CMS Pub. 100-08, ch. 10, § 10.6.1.1.2

A. Introduction

Pub. 100-07, chapter 2, section 3210.1D outlines in detail certain types of transactions (based on

business type) that involve (or do not involve) a CHOW. This list is not exhaustive, however,

and CMS recognizes that scenarios may arise that do not fall within the normal/typical categories

of CHOW transactions. Indeed, it is not possible for CMS to address in these instructions every

conceivable case. Hence, if the contractor is uncertain as to how to handle a situation that could

involve a CHOW under 42 CFR § 489.18, it may contact its PEOG BFL for assistance or the

SOG location representative.

In reviewing this section 10.6.1.1.2, the contractor should keep in mind the following:

1. Other Business Types - Although § 489.18 addresses only sole proprietorships, partnerships,

corporations, and lease arrangements, other types of business entities (such as limited liability

companies (LLCs)) can have CHOWs. These entities will be identified within the category in

section 10.6.1.1.2(B) to which they are most applicable.

2. Assignment – Any statement in section 10.6.1.1.2(B) that a particular business transaction

constitutes a CHOW assumes that the new owner accepted assignment of the provider

agreement. In cases where a § 489.18-type business transaction occurred but assignment was not

accepted (as discussed in detail in section 10.6.1.1.3.2 below): (a) no CHOW has taken place; (b)

the provider agreement does not transfer; and (c) the entity must enroll as a brand new provider.

Moreover, the existing owner must voluntarily terminate the provider’s enrollment and

agreement consistent with existing regulations and the policies in this chapter.

3. CHOW Categories on the Form CMS-855A - For purposes of provider enrollment only, there

are three main categories of CHOWs captured on the Form CMS-855A application:

a. “Standard” CHOW - This occurs when a provider’s CMS Certification Number (CCN) and

provider agreement are transferred to another entity as a result of the latter’s purchase of the

provider. To illustrate, suppose Entity A is enrolled in Medicare, but Entity B is not. B acquires

A. Assuming all regulatory requirements are met, A’s provider agreement and CCN will transfer

to B.

This is the most frequently encountered change of ownership scenario. As explained in section

10.6.1.1 et seq., even though it is technically an acquisition (i.e., B bought/acquired A) under §

489.18, this situation falls under the “CHOW” category – as opposed to the

“Acquisition/Merger” category – on the Form CMS-855A.

b. Acquisition/Merger - In general, this occurs when two or more Medicare-enrolled entities

combine, leaving only one remaining CCN and provider agreement. For instance, suppose

Entity A and Entity B are both enrolled in Medicare, each with its own CCN and provider

agreement. The two entities decide to merge. Entity B’s CCN and provider agreement will be

eliminated (leaving only Entity A’s CCN and provider agreement).

If the acquisition results in an existing provider having new owners but keeping its existing

provider number, the applicant should check the CHOW box in the Basic Information section of

the Form CMS-855A.

Unlike the new owner in a CHOW or consolidation, the new owner in an acquisition/merger

need not complete the entire Form CMS-855A. This is because the new owner is already

enrolled in Medicare. As such, the provider being acquired should be reported as a practice

location in the Practice Location Information section of the new owner’s Form CMS-855A.

c. Consolidations - This occurs when the merger of two or more Medicare-enrolled entities

results in the creation of a brand new entity. To illustrate, if Entities A and B decide to combine

and, in the process, create a new entity (Entity C), the CCNs and provider agreements of both A

and B will be eliminated. Entity C will have its own CCN and provider agreement.

Note the difference between acquisitions/mergers and consolidations. In an acquisition/merger,

when A and B combine there is one surviving entity. In a consolidation, when A and B combine

there are no surviving entities. Rather, a new entity is created – Entity C.

Regardless of which of these three categories the particular transaction falls under on the Form

CMS-855A, the central issue for the contractor is whether a CHOW has occurred pursuant to §

489.18. In other words, the question of how the transaction is reported on the application is less

important than the determination as to whether the CHOW requirements have been met. Indeed,

merely because the provider reports a transaction as a § 489.18 CHOW on the Form CMS-855

does not mean that one has legally occurred. The contractor will therefore (as discussed below)

have to carefully analyze the scenario and legal documentation to ascertain whether a CHOW is

involved.

