BOARD MEMBERS Jon M. Bradley Chair, Dallas Jerry Kane Vice Chair, Corpus Christi Abigail Rios Barrera, M.D. San Antonio John A. Cuellar Dallas Manson B. Johnson Houston Terry Durkin Wilkinson Midland
COMMISSIONER James R. Hine May 17, 2002

To: All Nursing Facilities
Re: Provider Letter #02-15 -- Temporary Change of Ownership and Expedited Change Of Ownership

TEMPORARY CHANGE OF OWNERSHIP (CHOW) LICENSE

What is a temporary CHOW license?

As of January 1, 2002, all nursing facility changes of ownership are considered temporary CHOWs. A temporary CHOW license is issued when an applicant applies to become the new operator of an existing nursing facility.

What is the process for obtaining a temporary CHOW license?

The applicant must submit a complete application and fee to Texas Department of Human Services (DHS). The application, available from DHS, must be signed and notarized and must contain all forms required by DHS. If the applicant and persons listed in §19.201(f) (relating to Criteria for Licensing), of the Nursing Facility Requirements for Licensure and Medicaid Certification, meet the qualifications of §19.201(e)(2) and §19.201(g) and pass the background check, DHS issues a temporary CHOW license.

What procedures will DHS follow?

DHS issues or denies the temporary CHOW license within 30 days of receipt of the complete application. Upon notification of a CHOW, DHS may not place a vendor hold on payments to the new owner. However, vendor payments to the new owner will not start until the temporary license is issued and the Medicaid contract is approved. Upon notification of a proposed CHOW, DHS places a hold on vendor payments to the "old" operator (currently licensed/contracted).

Who notifies DHS of a proposed CHOW?

DHS accepts notification of a proposed CHOW from the old operator or from the new operator. The applicant must submit written documentation; i.e., lease, transfer affidavit, etc., listing the proposed date of the CHOW. As part of the application process, the applicant must submit documentation showing right to possession of the facility. If the old owner disputes the CHOW and the applicant (the proposed new owner) does not have documentation showing the right to possession of the facility, the applicant may withdraw the application. DHS will propose to deny the application if it is not withdrawn by the applicant.

What is the effective date of the temporary CHOW license?

The effective date of the temporary CHOW license is the date requested on the application. However, that date cannot precede the stamp-in date of the application. The stamp-in date is the date the application is received in Facility Enrollment.

What happens when a temporary CHOW license is issued?

After a temporary CHOW license is issued, an on-site "health" inspection will be conducted to verify compliance with the Nursing Facility Requirements for Licensure and Medicaid Certification. (A Life Safety Code [LSC] inspection is not required for a change of ownership.) The inspection is conducted prior to the expiration of the temporary CHOW license, which expires on the 91st day after the issuance date. If the facility passes the on-site inspection or follow-up inspection, if one is necessary, before the temporary license expires, a regular two-year or probationary license is issued.

How will DHS determine if a facility passes the on-site inspection?

The DHS "health" surveyor assesses the facility during the on-site inspection to determine if the facility is in "substantial compliance" with the Nursing Facility Requirements for Licensure and Medicaid Certification.

If my facility passes the on-site inspection for the temporary CHOW license, am I required to submit another application in order to obtain a "regular" or "probationary" license?

No. If an applicant applies for a temporary CHOW license, a temporary CHOW license is issued, and the facility passes the on-site inspection during the 90-day period, a "regular" or "probationary" license is issued. The regular license is issued using the same effective date as the effective date on the temporary CHOW license.

What is the effective date of the regular or probationary license?

The effective date of the regular two-year license or the one-year probationary license is the date requested in the application. However, the effective date may not precede the stamp-in date of the application.

What is the expiration date for a temporary CHOW license?

A temporary CHOW license expires on the 91st day after the issuance date.

Will the effective date and the issuance date of the temporary CHOW license be the same date?

No. The effective date of the temporary CHOW license is the date requested for the change of ownership, and that date cannot precede the stamp-in date of the application. The issuance date on the license is the date Facility Enrollment issues the license. The issuance date is used to determine the expiration date for the temporary CHOW license. The temporary CHOW license expires on the 91st day after the issuance date.

PROBATIONARY LICENSE

What is a probationary license?

A probationary license is a one-year license issued when an applicant has not previously held a license in Texas.

What is the expiration date for a temporary CHOW license for an applicant who qualifies for a probationary license?

A temporary CHOW license expires on the 91st day after the issuance date. The effective date of the probationary license is the date requested in the application. (That date cannot precede the stamp-in date of the application.) The temporary CHOW license expiration date is the same for an applicant who qualifies for a regular two-year license or for an applicant who qualifies for a one-year probationary license.

EXPEDITED CHOW LICENSE

What is an expedited CHOW license?

A nursing facility license holder with an excellent operating record in Texas may be eligible for an expedited CHOW license to operate another existing nursing facility. A license holder that appears on the expedited CHOW list maintained by DHS may be granted expedited approval in obtaining a temporary CHOW license, if all applicable criteria are met.

How does a license holder get on the excellent performing nursing facility license holders list?

The criteria found in §19.2322(d) (relating to Allocation, Reallocation, and Decertification Requirements) of the Nursing Facility Requirements for Licensure and Medicaid Certification, is used to establish the list. An excellent performing nursing facility license holder who meets these criteria appears on the list and will be eligible for an expedited CHOW license.

