Surety bond: Industry persuades senator to hold off

Sunday, February 17, 2008

WASHINGTON - The lead sponsor of a bill that would impose a $500,000 surety bond requirement on HME providers told AAHomecare officials last week that he would "reconsider" the measure.

"It's really out of proportion, because your everyday provider doesn't pose that big a risk to the Medicare program," said healthcare attorney Asela Cuervo. "That's why it's so unrealistic. The government needs to find better ways of deterring fraud and abuse."

The bill, S. 2603, was introduced Feb. 7 by six senators: Sens. Mel Martinez, R-Fla., the lead sponsor; John Coryn, R-Texas; Norm Coleman, R-Minn.; Lamar Alexander, R-Tenn.; David Vitter, R-La.; and Jim DeMint, R-S.C. The "Medicare Fraud Prevention Act of 2008" would also increase civil and criminal fines for fraud and abuse.

The government keeps raising the stakes on a possible surety bond requirement for HME providers. In 1997, Congress passed a law requiring a $50,000 surety bond, but it was never implemented; last year, CMS proposed a $65,000 surety bond.

The industry has argued that even a $50,000 or $65,000 surety bond requirement would put some legitimate HME providers out of business, never mind $500,000. To meet this latest requirement, a provider would have to cough up $10,000 to $20,000 to post a bond and then put up collateral to back it up, according to estimates.

"No one would be able to get a bond who didn't have a net worth in excess of $1 million--and that's money in the bank, not assets," said Jim Walsh, general counsel for The VGM Group and president of VGM Management. "If they're trying to stop competition entirely and turn the industry over to huge corporations, this is the way to do it. It's insane."

In fighting the requirement further, the HME industry may have an unlikely ally in the surety bond industry, which submitted comments last year questioning CMS's proposal, Walsh said.

"The idea of a Medicare bond is so bizarre to them," he said. "Surety bonds are a third-party guarantee against illegal, unethical or immoral conduct. CMS often makes recoupments based on subjective variables that are not normally thought of as illegal conduct: interpretations of adequate medical record keeping or perceived patient need. Those are often mistakes at best."

AAHomecare applauded the industry's ability to, in less than a week's time, get Martinez to agree "to sit down and work with us on more meaningful ways to prevent fraud and abuse," said Walt Gorski, the association's vice president of government affairs.

"If the industry is looking to identify ways that it has influence, surety bonds is a good example," he said. "AAHomecare and others were able to work with lawmakers to make sure they didn't rush to judgment on this."