CMS SURETY BOND REQUIREMENTS
On January 2, 2009 the Centers for Medicare and Medicaid Services (CMS, a part of the Department of Human Services), published its final rule that implemented Surety Bond Requirements for suppliers of Durable Medical Equipment, Prosthetics and Supplies. [CMS-6006-F] This ruling requires that all qualifying suppliers must have a minimum surety bond in the amount of $50,000. Existing suppliers must have this bond in place no later than October 2, 2009; suppliers applying for new NPI numbers must have this bond if the application is not approved prior to May 4, 2009. This information was confirmed again in a CMS conference call held on March 17, 2009, with over 700 participants.
A Pharmacists Mutual Insurance Company subsidiary, Pro Advantage Services, Inc., d/b/a Pharmacists Insurance Agency (in California), has formed relationships with three companies who are committed to offering the required Medicare Surety Bond. All three companies are approved (“T” listed) by CMS to offer these bonds. We have negotiated a price that is far below the $1500 that was stated by CMS in the January 2, 2009 regulation. Premiums will be determined by the credit history of the person or business, the amount of the bond needed and whether any adverse actions have occurred with CMS in the past 10 years.
If you need a Medicare Surety Bond, you can contact us in any of the following ways:
To access Medicare Surety Bond Frequently Asked Questions (FAQs) provided by CMS, click here.
Brief History of the Medicare Surety Bond
In January 1998, a proposal was made that would require DME suppliers to provide CMS a surety bond for a minimum value of $50,000. This bond was to be required for each NPI number issued for billing. In October of 2000, CMS announced that the surety bond requirement would be delayed until a later date.
In August of 2007, the proposed rule titled “Medicare Program; Surety Bond Requirement for Supplies of Durable Medical Equipment, Prosthetics and Supplies (DMEPOS)” was published. This rule stated that suppliers of DMEPOS were to supply a surety bond of no less than $65,000 or more based upon a CPI adjustment.
On January 2, 2009 the ruling CMS-606-F was published with the minimum bond set back to the initial $50,000 level.
Purpose of the Bond
As justification for the bond, CMS has provided the following explanation:
· To limit CMS risk of fraudulent DME suppliers
· To insure that only legitimate DME suppliers are allowed to remain in the Medicare program
· To allow Medicare to recover payments that are discovered to be fraudulent as well as to seek payment for the penalties of such actions
· To assure that those receiving Medicare benefits are doing so from reputable DME suppliers.
CMS expects over 25% of the current NPI numbers will discontinue supplying services to Medicare beneficiaries as a result of the implementation of this bonding requirement.
Bonding Provisions
Surety bonds are different than insurance in that they are simply a promise to pay. In this case, if a bond payment is exercised by CMS, the bond holder is required to repay the bonding company for the amount of the assessment against the bond.
Suppliers of DMEPOS are required to submit a surety bond of $50,000 or more by:
· October 2, 2009 – For existing suppliers
· May 4, 2009 – Suppliers applying for new NPI numbers not received prior to the May 4, 2009 date will be required to have the bond in order to have applications considered for approval after that date.
Failure to carry the surety bond will result in Medicare privileges being revoked while noncompliant. Services provided during any gap in bond coverage will cause the DMEPOS supplier to be held responsible for the charges during that time period. (Beneficiaries may not be charged for services during that period.)
DMEPOS who have had an adverse action imposed against them will be required to provide bonds at a higher value. Each adverse action occurrence will require an additional $50,000 bond. Therefore, a DMEPOS with one occurrence against it will be required to post a $100,000 bond. Existing suppliers who have an adverse action will be notified in writing by CMS whether they will be required to post a bond in excess of $50,000. Adverse actions include:
A Medicare-imposed revocation of Medicare billing privileges;
Suspension or revocation of a license to provide health care by any State licensing authority;
Revocation or suspension by an accreditation organization;
A conviction of a Federal or State felony offense within the last 10 years preceding enrollment or re-enrollment; or
An exclusion or debarment from participation in a Federal or State health care program.
Additional Provisions:
• Surety Bond companies must be “T” listed which means that the bonding company is approved by the US Department of the Treasury for bonding Federal obligations.
