BALTIMORE--It was a case of déjà vu for many in the industry last week when HHS announced a proposed rule that would require all DMEPOS providers to supply CMS with a $65,000 surety bond (see HomeCare Monday, July 30).

In 1997, the Balanced Budget Act mandated that providers obtain a $50,000 surety bond as a condition of Medicare enrollment. The next year, CMS--then called the Health Care Financing Administration--published a proposed rule that included the requirement, but it was never finalized.

The bond was, and is, intended to curb fraud. So, will it? Stakeholder opinions are mixed.

"It will combat some fraud, [but] it's not the only thing that anyone who wants to eliminate or reduce fraud needs to rely on," said HME consultant Wallace Weeks, president of Weeks Group in Melbourne, Fla. In the proposal's favor, he said, many potential scammers would likely give up from the get-go just because the requirement is in place.

If sham companies are under-reporting income and showing little, if any, profit, Weeks said, that ultimately weakens their financial position and, thus, their ability to buy a bond.

"At a minimum, it will raise their premium and, at the worst, make them uninsurable," Weeks said. He estimated that a surety bond premium would be $3,000 to $6,000 a year, "so I think the majority of suppliers can handle it. Those that can't are going to be companies who have such a bad financial position that an insurance company will not write the bond."

Meanwhile, VGM President Ron Bendell said the bond requirement could force some providers out of the business, "so that could reach some potential for fraud, but I think those that are going to commit fraud are going to be able to get past this hurdle also."

Raul Lopez, director of operations for Bayshore Dura Medical, Miami Lakes, Fla., and president of the Florida Association of Medical Equipment Services, was also uncertain the requirement would be effective against fraud. "I don't know that it would be a deterrent, because anybody who wants to get into the business to commit fraud will spend whatever they need to when they think there's a huge payout at the end," Lopez said.

In Florida, providers who do business with Medicaid are already required to have a surety bond. One question Lopez had was whether those companies would be required to get an additional bond for Medicare. If so, "you're hitting the Medicaid provider twice in the pocket," he noted.

The majority of FAMES members--80 to 85 percent--do not do Medicaid business, he said, so getting a bond would be new for them. The added cost will be a factor for providers vying to participate in competitive bidding, but even for those that aren't, it's an added expense to other constantly mounting costs--gas, vehicle insurance, rent, utilities.

"Our expenses continue to go up, but our reimbursement either stays the same or, in some cases, reduces," Lopez said. "We don't get to increase our fees because of gas price increases, unlike every other industry, so it's going to be a pain for some people."

"I think it is one of those things we are going to have to swallow," said David Petsch, president of Petsch Respiratory Services in Martinez, Ga. However, while the price is "a little high," he noted, "there is nothing unreasonable about it. I would support it to add to our industry's image to fight fraud and abuse."

"We have all heard it before, and were prepared to deal with it then," said Todd Tyson of Norcross, Ga.-based Hi-Tech Healthcare. "It is an additional expense, but not an unrealistic one. The big issue before was finding someone to write the surety bonds, but there are companies that will provide bonds now."

"I think CMS needs to sit back and make a plan," said Kim Brummett, vice president of reimbursement for Advanced Home Care in Greensboro, N.C. "We have competitive bidding, accreditation, re-enrolling two large areas in Miami and L.A. and now this. Seems like they are throwing ideas out one on top of the other [and] not all are needed."

The ultimate consequence, according to Miriam Lieber of Lieber Consulting, Sherman Oaks, Calif., may be the loss of small providers. With the cost of the surety bond on top of costs for accreditation, Lieber said, some providers might "truly have to evaluate the additional financial burden.

"This may become the last straw for many small providers who finally decide to exit the HME market, particularly small pharmacy HME owners," she said.

VGM's Bendell made a similar assessment.

"It's a further cost being borne by smaller suppliers that I'm not so sure they can handle," Bendell said. "With accreditation and everything else that's going on, this is just another added cost to the whole industry--when they're looking to further cut reimbursement."

To view the proposed rule, which includes instructions for submitting comments, click here. Comments on the rule must be submitted no later than 5 p.m. on Oct. 1, 2007.