A new home health agency cannot bill Medicare until CMS sets the effective date of its provider agreement. Before that, it serves its first patients without Medicare payment, passes its survey, and sets up everything a Medicare claim needs. This guide covers that path in order, from the state license to the first notices of admission and claims. It is general education about Original Medicare, not legal advice.

How do new home health agencies handle billing before Medicare certification?

They do not bill Medicare at all. Medicare payment for services provided before the effective date of Medicare participation is not permitted, and a new agency cannot bill Medicare until CMS has determined that date (State Operations Manual, chapter 2, section 2202.10D). Until then, the work is billing the first patients' actual payers, keeping survey-ready records, and setting up Medicare claim submission. The path usually runs in this order:

  1. State license
  2. Medicare enrollment on the CMS-855A
  3. Initial reserve operating funds
  4. Ten skilled patients and the initial survey
  5. The effective date and approval letter
  6. Claim submission setup
  7. The first notices of admission and claims

Does a new home health agency need a state license first?

In California, yes. A license from the California Department of Public Health (CDPH) is required to operate a home health agency, and the state's initial application packet includes the federal CMS-855A enrollment application and CMS-1561 provider agreement (CDPH: HHA initial application packet).

California has also paused new licenses. Senate Bill 164 put a moratorium on new home health agency licensure in place on June 29, 2026, lasting until no later than 90 days after CDPH's revised regulations take effect. CDPH may grant an exception only on a written finding of unmet need in the proposed service area, based on the concentration of existing agencies there. The law also requires fingerprints for anyone with a 5 percent or greater interest in an entity that owns a private agency (CDPH All Facilities Letter 26-28).

How does Medicare enrollment work for a new home health agency?

The agency files the CMS-855A, Medicare's enrollment application for institutional providers, through PECOS or on paper. With an initial home health application, the Medicare Administrative Contractor also expects a signed CMS-1561 provider agreement and evidence that the HHS-690 civil rights assurance was submitted (Program Integrity Manual, chapter 10, section 10.2.1.6).

New home health agencies are screened at CMS's highest risk level: an on-site visit, plus fingerprint-based criminal background checks for everyone with a 5 percent or greater direct or indirect ownership interest (42 CFR 424.518). The contractor may not convey billing privileges until the site visit is complete (Program Integrity Manual, chapter 10). The agency must also agree to receive payments by electronic funds transfer on the CMS-588 (42 CFR 424.510(e)).

The contractor then sends the state an approval recommendation. The survey cannot be done until the contractor has approved the CMS-855A (State Operations Manual, Appendix B).

How much money does a new home health agency need in reserve?

Enough to run its first three months of Medicare billing without counting any Medicare receivables. This initial reserve operating funds requirement applies when the application is submitted, throughout enrollment, and for the three months after billing privileges are conveyed (42 CFR 489.28; 42 CFR 424.510(d)(9)).

There is no fixed figure. The contractor takes the average first-year cost per visit of at least three comparable agencies and multiplies it by the new agency's projected visits for its first three months. Proof starts with account statements and an attestation from the financial institution. At least half of the required amount must be non-borrowed funds; the rest can come from an unrelated lender or a line of credit (42 CFR 489.28).

The contractor checks the funds four times: before it recommends approval, 30 to 35 days later, after the state recommends approval, and during the first three months of billing. Proof is due within 30 days of each request. Without it, enrollment is denied or revoked (Program Integrity Manual, chapter 10, section 10.2.1.6.2).

How many patients does a new home health agency need before the Medicare survey?

Ten. Before the initial survey, the agency must have provided skilled care consistent with the conditions of participation to at least 10 patients, and at least 7 should be receiving skilled care at the time of the survey. They do not have to be Medicare beneficiaries. An agency in a medically underserved area may be allowed a minimum of 5, with 2 receiving care at the survey. The agency must also provide skilled nursing and at least one other service: physical therapy, speech-language pathology, occupational therapy, medical social services or home health aide services (State Operations Manual, Appendix B).

The survey is unannounced, reviews every condition of participation, and is done by the state survey agency or by an accrediting organization with CMS deeming authority (same source). The agency must also show it can transmit OASIS assessment data before the survey is scheduled (State Operations Manual, chapter 2, section 2202.10).

Who pays for the first patients?

Not Medicare. Since the survey patients do not have to be Medicare beneficiaries, a new agency's first patients are paid for privately, by another payer, or not at all. Keep billing those payers after certification; their payments carry the agency while its first Medicare claims are in process.

When can a new home health agency start billing Medicare?

On the effective date of its provider agreement, and not before. That is the day the survey is completed, or the effective date of the accrediting organization's decision, if every federal requirement is met that day. It cannot be earlier than the latest date each requirement is met, enrollment included. With lower-level deficiencies, it can instead be the date an acceptable plan of correction is received (42 CFR 489.13). Billing privileges take effect on the same date (42 CFR 424.520(a)).

After the state recommends approval, the contractor orders the site visit, checks the reserve funds again and rechecks the agency and its owners and managers against federal exclusion and debarment lists. CMS then countersigns the provider agreement and assigns the effective date and a CMS Certification Number (CCN), and the contractor sends the approval letter (Program Integrity Manual, chapter 10, section 10.2.1.6). Notice of the effective date may come many weeks after the survey (State Operations Manual, chapter 2, section 2202.10D).

