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.
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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