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 portion of the DMEPOS CBP Contract when, for example, the contract supplier sells a distinct company (e.g., a subsidiary) that furnishes a specific product category or that provides services to a specific area within a competitive bidding area (CBA) (i.e., state, territory, or the District of Columbia) if it determines:
- The transfer or assignment will not result in a disruption of services or harm to beneficiaries,
- The CBA, product category, and location of the company being sold is transferred to the successor entity and the sale includes all the assets associated with the product category or CBA,
- 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, as applicable.
These requirements help ensure that transfers or assignments do not materially alter the structure of the DMEPOS CBP. For example:
- If a contract supplier is awarded a Contract to furnish Off-the-Shelf (OTS) Knee Braces to beneficiaries nationwide (e.g., under a nationwide remote item delivery competitive bidding area), CMS will not consent to a transaction in which one entity assumes responsibility for furnishing items and services in Florida, Georgia, and Tennessee, while the original contract supplier continues serving the remaining states. Such a transfer or assignment would be inconsistent with CMS's determination that a single contract supplier must be responsible for furnishing the competitively bid items and services throughout the designated competitive bidding area.
- If a contract supplier is awarded a Contract to furnish OTS Knee Braces and OTS Upper Extremity Braces to beneficiaries nationwide (e.g., under a nationwide remote item delivery competitive bidding area), CMS may consent to a transaction in which one entity assumes responsibility for furnishing OTS Knee Braces nationwide, while the original contract supplier continues furnishing OTS Upper Extremity Braces.
When to Request a Transfer of a Portion of a Contract
The contract supplier 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 a Portion of a 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 Partial Transfer or Assignment of a Contract
When submitting a request for CMS to approve the partial transfer or assignment of a 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 transaction, or a draft copy of the instrument effectuating the transaction (e.g., draft bill of sale);
• Contract supplier’s organizational chart/structure;
• Distinct company’s Taxpayer Identification Number (TIN) and Provider Transaction Access Number(s) (PTAN(s)) (to be considered distinct, a company must be operating under its own TIN);
• Distinct company’s organizational documents (e.g., certificate and articles of incorporation, certificate of partnership, Limited Liability Corporation (LLC) formation documents); and
• Distinct company’s credit report with numerical credit score or rating.
CMS Approval Process
Prior to the effective date of the transaction, as specified in the DMEPOS CBP Contract, CMS will review the documents submitted related to the proposed transaction and make a determination as to whether transferring the portion of the contract is appropriate.
Partial Novation Agreement
If CMS determines the partial transfer or assignment of the DMEPOS CBP Contract is appropriate, the contract supplier (transferor), successor entity (transferee), and CMS must execute a partial novation agreement allowing for such transfer.
The partial novation agreement will be the legal instrument by which CMS permits the partial transfer or assignment of a DMEPOS CBP Contract from one supplier to another following the sale of a distinct company (e.g., a subsidiary) that furnishes all items and services relating to a specific CBA and product category combination (competition).
Consistent with 42 CFR § 414.422(d)(1)(iii), the novation agreement must be acceptable to CMS. To be acceptable, the partial 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 partial novation agreement must be effective on the date of the transaction.
• Scope: The novation agreement must require the successor entity to assume all rights, obligations, and liabilities of the DMEPOS CBP Contract applicable to the competition that the successor entity will furnish items and services.
• Terms: The terms of the partial 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 change of ownership (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 partial novation agreement. Any claims for competitively bid items furnished to beneficiaries submitted by the successor entity before the effective date of the partial 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.