§ 423.509 Termination of contract by CMS. ( a ) *Termination by CMS.* CMS may at any time terminate a contract if CMS determines that the Part D plan sponsor meets any of the following: ( 1 ) Has failed substantially to carry out the contract.
( 2 ) Is carrying out the contract in a manner that is inconsistent with the efficient and effective administration of this part.
( 3 ) No longer substantially meets the applicable conditions of this part.
( 4 ) CMS may make a determination under paragraph (a)(1), (2) or (3) of this section if the Part D Plan sponsor has had one or more of the following occur: ( i ) Based on credible evidence, has committed or participated in false, fraudulent, or abusive activities affecting the Medicare, Medicaid, or other State or Federal health care programs, including submission of false or fraudulent data.
( ii ) Substantially failed to comply with the requirements in subpart M of this part relating to grievances and appeals.
( iii ) Failed to provide CMS with valid risk adjustment, reinsurance and risk corridor related data as required under §§ 423.322 and 423.329 (or, for fallback entities, failed to provide the information in § 423.871(f)).
( iv ) Substantially failed to comply with the service access requirements in § 423.120.
( v ) Substantially failed to comply with either of the following: ( A ) Requirements in subpart V of this part.
( B ) Information dissemination requirements of § 423.128 of this part.
( vi ) Substantially failed to comply with the coordination with plans and programs that provide prescription drug coverage as described in subpart J of this part.
( vii ) Substantially failed to comply with the cost and utilization management, quality improvement, medication therapy management and fraud, abuse and waste program requirements as specified in subparts D and K of this part.
( viii ) Failed to comply with the regulatory requirements contained in this part.
( ix ) Failed to meet CMS performance requirements in carrying out the regulatory requirements contained in this part.
( x ) Achieves a Part D summary plan rating of less than 3 stars for 3 consecutive contract years. Plan ratings issued by CMS before September 1, 2012 are not included in the calculation of the 3-year period.
( xi ) ( A ) Has failed to report MLR data in a timely and accurate manner in accordance with § 423.2460; or
( B ) That any MLR data required by this subpart is found to be materially incorrect or fraudulent.
( xii ) Failure of an essential operations test before the start of the benefit year by an organization that has entered into a Part D contract with CMS when neither it, nor another subsidiary of the organization's parent organization, is offering Part D benefits during the current year.
( xiii ) The Part D plan sponsor has committed any of the acts in § 423.752 that support the imposition of intermediate sanctions or civil money penalties under § 423.750.
( xiv ) Following the issuance of a notice to the sponsor no later than August 1, CMS must terminate, effective December 31 of the same year, an individual PDP if that plan does not have a sufficient number of enrollees to establish that it is a viable independent plan option.
( b ) *Notice.* If CMS decides to terminate a contract it gives notice of the termination as follows: ( 1 ) *Termination of contract by CMS.* ( i ) CMS notifies the Part D plan sponsor in writing at least 45 calendar days before the intended date of the termination.
( ii ) The Part D plan sponsor notifies its Medicare enrollees of the termination by mail at least 30 calendar days before the effective date of the termination.
( iii ) The Part D plan sponsor notifies the general public of the termination at least 30 calendar days before the effective date of the termination by releasing a press statement to news media serving the affected community or county and posting the press statement prominently on the organization's Web site.
( iv ) CMS notifies the general public of the termination no later than 30 calendar days after notifying the plan of CMS's decision to terminate the Part D plan sponsor's contract by releasing a press statement.
( v ) In the event that CMS issues a termination notice to a Part D plan sponsor on or before August 1 with an effective date of the following December 31, the Part D plan sponsor must issue notification to its Medicare enrollees at least 90 days prior to the effective date of the termination.
( 2 ) *Immediate termination of contract by CMS.* ( i ) The procedures specified in (b)(1) of this section do not apply if— ( A ) CMS determines that a delay in termination, resulting from compliance with the procedures provided in this part prior to termination, would pose an imminent and serious risk to the health of the individuals enrolled with the Part D plan sponsor;
( B ) The Part D plan sponsor experiences financial difficulties so severe that its ability to make necessary health services available is impaired to the point of posing an imminent and serious risk to the health of its enrollees, or otherwise fails to make services available to the extent that such a risk to health exists; or
( C ) The contract is being terminated based on the grounds specified in paragraphs (a)(4)(i) and (xii) of this section.
