Colorado Real Estate Journal - March 18, 2015

Lead time is necessary for licensing and Medicaid certification

Kevin Peters Partner, Husch Blackwell, Denver

---

An owner or developer of an assisted living residence in Colorado must take into account the lead time necessary for the operating entity to become licensed by the state and possibly certified for Medicaid participation. These issues must be considered whenever there is a change of ownership of the licensed operator, which would occur when opening a new facility, entering into a lease with a new operator, or purchasing and selling an existing assisted living residence if the operating entity changes.

Licensing Change of Ownership

The Colorado Department of Public Health and Environment, Health Facilities and Emergency Medical Services division handles health facility licensure in Colorado. State law specifies that a change of ownership occurs for all licensed health facilities whenever there is a sale of assets or a transfer of at least 50 percent of the licensed entity’s direct or indirect equity interests to one or more new owners. The change of ownership licensure process begins with an electronic submission of a letter of intent to CDPHE. A health facility license application must then be completed and submitted electronically through the CDPHE website. The current operator of the assisted living residence also must provide a notice of change of ownership. The notice and complete application must be submitted to CDPHE at least 30 days prior to the change of ownership date.

Health Facility Licensing

The license application requires a significant amount of information and documentation including, but not limited to, organizational documents, management agreement (if applicable), lease (if applicable), disclosures of individual owners, disclosures of licensure actions or legal actions for affiliated health facilities in other states, and building code and fire code sign-offs.

CDPHE takes the position that the time frame for processing the applications does not begin until all information and documentation is received.

Since it normally takes longer to prepare the license application than expected, sufficient lead time is critical.

A fitness review is required to process the license application, during which CDPHE reviews the applicant’s ability to conduct a licensed operation. CDPHE also reviews the application, required documentation, applicant’s financial resources, compliance history, insurance coverage, policies and procedures, and credentials of staff.

If the applicant has no operating history in the state, CDPHE may also check with other states in which the applicant, applicant’s parent company or affiliated entities operated health facilities to determine compliance history. This fitness review process also may require an on-site inspection or survey if the facility is new or if the applicant has applied for Medicaid certification.

The 30-day time period is not a requirement for processing an assisted living residence license, so the process may take much longer, especially if there is a history of compliance problems.

Health Facility Fire and Building Codes

Since July 2013, health facility buildings and structures must be maintained in accordance with local building and fire codes. If no local building and fire codes exist, health facilities must comply with building and fire codes adopted by the director of the Department of Public Safety, Division of Fire Prevention and Control.

For new construction or substantial remodeling, the local building department and local fire department conduct construction plan reviews, issue building permits, perform necessary inspections and issue certificates of occupancy. If there is no local building department or fire department, DFPC will perform the construction plan review, issue building permits, perform necessary inspections and issue certificates of occupancy.

A facility also has the option of hiring and compensating a third-party inspector who is under contract with DFPC or who has been certified by DFPC to perform such inspections. The developer of a new assisted living residence must determine whether local authorities or DFPC will have authority over the facility.

We recommend opening a dialogue and requesting periodic inspections during construction to assure code compliance and avoid excessive costs for correction of deficiencies.

If the assisted living residence is not Medicaid certified, only local authority approvals (local fire authority and local building code authority) are required. However, if the assisted living residence also is applying for Medicaid certification, the facility must meet requirements established by the Centers for Medicare and Medicaid Services and undergo a life-safety code survey by DFPC. For a new Medicaid-certified assisted living residence, the license will not be issued until the lifesafety code survey is completed and deficiencies are corrected.

An assisted living residence license will not be issued until local authority or DFPC signoffs are obtained. Correction of deficiencies cited by local authorities or DFPC can further delay the licensing process.

Medicaid Certification

The Colorado Department of Health Care Policy and Financing administers the Colorado Medicaid program for assisted living residences.

A Medicaid-certified assisted living residence is known as an alternative care facility. The current operator must provide notice to HCPF at least 30 days prior to the anticipated change of ownership date and the new operator must submit a separate Medicaid application with HCPF. There is no option for an alternative care facility to assign an existing Medicaid provider agreement, and the new operator cannot bill under the prior operator’s Medicaid provider agreement if an assisted living residence license is issued, but the Medicaid change of ownership process is not complete. A new operator cannot bill for Medicaid services until the Medicaid application has been approved and a new Medicaid provider agreement has been entered into. The effective date of the Medicaid approval can be retroactive to the effective date of the assisted living residence license. So, there can be a delay in receiving Medicaid payments if a Medicaid change of ownership is not processed in a timely manner.

Both the licensing and the Medicaid certification processes can take a significant amount of time to complete.

DPHE will make every effort to process the health facility application as quickly as possible, but with limited resources DPHE cannot always expedite the processing of a license application. There are a number of factors that could substantially increase the time needed to process the assisted living residence license application, including issues that arise from the fitness review, obtaining local jurisdiction or DFPC sign-offs.

If a new operator is considering applying for a new Medicaid provider agreement, the operator must plan ahead and file the Medicaid application and supporting documentation sufficiently in advance to minimize the period of time that it will not be able to bill the Medicaid program.