---
kind: "section"
citation: "42 C.F.R. § 417.494"
title: "42"
number: "417.494"
heading: "Modification or termination of contract."
url: "https://uscodex.org/cfr/42/417.494"
---

# §417.494. Modification or termination of contract.

- (a) **Modification or termination by mutual consent.**
  - (1) CMS and an HMO or CMP may modify or terminate a contract at any time by written mutual consent.
  - (2) If the contract is modified, the HMO or CMP must notify its Medicare enrollees of any changes that CMS determines are appropriate for notification.
  - (3) If the contract is terminated, the HMO or CMP must notify its Medicare enrollees, and CMS notifies the general public, at least 30 days before the termination date.
- (b) **Termination by CMS.**
  - (1) CMS may terminate a contract for any of the following reasons:
    - (i) **The HMO or CMP has failed substantially to carry out the terms of the contract.**
    - (ii) The HMO or CMP is carrying out the contract in a manner that is inconsistent with the effective and efficient implementation of [section 1876](/cfr/42/1876.md) of the Act.
    - (iii) The HMO or CMP has failed substantially to comply with the composition of enrollment requirements specified in [§ 417.413(d)](/cfr/42/417.413.md?p=d).
    - (iv) CMS determines that the HMO or CMP no longer meets the requirements of section 1876 of the Act and this subpart for being an HMO or CMP.
  - (2) If CMS decides to terminate a contract, it sends a written notice informing the HMO or CMP of its right to appeal the termination in accordance with [part 422](/cfr/42/part422.md) [subpart N](/cfr/42/subpartN.md) of this chapter.
  - (3) An HMO or CMP with a risk contract must notify its Medicare enrollees of the termination as described in [§ 417.488](/cfr/42/417.488.md).
  - (4) CMS notifies the HMO's or CMP's Medicare enrollees and the general public of the termination at least 30 days before the effective date of termination.
- (c) **Termination by the HMO or CMP.** The HMO or CMP may terminate the contract if CMS has failed substantially to carry out the terms of the contract.
  - (1) The HMO or CMP must notify CMS at least 90 days before the effective date of the termination and must include in its notice the reasons for the termination.
  - (2) The HMO or CMP must notify its Medicare enrollees of the termination at least 60 days before the termination date. Risk HMOs or CMPs must also provide a written description of alternatives available for obtaining Medicare services after termination of the contract. The HMO or CMP is responsible for the cost of these notices.
  - (3) The HMO or CMP must notify the general public of the termination at least 30 days before the termination date.
  - (4) The contract is terminated effective 60 days after the HMO or CMP mails the notice to Medicare enrollees as required in [paragraph (c)(2)](#c-2) of this section.
  - (5) CMS's liability for payment ends as of the first day of the month after the last month for which the contract is in effect.

## Notes

### Amendments

[50 FR 1346, Jan. 10, 1985, as amended at 52 FR 22322, June 11, 1987; 56 FR 46571, Sept. 13, 1991; 58 FR 38079, 38082, July 15, 1993; 60 FR 45681, Sept. 1, 1995; 75 FR 19803, Apr. 15, 2010]

### Source

Source: 50 FR 1346, Jan. 10, 1985, unless otherwise noted.

### Authority

Authority: 42 U.S.C. 1302 and 1395hh, and 300e, 300e-5, and 300e-9, and 31 U.S.C. 9701.

### Amendments

[50 FR 1346, Jan. 10, 1985, as amended at 52 FR 22322, June 11, 1987; 56 FR 46571, Sept. 13, 1991; 58 FR 38079, 38082, July 15, 1993; 60 FR 45681, Sept. 1, 1995; 75 FR 19803, Apr. 15, 2010]