OIG prods CMS to implement unused rule for HHAs
WASHINGTON - It has been nearly 15 years since the Centers for Medicare & Medicaid Services (CMS) iced a controversial rule requiring home health agencies (HHAs) to obtain surety bonds, but a new report by the Office of Inspector General has raised the issue again.
In order to protect Medicare from fraud and abuse in the home health sector, CMS issued a rule in 1998 requiring that HHAs obtain a surety bond of $50,000, or 15 percent of the annual amount paid to the HHA by Medicare, whichever is greater.
Many objected to the rule, complaining about the amount required and that all HHAs - even established ones - are required to obtain a surety bond. According to OIG's report, a joint resolution expressing displeasure with the rule was introduced in the Senate and the House, but never was voted on.
A 1999 Government Accountability Office (GAO) report supported the use of surety bonds for HHAs, but the GAO also recommended capping the surety bond requirement at $50,000 and exempting those HHAs that had demonstrated fiscal responsibility.
Due to the various objections at the time, CMS indefinitely postponed implementation dates for the rule. It remains unimplemented today.
In September, the OIG released a report recommending that CMS implement the iced rule. OIG's report argues that since home health expenditures and the number of HHAs has increased, implementing the surety bond requirement is an important tool for keeping fraudulent providers out of the system and provides a process for Medicare to recoup some overpayments.
But not everyone agrees that surety bonds are the best way to manage fraud and abuse in the home health sector.
"It isn't going to be an effective way of keeping agencies that are fraudulent out of the mix," said Howard Petersen, a 25-year-plus veteran of the home health industry and the chief financial officer at Professional Caretakers, a Texas-based HHA.
It doesn't cost that much money to purchase a surety bond, Petersen said. "If you're really in it for the fraud ... (the low cost of purchasing a surety bond) isn't going to keep somebody from stealing millions of dollars," he said.
William Dombi agrees. Since the rule was promulgated, he noted, CMS has instituted many system checks and safeguards that prevent overpayments and fraud. "We still have bad stuff today, but the bad stuff that we're seeing today (is) really criminal conduct that a surety bond of $50,000 or $100,000 is not going to do anything about," said Dombi, who is vice president for law for the National Association for Home Care and Hospice, a trade organization representing the home care industry.
If CMS is going to finally implement the surety bond rule, said Dombi, the agency needs to revisit it first. "The value of the tool has to be reexamined in light of the developments in program integrity since 1997-98, in light of what we've learned could be alternative program integrity tools that are equally or better in effectiveness."
For instance, while NAHC agrees with the OIG that using surety bonds may be an effective tool for new HHAs, it doesn't believe it is a useful tool for experienced HHAs.
But without experienced HHAs in the pool of surety bond applications, surety's applicant pool will consist only of untested entities, which increases the risk of exposure for surety, thereby possibly limiting the availability of surety bonds to HHAs, said Rob Duke, counsel for and director of underwriting at the Surety and Fidelity Association of America.
Surety bonds are effective tools against fraud and abuse because HHAs go through a pre-qualification process that's meant to assist the regulatory function of "keeping bad actors out of the system," he said.
"A primary benefit of a bond is pre-qualification, and to be able to provide this benefit effectively, the bond requirements should apply across the board to all home health agencies," Duke said.
CMS, in its response to the OIG's recommendations, said it is reevaluating its options regarding the surety bond rule. Dombi said that NAHC, surety and others have begun a conversation with CMS about the rule and its future, but no timeframe has been set for when the industry can expect a decision from CMS.