Introduction
Selling a Medicare-certified home health or hospice agency is not only a valuation exercise. The buyer also has to understand what happens to the Medicare provider agreement, enrollment record, state license, payer contracts, and billing relationship after closing. That is where change of ownership, often called CHOW, becomes important.
This guide is written for agency owners who are preparing for a sale or trying to understand what buyers mean when they ask about CHOW risk. It is not legal advice, tax advice, or a substitute for counsel, regulatory advisors, the applicable Medicare Administrative Contractor, CMS guidance, or state licensing review.
A Medicare CHOW generally refers to a change in ownership where the Medicare provider agreement and Medicare identification/billing relationship may transfer to the new owner if the buyer accepts assignment of the provider agreement.
That acceptance matters. If the buyer does not accept assignment of the provider agreement, the seller’s Medicare agreement is terminated and the buyer or new owner is treated as a new applicant. That can materially change the diligence, timing, approval, survey, and closing-risk conversation.
For home health agencies, buyers also pay close attention to CMS’s 36-month ownership provisions. If a change in majority ownership occurs within three years of initial Medicare enrollment or the most recent majority ownership change, CMS guidance indicates the agency may need to enroll as a new provider and obtain a new survey or accreditation unless an allowable exception applies. Owners should not assume a transaction structure avoids this analysis.
In practice, a Medicare-certified agency sale usually needs coordinated review of transaction structure, CMS-855A enrollment filings, PECOS/MAC processing, provider agreement assignment, state licensure, Medicaid and managed care contracts, and buyer diligence before the parties can responsibly set timing expectations.
What CHOW Means in a Medicare-Certified Agency Sale
In plain English, CHOW is the ownership-change process that helps determine what happens to the Medicare provider relationship when an agency is sold.
For a seller, the word can sound like a single form. In a real transaction, it is usually part of a larger closing plan that includes:
- How the buyer is acquiring the business.
- Whether the Medicare provider agreement is assigned.
- Whether the buyer accepts that assignment.
- Which CMS-855A filings are required.
- How the Medicare Administrative Contractor processes the change.
- Whether PECOS records need to be updated.
- Whether the state license, Medicaid enrollment, or managed care contracts also transfer, require notice, or require separate approval.
- Whether any home health 36-month ownership provision issue is present.
The exact path depends on the provider type, transaction structure, ownership history, state licensing rules, and buyer facts. That is why buyers ask for ownership records early and why sellers should not wait until late diligence to organize Medicare enrollment history.
CHOW, Provider Agreement Assignment, and New Applicant Risk
The provider agreement is central to the CHOW conversation because it is tied to the Medicare-certified provider’s ability to participate in Medicare.
When the buyer accepts assignment of the provider agreement, the buyer generally takes on the Medicare provider agreement relationship associated with the acquired provider. That can include both opportunity and responsibility. Buyers and their counsel will review what obligations, liabilities, compliance history, overpayment exposure, and operational risks may come with that assignment.
If the buyer does not accept assignment, the seller’s provider agreement is terminated and the buyer is treated as a new applicant. New applicant treatment can create a very different process than a straightforward ownership update. It may involve new enrollment review and, depending on the provider type and circumstances, survey or accreditation issues before Medicare participation is established.
Owners should treat this as a diligence issue, not a marketing slogan. A buyer will not simply ask, "Is this a CHOW?" The buyer will ask what is being purchased, what is being assigned, what filings are needed, what the MAC will require, what state approvals apply, and whether the timeline can support the intended closing.
How Common Transaction Terms Fit Together
The table below is a practical orientation tool. It is not a legal classification chart, and it should not be used to decide structure without professional review.
| Term or structure | What it usually means in the sale conversation | Why the buyer cares | Seller preparation step |
|---|---|---|---|
| Asset sale | Buyer purchases selected assets of the business rather than buying the ownership interests of the existing legal entity | The buyer needs to understand whether Medicare participation, licenses, contracts, employees, records, and operations can move as intended | Map which assets, provider numbers, licenses, contracts, records, and payer relationships are expected to transfer |
| Stock or equity transfer | Buyer purchases ownership interests in the existing legal entity | Buyers still analyze Medicare enrollment, ownership changes, state licensure, payer contracts, liabilities, and whether new enrollment risk exists | Do not assume an equity transfer automatically avoids Medicare enrollment or licensure review |
| Medicare CHOW | A Medicare change-of-ownership process tied to a change in the provider’s ownership | The buyer wants to know whether the provider agreement is assigned, what filings are required, and how timing affects closing | Gather Medicare enrollment records, prior ownership-change history, CMS-855A materials, correspondence, and MAC contacts |
| Provider agreement transfer or assignment | The Medicare provider agreement relationship may transfer to the new owner if the buyer accepts assignment | Acceptance can carry obligations as well as continuity of the Medicare provider relationship | Identify known compliance, claims, overpayment, survey, and corrective-action history before buyer diligence |
| New applicant risk | The buyer or new owner may be treated as a new Medicare applicant rather than stepping into the existing provider agreement | New applicant treatment can change survey, accreditation, enrollment, timing, and operational assumptions | Flag ownership-history issues early, especially for home health agencies subject to the 36-month ownership provisions |
The Home Health 36-Month Ownership Provisions
Home health agencies have an extra issue that buyers often raise quickly: CMS’s 36-month ownership provisions.