( ii ) CMS notifies the Part D plan sponsor in writing that its contract will be terminated on a date specified by CMS. If a termination in is effective in the middle of a month, CMS has the right to recover the prorated share of the capitation payments made to the Part D plan sponsor covering the period of the month following the contract termination.
( iii ) CMS notifies the Part D plan sponsor's Medicare enrollees in writing of CMS's decision to terminate the Part D plan sponsor's contract. This notice occurs no later than 30 days after CMS notifies the plan of its decision to terminate the Part D plan sponsor's contract. CMS simultaneously informs the Medicare enrollees of alternative options for obtaining qualified prescription drug coverage, including alternative PDP sponsors and MA-PDs in a similar geographic area.
( iv ) CMS notifies the general public of the termination no later than 30 days after notifying the plan of CMS's decision to terminate the Part D plan sponsor's contract. This notice is published in one or more newspapers of general circulation in each community or county located in the Part D plan sponsor's service area.
( c ) *Opportunity to develop and implement a corrective action plan* — ( 1 ) *General.* ( i ) Before providing a notice of intent to terminate the contract, CMS will provide the Part D plan sponsor with notice specifying the Part D plan sponsor's deficiencies and a reasonable opportunity of at least 30 calendar days to develop and implement a corrective action plan to correct the deficiencies.
( ii ) The Part D plan sponsor is solely responsible for the identification, development, and implementation of its corrective action plan and for demonstrating to CMS that the underlying deficiencies have been corrected within the time period specified by CMS in the notice requesting corrective action.
( 2 ) *Exceptions.* The Part D plan sponsor will not be provided with an opportunity to develop and implement a corrective action plan prior to termination if— ( i ) CMS determines that a delay in termination, resulting from compliance with the procedures provided in this part prior to termination, would pose an imminent and serious risk to the health of the individuals enrolled with the Part D plan sponsor;
( ii ) The Part D plan sponsor experiences financial difficulties so severe that its ability to make necessary health services available is impaired to the point of posing an imminent and serious risk to the health of its enrollees, or otherwise fails to make services available to the extent that such a risk to health exists; or
( iii ) The contract is being terminated based on the violation specified in (a)(4)(i) of this section.
( d ) *Appeal rights.* If CMS decides to terminate a contract, it sends written notice to the Part D plan sponsor informing it of its termination appeal rights in accordance with subpart N of this part.
( e ) *Timely transfer of data and files.* If a contract is terminated under paragraph (a) of this section, the Part D plan sponsor must ensure the timely transfer of any data or files.
( f ) If CMS makes a determination to terminate a Part D sponsor's contract under § 423.509(a), CMS also imposes the intermediate sanctions at § 423.750(a)(1) and (3) in accordance with the following procedures: ( 1 ) The sanction will go into effect 15 days after the termination notice is sent.
( 2 ) The Part D sponsor will have a right to appeal the intermediate sanction in the same proceeding as the termination appeal specified in paragraph (d) of this section.
( 3 ) A request for a hearing does not delay the date specified by CMS when the sanction becomes effective.
( 4 ) The sanction will remain in effect— ( i ) Until the effective date of the termination; or
( ii ) If the termination decision is overturned on appeal, when a final decision is made by the hearing officer or Administrator.
[70 FR 4525, Jan. 28, 2005, as amended at 72 FR 68733, Dec. 5, 2007; 73 FR 20507, Apr. 15, 2008; 75 FR 19822, Apr. 15, 2010; 76 FR 21575, Apr. 15, 2011; 77 FR 22170, Apr. 12, 2012; 78 FR 31310, May 23, 2013; 79 FR 29965, May 23, 2014; 80 FR 7965, Feb. 12, 2015; 83 FR 16750, Apr. 16, 2018; 89 FR 30838, Apr. 23, 2024]