When a Novation Agreement is Required

30.1 - When a Novation Agreement is Required (Rev. 113, Issued: 05-17-13, Effective: 05-17-13, Implementation: 05-17-13) Novation agreements are only required when there has been a change of ownership (as defined in §10.1 above). A novation agreement is required to transfer the rights and obligations under a Medicare contract from one entity to another entity eligible to contract with Medicare. When a novation agreement is required, the new entity or organization may be required to file a new application, demonstrate eligibility, and be determined an eligible entity, in order to contract with CMS. CMS recommends that organizations anticipating a change in ownership submit a novation agreement to CMS at least 60 days prior to the expected effective date of change of ownership. Organizations must submit such an agreement no later than 30 days prior to the effective date of change of ownership. Organizations must also submit three (3) copies of the novation agreement with the additional information requested in §20.2 above. Organizations must receive CMS approval of the novation agreement prior to the effective date of change in ownership in order for the new entity to assume an existing contract with CMS. If a novation agreement is not completed before the effective date of the change of ownership, then the following will occur: • The Medicare contract will be terminated as of that date; • Enrollees in the terminated contract will be disenrolled and provided notice of their remaining Medicare coverage options in accordance with existing statute, regulations, and policies; and • As indicated in §20.5 above, the MA organization continues to be liable for capitation payments that CMS makes to it on behalf of Medicare enrollees after the date of change of ownership.