OIG surety bond report: program mismanaged by CMS

WASHINGTON, D.C., April 5, 2013—On March 28, the Department of Health and Human Services Office of Inspector General (OIG) released a report entitled “Surety Bonds Remain an Underutilized Tool to Protect Medicare From Supplier Overpayments.” The report analyzed CMS’ handling of the surety bond program for DME providers and concluded that the Agency had mismanaged the program.

The program’s purpose is to guarantee that DME providers meet their obligations in the Medicare program. Starting in 2009, CMS required providers to obtain a $50,000 surety bond for each location. However, the report found that “Two years after the surety bond requirement was implemented, CMS did not have accurate surety bond information for all suppliers. Information for thousands of bonded suppliers was missing, and surety bond amounts were not consistently maintained by supplier location.”

The OIG also found that more than 27,000 reports were missing. This error was only discovered because of an OIG investigation. “In October 2011, CMS provided OIG with surety bond information for 54,695 suppliers, which was extracted from PECOS, the current provider data system. However, a comparison of these suppliers to the CMS-provided list of suppliers with overpayments resulted in very few matches. In November 2011, at our request, CMS reviewed the data and discovered that information for a large number of suppliers was missing from PECOS. CMS determined that errors had occurred during the October 2010 transition of supplier data from the previous data system—PIMS—to the current data system, PECOS. As a result, data for 27,763 suppliers had not been transferred from PIMS to PECOS and were thus missing from the initial data received. After discovering this error—two years after suppliers were required to have bonds—CMS provided OIG with an updated surety bond data set in December 2011 containing 82,458 suppliers.”

As a result of the investigation, OIG made four recommendations to address problems with the program: Improve oversight of supplier data to ensure accurate and consistent information; immediately begin utilizing the surety bond requirement to recover outstanding overpayments from suppliers’ surety bonds; consider using the legislative authority given by the Patient Protection and Affordable Care Act of 2010 to require increased surety bond amounts for suppliers that receive high overall Medicare payments, and; evise collection guidelines to state that collection of debts through surety bonds is based on dates of service. CMS concurred with all of the recommendations. AAHomecare is evaluating them.

The Association has a long record of supporting effective methods to eliminate fraud in the DME sector. Its 13-point plan targeting Medicare waste, fraud, and abuse has been partially adopted by CMS, resulting in the OIG testifying that fraud has largely moved out of the sector.

AAHomecare is concerned by CMS’ apparent mismanagement of the surety bond program. It understands the need for an effective program and will continue working with Congress and the Administration on appropriate reforms. Learn more at www.aahomecare.org.