prove it qualifies. Nor does a statement that two reports were filed.

For the cost-report exception, the CMS manual adds that the reports must have been submitted in the two years preceding the effective transfer and accepted by the contractor. Obtain acceptance evidence and the reports themselves. Tax returns, short financial summaries, or a CPA's profit calculation are not substitutes for Medicare cost reports. (Sources: 42 CFR 424.550; CMS Program Integrity Manual, section 10.6.1.1.5.B)

Have the advisers compare the claimed exception with the actual facts and current guidance. If the history is incomplete, record that as an unresolved condition. Do not turn an unverified seller explanation into a statement that billing privileges will convey.

Keep CHOW and majority ownership separate

The provider-agreement CHOW framework in 42 CFR 489.18 and the majority-ownership rule answer different questions. Section 489.18 sets out how it treats corporate stock transfers. Section 424.550 also covers stock transfers, but uses its own majority-ownership test. Both can be relevant to the same deal. (Sources: 42 CFR 489.18 and 424.550)

The asset-versus-stock discussion explains why a commercial structure cannot settle every approval issue. The CHOW guide covers the agreement, application, and continuing-condition questions. State which rule each finding addresses and what still needs review.

Check the current new-enrollment constraint

CMS implemented a nationwide HHA and hospice initial-enrollment moratorium on May 13, 2026. The July FAQ says it includes non-exempt majority changes that require initial enrollment. As of this review, the announced initial six-month period remains relevant and can be extended. (Source: CMS moratorium FAQs, July 2026)

If the 36-month rule requires initial enrollment, the buyer cannot simply assume that submitting a new application solves the problem. The moratorium guide explains why affected applications are denied during the restriction and why later dates need a fresh check.

Declining the existing provider agreement also has a separate initial-enrollment consequence described in CMS-855A. It should not be treated as a routine way to avoid an ownership issue. Review authority, care continuity, and funding before relying on any proposed transition arrangement. (Source: CMS-855A, September 2024 revision)

Turn the analysis into a transaction decision

Prepare a concise decision record with the provider identity, direct ownership changes, relevant dates, claimed exception, supporting documents, and unresolved questions. Name the adviser or authority that must address the next question. Distinguish a submitted request from a completed review.

An ownership review may identify a possible path. The provider agreement decision guide connects that path with debt records and dated cash needs. Keep unavailable enrollment paths out of comparisons that assume both options can proceed.

The home-health seller guide examines an earlier enrollment letter alongside two other fictional package records. The ownership facts preceded a later deal change. Use that comparison to identify the revised transaction question for counsel. Uploading the letter again does not resolve what the changed proposal still needs reviewed.

The buyer's forecast should state the basis for any assumption that existing billing continues. If that basis is unverified, identify the effect on closing conditions, operating cash, and patient services. The seller can help by assembling a complete ownership history before marketing rather than waiting for a buyer to discover gaps.

Continue clinical and financial diligence even when the ownership path appears workable. Use the home-health checklist or hospice checklist for the separate payment, staffing, and service-record questions.

Common mistakes that weaken the review

• Using the LLC formation date instead of Medicare enrollment history.
• Examining only the latest percentage transfer and ignoring prior purchases.
• Treating an exempt majority change as if it never occurred.
• Substituting tax returns for qualifying Medicare cost reports.
• Assuming that a stock sale, management agreement, or delayed paperwork avoids the rule.
• Treating an exception as approval of all state, payer, and clinical requirements.

The goal is to check the evidence before the parties rely on the result. Keep the evidence current if the ownership structure or effective date changes, and ask the MAC to address case-specific questions through the appropriate process.

The 36-month-rule definition adds a short cumulative ownership example. Use it to frame the ownership history, then return to the exception, enrollment and current-restriction review in this guide.

The early home-health sale question compares two fictional ownership histories. One agency has operated longer but has a recent majority-ownership change. Use that contrast to identify the records needed before relying on the age of a business.