What is the process for obtaining an expedited CHOW license?

The applicant appearing on the excellent performing nursing facility license holder list must submit, in addition to a complete application and fees, an affidavit demonstrating that the license holder continues to meet the criteria for appearing on the list. If the applicant and persons listed in §19.201(f) (relating to Criteria for Licensing), of the Nursing Facility Requirements for Licensure and Medicaid Certification, meet the qualifications of §19.201(e)(2) and pass the background check, DHS issues an expedited CHOW license.

When will DHS issue the expedited CHOW license?

DHS issues the expedited CHOW license within 14 working days after receipt of a complete application, fee, and required affidavit. An applicant for an expedited CHOW license must meet all applicable requirements that an applicant for renewal of a license must meet. Any requirement relating to inspections or to an accreditation review applies only to institutions operated by the license holder at the time the application is made for the expedited temporary CHOW license.

What is the difference between an expedited CHOW license and a temporary CHOW license?

DHS issues an expedited CHOW license within 14 days after receipt of a complete application, fee, and affidavit. DHS issues a temporary CHOW license within 30 days from

submission of a complete application, fee and required documents. An expedited CHOW license is also a temporary CHOW license. All procedures listed for a "temporary CHOW license" apply to an expedited CHOW license.

When does an expedited CHOW license expire?

An expedited CHOW license expires on the 91st day after the issuance date for the temporary CHOW license.

What happens when an expedited temporary CHOW license is issued?

See the above section titled, "What happens when a temporary CHOW license is issued?" Procedures for a temporary CHOW license also apply to an expedited CHOW license. An expedited CHOW license is a temporary CHOW license.

GENERAL DEFINITIONS AND MISCELLANEOUS INFORMATION

What is a complete application?

A complete application is DHS form 3720N completely filled out with all required data, signed and notarized, accompanied by all required documents and fees. The required documents that must be submitted are itemized in the instructions that accompany the form 3720N.

Where can I obtain a CHOW application (form 3720N)?

Call (512) 438-2633 to request an application. The application combines the information required for licensure and for certification into one document, the form 3720N.

How long will DHS hold an incomplete application?

An applicant must submit a complete application within 30 days after submission of an incomplete application. DHS denies an application that remains incomplete 30 days after the date an incomplete application is submitted to Facility Enrollment.

If the new operator fails to pass the on-site inspection(s) and the temporary license expires, does the facility license for the "old" (previous) owner continue?

No. Because DHS issued the temporary CHOW license to the new operator, the license for the previous operator no longer exists from the effective date of the temporary CHOW license.

What steps should I take if my temporary CHOW license expires?

Fifteen days before the temporary CHOW license expires, DHS will notify the operator that the license will expire. The applicant may submit a new application. Once the temporary

license expires, the facility is considered an "unlicensed" facility, operating without a license. It is recommended that the operator or a new operator submit a new initial application as quickly as possible. The operator should take steps to immediately correct the violations that prohibited issuance of a regular license.

What inspections are conducted after expiration of the temporary CHOW license, if I reapply?

If an operator fails to pass the on-site inspection(s) and the temporary CHOW license expires, the facility is certified as not being in compliance, and the Medicaid contract is cancelled. The operator must then apply for an initial license and a new Medicaid contract. A Life Safety Code (LSC) inspection is required for an initial license. After receipt of the complete application, fees and required documentation, an LSC inspection will be scheduled. When the facility passes the LSC inspection, an unannounced "health" on-site inspection will be conducted. When the operator passes the on-site inspection(s), the effective date of the initial license will be the date of the approved "health" inspection.

If my temporary CHOW license expires, what is the effective date of my Medicaid contract?

When the temporary CHOW license expires, the operator must apply for a new license and Medicaid contract. The operator must submit all required documents for the license and for the Medicaid contract. The Medicaid contract effective date is the same as the license effective date. If all required Medicaid contract documents were not submitted with the required license documents, the Medicaid contract will not be issued at the same time the license becomes effective. However, when all Medicaid contract documents are submitted, the effective date of the Medicaid contract is retroactive to the license effective date.

What steps will DHS take when a facility becomes "unlicensed"?

DHS will look at each facility and assess the situation. This policy, used prior to the initiation of the temporary CHOW license, will continue. One action that may be considered is requesting that the courts place a trustee in the unlicensed facility, in accordance with Section 242.094 of the Texas Health and Safety Code.

Who can tell me if I appear on the "excellent performing operator list"?

You may call Facility Enrollment, (512) 438-2630, to determine if an operator is eligible to apply for an expedited CHOW license. Upon receipt of a CHOW application, Facility Enrollment will automatically check the "excellent performing operator list" to determine if the operator qualifies for an expedited CHOW license.

The excellent performing operator list will be posted on the DHS Long Term Care-Policy website, http://www.ltc.dhs.state.tx.us/policy.

What should I do if I do not appear on the "excellent performing operator list" and I think I meet the criteria?

At the time an operator submits a CHOW application, the proposed new operator may call Chris Harper, Section Manager, Facility Enrollment, at (512) 438-2630.

Who do I call if I have questions about these new procedures?

Please call Facility Enrollment at (512) 438-2630.

Sincerely,

- Original Signature on File -

Marc S. Gold
Director
Long Term Care Policy

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