At a high level, CMS guidance indicates that if an HHA experiences a change in majority ownership within 36 months of initial enrollment in Medicare or within 36 months of the most recent change in majority ownership, the HHA may need to enroll as a new provider and obtain a new survey or accreditation unless an allowable exception applies.
The practical takeaway for sellers is simple: know your ownership history before you go to market.
Buyers will want to know:
- When the agency was initially enrolled in Medicare.
- Whether there has been a prior change in majority ownership.
- When that ownership change occurred.
- Whether the proposed transaction could be treated as another change in majority ownership.
- Whether counsel or regulatory advisors believe any CMS-recognized exception may apply.
- How the issue affects closing timing, conditions, and buyer appetite.
Do not frame the 36-month provisions as something a seller can casually avoid. A safer and more credible approach is to identify the issue early, bring in qualified advisors, and let buyers underwrite the transaction with accurate information.
CMS-855A, PECOS, and the Medicare Administrative Contractor
Medicare enrollment changes for institutional providers generally run through CMS enrollment processes, including CMS-855A and PECOS. The Medicare Administrative Contractor is also part of the practical workflow because the MAC reviews and processes enrollment and ownership-change submissions for its jurisdiction.
For sellers, the important point is that paperwork and timing are transaction issues.
A buyer may ask for copies of:
- The current Medicare enrollment record.
- Prior CMS-855A filings.
- Ownership and managing-control information.
- PECOS confirmation or enrollment details.
- MAC correspondence related to prior changes.
- Survey, accreditation, or certification history.
- Notices, corrective actions, overpayment correspondence, or open enrollment issues.
If those materials are scattered, outdated, or inconsistent with the cap table and operating reality, diligence slows down. If the records are organized before the sale process begins, the buyer can focus on real risk instead of reconstructing basic history.
CMS processing is also not something sellers should oversimplify. Timing can vary by facts, filings, completeness, MAC workload, and related state or payer approvals. A seller should avoid promising a buyer that billing will continue without interruption or that a particular filing path will be approved on a specific schedule.
State Licensure, Medicaid, and Managed Care Are Separate Issues
Medicare CHOW review does not replace state licensure review.
Home health and hospice agencies operate inside state-level licensing frameworks, and those rules can vary. Some states may require advance notice, approval, updated applications, new surveys, amended licenses, or other steps tied to ownership change. Medicaid enrollment and managed care contracts may have their own assignment, notice, credentialing, or termination provisions.
Because these rules are state-specific and contract-specific, a seller should not assume that Medicare treatment answers every transfer question.
Before going to market, owners should identify:
- The current state license holder.
- License expiration dates and renewal status.
- Whether the state requires notice or approval before closing.
- Medicaid enrollment and provider agreement requirements, if applicable.
- Managed care, referral, facility, hospital, and vendor contract assignment provisions.
- Any pending surveys, plans of correction, complaints, sanctions, or license conditions.
This does not mean every issue is fatal. It means buyers need enough information to build a closing plan.
What Buyers Review Before They Get Comfortable
Buyers do not look at CHOW in isolation. They connect it to the broader risk profile of the agency.
A serious buyer may review:
- Ownership history and entity structure.
- Medicare enrollment records and prior CHOW filings.
- Whether the provider agreement is expected to be assigned.
- HHA 36-month ownership provision risk, if applicable.
- State license status and survey history.
- Hospice or home health certification and accreditation records.
- Claims history, billing controls, audits, refunds, and overpayments.
- Payer contracts and whether they can be assigned or must be recredentialed.
- Patient census, active episodes, referral sources, and continuity planning.
- Clinical documentation, compliance program materials, and quality reporting.
- Employee, contractor, and key-leader transition risk.
From the seller’s perspective, the goal is not to pretend there is no regulatory risk. The goal is to show that the agency understands its own history, has credible records, and is prepared for buyer diligence.
Questions to Ask Before Going to Market
Before launching a sale process for a Medicare-certified home health or hospice agency, owners should ask these questions with counsel, transaction advisors, and regulatory support:
- What exactly is being sold: assets, equity, or another structure?
- Who currently owns the provider entity, and has ownership changed before?
