Health Law Daily Wrap Up, ADMINISTRATION OF MEDICARE/MEDICAID PROGRAMS—DAB DECISIONS: Untimely reporting of change of ownership leads to enrollment revocation, (Jun 3, 2026)

By WK Editorial Staff

An ALJ upheld CMS’s revocation of a Medicare supplier’s enrollment based on its failure to report a change of ownership within the required 30-day timeframe.

An HHS Departmental Appeals Board (DAB) Administrative Law Judge (ALJ) sustained CMS’s determination to revoke the Medicare enrollment and billing privileges of Vandalia Physical Therapy, Ltd., pursuant to 42 C.F.R. § 424.535(a)(9). CMS requires suppliers to report certain changes, including changes of ownership, within 30 days. Under current regulations, CMS considers compliance with these reporting obligations as a condition of continued program participation rather than administrative formality (Vandalia Physical Therapy, Ltd., DAB No. CR6875, Doc. No. C-26-153 (Apr. 15, 2026)).

The ALJ noted that the supplier’s ownership changed on January 1, 2024, when a new owner acquired the practice. However, the supplier did not notify its Medicare contractor of this change within the 30-day deadline required by 42 C.F.R. § 424.516(d). The record showed that the supplier failed to report the ownership change for approximately a year and a half. CMS subsequently revoked the supplier’s enrollment based on this failure.

Under 42 C.F.R. § 424.535(a), CMS is authorized to revoke a supplier’s enrollment if any enumerated ground is satisfied. Among those grounds is the failure to report a change of ownership within the required timeframe. The ALJ emphasized that once CMS establishes the existence of a regulatory basis for revocation, the inquiry is effectively complete. The ALJ’s role is limited to confirming that the regulatory criteria are met, not to reassessing the wisdom or fairness of CMS’s enforcement decision.

The supplier advanced several arguments seeking to excuse or mitigate its noncompliance. First, it asserted that the new owner relied on representations from the prior owner that the ownership change had already been properly reported. Second, it noted that it promptly corrected the deficiency once it learned of the issue. Finally, it argued that the violation did not involve fraud or abuse and resulted from an innocent misunderstanding. The ALJ rejected these arguments as legally insufficient. The ALJ cited longstanding authority establishing that parties who participate in federal programs are charged with knowledge of applicable regulations. Reliance on another party or ignorance of the rules does not excuse noncompliance. Similarly, the ALJ determined that post hoc corrective action does not cure a failure to meet a regulatory deadline. The governing regulation requires reporting within 30 days, and compliance outside that timeframe does not satisfy the requirement.

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