Half-Million Dollar Surety Bond Requirement Would Put Many Small Durable Medical Equipment Providers Out Of Business

Main Category: Caregivers / Homecare
Also Included In: Medicare / Medicaid / SCHIP
Article Date: 12 Feb 2008 - 2:00 PST

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A Senate bill introduced last week would impose a $500,000 surety bond requirement on providers of durable medical equipment (DME) under Medicare and would put thousands of small homecare companies out of business, says the American Association for Homecare.

A law passed in 1997 requires a $50,000 surety bond for DME providers as a deterrent to fraud and abuse. However, the federal government has never actually implemented the surety bond requirement for the DME sector. The Centers for Medicare and Medicaid Services has proposed that the amount increase to $65,000.

The bill introduced last week, S. 2603, called the "Medicare Fraud Prevention Act of 2008," would increase the $50,000 surety bond requirement by a factor of ten. The bill would also increase civil and criminal fines for Medicare fraud and abuse. The bill is sponsored by Senators Mel Martinez (R-Fla.), John Cornyn (R-Texas), Norm Coleman (R-Minn.), Lamar Alexander (R-Tenn.), David Vitter (R-La.) and Jim DeMint (R-S.C.).

"The impact of a half-million dollar surety bond requirement would be devastating on law-abiding small providers," said Tyler J. Wilson, president of the American Association for Homecare. "This provision would put a lot of home medical equipment providers out of business without fixing the fraud and abuse problem. No one is more concerned about getting criminals out of Medicare than the homecare sector, but this is clearly a case of throwing the baby out with the bathwater. Why would the government increase the surety bond by 1000 percent before it has even implemented the original amount?"

Insurance experts say a $500,000 surety bond would require that DME providers put up collateral to back the half-million-dollar bond, on top of the $10,000 to $20,000 cost of the bond.

"The American Association for Homecare welcomes and supports efforts to eliminate Medicare fraud. The Association continues to work with federal agencies and Congress to prevent fraudulent activity in the DME sector. However, it is essential for the public and Congress to understand that the Medicare program has failed to effectively exercise its already ample authority to combat fraud and abuse," Wilson stated. "And while increased civil and criminal penalties may help thwart fraud and abuse in Medicare, we suspect that most of the people who willingly engage in such activity will not be deterred by higher penalties."

Since the early 1990's, the durable medical equipment industry has pressed Congress and Medicare to impose provider accreditation requirements for durable medical equipment suppliers. Accreditation is one time-tested way of distinguishing legitimate businesses from fraudulent entities. While it took Congress until 2003 to pass a law mandating accreditation, it wasn't until several weeks ago that Medicare actually indicated the date by which DME suppliers must be accredited-and that date is not until September 30, 2009. Moreover, in 2006, the American Association for Homecare recommended that CMS adopt quality standards for DME that were far more stringent than those the agency actually adopted in its final standards issued in November 2006.

The American Association for Homecare (AAHomecare) represents providers of durable medical equipment and related services and supplies as well as equipment manufacturers. AAHomecare members serve the medical needs of millions of Americans who require home oxygen equipment, wheelchairs and other mobility products, hospital beds, medical supplies, inhalation drug therapy, home infusion, and other medically prescribed equipment and services delivered in the patient's home. AAHomecare's members operate more than 3,000 homecare locations in all 50 states.

American Association for Homecare