First Surety Bond Deadline Today; Carriers Report Brisk Business

News

BALTIMORE — As of today, HME companies applying for a new
National Provider Identifier must have a $50,000 surety bond in
order to be approved as a Medicare provider.

In a final
rule published Jan. 2, CMS mandated that existing DMEPOS
providers obtain a surety bond by Oct. 2, 2009. New providers,
those adding locations and those changing ownership were required
to obtain the bond by May 4. (In a recent clarification, CMS said
providers with 25 locations or more need not meet the May 4
deadline, but must submit one surety bond per practice location by
Oct. 2 with pending applications for new locations.)

In establishing the bond requirement, CMS said the agency hoped
to stem fraud and abuse and curtail Medicare costs. Its final rule
also said CMS expects more than 25,000 HME providers to abandon the
Medicare program because of the combined costs of the surety bond
and accreditation, which is required by Sept. 30, 2009. Still, the
agency said, it did not anticipate any access issues for
beneficiaries.

In spite of the predicted provider fallout, representatives of
organizations offering DMEPOS surety bonds reported brisk business
leading up to the May 4 deadline.

Warren Freeman, director of sales and marketing for VGM Insurance in
Waterloo, Iowa, reported the company has issued bonds to about 28
percent of those that CMS expected would seek an NPI by May 4.

“We feel good about those numbers,” he said. “The bulk of [the
companies seeking surety bonds by May 4] had existing locations and
they were adding a location. They needed a new number and were
going through the process. Behind them, there were new providers
and then third were the ones changing ownership.”

Freeman was encouraged by the number of new providers breaking
into an industry that is grappling with competitive bidding,
mandatory accreditation, a 36-month oxygen rental cap and a 9.5
percent reimbursement cut.

Many of the new providers, Freeman said, “realize that in a
particular city there is a niche they can fill, and that’s where
they are going. It’s neat to see a pharmacy that has had a location
for 22 years and they are just now opening another location —
at this time.”

One glitch: The National Supplier
Clearinghouse, which issues the NPI, did not notify potential
candidates they would need a surety bond, Freeman said. So those
who had downloaded an application some months ago did not realize
that the application had been changed and a surety bond was now
required.

“I think we are going to see some people have their applications
rejected because they didn’t submit a surety bond,” Freeman
said.

The American Association for Homecare,
which is issuing bonds through
AON Affinity Insurance Services, also reported brisk surety
bond traffic.

“I think we’re getting what we thought by this point,” said Sue
Mairena, AAHomecare COO. “We’re seeing providers opening new
locations. It could be a large provider who has had a location in
the works and it has fallen on this deadline.”

Mairena said she expected a much larger number of providers
seeking surety bonds in time for the Oct. 2 deadline. “Some of the
larger providers are taking a wait-and-see approach hoping that
they can get discounts for having so many locations,” she said.

And some are waiting for more clarification. Although CMS has
issued FAQs about the surety bonds, there are still questions.
“This is still a pretty fluid process,” Mairena said. “It’s not
black and white. I still think it’s the early stages of this.”

According to Tilly Gambill, AAHomecare manager of marketing and
communications, the association is awaiting responses from CMS to
the following questions:

  • If you are processing a re-enrollment for existing supplier
    numbers, do you have to have the surety bond in place for the
    re-enrollment by May 4 or Oct. 2?

  • The provider may have multiple NPIs based on other payers’
    requirements. For example, some state Medicaid programs and
    third-party payers require multiple NPI numbers for different
    product lines. Florida currently has a state surety bond
    requirement of $50,000 for both home health agencies and HME. This
    is overly burdensome on providers who must comply with the federal
    requirement as well.

  • If a multi-location entity (with one NPI per location, each of
    which requires a surety bond) has a final adverse action against
    it, which would require an elevated bond amount, would the entity
    be required to obtain a higher bond amount for each location or
    only for the location against which the final adverse action was
    taken? Similarly, if an entity has one location (with two NPI
    numbers, each of which requires a surety bond) and a final adverse
    action against it, would the entity be required to obtain an
    elevated bond amount for each NPI number?

Even though the answers are outstanding on these questions,
Mairena encouraged providers to start the surety bond process as
early as possible.

“The application process does not take long,” she said, noting
that it can require as little as 15 days. But depending on the
financial information the bond issuer might require, it could take
longer. “You don’t want to wait until two weeks before the Oct. 2
deadline,” she cautioned.

Freeman agreed. “From here on out, we now have a backlog of
people who need [surety bonds] by Oct. 2,” he said, so starting the
process soon would be a wise move.

View a list of approved
surety bond carriers from the Department of Treasury Web
site.

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