Competitive bidding analysis

Sunday, July 1, 2007

Suppliers might be wondering whether they can sell their companies after they have agreed to become a contract supplier. If a supplier is selected as a contract supplier and decides to sell his business, the supplier must notify CMS of the change in ownership 60 days before the anticipated date of the change. CMS may award a contract to the entity that acquires the contract supplier, but it must be satisfied that the buyer, or successor entity, meets eligibility requirements for a contract supplier and will assume the obligations of the contract supplier.

First, the buyer must establish that it meets the conditions for participating in the competitive bidding program. Among other things, the buyer must show that it complies with all the of the supplier standards, is accredited and meets the financial standards that apply to contract suppliers. The buyer must also disclose prior or current legal actions, sanctions, revocations from the Medicare program, program related convictions and exclusions or debarments imposed against it or any of its board members, chief corporate officer, high level employees, affiliated companies or subcontractors. This information must be submitted within 30 days of the effective date of the change of ownership. If one of the parties has submitted this information previously, duplicate information is not required as long as the information remains current.

The buyer must submit a novation agreement to CMS for its approval. A novation agreement is an agreement between CMS and a successor entity to continue an existing contract arrangement with that successor entity. By entering the novation agreement, the buyer takes on the liabilities, obligations and benefits of the contract. The novation agreement must be submitted at least 30 days before the effective date of the change of ownership if the buyer is purchasing the assets of a contract supplier. If a new entity will be formed as a result of an acquisition or merger, the contract supplier must submit a final draft of a novation agreement for CMS's approval 30 days before the effective date of the change of ownership. In this case, the successor entity must furnish the executed novation agreement within 30 days after the transaction closes. CMS has stated that it will maintain the confidentiality of information relating to acquisitions.

Healthcare attorney Asela Cuervo is based in Washington, D.C.