Editorial Note on Part 414
Editorial Note: Nomenclature changes to part 414 appear at 60 FR 50442, Sept. 29, 1995, and 60 FR 53877, Oct. 18, 1995.

§ 414.422 Terms of contracts. ( a ) *Basic rule.* CMS specifies the terms and conditions of the contracts entered into with contract suppliers under this subpart. A contract supplier must comply with all terms of its contract, including any option exercised by CMS, for the full duration of the contract period.
( b ) *Recompeting competitive bidding contracts.* CMS recompetes competitive bidding contracts at least once every 3 years.
( c ) *Nondiscrimination.* The items furnished by a contract supplier under this subpart must be the same items that the contract supplier makes available to other customers.
( d ) *Change of ownership (CHOW).* ( 1 ) CMS may transfer a contract to a successor entity that merges with, or acquires, a contract supplier if the successor entity— ( i ) Meets all requirements applicable to contract suppliers for the applicable competitive bidding program;
( ii ) Submits to CMS the documentation described under § 414.414(b) through (d) if documentation has not previously been submitted by the successor entity or if the documentation is no longer sufficient for CMS to make a financial determination. A successor entity is not required to duplicate previously submitted information if the previously submitted information is not needed to make a financial determination. This documentation must be submitted prior to the effective date of the CHOW; and
( iii ) Submits to CMS a signed novation agreement acceptable to CMS stating that it assumes all obligations under the contract. This documentation must be submitted no later than 10 days after the effective date of the CHOW.
( 2 ) Except as specified in paragraph (d)(3) of this section, CMS may transfer the entire contract, including all product categories and competitive bidding areas, to a successor entity.
( 3 ) For contracts issued in the Round 2 Recompete and subsequent rounds in the case of a CHOW where a contract supplier sells a distinct company (for example, a subsidiary) that furnishes a specific product category or services a specific CBA, CMS may transfer the portion of the contract performed by that company to a successor entity, if the following conditions are met: ( i ) Every CBA, product category, and location of the company being sold must be transferred to the successor entity that meets all competitive bidding requirements; that is, financial, accreditation, and licensure;
( ii ) All CBAs and product categories in the original contract that are not explicitly transferred by CMS remain unchanged in that original contract for the duration of the contract period unless transferred by CMS pursuant to a subsequent CHOW;
( iii ) All requirements of paragraph (d)(1) of this section are met;
( iv ) The sale of the distinct company includes all of the contract supplier's assets associated with the CBA and/or product category(s); and
( v ) CMS determines that transfer of part of the original contract will not result in disruption of service or harm to beneficiaries.
( e ) *Furnishing of items.* Except as otherwise prohibited under section 1877 of the Act, or any other applicable law or regulation: ( 1 ) A contract supplier must agree to furnish items under its contract to any beneficiary who maintains a permanent residence in, or who visits, the CBA and who requests those items from that contract supplier.
( 2 ) A skilled nursing facility defined under section 1819(a) of the Act or a nursing facility defined under section 1919(a) of the Act that has elected to furnish items only to its own residents and that is also a contract supplier may furnish items under a competitive bidding program to its own patients to whom it would otherwise furnish Part B services.
( 3 ) Contract suppliers for diabetic testing supplies must furnish the brand of diabetic testing supplies that work with the home blood glucose monitor selected by the beneficiary. The contract supplier is prohibited from influencing or incentivizing the beneficiary by persuading, pressuring, or advising them to switch from their current brand or for new beneficiaries from their preferred brand of glucose monitor and testing supplies. The contract supplier may not furnish information about alternative brands to the beneficiary unless the beneficiary requests such information.
( f ) *Disclosure of subcontracting arrangements.* ( 1 ) *Initial disclosure.* Not later than 10 days after the date a supplier enters into a contract under this section the supplier must disclose information on both of the following: ( i ) Each subcontracting arrangement that the supplier has in furnishing items and services under the contract.
( ii ) Whether each subcontractor meets the requirement of section 1834(a)(20)(F)(i) of the Act if applicable to such subcontractor.
( 2 ) *Subsequent disclosure.* Not later than 10 days after the date a supplier enters into a subcontracting arrangement subsequent to contract award with CMS, the supplier must disclose information on both of the following: ( i ) The subcontracting arrangement that the supplier has in furnishing items and services under the contract.
( ii ) Whether the subcontractor meets the requirement of section 1834(a)(20)(F)(i) of the Act, if applicable to such subcontractor.
( g ) *Breach of contract.* ( 1 ) Any deviation from contract requirements, including a failure to comply with governmental agency or licensing organization requirements, constitutes a breach of contract.
( 2 ) In the event a contract supplier breaches its contract, CMS may take one or more of the following actions, which will be specified in the notice of breach of contract: ( i ) Suspend the contract supplier's contract;
( ii ) Terminate the contract;
( iii ) Preclude the contract supplier from participating in the competitive bidding program; or
( iv ) Avail itself of other remedies allowed by law.
[72 FR 18085, Apr. 10, 2007, as amended at 74 FR 2881, Jan. 16, 2009; 75 FR 73623, Nov. 29, 2010; 76 FR 70315, Nov. 10, 2011; 79 FR 66264, Nov. 6, 2014; 81 FR 77967, Nov. 4, 2016; 83 FR 57073, Nov. 14, 2018; 84 FR 60808, Nov. 8, 2019]