Trying to compare options between acquiring an existing DME vs creating/accrediting one from scratch. Pros and Cons.
We have seen claims like the one below as the advantages for acquiring an existing DME listed for sale:
"NO Waiting for Long Application approvals, Medicare License can be moved to ANY STATE IN THE US. Purchase and continue billing Medicare very QUICKLY. Contact NOW we have the medical consultant,and medical attorney for a smooth transition."
Is the above true that a Medicare "license" which is a misnomer can be moved (transferable) anywhere in the US? Is the DME accreditation process for reaccreditation shorter even with a Change of Ownership (CHOW)? And how can the new owner purchase and continue billing Medicare very "quickly". What is considered "quickly"?
There are no "short-cuts" to obtaining accreditation. Medicare Numbers (PTAN's) cannot be "transferred or sold. Pie in sky in my opinion. Love to have the name of the consultant and health care attorney (so I will know who to avoid )
I agree with sleeping410, there are no shortcuts and the statement you quoted smacks of being a scam.
As an accreditation consultant and a billing agency for DME I can tell you this. One of my accreditation clients recently sold his business as a STOCK sale, in other words, everything complete. I bugged NSC with countless questions prior to the sale to assure we would not have problems. That is the only way through the CHOW as you mentioned that this can be accomplished with Medicare and still keep the PTAN intact with the business. We had no problems with Medicare (NSC), the sale went smoothly and the PTAN remained in place for the new owners. They kept the same location as the previous owner. Moving the location to another state would just bring on a host of problems that would never pass the mustard with NSC.
On the accreditation side, again we had no problems with Jt. Commission. Their position is that as long as the scope of services remain the same with the new owners, they did not require a new site survey. However, that position is not set in stone and if they suspect something, the change of ownership "could" trigger a site survey.
You will see many more brokers making claims like the one you mentioned as the industry jockys its way through the competitive bidding process. Brokers know that companies who win bids and need a physical presence in a geographical area are going to be looking for DMEs that are for sale. However, many of them do not know the regulations and will lead less knowlegable buyers down a garden path of disaster. Feel free to contact me if you have further questions. arrowmedical@vqme.com
How did you convince the NSC to transfer the PTAN? I have always been told that a transfer of stock of more than 40% requires a new Tax ID to be issued. The IRS doesn't allow transfers of those numbers even with a stock sale. NSC cannot change the Tax ID on a PTAN, can they???
Not to mention all of the risks associated with a stock purchase, most importantly that the new owners would be assuming all of the risk of any audits performed on issues dating back to the previous owners. Even if you received indemnifications, they are only as good as the persons ability to pay them.
The difference is because it was a 100% stock sale instead of an asset sale. The old owner was completely removed from the NSC record through the CHOW application. With an asset sale, NSC does require a new PTAN to be applied for. The tax ID is issued to the entity, i.e. My DME Company, Inc., not to an individual, therefore the IRS does allow the TIN to transfer on a 100% stock sale. This is directly from NSC's site regarding CHOWs:
While there may be a variety of legal definitions and purchase options, most of the changes of ownership received by the NSC are completed using one of the following methods, which are defined as follows:
An asset purchase is the purchase of the assets of a business only. The buyer will be operating the business under a new tax identification number (TIN).
A stock purchase is the purchase of all assets and liabilities where the buyer will retain and operate the business under its existing TIN.
Suppliers should keep the following in mind with regards to changes in ownership:
Supplier Standard #2 requires a supplier to report to the NSC any change in information within 30 days of the change
Supplier numbers are associated with the TIN. If the buyer chooses to purchase the assets and liabilities, retaining the TIN, then the supplier file only needs to be updated. If there is a change in TIN, then the new owner must obtain a new supplier number.
Both parties had very good, seasoned attorneys. Part of the sales contract dictates that the previous owner is responsible to pay the new owners for any recoupments on claims with dates of service up to the sale date. He had to legally accept that responsibility or he would not have been able to sell. CMS will not go after him on any recoupments, they will go after the entity who is responsible to pay whether they get reimbursed from the previous owner or not. However, they have a bound contract that now allows them to sue the previous owner if need be. Given my knowlege of the previous owner I do not see that happening.
Thanks for the feedback and as suspected the claims from the DME selling broker looks too good to be true or at least sound too easy to be true.
Some interesting points were brought up.
Are PTANs still issued? I thought they are legacy numbers like UPIN which has been replaced by NPI for new applications. This Medicare billing number for lack of a better name is tied to the TIN of whatever legal entity?
If the legal entity is a LLC and to convert it to a C Corp does the TIN need to be replaced? We need the DME to operate as a C Corp.
Given that we are likely to need the DME to be physically relocated and that it's unlikely to be carrying the Medicare covered product lines that we wish to claim for, the idea of acquiring an existing DME appears more trouble than it's worth.
We also notice that many DMEs being posted for sale are in areas like Florida and California where Medicare Fraud is being targeted. Red flags.
