The New York State Department of Health (DOH) Medicaid enrollment moratorium is creating significant new considerations for healthcare providers, owners and investors pursuing changes of ownership (CHOWs), acquisitions and other transactions involving affected providers. Importantly, the moratorium does not necessarily mean that healthcare transactions involving affected providers must stop. Transactions may still be possible, but the Medicaid enrollment implications need to be evaluated carefully and, in some cases, addressed as part of the structure and timing of the transaction. The consequences can differ substantially depending on where a provider's application or transaction stood when the moratorium took effect and on how a transaction occurring during the moratorium is structured. A provider with a CHOW application already under review may simply face a delay, while a transaction in which the Medicaid enrollment consequences were not addressed in advance may create a more significant operational problem.

Affected provider categories include pharmacies, laboratories, DMEPOS suppliers, Applied Behavior Analysis (ABA) providers, Licensed Home Care Services Agencies (LHCSAs), Social Adult Day Care (SADC) providers, certain long-term care providers, and other provider types identified by DOH.

This week, DOH provided additional guidance regarding how the moratorium will affect pending applications and transactions. The guidance underscores the importance of addressing Medicaid enrollment as part of the transaction itself rather than assuming that enrollment issues can be resolved after closing.

The Moratorium Extends Beyond New Enrollments

The moratorium is not limited to applications for new Medicaid provider numbers. According to DOH, it applies broadly to Medicaid enrollment transactions involving affected provider types, including:

• new enrollments;

• full and partial CHOWs;

• changes of information; and

• modifications to applications that were already pending when the moratorium became effective.

During the moratorium, affected providers generally cannot submit new applications, make changes to pending applications, or otherwise modify their Medicaid enrollment. Providers that were already enrolled in Medicaid when the moratorium became effective will remain enrolled, subject to the usual requirements for continued participation.

What Happens to Applications That Were Already Pending?

DOH clarified that applications submitted before the moratorium are effectively paused rather than automatically cancelled. Once the moratorium is lifted, DOH indicated that pending applications will resume from the stage they had reached before the moratorium became effective, provided the applicable forms and provider information remain unchanged. This is particularly important for providers whose applications had already been under review for an extended period. Based on DOH's guidance, those applicants should not have to begin the enrollment process again from the beginning simply because their applications were caught by the moratorium. There is an important qualification. If DOH revises the applicable enrollment forms or requirements during the moratorium, an applicant may be required to submit new or updated documentation when processing resumes. Each pending application will ultimately be evaluated after the moratorium ends.

CHOWs and Transactions During the Moratorium

The moratorium creates additional considerations for acquisitions and other changes of ownership, but it should not be understood as a blanket prohibition on buying or selling an affected healthcare business. DOH confirmed that both full and partial CHOW applications are subject to the moratorium. Where a CHOW application was properly submitted and was already under review before the moratorium took effect, the application should generally remain pending and resume processing after the moratorium is lifted.

Transactions that have not yet closed require a different analysis. Because Medicaid enrollment applications and certain enrollment changes cannot presently be submitted or processed, buyers and sellers should determine before closing how the transaction will affect the provider's existing enrollment, whether Medicaid notification is required or permitted, and how operations and billing will be handled during the period in which the applicable enrollment action cannot be completed. DOH has indicated that Medicaid may still be notified of a CHOW transaction during the moratorium, even though the formal CHOW application cannot be submitted until the moratorium is lifted. That distinction may be important in evaluating transactions that are currently pending or being contemplated. Accordingly, parties considering an acquisition or sale should not assume that the transaction necessarily must be postponed until the moratorium ends. Rather, the Medicaid consequences should be analyzed before the transaction is structured and closed.

Pharmacies With Pending Termination Dates Face a Particular Risk

DOH specifically addressed the situation of pharmacies that completed a CHOW and notified Medicaid of the transaction before the moratorium but did not submit the required CHOW application. Where Medicaid has already issued a termination date for the existing provider enrollment, DOH indicated that the provider will not be permitted to submit the CHOW application during the moratorium and that the existing Medicaid provider number will terminate on the previously established date.

The practical consequences can be significant. A pharmacy may have completed its acquisition while the purchaser remains unable to obtain the Medicaid enrollment necessary to continue billing after the seller's existing enrollment terminates. Pharmacy transactions that were underway when the moratorium took effect therefore warrant careful review of the Medicaid enrollment record, CHOW notices, termination correspondence and the status of any submitted application. The pharmacy example also illustrates why the timing and structure of a transaction matter. Parties contemplating a transaction during the moratorium should evaluate the Medicaid consequences before closing rather than assume that the enrollment can simply be addressed afterward.

Existing Providers Should Be Careful About Enrollment Changes

The moratorium also affects existing enrolled providers seeking to modify their Medicaid enrollment information. Providers should not assume that a change that would ordinarily be considered routine including an ownership, organizational or other enrollment information change can be processed during the moratorium. This has practical consequences for acquisitions, restructurings, relocations, corporate changes, and other transactions involving affected providers.

At the same time, an inability to process a particular Medicaid enrollment change during the moratorium does not necessarily mean that the underlying business transaction cannot proceed. The critical issue is understanding the enrollment consequences in advance and determining how they should be addressed in the transaction's structure, timing, and post-closing arrangements.

What Providers, Buyers and Sellers Should Do Now

Affected providers should determine exactly where their Medicaid enrollment or pending application stood when the moratorium became effective. Providers with pending applications should preserve proof of submission, Medicaid acknowledgments, correspondence, application status information, and complete copies of the forms and supporting documents submitted. They should also determine whether Medicaid requested additional information before the moratorium and whether anything remained outstanding when processing stopped.

Providers involved in a pending or contemplated CHOW should determine:

• whether the transaction has already closed;

• whether Medicaid was notified of the transaction;

• whether the formal CHOW application was submitted before the moratorium;

• whether Medicaid acknowledged or began reviewing the application;

• whether additional documentation was outstanding;

• whether the seller's existing Medicaid enrollment is subject to a scheduled termination date; and

• how the transaction will affect Medicaid participation and billing while the moratorium remains in effect.

These facts may determine whether a provider simply waits for an existing application to resume, faces a potential interruption in Medicaid enrollment, or needs to address Medicaid enrollment through the structure and timing of the transaction itself.

The Bottom Line

The Medicaid enrollment moratorium creates meaningful restrictions, but it does not necessarily bring healthcare transactions involving affected providers to a standstill. For providers with applications already pending when the moratorium took effect, DOH's guidance provides some reassurance: those applications are generally expected to remain pending and resume where they left off once the moratorium ends. Transactions that have not yet closed require a more individualized analysis. The effect of the moratorium may depend on the type of provider, the status of its existing Medicaid enrollment, the nature of the ownership change, the timing of the transaction, and how the transaction is structured. Therefore, Medicaid enrollment should be treated as a central transaction issue rather than an administrative step to be addressed after closing.

MDRXLAW is advising pharmacies, LHCSAs, SADCs, long-term care providers and other affected healthcare organizations, purchasers and sellers on structuring and navigating transactions during the Medicaid enrollment moratorium, as well as pending CHOWs and enrollment applications affected by the new restriction. You may reach us by email at info@mdrxlaw.com or by phone/text to 212.668.0200.