Surety bonds make future unsure for some

Smaller not-for-profit providers will feel pinch

The Balanced Budget Act of 1997 requires surety bonds of $50,000 or 15% of a provider’s annual reimbursement figure. Despite the industry’s recalcitrance, the provision, which went into effect Jan. 1, stands. It’s the law, and home care will just have to live with it.

But will everyone be able to survive? Some agencies, especially the smaller ones, likely will not be able to afford such insurance and may be forced out of business.

Lorraine Waters BSN, C, MA, director of Southern Home Care, a full-service hospital-based agency located in Jeffersonville, IN, has been gathering information for the hospital to purchase their bond. Waters says that surety bonds can be purchased from insurance companies, similar to bonds purchased by other businesses such as maid services, whose employees are bonded against theft.

The amount of an agency’s bond depends on the amount of Medicare reimbursement shown on its annual cost report. In many cases, this figure will exceed the $50,000 minimum set forth in the Balanced Budget Act, but a provider only pays a certain percent each year of the total amount of the bond.

For instance, if an agency’s bond, based on the annual reimbursement figure was $75,000 (15% x $500,000), the agency would pay a percentage of that. "You might pay 5% or 10% or 15% per year of the total amount," Waters explains. "Ours is about 7% or 8%."

Waters says her agency will have no problem purchasing a bond, but she worries about others. "The VNAs and the not-for-profits don’t have any collateral," she points out, "no property. They don’t own anything. It’s going to be hard for them to make it."

As far as Southern home care is concerned, Waters says, "The hospital hasn’t gotten a bit upset about it. But it’s annoying, and I find it ironic that we are mandated to have a bond, but it’s not allowed on the cost report." n