Change of Ownership

Change of Ownership (CHOW)

In the Final Rule, CMS left the door open for the opportunity for non-contract suppliers to merge with or acquire a contracted supplier. If a non-contract supplier merges or acquires a contracted supplier, it may also receive that supplier’s contract. However, CMS has requirements for non-contract suppliers that wish to acquire a contracted supplier’s contract.

CMS will award a contract to a supplier who merges or acquires a contracted supplier if:

  • They meet the requirements applicable to the contracted suppliers for the competitive bidding program that the contract applies to.
  • The successor supplier submits the necessary financial and accreditation documents, required in the initial competitive bidding process, unless it has already been filed.
  • The existing contract supplier notifies CMS of the change in ownership at least 60 days before the anticipated date of change.
  • The successor supplier submits an executed novation agreement, acceptable to CMS, at least 30 days before the anticipated date of change. Novation agreement requirements and examples provided below.

Novation Agreements

A novation agreement is an agreement among the previous contract supplier, the new supplier, and CMS that is put into a document, executed and signed by all 3 parties, and recognizes the new owner as the successor in interest to the previous owner’s Medicare contract.

In order to be accepted, a novation agreement must include the following:

  • The new supplier must be an eligible organization.
  • The previous owner must guarantee that the new owner will carry out the terms of the original contract.
  • The new supplier must accept all of the obligations of the original contract.
  • The previous owner must waive its right to reimbursement for covered services for the rest of the current contract period.

Sample Novation Agreement
This sample novation agreement is NOT a legal document. Legal counsel should be consulted when making necessary modifications to this document. The presentation of this document does not constitute legal advice.

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Change of Onwership Requirements

Entity Requirement Number of Days to Meet Requirement
Contract Supplier Only "The existing contract supplier must notify CMS if it is negotiating a CHOW." 60 calendar days before the anticipated date of the change.
*If a new entity will be formed as a result of the merger or acquisition, the existing contract supplier must submit to CMS, its final draft of a novation agreement as described in 414.422 (d)(2)(iii). At least 30 calendar days before the anticipated date of the CHOW
Successor Entity or New Entity The successor entity or new entity must submit to CMS the documentation in 414.414(b)-(d), if not submitted previously by the successor or the contract supplier or if no longer current. Duplicates of previously submitted information need not be submitted if that information is still current. Within 30 calendar days prior to the anticipated effective date of the CHOW
Successor Entity Only The successor entity that is acquiring the assets of the existing contract supplier must submit to CMS, a signed novation agreement acceptable to CMS, stating that it will assume all obligations under the contract At least 30 calendar days before the anticipated effective date of the change of ownership.
New Entity Only The new entity must submit to CMS an executed novation agreement acceptable to CMS. Within 30 calendar days after the effectivedate of the CHOW
NOTE: Successor and new entities must meet all requirements applicable to contract suppliers for the applicable competitive bidding program.
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