Healthcare Entity & Facility Licensing

Health care businesses often need more than a corporate registration to begin operations. Depending on the type of services provided, a health care entity or facility may need a state license, permit, certification, Medicare enrollment, accreditation, or other regulatory approval before treating patients or billing for services.

Hospitals, skilled nursing facilities, assisted living facilities, ambulatory surgical centers, home health agencies, behavioral health providers, laboratories, pharmacies, diagnostic facilities, and many other health care organizations are subject to licensing and operational requirements that differ by jurisdiction and provider type.

G2Z Law Group assists health care businesses with entity licensing, facility licensing, license applications, renewals, changes of ownership, regulatory approvals, Medicare certification, and related compliance matters.

What Is Health Care Facility Licensing?

Facility licensing is the regulatory process through which a state authorizes a health care organization to operate a particular type of facility or provide specified health care services.

Unlike professional licensing, which generally applies to individual practitioners, facility or entity licensing applies to the organization itself.

Licensing requirements vary substantially depending on the state and the services being offered. A health care organization may be required to satisfy standards relating to:

• ownership and organizational structure;

• governing body responsibilities;

• staffing and professional qualifications;

• physical plant and facility requirements;

• clinical policies and procedures;

• infection prevention and patient safety;

• emergency preparedness;

• quality assurance and performance improvement;

• medical records and documentation;

• patient rights;

• background checks;

• administrator or medical director requirements; and

• financial or insurance requirements.

A business should determine its licensing obligations before entering into leases, hiring staff, purchasing equipment, or beginning patient operations.

What Types of Health Care Entities May Require a License?

Licensing requirements depend on state law, but regulated health care entities may include:

hospitals;

skilled nursing facilities and nursing homes;

assisted living and residential care facilities;

ambulatory surgical centers;

home health agencies;

hospices;

behavioral health and substance use treatment facilities;

clinical laboratories;

imaging and diagnostic centers;

dialysis facilities;

rehabilitation facilities;

pharmacies;

medical practices offering specially regulated services; and

other institutional health care providers.

Some organizations may require more than one approval. For example, an entity may need a state facility license, professional permits, federal enrollment, controlled-substance registrations, laboratory certification, or accreditation depending on the services it provides.

What Is the Difference Between Facility Licensing and Medicare Certification?

A state facility license and Medicare certification are not the same thing.

State licensing generally establishes whether a health care facility is authorized to operate under applicable state law. Medicare certification determines whether certain institutional providers satisfy federal participation requirements necessary to participate in the Medicare program.

CMS identifies hospitals, skilled nursing facilities, home health agencies, hospices, and similar institutions as institutional providers subject to specific Medicare enrollment and certification processes. For many provider types, the process involves Medicare enrollment, review by a Medicare Administrative Contractor, and compliance review by a State Survey Agency or, where permitted, a CMS-recognized accrediting organization.

Accordingly, opening a health care facility may involve several related but legally distinct processes: business formation, state licensing, accreditation, Medicare or Medicaid enrollment, and payer credentialing.

What Happens During a Facility Licensing or Certification Survey?

Many facility licenses and certifications require an inspection or survey before approval or as a condition of continued operation.

Surveyors may evaluate whether the organization complies with applicable operational, clinical, safety, staffing, documentation, and quality requirements.

CMS explains that State Survey Agencies conduct surveys for many Medicare-certified providers and determine compliance with applicable health and safety standards. Federal certification requirements differ by provider type, and deficiencies may affect a facility’s ability to participate in Medicare or Medicaid.

Preparation for a licensing or certification survey may therefore require review of:

• policies and procedures;

• staffing files and credentials;

• governing documents;

• patient records;

• quality assurance programs;

• infection-control systems;

• emergency preparedness;

• physical environment requirements;

• incident reporting;

• contracts and vendor relationships; and

• evidence of compliance with applicable regulations.

How Do Ownership Changes Affect a Facility License?

Health care transactions frequently create licensing issues.

A change of ownership, acquisition, merger, restructuring, relocation, or change in controlling interest may require advance notice, a new license application, regulatory approval, amendment of an existing license, or changes to federal enrollment information.

The requirements vary by jurisdiction and provider type, and the regulatory definition of a “change of ownership” may not always correspond to the way the transaction is characterized in the purchase agreement.

CMS also requires institutional providers to keep Medicare enrollment information current and identifies certain changes—including changes in ownership and practice location—as reportable events.

For this reason, licensing review should be incorporated into the planning stages of a health care transaction rather than addressed only after closing.

What Happens if a Facility Operates Without the Required License?

Operating without an appropriate license or outside the scope of an existing license can create significant regulatory consequences.

Depending upon the jurisdiction and circumstances, an organization may face:

• denial or suspension of a license;

• civil monetary penalties;

• restrictions on operations;

• corrective-action requirements;

• repayment or reimbursement issues;

• exclusion from government health care programs;

• inability to bill payers;

• enforcement proceedings; or

• closure of the facility.

Licensing problems may also affect contracts, financing, accreditation, payer participation, and future transactions involving the business.

Can a Facility License Be Renewed, Reinstated, or Modified?

Health care facility licenses generally require periodic renewal and continued compliance with applicable regulatory standards.

Organizations may also need regulatory approval when they expand services, add locations, relocate, change ownership, increase capacity, or modify the scope of licensed operations.

When a license has expired, been suspended, or become subject to enforcement action, the provider may need to complete a license reinstatement or corrective-action process before resuming operations.

Early legal review can help identify required filings, deadlines, documentation, and regulatory risks before those issues interfere with ongoing operations.

What Can G2Z Law Group Do for My Health Care Business?

G2Z Law Group assists health care organizations with entity and facility licensing, regulatory approvals, certification, and operational compliance.

Our attorneys can assist with initial facility-license applications, renewals, reinstatements, changes of ownership, relocations, changes in services, regulatory disclosures, survey preparation, responses to deficiencies, and communications with state licensing agencies.

We also help clients evaluate the relationship between facility licensing and Medicare certification, accreditation, provider enrollment, Corporate Practice of Medicine requirements, ownership restrictions, Management Services Agreements, and other health care regulatory obligations.

Whether establishing a new health care business, acquiring an existing provider, expanding operations, or responding to a licensing problem, identifying regulatory requirements early can help avoid delays and protect the organization’s ability to operate.