§ 423.508 - Modification or termination of contract by mutual consent.

§ 423.508 Modification or termination of contract by mutual consent.

Cross Reference

Link to an amendment published at 89 FR 30838, Apr. 23, 2024.

(a) General rule. A contract may be modified or terminated at any time by written mutual consent. If the PDP sponsor submits a request to end the term of its contract after the deadline provided in § 423.507(a)(2)(i), the contract may be terminated by mutual consent in accordance with paragraphs (b) through (f) of this section. CMS may mutually consent to the contract termination if the contract termination does not negatively affect the administration of the Medicare Part D program.

(b) Notification of termination. If the contract is terminated by mutual consent, the Part D plan sponsor must provide notice to its Medicare enrollees and the general public as provided in paragraph (c) of this section.

(c) Notification of modification. If the contract is modified by mutual consent, the Part D plan sponsor must notify its Medicare enrollees of any changes that CMS determines are appropriate for notification within timeframes specified by CMS.

(d) 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.

(e) Agreement to limit new Part D applications.

(1) As a condition of the consent to a mutual termination, CMS

will require

requires, as a provision of the termination agreement, language prohibiting the Part D plan sponsor from applying for new contracts or service area expansions in the PDP region or regions served by the contract for a period up to 2 years

, absent circumstances warranting

unless there are circumstances that warrant special consideration, as determined by CMS.

(2) A PDP sponsor that agrees to terminate its offering of PBPs in a PDP region also agrees that it is not eligible to apply to resume offering plans in that region for 2 years.

(3) The provisions of this paragraph do not apply to employer group waiver plans offered by a Part D plan sponsor.

(f) Prohibition against Part D program participation by organizations whose owners, directors, or management employees served in a similar capacity with another organization that mutually terminated its Medicare contract within the previous 2 years. During the 2-year period specified in paragraph (e) of this section, CMS will not contract with an organization whose covered persons also served as covered persons for the mutually terminating sponsor. A “covered person” as used in this paragraph means one of the following:

(1) All owners of nonrenewed or terminated organizations who are natural persons, other than shareholders who have an ownership interest of less than 5 percent.

(2) An owner of a whole or part interest in a mortgage, deed of trust, note or other obligation secured (in whole or in part) by the organization, or any of the property or assets thereof, which whole or part interest is equal to or exceeds 5 percent of the total property, and assets of the organization.

(3) A member of the board of directors or board of trustees of the entity, if the organization is organized as a corporation.

[70 FR 4525, Jan. 28, 2005, as amended at 75 FR 19821, Apr. 15, 2010; 76 FR 21575, Apr. 15, 2011; 83 FR 16750, Apr. 16, 2018; 89 FR 30838, Apr. 23, 2024]