Why bonds matter beyond competitive bidding
by Michael D. Lapre

Any supplier of durable medical equipment, orthotics or prosthetics (DMEPOS), must acquire a DMEPOS bond; if they eventually want to file a claim with Medicare or Medicaid for reimbursement for that equipment, it will be an absolute necessity. Home medical equipment falls under this category, so it’s a good idea to get bonded when equipment in any of these categories is involved. These types of bonds are required by the Centers for Medicare & Medicaid Services (CMS) to provide legal protection against any kind of fraud or malpractice that might be perpetrated by medical practitioners or bonded physicians.

What the Medicare bond costs.

The annual premium amounts for a Medicare bond are generally based on the owner’s personal credit, so it’s always best to maintain good credit standing in order to receive the best rates on bonds. Providers who have outstanding credit are eligible for low standard market rates, typically between 1% and 3% of the established face value of the bond itself.

For those who have less than stellar credit, that annual premium can soar to between 5% and 12% of the face value of the bond. Providers with bad credit are still able to obtain bonds in many cases, but they can typically expect to pay a much higher annual premium, simply because they are considered a greater risk than companies with excellent credit ratings.

Learn how DMEPOS bonds work.

All DMEPOS suppliers intending to file a claim or bill Medicare for medical equipment are required to be bonded through a surety company. This bond would be posted with the obligee, which is the CMS provider, so as to guarantee compliance with any regulations that might be in effect at the time. By having a When linking to anything offsite DMEPOS Medicare bond in place, providers can guarantee that any claims submitted to Medicare are legitimate, which helps reduce fraudulent behavior.

In exchange for the premium charged annually, a surety company provides a financial guarantee to the medical facility that potential claims will be resolved if they are found to be legitimate. Whenever the surety company is obliged to pay out on a claim, the bonded provider or supplier will then have to reimburse the surety for any and all monies paid out, since that party caused the claim to be filed originally.

Will a DMEPOS bond cover multiple locations?

In some cases, a DMEPOS bond will cover multiple locations, but that’s not always true unless specific arrangements are discussed before the bond is drawn up. Every location that has its own National Provider Identifier (NPI) would normally be obliged to have its own Medicare bond, unless arrangements are made otherwise.

If you have a number of locations with different NPIs under your organizational umbrella and you would like to consolidate your paperwork, it may be possible to get all locations listed on a single bond document. The surety company would have to agree to this, and each covered entity would have to be specified to the surety so that they could all be included in the language of the bond and listed as covered entities.

What information must be provided?

If you’re looking to obtain a quote for a Medicare bond, you have to provide some basic information about your company, its owners and the type of bond you are seeking. The surety company will be looking for the legal name of the principal, the address of the DMEPOS supplier, the National Supplier Clearinghouse’s Provider Transaction Access Number (in those cases where supplier has one), the NPI and the principal tax ID number.

All of this information must be supplied to the surety, as well as the bond amount for which you are seeking coverage. Once the surety company has this information in hand, they will begin researching your company to find as much information as possible about your company profile and credit history. That will then determine your annual premium rates, assuming that the surety company decides to provide coverage for your bond.

Getting your DMEPOS bond application started.

It’s fairly easy to start an application for your DMEPOS bond request. The first step is to contact a surety company and find out any requirements so the company can provide you with an accurate quote on your request. After that, you’ll have to fill out an application and supply the surety company with the required documentation and information.

It’s not always necessary to include a financial statement with this documentation, but there are cases where surety companies prefer to have financial statements included. If the surety company you’re working with requires this financial document, representatives will let you know.

When your application is received by the surety company, an agent will do whatever research is necessary before providing you with a quote. In most cases, a quote can be supplied to the applicant within 24 hours, and sometimes it’s even possible to receive a quote on the day of application.

If you find the quote to be suitable, you would then simply have to pay the premium and wait for the surety company to issue your DMEPOS surety bond.

Michael D. Lapre is senior vice president of Surety Operations for NFP, which operates nationally with a specialty in DMEPOS bonds and represents many of the country’s top insurance carriers. He established a surety and specialty commercial lines insurance agency, Lapre Insurance & Surety, in 1984. The surety bond program expanded to a national level in 1996, at which time Lapre became licensed in all 50 states. At NFP, he oversees the bonding department.