• The surety bond is liable to the face amount of the bond for unpaid claims, civil penalties and/or assessments taking place during the bond.
• CMS may draw claims from the bond prior to an appeals process being completed provided there is sufficient evidence of wrongdoing.
• Businesses that have multiple NPI numbers may purchase one bond for the amount to cover all numbers. (Example – if your business has 3 NPI numbers, you can purchase 1 bond for $150,000 to cover all three numbers.)
• The Surety may cancel the bond at any time with 30-days written notice to the supplier and National Supplier Clearinghouse (NSC). Billing privileges would be suspended from the supplier 15 days after the date of the notice. This time is to allow the supplier to take corrective action.
Surety Bond Exemptions
The following are exempt from the surety bond requirement:
· Physicians and non-physician practitioners (NPPs)
· State-licensed O&P personnel providing only custom made orthotics and prosthetics and suppliers related to custom-made O&P devices
· This exception does not apply to DME’s who employ State-licensed O&P personnel
· Physical therapists and occupational therapists who are providing orthotics, prosthetics and supplies only to their patients
· DMEPOS suppliers operated by Federal, State, Local or tribal government agency if the DME supplier has provided CMS with a comparable surety bond required under State law. (This applies only if the supplier does not have any unpaid claims, CMPs, or assessments.)
Financial Impact
CMS is expecting the impact to suppliers to be $106.2 million the first year and $102.3 million in future years for the surety bond requirement. These numbers are based upon the following assumptions:
· Roughly 25,000 NPI numbers will discontinue serving Medicare beneficiaries
· Slightly more than 15,000 suppliers will qualify for one of the exemptions above
· CMS estimates the average cost of the $50,000 surety bond will be $1500 per year (Pharmacists Mutual has negotiated a much lower price for customers with good credit and no adverse actions.)
· Less than .5% of suppliers had an adverse action in the last ten years
Implementation of this program will cost CMS just over $4 million dollars and $180,000 per year thereafter to maintain.
Pharmacists Mutual Companies will be your resource for the Medicare Surety Bonds
A Pharmacists Mutual Insurance Company subsidiary Pro Advantage Services, Inc., d/b/a Pharmacists Insurance Agency (in California) is working with three companies who are “T” listed and have agreed to supply the bond. The premium we have negotiated will be $500 or less per $50,000 bond for those with excellent credit and no adverse actions as identified by CMS. Pharmacists Mutual Companies customers and those who are members of state or national associations that endorse Pharmacists Mutual can qualify for an additional 10% discount on their bond premiums. The companies agreeing to provide the bonds for the premiums stated above include:
• American Contractors Indemnity Company (HCC Surety Group)
• Merchants Bonding Company
• Old Republic Surety Group
Individuals or businesses with adverse actions will pay a higher premium per $50,000 bond applied for. Additional underwriting requirements may be required for this group that could include providing financial statements and agreeing to property liens if needed to secure the risk. Premiums for individuals or businesses that fall into this category will pay a rate that is higher than the $500 per bond stated above. This rate will be set by the bonding companies. Pro Advantage Services Inc. will work with you and the companies to secure the most affordable rates for you and your business.
We will be adding additional staff as needed to handle the demand for these bonds. The companies we will be working with have agreed to do the same. Depending on the demand, we may have underwriters from these companies on-site to expedite the issue of these bonds.
Time will be critical for the issue of these bonds especially considering the volume that will be needed. For this reason, we encourage all who will need this bond to place their applications as soon as possible. If, for some reason the bonding requirement is revoked, the companies have agreed to refund the full premium or the pro-rata portion of the bond not used upon return of the original bond.
When your bond is delivered to you, you will receive two copies of the bond, the original for your records and a copy of the bond for you to supply to CMS along with an envelope addressed to NSC to assure you receive proper credit for purchasing your bond and meeting the requirement in a timely manner.
NOTE:
As of this update, no bonds have yet been approved for sale by CMS. As soon as the Surety Bonds are available, we will notify all those who have contacted us and provide applications and information as it becomes available.
Thank you for the confidence you have placed in Pharmacists Mutual Companies. We will do our best to serve your needs.