Under the terms of a Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP) Contract, an entity that is awarded a DMEPOS CBP Contract (contract supplier) may not transfer or assign any portion of a DMEPOS CBP Contract, unless the Centers for Medicare & Medicaid Services (CMS) approves the transfer through the process described in this fact sheet.
Consistent with 42 CFR § 414.422(d) and Section 1847(b)(6) of the Social Security Act, CMS may approve the transfer or assignment of a DMEPOS CBP Contract when the contract supplier undergoes a business change – for example, if the supplier merges with or is acquired by another entity, a sole proprietorship or partnership incorporates, or the supplier sells all or substantially all of the assets used to perform the Contract. CMS may approve the transfer if it determines that:
- The transfer or assignment will not result in a disruption of services or harm to beneficiaries;
- The successor entity satisfies the same eligibility criteria that applied to the bidding entity for consideration for a DMEPOS CBP Contract and submits any documentation CMS needs to verify that the eligibility criteria are met; and
- The successor entity assumes all rights, obligations, and liabilities of the DMEPOS CBP Contract.
CMS may approve of a transfer or assignment that meets these requirements, and any other requirements set forth in regulation or the DMEPOS CBP Contract, upon the execution of a novation agreement by the contract supplier, successor entity, and CMS.
When to Request a Transfer of an Entire Contract
A contract supplier that intends to undergo such a change in ownership (CHOW) must submit written notice before the transaction's effective date, consistent with the terms of its DMEPOS CBP Contract.
How to Request a Transfer of an Entire Contract
A contract supplier must request CMS approval of the assignment or transfer in Connexion, the DMEPOS CBP’s secure portal. The contract supplier must also upload the required documents in Connexion.
What Documents Must Be Submitted When Requesting CMS Approval of a Transfer or Assignment of a Contract
When submitting a request for CMS to approve the transfer or assignment of an entire DMEPOS CBP Contract, the following documents must be uploaded in Connexion so CMS can review the successor entity’s eligibility under 42 CFR § 414.422(d)(1)(ii) and the transaction information required under the terms of the DMEPOS CBP Contract:
- Cover letter with a description of the proposed CHOW, or a draft copy of the instrument effectuating the CHOW (e.g., draft bill of sale); and
- Successor entity’s credit report with numerical credit score or rating.
CMS Approval Process
Prior to the effective date of the CHOW, as specified in the DMEPOS CBP Contract, CMS will review the documents submitted related to the proposed CHOW and make a determination as to whether transferring the contract is appropriate.
Novation Agreement
If CMS determines that the transfer of the entire DMEPOS CBP Contract is appropriate, the contract supplier (transferor), successor entity (transferee), and CMS must execute a novation agreement allowing for such transfer.
The novation agreement will be the legal instrument by which CMS permits the transfer or assignment of an entire DMEPOS CBP Contract from one supplier to another following a CHOW.
Consistent with 42 CFR § 414.422(d)(1)(iii), the novation agreement must be acceptable to CMS. To be acceptable, the novation agreement must comply with the following requirements, as well as any other requirements set forth in the DMEPOS CBP Contract or applicable regulation:
- Effective Date: To avoid any disruption in items or services furnished under the DMEPOS CBP, the novation agreement must be effective on the date of the CHOW.
- Scope: The novation agreement must require the successor entity to assume all rights, obligations, and liabilities of the DMEPOS CBP Contract.
- Terms: The terms of the novation agreement must be aligned with the requirements set forth in Federal Acquisition Regulation (FAR) 42.1204, unless CMS determines that one or more such requirements are inapplicable.
- No Contingencies: CMS will not sign (execute) a novation agreement that contains a contingency even if a purchasing agreement (e.g., bill of sale) that supports the novation agreement may contain contingencies.
- Signatures for Networks: An authorized official from each member included in the network must sign the novation agreement, unless they submit a document delegating this authority to a single representative.
The successor entity should upload a signed novation agreement to Connexion promptly after the effective date of the CHOW, and must do so no later than 10 days after that effective date. Any final documents effectuating the CHOW (including the notarized bill of sale) must also be uploaded to Connexion. A sample novation agreement can be found at FAR 42.1204 or 48 CFR § 42.1204.
As a reminder, the successor entity cannot furnish items under the DMEPOS CBP Contract prior to the effective date of the novation agreement. Any claims for competitively bid items furnished to beneficiaries submitted by the successor entity before the effective date of the contract transfer will be denied.
Notwithstanding the above, a contract supplier may subcontract for services in accordance with 42 CFR §§ 424.57 and 414.422(f). Mandatory disclosure of subcontracting arrangements must be completed in Connexion.