Surety Bond Issues Clearing Up

ATLANTA — Many HME providers successfully secured the $50K
per location surety bond by the
Oct. 2, 2009, deadline. However, some received ominous letters
indicating they were “not compliant.” After one to two weeks, that
initial notification letter was usually followed up with an actual
revocation notice, according to industry consultant Andrea
Stark.

So far, said Stark, founder of MiraVista LLC, the most common
problems have arisen due to bonds that have no NPI number and
address. “The bond has to be specific for $50,000 per NPI and
location,” she said. “You must specifically notate the NPI and
address for which that bond is effective. If you have multiple NPIs
and addresses affected by one bond, then of course the increment of
the bond is going to increase by $50,000 per location.”

According to Warren Freeman, director of sales and marketing for
VGM Insurance, Waterloo, Iowa, surety bond concerns have actually
calmed down quite a bit in recent weeks. “Businesses are getting
rejections from the [National Supplier Clearinghouse] on their
bonds, but most of it has actually been just a miscommunication,”
said Freeman. “Either they’ve had the wrong business name, or they
have put their ‘doing business as’ name.”

Fortunately, when the misunderstanding is corrected, most
providers are being covered retroactive to the date of the bond
with no problems. “Every day we get calls where people are frantic
saying they got a revocation letter from NSC and they are wondering
what they need to do,” added Freeman. “The NSC is sending out these
notices saying that a company’s billing privileges are going to be
revoked, and they are giving those companies 30 days to fix it.
They are sending [the notice] out as a warning, and [the company]
just needs to get it fixed. Once they do, there are no more
issues.”

Many bonds came through with just the name and address of the
company, Stark reported, noting that a number of smaller companies
with a single location did not consider that it might be necessary
to incorporate specifically their address and NPI number into the
bond — but that is a requirement.

“Yet another issue we are seeing is that the bond has a place
for the principal to sign to execute the bond,” said Stark. “It is
typically signed by the bond’s attorney or an official within the
bond company. The provider actually has to sign, and usually that
is on the second page; the bonds typically are two pages long. The
principal who signs must be the authorized official as designated
in the CMS 855S application. It is also prudent to print the name
of the individual who signed, because not all signatures are
legible.”

Making it clear that the authorized official has signed could be
crucial if corrections ultimately have to be made. The best-case
scenario is that the bond company will rewrite the bond and still
maintain the same effective date. In this case, there will no gap
in coverage, Stark said.

She added that the revocation notice gives suppliers
instructions to send an email to [email protected],
and that address makes sense for providers who have a fully
compliant bond if the only problem is that the NSC may have
overlooked receipt. For those who can prove tracking with no
deficiencies, Stark confirmed that everything should be
fine. 

However, she said, “When the bond has to be corrected, then that
email to the NSC revocation address is not going to allow you to
update the bond.” In that case, Stark said, providers have to wait
for the revocation letter, submit to the NSC as a corrective action
plan (CAP) or a reconsideration, and attach the corrected bond to
the letter.

“November [was] really when those letters started to go out,”
said Stark. “All of the bond companies are able to make these
corrections, and from what I’ve seen they still maintain the
original effective date … that would keep the company in
compliance. Whatever changes need to be made can go through the
CAP, and when the NSC processes the CAP, they will reinstate the
supplier retroactive to the compliance date of the bond. So it
should be without a gap, but the problem is there will be a
revocation, and claims will be denied if not medically necessary
until the CAP is completed.”

Another consequence of a bond issue is that any HME provider
trying to submit a bid for competitive bidding in the Round
1 rebid could get caught up in the mess. “If they are subjected to
a surety bond compliance issue and their number is revoked or
suspended, they will be unable to [access the online dBids bidding
system],” confirmed Stark. “Basically, they get an error message
saying that their provider number is not found in the database.
Those providers are under a specific strain and deadline with
significant potential consequences.”

The deadline for submitting Round 1 bids is Dec. 21.

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