April 1, 2026

The 36-Month Rule Comes to DMEPOS: What Suppliers Need to Know

Ashley Francois, M. Ramana Rameswaran Katten Muchin Rosenman LLP + Follow Contact LinkedIn Facebook X Send Embed Two recent regulatory actions by the Centers for Medicare & Medicaid Services (CMS) have reshaped the ownership and enrollment landscape for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) suppliers.

First, through its CY 2026 Home Health Prospective Payment System final rule (published December 2, 2025, effective January 1, 2026), CMS extended the "36-month rule" to DMEPOS suppliers, introducing new requirements for ownership transactions. Second, on February 27, 2026, CMS imposed a nationwide moratorium on the enrollment of certain DMEPOS medical supply companies. Together, these developments affect any company or investor involved in DMEPOS ownership transactions.

The 36-Month Rule

Historically applied only to home health agencies (HHAs) and hospices, the 36-month rule is now extended to DMEPOS suppliers. The rule is codified at 42 CFR § 424.551.

A "change in majority ownership" (CIMO) occurs when an individual or organization acquires more than 50 percent direct ownership in a DMEPOS supplier within 36 months of initial Medicare enrollment or the most recent CIMO. Notably, the rule applies only to direct ownership interests, not indirect ownership, meaning that changes at higher tiers of a corporate structure (such as a change in ownership of a parent holding company) would not trigger the rule. The 50 percent threshold can be met cumulatively through multiple transactions—asset sales, stock transfers, mergers, and consolidations—meaning a series of smaller deals can collectively trigger the rule.

When a CIMO is triggered during the 36-month period, and no exception applies, the supplier's Medicare billing privileges do not convey to the new owner. The prospective owner must enroll as a new DMEPOS supplier and obtain new accreditation from a CMS-approved organization, losing continuity of the acquired supplier's enrollment.

Exceptions to the 36-Month Rule

The rule provides narrow exceptions under 42 CFR § 424.551(c). Medicare billing privileges will convey to a new owner during the 36-month window only if:

• The DMEPOS supplier's parent company is undergoing an internal corporate restructuring, such as a merger or consolidation.
• The owners of the existing DMEPOS supplier are merely changing the supplier's business structure (for example, from a corporation to a partnership or LLC) and the owners remain the same.
• An individual owner of the DMEPOS supplier has died. Notably, the exception available to HHAs and hospices for submitting two consecutive years of full cost reports does not apply to DMEPOS suppliers, because DMEPOS suppliers do not submit cost reports. As a result, a 36-month waiting period must typically elapse from initial enrollment or the most recent CIMO before a majority ownership change can occur without forfeiting Medicare billing privileges.

The Nationwide Enrollment Moratorium

This moratorium marks a departure from prior CMS actions that focused on specific geographic areas-it applies across the entire country, covering all 50 states, U.S. territories, and the District of Columbia. The moratorium has an initial duration of six months, though CMS retains authority to extend it in six-month increments. Seven categories of "medical supply companies" are covered, including those employing specialized personnel such as respiratory therapists, pharmacists, and orthotics or prosthetics professionals.

Under the moratorium, a "medical supply company" refers to a business primarily engaged in providing DMEPOS supplies to end users, whether individual beneficiaries holding a medical order or health care providers and suppliers. Entities such as pharmacies, grocery stores, hospitals, and physician offices whose core business lies outside DMEPOS provision are generally not subject to the moratorium.

Importantly, the moratorium applies only to new Medicare enrollments—suppliers already enrolled may continue operating and billing without interruption. Certain activities fall outside the moratorium's scope: relocating an existing practice location (provided the supplier is not moving into the moratorium area from outside it), updating administrative details such as phone numbers or addresses, and ownership changes that qualify for an exception under 42 CFR § 424.551(c) and therefore do not require initial enrollment.

Interaction Between the 36-Month Rule and the Moratorium

The most significant interaction between these two regulatory actions arises at the point of ownership transactions. When a CIMO occurs within the 36-month window, and no exception applies, the new owner must enroll in Medicare as a new DMEPOS supplier. Because that constitutes an initial enrollment, it falls squarely within the scope of the moratorium. In practical terms, this means that during the moratorium, a medical supply company that undergoes a CIMO within the 36-month window could find itself unable to reenroll in Medicare at all.

CMS explicitly addressed this scenario in its moratorium notice, stating that "the aforementioned moratorium exemption under § 424.570 for changes of ownership does not apply to such a scenario" because the supplier is effectively treated as "new." As a result, a transaction that triggers the 36-month rule during the moratorium period would leave the buyer without a path to Medicare enrollment until the moratorium is lifted, which may affect the Medicare revenue associated with the acquired business.

Implications for Transactions

Due diligence for any DMEPOS acquisition should now include a careful analysis of several key factors: when the target supplier initially enrolled in Medicare, whether it has undergone a prior CIMO, and whether the proposed transaction would trigger the 36-month rule.

Buyers should evaluate whether the 36-month window has elapsed, as triggering a CIMO within the window requires new enrollment, accreditation, and survey. If the moratorium remains in effect, the supplier may be unable to reenroll. Suppliers opening new locations should also note that each location must be separately enrolled under 42 CFR § 424.57(b)(1), and new locations are treated as initial enrollments subject to the moratorium.

CMS has indicated it will apply heightened scrutiny to all DMEPOS supplier applications filed during the moratorium period to identify medical supply companies attempting to enroll under a different supplier classification. Applicants who provide false or misleading information to evade the moratorium risk denial of their application, a bar on reapplication for up to 10 years, and referral to the OIG for potential enforcement action.

Conclusion

The 36-month rule expansion and nationwide moratorium signal heightened regulatory focus from CMS, OIG, and DOJ on the DMEPOS sector. Although CMS has not imposed the moratorium on Medicaid or CHIP, the agency has urged states to evaluate whether similar restrictions may be appropriate for their programs. Florida has already taken action, with the Agency for Health Care Administration issuing a temporary six-month moratorium on enrollment of new DME providers in the Florida Medicaid program effective March 2026, and additional states may follow suit.

Suppliers should ensure existing enrollments remain compliant, evaluate ownership structures before transactions, and report any business changes per regulatory requirements. Those seeking to enter the Medicare DMEPOS market as a medical supply company must wait until the moratorium lifts-and should anticipate heightened scrutiny, as post-moratorium applicants will be assigned to the "high" categorical risk screening level for at least six months. Companies and investors contemplating DMEPOS transactions should consult experienced regulatory counsel to assess the impact on proposed deal structures and timelines.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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