"There are no "short-cuts" to obtaining accreditation." and "there are no shortcuts and the statement you quoted smacks of being a scam." says it all from your posts.
CHOW according to CMS 42 CFR 489.18 (a)
Change of Ownership (CHOW) is defined in 42 CFR 489.18 (a) and generally means, in the case of a partnership, the removal, addition, or substitution of a partner, unless the partners expressly agree otherwise, as permitted by applicable State law. In the case of a corporation, the term generally means the merger of the provider corporation into another corporation, or the consolidation of two or more corporations, resulting in the creation of a new corporation. The transfer of corporate stock or the merger of another corporation into the provider corporation does not constitute change of ownership.
Problem: When a State license is transferred to a new operator it is perceived that the Medicare provider agreement and CMS Certification number (CCN) are automatically assigned to the new operating entity.
(Effective March 2, 2007, the Medicare/Medicaid Provider Number has been renamed the Centers for Medicare & Medicaid Services (CMS) Certification Number (CCN))
Clarification: A State licensing CHOW decision based on an analysis under a State’s criteria is not necessarily relevant to a Medicare CHOW determination. The Medicare CHOW determination must be determined exclusively by Medicare regulations and policies.
And also:
In this regard, many sellers and potentially even buyers of HHAs may be captured by the Rule, which would result in their disenrollment from the Medicare program. For example, an HHA that underwent a reorganization in the past thirty-six (36) months captured by the Transmittal (whether or not a CHOW, but for example resulting in a change of information filing within the scope of the Transmittal), which then permitted the entry of a new equity investor of 5 percent or greater (again in conjunction with an asset sale in exchange for equity or entirely unrelated to a CHOW), may be captured by the Rule as interpreted by CMS, subject to being disenrolled from Medicare, and subject to the reimbursement gap associated with a new enrollment.
Change Request 6750, Transmittal 318, dated December 18, 2009, is being rescinded and will not be replaced at this time.
In the meantime, providers contemplating a transaction or transfer of any type reportable to CMS should carefully consider whether the provider has undergone an “ownership change” as broadly defined by the Transmittal within thirty-six (36) months of its potential “ownership change” (again as broadly defined) to determine the potential application of the Rule on any provider involved in the transaction.
Is this actually in effect in regards to the 'within 36 months' rule for Medicare disenrollment involving DME CHOWs ?
To my knowledge, PTANs are still issued. You still need a PTAN for the 855s form from NSC, and the contractors still ask for it as a means of identifying the supplier.
On your question regarding LLC to C Corp, I would refer you to your CPA or accountant. From limited knowledge in that area I do not think that is a problem but please check with your CPA.
Purchasing an existing DME via a stock sale is a bit of a process while the two parties legally wrangle out the terms of the sale. However, starting from scratch is a much longer process. Find the location, pass any State requirements, you must be accredited before you apply for a PTAN, etc. This can take even longer if you are not familar with all of the requirements. I do not understand why you would want to move an existing DME if you found and purchased it. If it is a viable business, you would lose the patient base by moving it. IMO, that would be the same as starting a new DME business. You have to get it established in the new area.
Not all DMEs for sale in the areas you mentioned are red flags, however, you must be knowledgable enough, or have a consultant, to review the company inside and out to determine if the company has abided by all laws and regulations.
You must treat any State requirements separately from the Federal requirements for a DME, and ususally you address the State requirements first. For example, Florida has a State License that you must obtain before you can sell one penny's worth of DME to a consumer. Once you obtain the State License, then you move to the Federal level because NSC is aware of each State's requirements and will be asking for proof that you met the State requirements.
Providers get caught on the 36 month rule when they do asset sales of their business, thinking it doesn't matter to CMS. However, any asset sale must be reported within 30 days. Personally, I do not condone asset sales unless it is absolutely necessary.
To sum up all of your questions, and if I were in your shoes, I would first be looking hard at any existing DMEs to see if they come close to what I'm looking for, even if not dead on target. I would only consider the long process of starting from scratch if I could not find an existing DME for sale. There will be many small DMEs for sale in the next couple of years because they will simply not be able to financialy survive the changes in the Medicare program.
BTW, back in horse and buggy days all we had was a "Medicare billing number". In 1993 CMS created the DMERCS (now referred to as the DME MACS) and invented the UPIN numbers for physicians. Then CMS decided every supplier needed their own identifying number so the created the NPI numbers. But the NPI numbers are not a secure number because they are openly available to anyone on the internet via the NPI registry. Thus, when a supplier calls a contractor they must provide NPI, PTAN and last four of their TIN or they do not pass go. CMS has been struggling with creating an anti-fraud system for decades. Personally, I'd like to see each provider have two numbers. The NPI would be public and given to referals for billing purposes and a second number would be private, never given to anyone for the purpose of that provider billing their claims.
Obtaining DME Accreditation
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