Surety bonds: Where they are, where you stand

Checking up on the status of HCFA’s requirement

They’re on. They’re off. They’re postponed. When it comes to surety bonds, no one — not even the Health Care Financing Administration (HCFA) — seems able to give a definitive statement on whether they will be reinstated and, if so, in what form. What people can agree on, however, is that home health agencies have been granted, at the very least, a temporary reprieve.

These questions beg to be answered: How long will it last? And when the reprieve ends, then what? Here, some experts in the field of home health offer their suggestions and prognostications.

On July 31, 1998, HCFA agreed, under pressure from Congress, to postpone the effective date of any surety bond requirement until Feb. 15, 1999, or the end of a 60-day notice and comment period (whichever is last). As it stands, HCFA is awaiting the results of a study conducted by the General Accounting Office (GAO), looking into subsequent surety bond regulations.

In the interim, agencies that have not yet secured bonds are free from penalty, and those who have already obtained bonds (some 40% of home health agencies, according to HCFA) are "being notified by a bulletin that if [agencies] want to get their bond returned to them and therefore apply to the surety bond company for a refund, they need to write a letter to their intermediary," says Mary St. Pierre, director of regulatory affairs with the National Association for Home Care (NAHC) in Washington, DC.

Will agencies get their money back?

Whether agencies will be successful in having their funds returned is another matter. Ann Howard, executive director of the American Federation of Home Health Agencies (AFHHA) in Silver Spring, MD, says that agencies may not find the reimbursement process easy.

"Agencies can apply to get their money back but that doesn’t mean the surety companies will give it back," she says. "Some agencies’ bonds were written to last until the beginning of the new fiscal year, and the surety companies will say, We covered you, and now we’ll hold onto it.’ I just don’t know how much luck people will have getting their money back."

Despite the potential for rejection, William Cadigan, JD, an attorney with MacKelvie & Associates in Chicago, recommends that agencies give it a try. "Insurance companies, as is common when people try to make a claim on car insurance, aren’t all that eager to refund premiums and, in this case, home health providers are going to face a similar problem."

His advice is to check "the terms of the bond and see if there is any provision that allows [the agency] to recoup any premiums after the time they’re needed. If a bond says that it was purchased for a certain amount of time, I think it will be difficult for them [to recoup], but it can’t hurt to look." Cadigan recommends agency owners and directors "consult counsel if they are confused, and in any event, consult an attorney on anything that involves liability, especially Medicare liability."

As for agencies concerned about leaving themselves vulnerable after a refund only to have HCFA proceed with the implementation of a new deadline, Cadigan believes that agencies in good standing will fare just fine. "A common sense approach should prevail," he says. "If the providers have no history of violations, then I think they will be in good shape after Congress and HCFA are done. They will want to have [surety bonds] apply to providers that actually pose a risk."

The saga continues

As for what the future holds, it’s anybody’s guess, says St. Pierre. "There’s no movement at all right now, and there will be no regulation until February. Even then we’re not exactly sure where it will go."

At the moment, Department of Commerce staff say Congress is more concerned about moving toward PPS and coming up with a case-mix adjuster rather than focusing on surety bonds.

Howard says she is especially fearful of the future paring of home care and surety bonds. "I am enormously concerned based on the fact that HCFA hasn’t entered into a cooperative mode with the home health industry to get the input on what surety bonds meant the last time around.

"I’m concerned they will use the bankruptcy of potentially more than several home health agencies [resulting from IPS] as an excuse to come back with the same model and say, See, we told you so.’ I think they set us up for this and are going to come back with a very unreasonable situation. We think it’s going to take congressional intervention," she adds.

Editor’s note: For a look at the findings from the House Government Reform & Oversight Committee’s July 22 hearing on surety bonds, go to:


William Cadigan, JD, Attorney, MacKelvie & Associates, 333 W. Wacker Drive, Suite 950, Chicago, IL 60606. Telephone: (312) 332-0533.

Ann Howard, Executive Director, American Federation of Home Health Agencies, 1320 Fenwick Lane, Suite 100, Silver Spring, MD 20910. Telephone: (301) 588-1454.

Mary St. Pierre, Director of Regulatory Affairs, National Association for Home Care, 228 Seventh St. S.E., Washington, DC 20003. Telephone (202) 547-7424.