Suggested Guidelines When Contracting for Inventory

Details of what is considered an acceptable contract with regard to purchasing inventory:

Supplier Standard #4 states, 'A supplier must fill orders from its own inventory, or must contract with other companies for the purchase of items necessary to fill the order. A supplier may not contract with any entity that is currently excluded from the Medicare program, any State health care programs, or from any other Federal procurement or non-procurement programs.'

If you do not have inventory, you must have a contract(s) to purchase inventory. In order for a contract to be considered acceptable by CMS or the NSC, it must contain at a minimum the following elements:

  • The signatures of both parties
  • Establish a credit limit ' C.O.D. not acceptable
  • Credit terms (net due)
  • Both companies identified in the contract
  • Dates contract is effective - if indefinite, this should be indicated

Currently, there is no regulation establishing a minimum credit limit. CMS and the NSC are looking for a 'reasonable' credit limit based on what products and services are being provided. For example, if a supplier provides electric wheelchairs and the supplier only has one wheelchair in stock and submits a contract for $500 in credit, this would not show compliance with this standard. Due to the cost of electric wheelchairs, this supplier does not have sufficient inventory in stock nor does the supplier have a contract to show enough inventory can be purchased to fill beneficiary orders.

The bottom line is to ensure suppliers have either the inventory or a contract to purchase inventory to support the products and services they are going to provide to beneficiaries.

If you have any questions, please contact the NSC Customer Service Line at 866-238-9652 and any analyst will be happy to address your questions.

Last Updated: 01/12/2017