The Medicare program is a health insurance program administered by the federal government benefitting the elderly and disabled, and the Medicaid program is a health insurance program administered by the states benefitting low-income individuals. Together, the Medicare and Medicaid programs expend over $1.1 billion annually—about one third of the entire U.S. national health expenditure—for healthcare items and services furnished to their beneficiaries. Given the dollars involved, it is no wonder that many providers and suppliers are highly dependent upon payments from these governmental programs. Yet, participation in these programs exposes providers and suppliers to significant risks of recoupment of payments, penalties, and false claims act liability if the regulatory requirements of these programs are not followed. Therefore, when a healthcare provider or supplier is involved in an M&A transaction, especially important considerations revolve around the provider’s or supplier’s participation in the Medicare and Medicaid programs.
This practice note will focus primarily on the “change of ownership” considerations for providers that furnish services reimbursed under Medicare Part A, such as inpatient care furnished by hospitals, care in skilled nursing facilities, hospice care, and home health services. Similar considerations also apply to entities providing services reimbursed under Medicare Part B, such as hospitals furnishing outpatient services, ambulatory surgical centers, durable medical equipment companies, clinical laboratories, and outpatient rehabilitation clinics.
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