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:
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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?
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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.
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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.