House bill proposes $500,000 surety bond

Saturday, February 28, 2009

WASHINGTON--Shortly after CMS issued a final rule requiring HME providers to obtain $50,000 surety bonds, a Florida congressman upped the ante.

On the opening day of Congress, Jan. 6, Rep. Cliff Stearns, R-Fla., introduced H.R. 203, the “Medicare Fraud Prevention Act of 2009,” a bill that would require providers to obtain $500,000 surety bonds.

The cost to obtain a $50,000 surety bond is roughly $1,500 per year. Obtaining a $500,000 bond would cost providers roughly $15,000 per year, sources say.

“It is going to be virtually impossible for a small business that may have an annual revenue of little more than ($500,000) to get a bond,” said Wayne Stanfield, president of the National Association of Independent Medical Equipment Suppliers (NAIMES).

The Stearns bill feels like déjà vu. Last year, Sen. Mel Martinez, R-Fla., co-sponsored the “Medicare Fraud Prevention Act of 2008,” a bill that would have required providers to obtain $500,000 surety bonds. Additionally, the bill would have increased civil and criminal fines for fraud and abuse.

Under pressure from the industry, however, Martinez agreed to reconsider the bill.

While Stanfield said it’s unlikely the Stearns bill will pass, NAIMES has urged providers to reach out to legislators and help them understand the potential impact of the bill.

The industry has argued that even at $50,000, the surety bond requirement will drive small, independent and law-abiding providers out of business. Increasing the bond to $500,000 could double or triple the number of providers who are either forced to close up shop or are unable to obtain a bond, said Stanfield.

Also, sources stress that surety bonds are ineffective methods of combating fraud and abuse. Instead, CMS should perform more on-site inspections and investigate unusual billing patterns, said provider Raul Lopez.

“If (CMS) pays attention to more of what they’re paying out, who they’re paying it to and the times of year they’re paying it, they would definitely be able to eliminate fraud quicker,” said Lopez, director of operations for Miami Lakes, Fla.-based BayShore Dura Medical.