Change of Ownership (CHOW)

Under 42 CFR 489.18, a CHOW includes the sale of an agency's assets, a merger of the provider into another entity, a consolidation of two or more entities into a new one, and certain partnership changes. A stock purchase generally is not a CHOW under this rule, because the enrolled corporate entity survives the transaction, though stock deals still carry PECOS reporting obligations and can trigger the separate 36-month rule. Classifying the transaction correctly is the first diligence step, since the CHOW path and the new-enrollment path have very different timelines.

Both buyer and seller report the CHOW to Medicare by filing CMS-855A applications, and the Medicare Administrative Contractor and CMS process the transfer. In parallel, the parties handle state licensure requirements and notify the accrediting organization if the agency has deemed status. Unless the buyer affirmatively rejects assignment, the provider agreement transfers automatically on the CHOW date, letting the agency keep billing without a certification gap. Ownership changes generally must be reported within 30 days, so the regulatory workstream needs to run alongside, not after, the closing checklist.

Automatic assignment is convenient, but it comes with the seller's baggage. The buyer who accepts the provider agreement inherits Medicare liabilities tied to it, including unrefunded overpayments, pending audit exposure, and civil monetary penalties. That makes pre-close diligence on ADR history, UPIC or other program integrity activity, open cost report issues, and OASIS and billing compliance essential. Buyers who want to avoid successor liability can reject assignment, but then they enroll as a new provider, undergo an initial survey, and lose billing continuity.

The two rules interact and are easy to confuse. The CHOW rules at 489.18 decide whether the provider agreement can transfer; the 36-month rule at 424.550(b) can override that outcome for home health agencies. If majority ownership changed within the prior 36 months, the agreement does not convey even in an otherwise routine CHOW, and the buyer must pursue initial enrollment and a new survey. Every home health deal should be screened against both rules before the letter of intent locks in structure and timing.