Novation agreement requirements.
(a) Conditions for CMS approval of a novation agreement.
CMS approves a novation agreement if the following conditions are met:
(1) Advance notification.
The MA organization notifies CMS at least 60 days before the date of the proposed change of ownership. The MA organization also provides CMS with updated financial information and a discussion of the financial and solvency impact of the change of ownership on the surviving organization.
(2) Advance submittal of agreement.
The MA organization submits to CMS, at least 30 days before the proposed change of ownership date, three signed copies of the novation agreement containing the provisions specified in paragraph (b) of this section, and one copy of other relevant documents required by CMS.
(3) CMS's determination.
CMS determines that—
The proposed new owner is in fact a successor in interest to the contract;
Recognition of the new owner as a successor in interest to the contract is in the best interest of the Medicare program; and
The successor organization meets the requirements to qualify as an MA organization under subpart K of this part.
(b) Provisions of a novation agreement—
(1) Assumption of contract obligations.
The new owner must assume all obligations under the contract.
(2) Waiver of right to reimbursement.
The previous owner must waive its rights to reimbursement for covered services furnished during the rest of the current contract period.
(3) Guarantee of performance.
The previous owner must guarantee performance of the contract by the new owner during the contract period; or
The new owner must post a performance bond that is satisfactory to CMS.
(4) Records access.
The previous owner must agree to make its books and records and other necessary information available to the new owner and to CMS to permit an accurate determination of costs for the final settlement of the contract period.
[50 FR 1346, Jan. 10, 1985, as amended at 56 FR 8853, Mar. 1, 1991; 58 FR 38079, July 15, 1993; 60 FR 45681, Sept. 1, 1995. Redesignated and amended at 63 FR 35067, 35106, June 26, 1998; 70 FR 52027, Sept. 1, 2005]