- When was the agency initially enrolled in Medicare?
- For a home health agency, could the HHA 36-month ownership provisions be relevant?
- Is the buyer expected to accept assignment of the Medicare provider agreement?
- If the buyer does not accept assignment, what would new applicant treatment mean for timing and operations?
- Which CMS-855A, PECOS, and MAC steps are likely to be required?
- What state license notices, approvals, or filings may be required before or after closing?
- Do Medicaid or managed care contracts require consent, notice, recredentialing, or new contracting?
- Are there open surveys, complaints, plans of correction, overpayments, or compliance matters that buyers will need to understand?
- Are patient care, staffing, billing, payroll, and referral operations ready for a transition?
- How will the purchase agreement allocate regulatory closing conditions and post-closing responsibilities?
If you cannot answer these questions yet, that does not mean the agency cannot be sold. It means the preparation work should start before buyers are deep in diligence.
How CHOW Risk Affects Valuation and Deal Process
CHOW risk does not automatically make a business unsellable. It can, however, affect buyer appetite, closing conditions, purchase agreement terms, holdbacks, indemnities, timing, and the perceived quality of the opportunity.
A buyer may still like the agency’s census, referral base, staff, geography, and earnings, while also requiring more comfort around enrollment, licensure, or payer-transfer risk. In those cases, cleaner documentation can protect momentum.
Common process impacts include:
- More regulatory diligence before a letter of intent becomes final.
- Closing conditions tied to filings, notices, approvals, or absence of adverse findings.
- Extra review of prior ownership changes and provider agreement history.
- More conservative treatment of revenue if billing continuity is uncertain.
- More discussion of escrows, holdbacks, or indemnity coverage.
- Longer time between signing and closing.
Owners who prepare early can often give buyers a clearer path. Owners who wait until the buyer discovers issues on its own may lose leverage, time, or trust.
Seller Preparation Checklist
A practical pre-sale file should include:
- Current entity chart and ownership records.
- Medicare enrollment and provider agreement materials.
- Prior CMS-855A submissions and MAC correspondence.
- PECOS enrollment details or access plan.
- State license, renewals, survey history, and plans of correction.
- Accreditation records, if applicable.
- Medicaid and managed care agreements.
- Major referral, vendor, facility, and service contracts.
- Compliance program materials and billing policies.
- Overpayment, audit, or refund documentation.
- Census, episode, payer mix, and revenue reports.
- A timeline of prior ownership changes.
This file is not just for lawyers. It helps the seller, buyer, broker, advisor, and diligence team talk about the same facts.
When to Bring in Help
Owners should involve qualified legal and regulatory advisors before making firm promises about structure, provider agreement assignment, state license transfer, HHA 36-month issues, or closing timeline. A broker or M&A advisor can help position the business and manage the process, but Medicare enrollment and licensure questions need proper professional review.
The best time to organize that review is before the agency is marketed widely. That gives the seller time to identify risks, correct record gaps where possible, and avoid overpromising to buyers.
If you are considering a sale, start with a confidential conversation about value, buyer fit, and readiness. Then pair that transaction planning with legal and regulatory review before locking in structure or timing.
Frequently Asked Questions
What is a Medicare CHOW?
A Medicare CHOW is a change of ownership process tied to a Medicare-certified provider. In a sale, it often involves analysis of whether the Medicare provider agreement and Medicare billing relationship transfer to the new owner, what filings are required, and whether the buyer accepts assignment of the provider agreement.
Does a stock or equity sale bypass Medicare CHOW analysis?
Do not assume that it does. A stock or equity transfer can still raise Medicare enrollment, ownership-change, state licensure, payer contract, and buyer diligence issues. The correct analysis depends on the facts, ownership history, provider type, and applicable guidance.
What happens if the buyer does not accept assignment of the provider agreement?
CMS-855A source language indicates that if the buyer does not accept assignment, the seller Medicare agreement is terminated and the buyer or new owner is treated as a new applicant. Sellers and buyers should review the operational and timing implications with qualified advisors.
What is the home health 36-month rule?
CMS guidance for home health agencies addresses changes in majority ownership within 36 months of initial Medicare enrollment or the most recent majority ownership change. If the rule applies, the HHA may need to enroll as a new provider and obtain a new survey or accreditation unless an allowable exception applies.
How should sellers think about Medicare billing continuity after closing?
No seller should guarantee billing continuity casually. Billing and enrollment timing can depend on transaction structure, filings, MAC processing, provider agreement assignment, state licensure, payer requirements, and deal-specific facts.
Is state licensure handled through Medicare CHOW?
Not by itself. State licensure is a separate review area, and requirements vary by state. Medicaid enrollment and managed care contracts can also have separate notice, consent, assignment, or recredentialing requirements.