Surety bond requirement rears its head

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,” said 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 initiated a 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 taking a more proactive approach to fraud prevention, including mandatory site inspections, real time claim audits and license checks, Gorski said.

Still, surety bonds continue to gain traction with legislators. In mid-January, Rep. Cliff Stearns, R-Fla., introduded a bill in the House of Representatives that proposes increasing the surety bond requirement to $500,000.