Corporate restructurings and name changes are common in the healthcare industry, but failure to comply with state and federal notification requirements, as well as those of private insurance companies, can pose serious risks.
In this HealthcareLINC Attorney Q&A, McAfee & Taft corporate lawyer Blaine Brewer reviews what types of business restructurings trigger notification requirements, which governmental and private entities must be notified and when, and best practices for ensuring healthcare entities comply with state, IRS, Medicare, and private insurance company notification requirements in a timely manner to avoid financial consequences.
For assistance with any type of healthcare corporate restructuring transaction, including complying with notification requirements, please contact McAfee & Taft’s Healthcare Industry Group.
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Q&A Transcript
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What are some common forms of restructuring in the healthcare industry?
A common situation that we see some healthcare clients face or experience is undergoing some sort of a corporate restructuring or even changing its name. It can be a physician practice, bringing in a new physician, changing its ownership, or maybe even converting from something like a corporation to an LLC. And there are notice requirements with the state, federal government, other agencies, and insurance companies, and so making sure that the company complies with those requirements is important.
What is planning important during restructuring or a name change?
It’s important to plan ahead when a healthcare company specifically is looking to restructure — whether that’s converting or merging with another company or bringing in a new physician owner. And a lot of these times that involves changing the name of the company. And whenever you do that, there are notice requirements and other requirements that insurance companies, that the state, IRS require. And there can be consequences if those are missed. Importantly, for cash flow reasons, failure to notify some insurance companies can lead to terminating billing privileges or overpayment recoupment. And so to avoid those potential risks, it’s important to make sure you know what requirements are out there and when to timely comply with them.
What must be filed with the state when restructuring or changing its name?
Whenever a healthcare entity or any entity wants to change its name, there are documents that they need to file with the Secretary of State — specifically in Oklahoma, the Oklahoma Secretary of State. If it’s an LLC, it’ll file an amendment to its articles of organization. If it’s a corporation, it will file an amendment to its certificate of incorporation. And then also, there are things, other documents you can file if it’s a conversion or a merger. But, yeah, the state requires those documents to be filed. If it’s just a change in ownership, that doesn’t necessarily really require a form be filed with the state, but the company should look at its internal organizational and governing documents just to make sure that those accurately reflect the ownership. But in terms of a name change specifically, there are articles that will need to be filed with the state.
When should the IRS be notified of a name change?
The IRS will need to be updated in some form — whether it’s a change in ownership, a change in the entity type, the tax status, or the name change. If it’s a change in ownership specifically, you’ll need to kind of consult with a tax attorney or a CPA to see if they need to file a tax election. But typically for a name change, companies can do it in a couple of ways. Commonly we see it just in the next tax return, but another way is to send a letter to the IRS requesting the IRS update their own records. And it’s important for healthcare companies to promptly ask the IRS to update their records because insurance companies, even Medicare, commonly require a notification or a letter from the IRS to match the correct EIN number to the current name. And so getting that done as soon as possible, rather than waiting til the next tax return, is important. One thing to note is that the processing time with the IRS can be longer than expected, and so getting that done as soon as possible is important.
Are there specific notification requirements for Medicare?
Yeah. So Medicare will need notification — whether that’s a change in ownership or a name change. Medicare uses NPI numbers, national provider or identification numbers. And so there’s a process of updating the name on the NPI that can be done online with just going on as a user to update the name. But for Medicare, there are forms that will need to be filed that can be done online as well, and the forms are available with the Medicare website.
For a change in ownership, that will typically need to be notified within 30 days of that change, but for a name change, that can be done within 90 days after the name change. But it’s important that the company compile all of its records that show what was changed and how it was changed — even that letter from the IRS — because Medicare specifically will require some of that supporting information. If the EIN and the name doesn’t match because the name was changed, some insurance companies may not send payment, they may delay that, and so it can cause some cash flow issues. And that’s a reason why it’s important to be prompt in getting the records updated, whether that’s with the IRS or the state, and then making sure that notification is provided to the insurance companies timely. Medicare has those notification requirements, and then private insurance companies might have different ones. But a best practice is to send like a letter to those private insurers and saying what was changed so they can update their records, and they may also request that supporting information.
What are some best practices for a sequence of timing for notifications?
Because of all of these notice requirements have timing involved and there are things that are going to be happening before other things, it’s important to kind of go through, maybe even have a checklist or a calendar on what needs to be done. And that goes back to planning in front of doing a restructuring, bringing in a new owner, or changing the name of the company.
So first is to actually do the change. And so that’s usually filing documents with the state or amending any governing documents of the company — whether that’s bringing in the owner or a physician or changing the name. The next would be to update the IRS because of that problem that insurance companies will need information from the IRS, so getting them updated as soon as possible is probably the second priority. And then complying with the insurance notification requirements of Medicare — that 90-day requirement for the name change is important to do that. And then following that, the company can review what other accrediting organizations or bodies they are part of that will need to be notified — whether that’s a medical board, a pharmacy board, or the DEA — and then looking at other private insurers who will need notification or just update their records. And so a good practice is to just go through what bodies are a part of that organization — what they’re a part of — and then what insurance companies they frequently use, and either look into what forms are available for those or to prepare a letter that can be sent to each of those organizations or insurance companies.
We see these healthcare transactions pretty frequently, so at McAfee & Taft we can help either prepare those restructuring documents, that change in ownership documents, or a name change. Or we can help with managing what notification requirements are out there and how to best follow those and make sure that nothing gets missed so that there’s no consequences or cash flow problems once that happens.
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For information:
healthcarelinc.com
mcafeetaft.com/healthcare-industry
