CMS Announces Nationwide Enrollment Moratoria for Hospices and Home Health Agencies

The Centers for Medicare & Medicaid Services (CMS) announced a nationwide six-month enrollment moratoria on new hospice and home health agency (HHA) enrollments in the Medicare program. The moratoria, which takes effect immediately, comes in direct response to what CMS has characterized as pervasive fraud, waste and abuse in these sectors, which the agency has determined cannot be adequately addressed through existing enrollment screening procedures alone. View CMS' FAQ on the moratoria.

Background

The hospice and home health industries have been subject to increasing federal scrutiny in recent years. CMS, the U.S. Department of Health and Human Services Office of Inspector General (HHS OIG) and U.S. Department of Justice (DOJ) have identified these sectors as among the highest-risk areas for Medicare fraud. Enforcement actions have targeted a range of compliance issues, including the recruitment of patients who do not qualify for hospice or home health services, falsification of medical documentation to support eligibility determinations, billing for services that were allegedly never rendered or medically unnecessary, and kickback arrangements that may have generated improper patient referrals in violation of the federal Anti-Kickback Statute.

The CMS announcement reflects the agency's determination that existing enrollment screening procedures have proven insufficient to prevent fraudulent actors from entering the Medicare program. The agency has characterized the scope of fraud in these sectors as "pervasive and escalating," warranting the extraordinary step of a nationwide moratorium on new enrollments.

Statutory Authority

The moratoria is authorized under Section 1866(j)(7) of the Social Security Act, 42 U.S.C. § 1395cc(j)(7), which empowers the HHS Secretary to impose temporary moratoria on the enrollment of new Medicare providers or suppliers in a particular geographic area or nationally when the Secretary determines that such action is necessary to prevent or combat fraud, waste or abuse. The implementing regulations are set forth at 42 C.F.R. § 424.570.

Historically, CMS has exercised this authority on a limited, geographically targeted basis. For example, CMS previously imposed enrollment moratoria on new HHAs in certain metropolitan areas where data suggested concentrated patterns of fraud. The current action represents a significant departure from that precedent, extending the moratoria nationwide and applying it simultaneously to both hospice providers and HHAs.

Scope and Duration

The key parameters of the moratoria are as follows:

1. Provider Types Affected. The moratoria applies to 1) hospice agencies seeking initial Medicare enrollment and 2) HHAs seeking initial Medicare enrollment. Existing enrolled providers are not directly affected and may continue to operate and bill for covered services under their current enrollment.¹
2. Geographic Scope. The moratoria applies nationwide. Unlike prior moratoria that targeted specific states or metropolitan statistical areas, this action applies uniformly across all 50 states, the District of Columbia and U.S. territories.
3. Duration. The moratoria appears to be effective immediately and will remain in effect for six months. Under 42 C.F.R. § 424.570(b), CMS may extend a moratorium in six-month increments if the agency determines that the conditions that prompted the moratoria continue to exist. Stakeholders should be prepared for the possibility that the moratoria may remain in effect beyond the initial six-month period.
4. Enrollment Actions Affected. During the moratorium period, CMS will not accept or process new Medicare enrollment applications from hospice agencies or HHAs. This includes applications for new provider numbers and certain changes of ownership (CHOW) that CMS treats as new enrollments under 42 C.F.R. § 489.18 (e.g., hospice agencies experiencing a majority ownership change within 36 months of initial enrollment or a previous ownership transition). Importantly, not all CHOWs are treated as new enrollments – the determination depends on the specific circumstances of the transaction and CMS' assessment of whether the change effectively constitutes a new provider entering the program.
5. Potential Impact on Medicaid Enrollment. Though CMS is deferring to states to individually determine if a similar pause on Medicaid enrollments will be enacted, it is encouraging states to adopt similar moratoria tailored to state-specific compliance concerns.

Implications for Mergers, Acquisitions and Growth Strategies

The moratoria have significant implications for transactional activity in the hospice and home health sectors.

