Buying a home health agency or hospice: the 36-month rule, and the state that disagrees with Medicare

Buy 60% of a home health agency in its second year and Medicare does not carry the agency’s billing privileges over to you. The provider agreement ends at closing, and your agency has to enroll as a brand new provider and pass a new survey. In 2026 there is a second problem on top of the first: a nationwide moratorium has frozen new home health and hospice enrollments, so the agency you just bought may not be able to bill Medicare at all until the freeze lifts.

That is the federal side. The state license is a separate question with a separate answer, and in at least one large state the answer is that nothing happened. This page covers the 36-month rule, how it treats an LLC, the 2026 moratoria, the state rules that disagree with it, and how to structure around it.

A majority sale of a home health agency or hospice inside its first 36 months does not transfer Medicare billing; the buyer enrolls from scratch.

The 36-month rule

If a home health agency or hospice has a change in majority ownership by sale within 36 months after its initial Medicare enrollment, or within 36 months of its last change in majority ownership, its provider agreement and billing privileges do not convey to the new owner (42 C.F.R. § 424.550(b)). The buyer must enroll as a new provider and obtain a new state survey or accreditation. The rule has covered home health agencies for years. Hospices were added for ownership transactions effective on or after January 1, 2024.

A change in majority ownership means acquiring more than 50% of the direct ownership, and it is counted cumulatively: asset sales, stock transfers, mergers and consolidations within the window all add up (42 C.F.R. § 424.502). CMS’s own example is a 40% owner who buys another 15% and crosses the line.

There are four exceptions. The rule does not apply if the agency has filed two consecutive years of full cost reports since its initial enrollment or last majority change, if a parent is doing an internal restructuring such as a merger, if the owners change the business form while staying the same people, or if an individual owner dies. One trap sits inside the exceptions: a transfer that qualifies for one still counts as a change in majority ownership for restarting the 36-month clock, according to CMS’s contractor manual.

A transaction that fits an exception still restarts the 36-month clock.

How Medicare treats a sale of LLC interests

The regulation that defines a Medicare change of ownership names partnerships, sole proprietorships and corporations, and says a transfer of corporate stock is not a change of ownership (42 C.F.R. § 489.18). It does not mention LLCs. CMS’s contractor manual fills part of that gap. In the section on change-of-ownership examples, it says that “the term ‘corporation’ includes LLCs” and “the term ‘stock’ includes LLC ownership interests.” So a sale of membership interests is handled like a stock sale: the provider agreement stays with the LLC, and the ownership change is reported within 30 days under 42 C.F.R. § 424.516.

That is good news for an ordinary sale and no help with the 36-month rule, which is a different provision.

The 2026 moratoria turn a delay into a stop

CMS imposed six-month nationwide moratoria on new Medicare enrollments of home health agencies and of hospices, both effective May 13, 2026 (CMS-6101-N and CMS-6102-N). They cover Medicare only and leave existing enrollments alone. Ownership changes are generally exempt from a moratorium, but both notices carve out an exception to the exception: an ownership change of a home health agency or hospice that requires a new initial enrollment is not exempt. Both notices say directly that the moratorium will prevent an agency that undergoes a non-exempt change in majority ownership within 36 months from re-enrolling.

So during the moratorium, a deal that trips the 36-month rule does not just send the buyer to the back of the enrollment line. It leaves the buyer with no line to stand in. The moratoria run to November 13, 2026 unless CMS extends them, which it can do in six-month steps by notice in the Federal Register.

In 2026, a home health or hospice deal that trips the 36-month rule leaves the buyer licensed and unable to bill Medicare.

The state license asks a different question

Each state licenses the agency itself and writes its own definition of a change of ownership. Those definitions do not line up with Medicare’s.

Texas defines a change of ownership of a home and community support services agency as “an event that results in a change to the federal taxpayer identification number of the license holder” (26 Tex. Admin. Code § 558.2). A sale of membership interests does not change the LLC’s taxpayer identification number. On that definition, selling 60% of a Texas home health LLC is not a change of ownership at all: the state license stays valid and no pre-closing application is required. Medicare, on the same facts inside the 36-month window, ends the provider agreement. The agency is fully licensed by Texas and unable to bill Medicare.

Other states pull the opposite way. Missouri voids a home health license on any sale or change in ownership, management or corporate status (Mo. Rev. Stat. § 197.420). New York requires state approval before anyone transfers 10% or more of a licensed home care agency (N.Y. Pub. Health Law § 3611-a). New Jersey requires an application at least 90 days before closing (N.J.A.C. 8:42-3.2), and a Department of Health memo dated September 3, 2026 set a penalty of $500 per day for unapproved transfers discovered after September 30, 2026. Illinois requires the buyer to file at least 30 days before closing and says the sale “shall not be complete until the Department issues a new license” (77 Ill. Adm. Code 245.80(d)).

