WASHINGTON--HHS announced a proposed rule on Friday to help limit Medicare's risk by requiring all DMEPOS providers to supply CMS with a surety bond.

In a press release about the rule, HHS said it would ensure that Medicare can recover erroneous payments up to $65,000 that result from fraudulent or abusive supplier billing practices.

"A surety bond will not only limit Medicare's risk to fraudulent billing, but will also help to ensure that only legitimate DMEPOS suppliers are enrolled in the program," acting CMS Deputy Administrator Herb Kuhn said in the statement.

The proposed rule represents another step in an effort to combat Medicare fraud with particular focus on DMEPOS suppliers, HHS said. In May, HHS and the Department of Justice announced the establishment of a multi-agency team of federal, state and local investigators designed specifically to combat Medicare fraud through the use of real-time analysis of Medicare billing. (See HomeCare Monday, May 14.)

The proposed surety bond requirement follows announcements of two demonstration projects, one requiring that DMEPOS suppliers in South Florida and Southern California reapply to Medicare in order to maintain their billing privileges. The other demonstration requires home health agencies in the Houston area and Southern California to reapply.

The proposed rule implements section 4312 of the Balanced Budget Act of 1997, according to the release. The rule would require all DMEPOS suppliers, except those that are government-operated, to obtain and retain a $65,000 surety bond. HHS said that amount is an inflation-adjusted figure from the $50,000 surety bond amount proposed in the 1997 Act.

Earlier on Friday, CMS also issued a notice that it was extending the bidding window for DMEPOS competitive bidding for an additional 60 days. (See "CMS Extends Bid Window after Legislators Bring Full-Court Press" in this issue.) The extension was granted to allow suppliers additional time to consider their bid submissions and have the opportunity to update their bids based on this new proposal, HHS said.

The proposed rule also asks for comments on:
--reasons to increase the surety bond amount for higher-risk suppliers, and the appropriate period of time that higher amount should be required;
--appropriate criteria to identify whether a physician or non-physician practitioner should be given an exception to the surety bond requirement; and
--establishing an exception to the surety bond requirement for licensed pharmacists and large, publicly traded chain suppliers.

To view the proposed rule, click here.