4. Continued Responsibility – In ascertaining whether a CHOW has occurred, another important

consideration for the contractor is whether the owning entity/individual is (or is no longer)

responsible for the provider and its operations. If some form of ownership change has occurred

but the same individual/entity (e.g., the same corporation) generally remains as the principal

owner of the provider, no CHOW has occurred; except as otherwise stated in this chapter,

therefore, the transaction should be treated as a change of information.

5. Change in Process – Notwithstanding the expanded CHOW instructions in this section

10.6.1.1 et seq., the contractor should remember that the only changes to the CHOW process are

generally as follows:

• The SOG location no longer makes the formal determination as to whether a CHOW has

occurred.

• If the contractor recommends approval of the CHOW, it forwards the application to the state

only (not to the SOG Location)

• If the state recommends approval to the contractor, the contractor coordinates with PEOG (as

described below)

• After PEOG responds to the contractor, the contractor finalizes the application

Except as otherwise stated in these instructions, therefore, the contractor shall continue to follow

the procedures it has in the past.

B. CHOWs by Business Type

(See section 10.6.4 of this chapter for basic information on the forms of business structures

frequently encountered in provider enrollment.)

The scenarios below are not an exhaustive list of all the types of CHOWs that may or may not

occur. Furthermore, the following situations may have different, unique facts that could raise

questions as to whether a CHOW has indeed taken place. The contractor will thus encounter

CHOW cases not precisely addressed in these instructions and, if uncertain regarding how they

should be handled, may contact its PEOG BFL for guidance.

1. Sole Proprietorship

If the provider is an entity owned by a single individual, a transfer of title to the enterprise to

another person or firm (whether or not this includes transfer of title to the real estate) constitutes

a CHOW. It is also a CHOW if the former owner becomes one of the members of a partnership

or corporation succeeding the former owner as the new owner (e.g., Jones is the sole proprietor

of Provider X and sells the business to a corporation of which Jones will become a shareholder).

As discussed in section 10.6.4 of this chapter, a sole proprietorship is neither a solely-owned

corporation nor a solely-owned LLC (e.g., an LLC with only one owner/member remains an

LLC and is not a sole proprietorship simply because there is only a single owner/member).

2. Partnership

General partnership (i.e., a partnership with no limited partners) - In a general partnership, the

removal, addition, or substitution of an individual/entity as a partner in the entity dissolves the

partnership unless: (1) state law holds otherwise; or (2) the partnership agreement expressly

states otherwise. If the partnership is indeed dissolved based on a partner’s

removal/addition/substitution, a new partnership is created and a CHOW has occurred.

Limited partnership – The departure/replacement of a general partner in a limited partnership

will often result in the dissolution of the limited partnership, the creation of a new one, and the

occurrence of a CHOW; these results typically do not stem from the departure or replacement of

a limited partner. In either case, the contractor shall carefully examine the relevant documents

(e.g., the Form CMS-855, limited partnership agreement) to see if the limited partnership has

undergone a CHOW.

3. Corporation

(For purposes of this section 10.6.1.1.2 only, and unless stated otherwise: (1) the term

“corporation” includes LLCs; and (2) the term “stock” includes LLC ownership interests. Thus,

a reference to the merger of two corporations could include, for instance, the merger of an LLC

with a corporation to create a brand new LLC or corporation.)

A merger of one or more corporations into the surviving Medicare-participating provider

corporation (i.e., a merger “into” the participating corporation) is not recognized as a CHOW of

the surviving corporation. However:

• If the corporation that survives is not the former owner of the provider entity, there is a

CHOW; and

• Consolidation or merger of two or more corporations that results in the creation of a new

corporate entity having ownership/control over a provider organization constitutes a CHOW.

4. Leasing

When all or part of a provider facility is leased, it constitutes a CHOW. If only part of the

provider is leased, the original provider agreement remains in effect only with respect to the

unleased portion. The lease of part of the facility constitutes a CHOW.