Surety Bond Requirements for Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS)
By Rachel Jones
Prosthetic Leg, 1575
The final rule implementing surety bond requirements for DMEPOS became effective March 3, 2009. The regulation implemented the surety bond requirements for DMEPOS set forth in section 4312(a) and (c) of the Balanced Budget Act of 1997 (BBA). The Centers for Medicare & Medicaid Services (CMS) proposed a rule on January 20, 1998 (63 FR 2926) reflecting the BBA’s surety bond requirements and solicited comments. Comments were solicited for advisability with respect to Section 4312(c) of the BBA, which further allowed CMS to require a surety bond from some or all providers or suppliers who furnish items or services under Medicare Part A or Part B and not solely Durable and Medical Equipment (DME) suppliers. A substantial amount of comments were received and in the final published rule on October 11, 2000 (65 FR 60366), CMS decided to delay the final rule with respect to surety bond requirements for suppliers of DMEPOS in order to further study the issue. However, in 2003 Congress enacted section 902 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173) (MMA) which prohibits the Secretary of Department of Health and Human Services from finalizing a proposed rule related to Title 18 that was published more than 3 years earlier except under exceptional circumstances. In response to this CMS proposed a rule on August 1, 2007 (72 FR 42001) to implement the statutory surety bond requirements set forth in the BBA. CMS received approximately 200 comments that were considered before they published the final rule on January 2, 2009. (FR 30802)
Surety bonds are a financial guarantee whereby a first party (obligee) contracts with a second party (principal) to perform duties in a contract that will benefit a third party (surety). The first party guarantees that the second party will fulfill its obligation(s) under the contract and in the event that the obligations are not met, the first party will recover its losses via the bond. CMS has imposed the rule in order to deter fraud and abuse by Medicare suppliers of DMEPOS. CMS believes a surety bond requirement will (1) limit the Medicare program risk to fraudulent DMEPOS suppliers; (2) enhance the Medicare enrollment process to help ensure that only legitimate DMEPOS suppliers are enrolled or are allowed to remain enrolled in the Medicare program; (3) ensure that the Medicare program recoups erroneous payments that result from fraudulent or abusive billing practices by allowing CMS or its designated contractor to seek payments from a surety up to the penal sum; and (4) help ensure that Medicare beneficiaries receive products and services that are considered reasonable and necessary from legitimate DMEPOS suppliers. CMS has also instituted other measures– including requiring accreditation for DMEPOS suppliers to deter fraud.
Who is affected by the surety bond requirements?
The regulation affects many healthcare providers; generally any DMEPOS supplier that is registered with the National Supplier Clearinghouse (NSC) may be subjected to the surety bond requirement. Every DMEPOS supplier to Medicare patients must register with the NSC. There are several exempt DMEPOS suppliers under the regulation:
I. Government-owned suppliers,
II. State-licensed orthotic and prosthetic personnel in private practice making custom made orthotics and prosthetics if the business is solely-owned and operated by said personnel and is billing only for orthotic and prosthetics, and supplies,
III. Physicians and non-physician practitioners if the DMEPOS items are furnished only to his or her patients as part of his or her professional service, and
IV. Physical and occupational therapists if: (1) the business is solely-owned and operated by the therapist, and (2) if the DMEPOS items are furnished only to his or her patients as part of his or her professional service.
The economic impact on non-exempt healthcare providers is significant since the regulation requires a minimum of $50,000 surety bond. This bond amount is required for each National Provider Identifier (NPI). Since DMPEOS suppliers must obtain an NPI by practice location, this amount can become quite significant for a supplier with multiple locations. The estimated cost to DMPEOS suppliers is approximately $1200 per $50,000 surety bond, depending on the company’s financial stability. The regulation also permits an additional $50,000 surety bond for high risk DMPEOS. For example, if a DMPEOS supplier has an adverse legal action within the last ten years preceding enrollment, revalidation, or re-enrollment then an additional $50,000 surety bond is required per adverse legal action. An adverse legal action includes: Medicare imposed revocation of any Medicare billing number, suspension of a license to provide health care by any State licensing authority, revocation or suspension of accreditation, a conviction of a Federal or State felony offense or an exclusion or debarment from participation in a Federal or State health care program.
CMS believes that the surety bond will deter fraudulent activity because a fraudulent DMEPOS supplier will not likely post a surety bond. However, it is more likely the basis for this new requirement is to more easily allow CMS to recoup lost funds due to fraudulent activities. In addition, the bond requirement allows CMS to track and reprimand those DMEPOS suppliers that have continuously violated the law and stayed in the Medicare
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Many surety companies will apply discounts for each additional year your bond will be extended too. Discounted premiums vary for each company. Normally a 15% reduction of premium is applied for the second year than 20% for the third year your bond is in force for.
That was a really good post. It helped me to make sense of some of the issues with the subject.
The problem with this rule requiring a surety bond is that it does not actually stop anyone. Medicare and CMS have used a fishnet approach to regulation once again! The surety bond rule does not only look over the enforcement of the Stark Law, it actually gives the Stark violators room to increase their trade. If you look at :
III. Physicians and non-physician practitioners if the DMEPOS items are furnished only to his or her patients as part of his or her professional service, and
IV. Physical and occupational therapists if: (1) the business is solely-owned and operated by the therapist, and (2) if the DMEPOS items are furnished only to his or her patients as part of his or her professional service.
This allows physicians and therapist to capture and self refer their patients for DMEPOS services, which they own. And they can do this unchecked and unregulated! DMEPOS suppliers cannot write their own scripts for the items that the patient receives, so the DMEPOS supplier is already regulated by the physician and or therapist! Who is regulating the physician or therapist? Studies from the early 90’s show that the physician that prescribes his own DMEPOS items prescribed 83% more than the physician that did not have a financial interest! This brought about the STARK LAW, which is now NOT being regulated! Medicare is not regulating the independent offender or fraudulent offender through this Surety Rule, they even allowed for a past offender to get a Surety bond, the only stipulation was that they secure a 100,000 instead of the 50,000 others had to secure! Big deal for a supplier that has stolen millions! Again, just another great smoke screen! Sounds good up front!
I had been billing with Medicare since 1997, and than I’m not trustworthy enough that I have to spend money for the privilege of waiting forever to get paid. I won’t bother this year. I hate to do that to my recepients but it’s not worth it to me
Check here for more information on DMEPOS bonds.