WASHINGTON--The American Association for Homecare submitted comments on Friday calling on CMS to revise its proposed surety bond rule to target those most likely to pose risks to Medicare.

Under the Balanced Budget Act of 1997, Congress mandated the surety bond requirement and CMS attempted to implement it in 1998, then proposing that providers put up a $50,000 bond. But the rule was never finalized, so CMS is trying again and has adjusted the amount for inflation. (See HomeCare Monday, July 30.)

Under the proposed rule, which was published Aug. 1 in the Federal Register, an HME provider would be required to obtain a $65,000 surety bond for each of its National Provider Identification numbers as a condition of enrollment in Medicare. The rule aims to curb fraud and abuse by ensuring that only legitimate providers are enrolled in the program.

The proposal has not been embraced by providers. In a HomeCare Web poll in August, 70 percent of those participating said the $65,000 bond proposal was a bad idea: 45 percent said they were honest providers but couldn't afford the additional costs, and another 25 percent said they thought government contractors should be held accountable for rooting out fraud.

While the American Association for Homecare believes that every effort should be made to eliminate fraud and abuse in the industry, it also believes that the surety bond would be "more punitive than effective," said Walt Gorski, vice president of government relations.

"Our comments reflect the changing nature of the Medicare program since surety bonds were [first] called for by Congress in 1997," he said. "Since that time, Medicare has implemented new quality standards and accreditation requirements and computer systems have become far more advanced to root out fraud and abuse. We believe that CMS must more effectively use the tools that are currently on the books rather than heap another set of requirements on suppliers.

"This is why the main thrust of our comments recommend that CMS apply the surety bond requirement only to new suppliers entering the marketplace," Gorski added.

The association is also concerned that the proposed surety bond will increase providers' costs and paperwork burden without accomplishing the goals of the rule. According to a CMS analysis, the requirement to obtain a bond will cost HME providers approximately $198 million annually. The additional cost may result in a drop in the number of providers willing to serve Medicare beneficiaries, particularly those in rural areas, the analysis suggests.

"We are very concerned that CMS appears to be using the surety bond as a claims payment tool rather than an anti-fraud and abuse mechanism," Gorski added. "If CMS moves forward with this regulation, the surety bond should not be tapped until suppliers have had a chance to appeal earlier denials or determinations. It should be the last step; it shouldn't be the first step."

In its comments, AAHomecare is calling on CMS to revise the proposed rule as follows:

CMS should exempt providers that have a good track record with the Medicare program.

• CMS should not impose an inflation adjustment on the amount of the bond because reimbursement for HME items since the BBA has either been cut or frozen.
• CMS should exempt rural providers and large national chain providers. Exempting rural providers, provided they don't otherwise pose risks, will ensure access to care for rural beneficiaries. National, publicly traded providers have resources to refund any claims payments they receive in error and they are already heavily regulated.
• Pharmacies, physicians and other practitioners who bill the Medicare program for DMEPOS items should not be exempted from the requirement to obtain a surety bond unless they otherwise meet the criteria for another exemption.
• A final rule must include a mechanism to protect providers in the event that the National Supplier Clearinghouse or a surety mistakenly reports that a bond has been cancelled, or the surety goes out of business. At a minimum, providers should have notice that their billing number will be revoked and an opportunity to demonstrate that they have a bond before the revocation.

Read the proposed rule.

Read AAHomecare's complete comments, visit the association Web site at www.aahomecare.org.

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