The PTAN. For a home health agency, the Medicare identification number is the CCN, and the approval letter shows it in the Provider Transaction Access Number (PTAN) box. The PTAN is what the agency uses to identify itself to the contractor's customer service and phone systems (Program Integrity Manual, chapter 10, sections 10.1.1 and 10.7.5.1).

Can you bill Medicare for patients seen before certification?

No. Visits before the effective date cannot be billed to Medicare. Once the CCN is assigned, the agency completes a new start of care assessment for each Medicare patient at the first billable visit after the effective date, and that date becomes day one of the patient's first Medicare period (State Operations Manual, chapter 2, section 2202.10E). That manual section dates from 60-day episodes; payment now covers 30-day periods (42 CFR 484.205). Ask your compliance adviser how to handle charges to a Medicare beneficiary for care before the effective date.

Because the date often arrives late, the notice of admission rule has an exception. The notice is due within 5 calendar days after the start of care, and a late one cuts the period payment by one thirtieth per day. CMS may waive that cut for a newly certified agency notified of its certification after the certification date, or still waiting for its user ID from its contractor, if the agency fully documents the circumstances (42 CFR 484.205(j)).

What do you need set up before the first Medicare claim?

Electronic claim submission with your Medicare Administrative Contractor, a bank account for payments, and a way to check eligibility. Claims must be submitted electronically unless the provider has a waiver. The contractor enrolls each provider for electronic data interchange (EDI) and assigns submitter IDs, after confirming the agency's National Provider Identifier is active in PECOS. EDI enrollment also records who is authorized to send transactions for you, such as a clearinghouse or billing company (Claims Processing Manual, chapter 24, sections 30 and 30.1).

  • Your contractor. California home health claims go to National Government Services, the contractor for Jurisdiction 6 (CMS: A/B MAC Jurisdiction 6). Its EDI enrollment begins once provider enrollment is complete and the welcome letter has arrived (NGS: EDI enrollment).
  • Electronic funds transfer. Confirm the CMS-588 account is on file before the first payment.
  • OASIS. Each assessment must be accepted before the claim that depends on it is sent. See claim data that does not match the assessment.
  • Eligibility. Check each patient's Medicare coverage and any Medicare Advantage plan before the first billable visit. See eligibility and coverage changes.
  • Practitioners. Ordering and certifying practitioners must be enrolled in Medicare in an approved status or have validly opted out (42 CFR 424.507).

What are the first claims after certification?

The first Medicare transaction for each patient is the notice of admission. It is filed within 5 calendar days after the start of care and covers the patient's 30-day periods until discharge (42 CFR 484.205(j)). Then, for each period:

  1. The final claim goes out at the end of the 30-day period, or at discharge if earlier, after all services are provided and the practitioner has signed the plan of care and any later verbal orders (Claims Processing Manual, chapter 10, section 10.1.10.4).
  2. One payment covers each 30-day period, made after the final claim is submitted (42 CFR 484.205).
  3. The wait: Medicare can pay a clean electronic claim no earlier than the 14th day after it is received (Claims Processing Manual, chapter 1, section 80.2.1.2).
  4. The deadline: each claim must be filed within 12 months, counted from its through date (42 CFR 424.44; Claims Processing Manual, chapter 1, section 70.1).

How long until a new agency's first Medicare payment?

For a patient who stays the full period, about six weeks from the first billable visit at the earliest: 30 days for the period to end, then at least 14 days before Medicare can pay. A returned claim, a missing signature or an assessment that was not accepted adds more time. The reserve funds rule assumes this gap, which is why it excludes Medicare receivables (42 CFR 489.28). Orders signed during the period, final claims sent the day they are ready, and prompt fixes to returned claims keep the wait short.

Can a new home health agency be sold? The 36-month rule

It can, but the buyer does not get the Medicare enrollment. If majority ownership changes by sale, including an asset sale, stock transfer, merger or consolidation, within 36 months after the effective date of the initial enrollment or the most recent majority change, the provider agreement and billing privileges do not convey. The new owner must enroll as a new agency and obtain a new survey or accreditation. Exceptions include two consecutive years of full cost reports, an internal corporate restructuring, a change in business structure with the same owners, and the death of an individual owner (42 CFR 424.550(b)).

California adds its own limit: CDPH may not approve a change of ownership within five years after the license was first issued, with narrow exceptions (CDPH All Facilities Letter 26-28).

First 90 days after certification: a checklist

  1. Record the effective date, CCN, PTAN and National Provider Identifier from the approval letter.
  2. Complete EDI enrollment and confirm the funds transfer account.
  3. Do a new start of care assessment for each current Medicare patient at the first billable visit.
  4. File each notice of admission within 5 calendar days; document late certification notice.
  5. Check coverage and practitioner enrollment before the first billable visit.
  6. Confirm each OASIS assessment is accepted before its claim is sent.
  7. Track every plan of care and verbal order until signed.
  8. Send each final claim when its period ends, and follow it until paid.
  9. Keep the reserve funds in place; answer proof requests within 30 days.
  10. Calendar each claim's 12-month filing deadline.

A billing company can take on much of this work for a newly certified agency, from claim setup with the contractor to timely notices of admission and follow-up on every claim. Enrollment, the survey and the clinical records stay with the agency.

Related guides

See Medicare home health billing for how periods, certification and deadlines fit together, and why home health claims come back for returned, rejected and denied claims. If you are weighing outside help, see choosing a home health billing company, and for what LMNS covers, see home health billing services. More guides: the home health notice of admission for the 5-day rule and late penalty, and home health billing codes for bill types, HIPPS, G-codes and claim codes.

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