California runs longer than Medicare for hospices. Under a 2022 law, AB 2673, the Department of Public Health must deny a change of ownership of a hospice within five years of the date its license was first issued, unless the hospice shows a need for continuity of patient care, or both financial hardship and an unmet need for hospice in its area. That is two years past the federal window. California also runs a separate “change of stock transfer” process for agencies, and its guidance does not say whether a sale of LLC interests is a change of ownership for the five-year bar.

The same closing can be no change at all in Texas, a voided license in Missouri, and a terminated provider agreement for Medicare.

Certificate of need: buying a rationed permit

In some states a new home health agency or hospice needs a certificate of need, so an existing agency carries a permit the state rations. Florida requires one to establish a hospice (Fla. Stat. § 408.036). New Jersey requires one to institute or license a new home health agency. Washington requires one for hospice agencies. North Carolina approves new hospice offices through certificate-of-need review but exempts the acquisition of an existing home health or hospice office. Tennessee treats home health and hospice organizations as health care institutions under its certificate-of-need law.

The consequence for a buyer is that the value of the agency is partly the value of a permit that could not be obtained new. A deal structure that forces a new license, rather than a transfer of the existing one, puts that value at risk.

The cash reserve a new enrollment requires

A home health agency entering Medicare, including one that gets a new provider number because of a change of ownership, must prove it has initial reserve operating funds for its first three months, excluding Medicare receivables (42 C.F.R. § 489.28). The Medicare contractor sets the amount from the average first-year cost per visit of comparable agencies times the projected visits for the first three months, and an officer must certify that at least 50% of the money is not borrowed.

So a buyer caught by the 36-month rule pays the purchase price and then funds a reserve. Using invented comparables for illustration: at $175 per visit and 2,400 projected visits in the first quarter, the reserve is $420,000, and at least $210,000 of it must be the buyer’s own money. The contractor sets the real figures.

A worked example

Sunrise Home Health LLC is a Texas LLC owned entirely by one person, with Medicare enrollment effective February 1, 2025. A buyer agrees to purchase 60% of the membership interests, closing October 1, 2026, month 20.

The purchase crosses 50% inside the 36-month window, which runs to February 1, 2028. No exception applies: the owners change, so the business-form exception fails; the agency cannot yet have two consecutive full cost reports; nobody died; and it is not an internal restructuring. Medicare deactivates the existing enrollment as of the sale date, and the buyer’s agency must enroll as new and pass a new survey. While the moratorium runs, it cannot enroll at all. When it can, it must fund the cash reserve. Meanwhile Texas sees no change of ownership, because the LLC’s taxpayer identification number did not change, and the license stays valid.

The structuring consequence: in a home health or hospice acquisition, the closing date and the percentage are set by the 36-month clock, not by the deal timeline.

How the deal gets structured instead

Three approaches follow from the rules.

Buy 50% or less now and the rest after the window closes. Because the count is cumulative, the second purchase has to close after month 36, and any side agreement that hands the buyer control earlier invites scrutiny as a change in managing control that must be reported.

Wait for the cost-report exception. Two consecutive years of full cost reports end the rule’s reach, which can come earlier than month 36.

Buy above the agency. CMS’s manual says the 36-month rule “does not apply to ‘indirect’ ownership changes.” If the agency LLC is already wholly owned by a holding company, a sale of 60% of the holding company is indirect. Inserting a new holding company just before the sale is a different matter: that insertion is itself a direct change in who owns the agency.

The bottom line

A majority sale of a home health agency or hospice within 36 months of enrollment ends the Medicare provider agreement, and the buyer must enroll as new.

The count is cumulative, and a transfer that fits an exception still restarts the clock.

The 2026 nationwide moratoria block the re-enrollment that the 36-month rule requires, for as long as they last.

State licenses use their own definitions, and Texas can treat a sale that Medicare treats as fatal as no change at all.

California bars a hospice change of ownership for five years after licensing, two years longer than Medicare.

A buyer forced into a new enrollment must also fund a three-month cash reserve, at least half of it unborrowed.

What this page does not cover

The four ownership models across licensed professions, and the general Medicare and Medicaid change-of-ownership rules, are on who is allowed to own a licensed business. The corporate practice of medicine and management companies are on healthcare licensing. The business structure of a home care company apart from licensing is in the home care playbook.

Last verified October 2026.