Medicare tries to collect on surety bonds

‘We’re seeing almost a tidal wave of claims’
Friday, May 18, 2012

WASHINGTON – Medicare has started filing claims against surety bonds as a way to recoup overpayments from HME providers, industry stakeholders report.

This latest move shouldn’t be much of a surprise: Last fall, Medicare took heat from the Office of Inspector General (OIG) for not using surety bonds to recoup overpayments.

“We knew it was coming and now we’re seeing almost a tidal wave of claims,” said Warren Freeman, director of sales and marketing for VGM Insurance, which has hired an additional employee just to help process the claims.

In 2009, Medicare started requiring that HME providers obtain surety bonds for at least $50,000 as a way to reduce fraud and abuse.

Stakeholders aren’t sure what’s triggering Medicare to file claims against surety bonds. Typically, when a provider receives notice of an overpayment, he can assume the amount will be offset from future payments.

“The provider gets the letter saying he has overbilled $100 and he thinks, I don’t need to worry about it, and he puts it at the bottom of his pile,” Freeman said.

Stakeholders have noticed that the claims often have one thing in common: They involve a provider who typically bills in, say, Jurisdiction A, but in this case, billed in Jurisdiction B. When that provider receives notice of an overpayment from Jurisdiction B, there are too few other payments to offset the overpayment and it goes unpaid, resulting in Medicare filing a claim against his surety bond.

“We can’t identify why one overpayment is offset and one isn’t, but that’s one issue that keeps popping up,” Freeman said.

Two other insurance companies that arrange bonds for HME providers, Cushman Insurance and Cailor Fleming Insurance, say they haven’t received any claims yet. All three insurance companies debate whether Medicare even has the right to file claims against surety bonds to recoup overpayments.

“Most of the surety carriers are under the impression that the bonds will be used in cases of fraud, not just for overpayments,” said Bill McMahon, an account executive for Cailor Fleming. “They’re also under the impression that Medicare will make every effort to collect that money themselves. Then, if a claim is filed, there needs to be sufficient evidence of these efforts to release money from the bond.”

In a recent bulletin, Medicare stated: “A surety is liable for any overpayments incurred during the term of the surety bond. This includes overpayment determinations made on or after the surety bond effective date. These overpayment determinations can relate to payments made on or after March 3, 2009.”

“I think there’s been some miscommunication between Medicare and the surety bond companies,” said Wayne van Halem, president of the van Halem Group. “Medicare always intended to use the bonds to collect overpayments.”

So what’s a provider to do? When he receives an overpayment, stakeholders say he must address it within 100 days in one of the following ways: cut a check, arrange a payment plan or, when appropriate, appeal the overpayment.

“The provider has to assume responsibility,” said Sylvia Toscano, owner of Professional Medical Administrators.

Stakeholders are in talks with Medicare to clear up any confusion and, hopefully, make the process of recouping overpayments more reasonable, but they don’t expect this issue to go away any time soon. In one jurisdiction alone, there are reportedly 30,000 unsatisfied overpayments and for 400 of them Medicare plans to file claims against surety bonds, van Halem says.

“They’ve only done one big push, so this was just an alarm,” he said.