HCFA’s surety bond announcements draw mixed reviews
Requirements slated for home health agencies and DME providers
When the Health Care Financing Administration (HCFA) released its proposed rules on surety bond requirements for Medicare and Medicaid certified home health agencies and durable medical equipment (DME) providers, industry response was swift yet diverse. All parties agreed, however, that the rules need refining at the very least before they are truly feasible.
In summary, the rules require a home health agency or DME provider to acquire a one-year surety bond the greater of $50,000 or 15% of the annual Medicare amount paid to the agency by the Medicare program. HCFA’s research shows that bonds should cost about $10 for every $1,000 of the surety bond.
While the two proposed rules are substantively the same, the DME proposed rule would also institute the following measures:
• Ban DME supplier telemarketing.
• Require suppliers to have a physical office and listed phone number.
• Codify a requirement that suppliers re-enroll in Medicare every three years.
• Prohibit suppliers from reassigning a supplier number.
• Apply criminal and civil sanctions for misrepresentations on billing number applications.
It’s also important to note that HCFA is putting such an emphasis on this fraud-fighting measure that shortly after announcing the surety bond requirements, it lifted the moratorium on new home health agencies.
Tim Redmon, the director of regulatory affairs for the National Home Infusion Association in Alexandria, VA, says the minimum bond requirement of $50,000 is too high for some home infusion providers who do minimal Medicare billing each year.
"Some of our people are very small as it relates to Medicare business," says Redmon. "If they did $2,000 worth of glucose drips for the year and that’s it, they’re still going to have to get a $50,000 bond because there’s no distinguishing the people who do $50,000 of Medicare business and those who do $500 worth. The real problem is that some providers will have to get a bond even though they’re going to lose their shirts on the bond."
Redmon says that in such a situation, which many home infusion providers face, it’s time to weigh the pros and cons of keeping your Medicare provider number vs. giving it up and the accompanying business.
He notes that that’s an option some providers are considering, although more are leaning toward making the investment to keep the number and begin marketing themselves more to sources of Medicare referrals.
"The competition might go away [because of the surety bond requirement], and then they could really jump into the business full time with both feet," says Redmon. "Some of the people who are positioning themselves are hoping others get out, but I think it depends on your situation, what your population base is, and how many Medicare patients you serve."
Redmon says it’s simple to evaluate your situation. "Go back to last year’s Medicare revenues and find out how much that was," he says. "A $50,000 bond is probably going to cost $500. Was there a $500 profit on the Medicare side last year or not? If there wasn’t, you have to make up your mind if that’s an area you’ll want to increase or to get out."
But there are intangibles that could affect your decision. "You also really have to look at the individual patients," he says. "Is Ms. Jones really important to you and do you need her coming back?"
HCFA has free reign’
The Home Care Association of America (HCAA) in Jacksonville, FL, is one of the organizations vehemently opposed to the rule. It says that some insurance companies, after reading the rule, are no longer willing to issue surety bonds.
"Many of the bond companies out there who had previously stated they would be willing to write bonds are now saying they are not willing to because home health is currently a cost-reimbursed system, so there is no profit," says Scott Lara, director of governmental affairs for the HCAA. "So when insurance companies want to see what assets we have, it’s difficult to show that unless the owner is going to put up his house."
Lara notes that a second area of concern is the carte blanche HCFA has given itself regarding the surety bonds.
The rule states that the surety company must guarantee to pay HCFA the full amount of any unpaid Medicare overpayment, plus interest. Such a payment must be made even if HCFA has alternative legal means to pursue collections.
"It’s scary that HCFA is going to have free reign to hit the surety bond," says Lara.
"There are no appeal rights here," notes Redmon. "By interjecting the bond people first, you’ve lost out on the appeal, and that’s a concern."
HCAA is officially calling for a repeal of the surety bond requirement and feels there is enough pressure from industry to prompt a major change in the rule.
"I believe there is going to be enough pressure that HCFA and Congress are going to have to look at this a second time," says Lara.
Some look at the proposed rules in a favor-able light. In support of the requirement is the Alexandria, VA-based Health Industry Distributors Association (HIDA).
Mark Hobratschk, associate director of government relations for HIDA, doesn’t anticipate widespread difficulties with providers acquiring a bond. "I think the smaller providers and anyone who has any type of credit problems may have a problem, but I think by and large it does more good than harm," he says. "It’s not a panacea by any means, but from what I understand you certainly have to be a legitimate provider in order to get a surety bond."
However, even in support of the rule, Hobratschk notes that the effective date implied by the rule could make it difficult to implement. The rule states that applicable home health agencies must submit to HCFA "by Feb. 27, 1998, a surety bond that is effective beginning Jan. 1, 1998 through the end of the HHA’s current fiscal year."
Because neither the home health nor the DME rule was published until after the Jan. 1, 1998, effective date, HCFA is in effect asking insurance companies to issue surety bonds retroactively.
"I’m not sure that provision is going to stay simply because the HCFA people we’ve talked to realize it cannot be retroactive," says Hobratschk. "They’ll need some type of correction if legally it can’t be retroactive, and the HCFA officials seem to be aware of that."
Redmon confirms this potential problem.
"I talked to some of the surety bond companies, and a few are not going to write them if the regs stay the same as HCFA has drafted," he says.
Redmon notes that there is no date by which the DME surety bond is needed, nor any reference to retroactivity of the bond, although the Balanced Budget Act stipulated these requirements be effective for Jan. 1, 1998.
However, there have been meetings between HCFA officials and the surety bond industry to address and resolve the above issues.
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