Subcontracting Overview


Subcontracting Resources

›› Post a subcontracting request

›› View subcontracting requests

›› Subcontract Packet - Brown Fortunato

›› General Subcontracting Information

›› Competitive Bidding Obligations
   Presented by Mark Higley and Jeff Baird, Esq.
   (Includes Template Subcontract Agreement,
   (Template Novation Agreement, Business
   Associate Addendum)

Per the Final Rule, CMS is offering contracted providers the opportunity to use subcontractors to allow them to fulfill the terms of their Medicare contract.  Subcontractor support is a popular option over networks for suppliers who either cannot qualify for networks or simply prefer to maintain control over their bid and operations.

Suppliers who enter into subcontracting arrangements with another bidding supplier may also bid for themselves.  Many suppliers have elected to enter into reciprocal subcontractor arrangements (“If I win, you can subcontract for me.  If you win, I will subcontract for you.  If we both win, we can subcontract for each other”)

The contract supplier must disclose information on (1) each subcontracting arrangement the supplier has in furnishing items and services under the contract; and (2) whether each such subcontractor has been accredited.  This disclosure must be made not later than 10 days after the date a supplier enters into a contract with CMS.  If the contract supplier subsequently enters into a subcontracting relationship, the supplier must disclose this information to CMS no later than 10 days after entering into the subcontracting relationship.

Subcontractor relationships must be made under the following conditions:

  • Subcontractor agreements must comply with supplier standards
    • Purchase of inventory (#4)
    • Repair of rented equipment (#12)
    • Delivery and instruction on the use of the item (#14)
  • Subcontractors must be accredited as applicable
  • CMS must be notified of subcontracting arrangements within 10 business days of contract award or of entering into an agreement

The following services may not be subcontracted out:

  • Intake and assessment
  • Coordination of care with physician
  • Submission of claims on behalf of beneficiary
  • Ownership and responsibility for equipment furnished to the beneficiary
  • Ensuring product safety
  • Other functions required to be performed by primary supplier

Contract suppliers MAY NOT:

  • Sell referrals to subcontractors
  • Purchase referrals from subcontractors
  • Subcontract with any entity currently excluded from:
    • Medicare program
    • State health care program
    • Any federal government executive branch procurement or non-procurement program or activity

Subcontractors would generally be used for support in fulfilling any or all of three contract terms:

Geographic Support

Contracted suppliers are required to (geographically) cover the entire competitive bidding area.  Many suppliers in outlying areas will find it unreasonable to drive 2+ hours to deliver product.  When this is the case, providers can set up subcontracting agreements with other providers who do have the ability to deliver products to those beneficiaries outside of the contract supplier’s normal coverage area.

Product Line Support

Under competitive bidding, providers who are awarded a contract for a given product category are required to provide all products in that category.  Providers have the option of referring a beneficiary to a subcontracted company if the choose not to carry certain products within a product category.  A common example is liquid oxygen, as many oxygen providers traditionally have not provided liquid oxygen.  Under the terms of a Medicare contract for supplying oxygen and related supplies stemming from competitive bidding, contract suppliers would be required to ensure that beneficiaries have access to liquid oxygen as prescribed.  Many suppliers may choose to direct those patients to a subcontractor as opposed to introducing liquid oxygen to their product/service line.

Personnel Support

Another potential need for subcontractor services may be personnel support.  Many providers may elect to pay another provider for the services of their Respiratory Therapist(s), for example.

Subcontractor Documents

In any case, any provider participating in the competitive bidding program who intends to use the services of a subcontractor(s) must supply the proper paperwork at the time of bid submission.  Per CMS’ Final Rule, it is necessary for contractor/subcontractor relationships to form a legal entity for the purposes of competitive bidding.

At the time of hard-copy document submission, a signed Letter of Intent will be necessary.  This Letter of Intent is not a legally binding document, but will effectively inform CMS of your intentions to sign an agreement should a contract be awarded.

A Subcontracting Agreement will be necessary to fulfill the requirement of a legal entity.  This can be supplied at the time Medicare Part B contracts are awarded.

Subcontracting Partners

VGM is offering providers the opportunity to provide your contact information for VGM members to view.  Whether you are looking to provide subcontracting services to a contract supplier or need a subcontractor to help you fulfill contract requirements, you can post your contact information on our virtual bulletin board for others to view.

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