Transfer a Portion of a Contract Fact Sheet
A competitive bidding contract cannot be sold. However, in accordance with 42 CFR §414.422(d)(3), a contract supplier1 negotiating a change of ownership (CHOW) may request to transfer a portion of its contract to a qualified successor entity. When a contract supplier sells a distinct company (e.g., a subsidiary) that furnishes a specific product category or services a specific competitive bidding area (CBA), the Centers for Medicare & Medicaid Services (CMS) may transfer the portion of the contract performed by that distinct company to the successor entity, if certain conditions are met.
CMS reviews the documents submitted with a request to transfer a portion of a contract to be assured that the successor entity is eligible to perform as a contract supplier in accordance with 42 CFR §414.414(b) through (d). If CMS determines that a transfer of a portion of the contract is appropriate and will not result in disruption of services or harm to beneficiaries, it will enter into an agreement with the contract supplier and the successor entity as described in more detail below.
How to Request a Transfer of a Portion of the Contract
A contract supplier who is selling a distinct company that furnishes a specific product category or services a specific CBA, and wishes to transfer the portion of its contract serviced by that distinct company, must request the transfer in Connexion, the DMEPOS Competitive Bidding Program’s secure portal. The contract supplier must also upload the required documents in Connexion prior to the effective date of the CHOW. Please follow the steps in the Uploading Documents in Connexion Quick Reference guide.
To access Connexion and submit a request to transfer a portion of a contract, a non-contract supplier must first be an authorized official (AO) on the CMS-855S enrollment form and reflected in the Provider Enrollment, Chain, and Ownership System (PECOS). The AO should log in to the CMS Enterprise Portal. Instructions on how to request access for Connexion in the CMS Enterprise Portal can be found in the Registration Reference Guide for DBidS and Connexion.
In addition to the request to transfer a portion of the contract, the following documents must be uploaded in Connexion prior to the effective date of the CHOW, as specified in 42 CFR §414.422(d)(ii):
- 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);
- Contract supplier’s organizational chart/structure;
- Distinct company’s taxpayer identification number (TIN) and Provider Transaction Access Number (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 financial statements (i.e., income statement(s), balance sheet(s), and statement of cash flow(s)), credit report and score and/or rating, and the tax return extract for the most recent year filed (if filed with the Internal Revenue Service for the distinct company’s TIN).
If CMS determines the conditions in 42 CFR §414.422(d)(3) are met, the following information will be requested:
- A list of all locations (PTANs) that will be furnishing competitively bid items for the CBA and product category combination(s) (competition(s)) on the contract;
- TIN of the successor entity;
- Successor entity’s tax return extract for the most recent year filed; and
- Successor entity’s financial statements listed below that correspond with its tax return extract for the most recent year filed:
- Income Statement;
- Balance Sheet;
- Statement of Cash Flows; and
- Successor entity’s credit report and score and/or rating.
Immediately following the effective date of the CHOW, the successor entity or contract supplier must upload in Connexion an authenticated copy of the instrument effectuating the CHOW (e.g., notarized bill of sale). CMS will review these documents and make a determination as to whether the conditions to transfer a portion of the contract have been met. If CMS approves, and the portion of the contract is eligible to be transferred to the successor entity, the agreement described below will be uploaded in Connexion for signature by the seller, successor, and CMS.
Agreement to Transfer a Portion of the Contract
The agreement to transfer a portion of the contract is the legal instrument by which CMS transfers a portion of the contract performed by the distinct company to the successor entity following the CHOW. As noted above, if a contract supplier is selling a distinct company that furnishes a specific product category or services a specific CBA, and CMS has determined the portion of the contract is eligible to be transferred to the successor entity, then CMS will notify the contract supplier in Connexion. The seller should acknowledge the agreement in Connexion after both the contract supplier and successor have signed.
The agreement is considered fully executed and binding once CMS has signed the document. The agreement to transfer a portion of the contract can only be executed after the CHOW is effectuated. For networks, an AO from each member must sign the agreement, unless they upload a document delegating this authority to a single representative.
The successor entity cannot furnish items under the transferred portion of the contract prior to the effective date of the transfer agreement. Any claims for competitively bid items furnished to beneficiaries in the applicable CBA submitted by the successor entity before the effective date of the transfer agreement will be denied.
Contract suppliers are also reminded of the mandatory disclosure of subcontracting arrangements set forth in 42 CFR §414.422(f). The disclosure form must be completed and submitted in Connexion. For more information about subcontracting, refer to the Subcontracting of DMEPOS Services fact sheet.
1 A contract supplier is an entity awarded a contract by CMS to furnish items included in a competitive bidding program and furnished in a competitive bidding area under section 1847 of the Social Security Act.