Surety bond requirement makes comeback

BALTIMORE - CMS dealt the industry one last blow for 2008, when it issued a final rule Dec. 29 that requires HME providers to obtain $50,000 surety bonds.

Currently enrolled providers must have a surety bond for each National Provider Identifier (NPI) by Oct. 2, 2009. New providers seeking to enroll in Medicare or providers changing ownership must have a surety bond by May 4, 2009. The cost for securing a bond: about $1,500 per year.

CMS has long touted surety bonds as a way to reduce fraud, but industry stakeholders say they don't get at the root of the problem.

"There are people who are bilking the program that shouldn't even be getting billing numbers in the first place," Cara Bachenheimer, senior vice president of government relations for Invacare. "This policy could end up penalizing the good companies and have no effect on the bad apples."

Congress mandated the surety bond requirement more than 10 years ago in The Balanced Budget Act of 1997. CMS issued a proposed rule a year later, but the agency never finalized it. CMS initiated a new rulemaking process in August 2007.

The surety bond requirement unfairly penalizes all providers, large and small, said Walt Gorski, vice president of government affairs for AAHomecare.

"It's a one-size-fits-all approach," he said.

The stakes are higher, however, for one group of providers, those with at least one "adverse legal action," such as a revocation of billing privileges or a license suspension. The rule states they must obtain an additional $50,000 surety bond for each action.

With scarce resources, CMS would be better off to take a more proactive approach to fraud prevention, including mandatory site inspections, real time claim audits and license checks, Gorski said.

"Good regulations will eliminate fraud, bad regulations will kill business," he said. "The surety bond shouldn't be a payment tool."

When you add the cost of securing surety bonds to the cost of becoming accredited, complying with new documentation requirements and absorbing the 9.5% nationwide reimbursement cut, it has been an expensive year for providers, industry stakeholders said. Providers should point this out when they're lobbying legislators to repeal national competitive bidding.

"I am encouraging providers to work on clearly articulating the cost of complying with all these requirements and do that in a way to help better frame our position to eliminate NCB," said Seth Johnson, vice president of government affairs for Pride Mobility.

Certain providers are exempt from the requirement, including government-operated providers, orthotics and prosthetics providers, physicians and non-physician practitioners, and physical and occupational therapists.

Pharmacies, home health and hospice agencies, and rural providers must comply with the requirement.