1. Impact on Pending and Planned Transactions: Any transaction that requires a new Medicare enrollment – whether through a new application, a CHOW that CMS treats as a new enrollment or a restructuring that results in a new provider number – may face material delays or may not be able to proceed during the moratorium period. Buyers, sellers and investors should immediately assess whether any pending or planned transactions involve enrollment actions that could be subject to the moratoria. Deal timelines and closing conditions should be reevaluated in light of the moratoria, and parties should consider whether their purchase agreements adequately address the risk of enrollment delays or denials through appropriate representations, warranties, conditions precedent and termination rights.
2. De Novo Entry and Expansion: Entities planning de novo market entries – i.e., establishing new hospice or home health operations from the ground up that require initial Medicare enrollments – should treat those plans as effectively suspended for the duration of the moratorium. Strategic alternatives may include acquiring existing enrolled providers rather than pursuing new enrollments; however, competition for acquisition targets with existing Medicare enrollments is expected to intensify as a result of this policy. This dynamic may also affect valuations, as the scarcity value of an existing Medicare enrollment increases during the moratorium period.
3. Diligence Considerations: For transactions that remain viable during the moratoria period, enhanced due diligence is likely warranted. Buyers should pay particular attention to the target's compliance history, billing patterns, any pending or prior investigations or audits, and potential exposure to the types of fraud schemes that prompted the moratorium. Given the heightened enforcement environment, any compliance deficiencies identified during diligence should be carefully evaluated as potential post-closing liabilities.
4. Anticipated Enforcement Activity: Stakeholders should expect an increase in the following enforcement-related activities during and after the moratorium period: Medicare audits and claim reviews by CMS contractors, including Zone Program Integrity Contractors and Unified Program Integrity Contractors; investigations by HHS OIG, including audits, evaluations and investigations of suspected False Claims Act violations; civil and criminal enforcement actions by DOJ, including qui tam actions brought by whistleblowers under the False Claims Act; and revocations of existing provider enrollments where CMS identifies fraud, abuse or noncompliance, pursuant to 42 C.F.R. § 424.535.

Key Recommendations

1. Assess Transactional Exposure: Identify any pending or planned enrollment applications, CHOW submissions or transactions that may be affected by the moratoria and evaluate alternative transaction structures where feasible.
2. Strengthen Compliance Programs: Conduct a comprehensive review of existing compliance programs, billing practices and clinical documentation protocols, with particular emphasis on known fraud risk areas identified by CMS, HHS OIG and DOJ in prior enforcement actions and guidance.
3. Evaluate Growth Strategies: Reassess any planned de novo market entries or expansions that depend on new Medicare enrollments and develop contingency plans or alternative strategies for the moratoria period and beyond.
4. Monitor Regulatory Developments: Track any additional guidance, rulemaking or subregulatory guidance from CMS or Medicare administrative contractors regarding the moratoria, enhanced enrollment procedures and related enforcement initiatives.
5. Engage Counsel: Schedule a discussion with Holland & Knight's Healthcare Team to evaluate the specific impact of the moratoria on your organization's operations, transactions and compliance posture.

Conclusion

CMS' imposition of nationwide enrollment moratoria on hospice and HHAs is a significant regulatory development. The moratoria will directly affect new market entrants and certain transactional activity and signals the start of what will likely be a sustained period of heightened enforcement scrutiny for the entire industry. Existing providers, investors and transactional counterparties should act promptly to assess their exposure, fortify compliance programs, and adjust strategic plans accordingly.

Holland & Knight is available to assist with all aspects of this evolving regulatory landscape, including transactional due diligence, compliance program assessments and regulatory counseling. We maintain a deep bench of experienced healthcare regulatory and white-collar defense attorneys prepared to support clients in responding to government investigations, audits and enforcement actions, which we expect to increase significantly in the coming months.

Notes

¹ See 42 U.S.C. § 1395cc(j)(7)(A) (authorizing moratoria on enrollment of "new" providers).

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