Medicare Compliance & Reimbursement

Surety bonds could close your doors if OIG implements this requirement ruthlessly.

The Centers for Medicare & Medicaid Services had finalized in 1998 a surety bond requirement for home health agencies that Congress passed way back in 1997's Balanced Budget Act but had to put it on hold. The HHS Office of Inspector General wants it implemented now.

"The surety bond requirement is an important program integrity tool that provides a sentinel effect of keeping fraudulent providers out of the program and a means for Medicare to guarantee recoupment of some overpayments," says the OIG in its report, Surety Bonds Remain an Unused Tool to Protect Medicare from Home Health Overpayments (OEI-03-12-00070). The growth in both Medicare home health spending and the number of home care providers leaves the industry "highly vulnerable to fraud," the OIG insists.

If CMS had implemented a $50,000 bond back in 1997, it could have recovered at least $39 million of the $590 million in overpayments HHAs owed between then and 2011, the OIG argues. If CMS required higher-amount bonds based on levels of HHA billing, as Congress approved in the Affordable Care Act in 2010, the recoveries could have been even higher.

Recommendation: The OIG wants CMS to waste no time in implementing the long-postponed surety bond requirement. "Requiring the use of surety bonds would discourage fraudulent HHAs' entry into the program and guarantee CMS's ability to recoup some portion of overpayments," the watchdog agency maintains.

The original BBA law called for a bond of $50,000 or 15 percent of annual Medicare payments. "We found that many of the HHAs with outstanding overpayments each owed more than twice the $50,000 surety bond amount," the OIG notes. "CMS should consider increasing surety bond amounts above $50,000 for those HHAs with high overall Medicare payment amounts."

Response: CMS says it is working on a proposed rule regarding surety bonds now. However, it stops short of promising anything concrete. "Given the agency's prior experience with a surety bond requirement, which ... met with significant resistance, CMS is carefully evaluating the best way to implement a HHA surety bond," CMS Acting Administrator Marilyn Tavenner says in the agency's response letter to the OIG report. "CMS is ... mindful of the impact that our initiatives have on legitimate providers and suppliers, particularly smaller entities," she continues.

But "implementing a surety bond requirement for HHAs may help reduce potential program vulnerabilities," Tavenner says. "CMS is currently evaluating its options."

Surety Bonds Likely To Bring Access Problems

This issue is not as cut and dried as the OIG might like to think, protest many in the home care industry. The original surety bond requirements were "unrealistic and excessive," argues the National Association for Home Care & Hospice.

"I vividly remember CMS' attempts to implement the requirements for surety bonds back in 1998," recalls Washington, D.C.-based health care attorney Elizabeth Hogue. "Very few agencies were able to obtain surety bonds. The OIG's report does not acknowledge or account for this fact."

Agencies had a hard time finding a bond company, agrees financial consultant Tom Boyd with Rohnert Park, Calif.-based Boyd & Nicholas. And when they did, "almost always the insurance company required a personal guarantee. This greatly scared many of the providers as they had visions of losing their personal assets," namely their home, Boyd tells Eli.

Unless something major changes, "agencies will undoubtedly experience the same problems, if CMS makes another run at implementing these requirements," Hogue expects.

"Meeting the requirements could preclude participation in the program for all but the most highly capitalized providers," NAHC warns.

And surety bonds aren't even a very effective fraud-fighting tool, maintains attorney Robert Markette Jr. with Benesch, Friedlander, Coplan & Aronoff in Indianapolis. For one, hard core criminals can easily fake one.

And even if providers obtain a bona fide bond, "when the fraud is in the millions, the $50,000 bond is, essentially, pointless," Markette says. "Meanwhile, hundreds of law abiding providers have to pay to obtain the bond in order to be a provider."

The bottom line: "This is one more cost on providers whose reimbursement continues to decline with little demonstrable return," Markette judges. "The only thing that a surety bond requirement does is create an additional expense to law abiding providers, which may reduce the number of providers who enroll."

The expense could be prohibitive to small providers, notes Lynn Olson with billing company Astrid Medical Services in Corpus Christi, Texas.

Confirming agencies' surety bonds may also be a problem, Boyd observes. Back in 1998, law- and policymakers expected "that the intermediary's cost report audit review would confirm the existence of the bond," he says. "The MACs are not set up or funded to do reviews today."

Another problem: Adding surety bond vendors into the mix could introduce another layer of compliance problems, Olson adds. "The previous iteration of the surety bond implementation brought twelve companies to my door requesting endorsement and recommendations to my providers, to include a finder's fee," he illustrates.

The OIG's report also contains other flaws, Hogue points out. Profiling the industry as fraud-riddled is "old hat" and may be unfair, she claims. "I would like to know how much money the OIG has recovered from fraudulent providers based on type, i.e., physicians, drug manufacturers, etc.," Hogue says. "I would be very surprised to see home health agencies at the top of this list."

"There are fraudulent providers in all segments of the health care industry," Hogue maintains. "It feels like we are being picked on," she exclaims.

The OIG's recovery estimate also may be inflated, Hogue says. "There is no consideration of whether or not CMS' assessments of overpayments were correct or whether CMS' collection efforts were timely or correct," she points out.

Chains Call For Even Higher Bond

Not everyone is against the surety bond, however. The Partnership for Quality Home Healthcare, a lobbying group that includes the four publicly traded home care chains, supports the requirements, it says in a release. The group, which spent more than $2 million on lobbying in 2011 according to opensecrets.org, already has advocated "a $100,000 surety bond for new providers beginning in 2013 in order to ensure that they can demonstrate to CMS they are serious about taking care of seniors and have the operational capability to do so," PQHH says in the release.

Many longstanding, legit home care providers would like to see a surety bond put in place to deter unscrupulous new providers and outright fraudsters, industry veterans say. A combination of a targeted moratorium and a surety bond would be viewed as "better late than never" by many, says one industry member.

Agreement: PQHH and NAHC concur on one point: any surety bond action should be targeted to problem areas. The trade group urges "the application of surety bond requirements only to agencies with poor records of repayment to Medicare or Medicaid, and as a means to bar inappropriate providers from the program," it says in its member newsletter.

Applying a $100K surety bond only to new entrants ensures "the Partnership's proposal doesn't burden existing providers in good standing with CMS," the lobbying group points out. And PQHH calls for "exceptions to ensure beneficiary access to care, especially in underserved areas."

Note: The OIG report is at oig.hhs.gov/oei/reports/oei-03-12-00070.pdf.