Home care representatives see latest GAO surety bond study


HHBR Washington Correspondent

WASHINGTON – Representatives from several leading home care organizations were invited by the General Accounting Office (GAO; Washington) earlier this month to assess the latest version of the GAO’s study on surety bonds under the condition these representatives did not divulge the contents of the GAO’s draft report.

One industry representative close to the process told HHBR the GAO is now working "furiously" to complete the study. Once completed, the GAO will forward its final report to the congressional committees with jurisdiction over Medicare and Medicaid – Senate Finance, House Ways and Means, and House Commerce – where it is expected to be held for 30 days before it is formally released.

Last June, the Health Care Financing Administration (HCFA; Baltimore) suspended the effective date for implementing the home health surety bond regulations, which were mandated by the Balanced Budget Act of 1997 (BBA) and had been scheduled to go into effect July 31, 1998. HCFA took this action after industry opposition prompted several key members of congress, notably Sen. Kit Bond (R-MO), Chairman of the Small Business Committee, and Sen. Charles Grassley (R-PA), Chairman of the Special Committee on Aging, to raise serious objections to HCFA’s regulations.

Congress already eased the bonding rule for home health agencies that bill less than a combined $334,000 to the Medicare and Medicaid programs by allowing these agencies to secure one combined $50,000 bond. But all agencies would still have been forced to comply with a rule requiring that the bond equal the greater of $50,000 or 15% of annual billings. In the meantime, the GAO was sanctioned by Congress to carry out an independent analysis of the surety bond regulations.

Most industry observers continue to believe HCFA will maintain the toughest surety bond requirement it believes it can sustain. "It’s unlikely HCFA will issue any regulations until [the GAO report] comes out, but they are probably privy to the initial findings," said one industry representative close to the process. There is also some speculation that the regulations might not go into effect until September and that HCFA might forgo the formal notice and comment procedure and opt instead to pursue a fairly restrictive administrative procedure when they are issued, the representative added.

"On Capitol Hill, there’s a feeling the bond should not be larger than $50,000 and maybe even less than that amount for smaller agencies," the representative told HHBR. "It will certainly be a major issue if it is over $50,000 and smaller agencies will have a great deal of trouble even with a $50,0000 bond."

The other major concern of home care representatives is whether the regulation requires a fraud bond or financial guarantee bond. "It will make a huge difference," said the representative. "If it’s a fraud bond, HCFA could not go after the bond until fraud has been proven, but if it’s a financial guarantee bond, they could call the bond immediately." A financial guarantee bond would create more liability on the part of the bonding agency which would translate into greater personal guarantees and collateral when the agency secures the bond. The current sentiment in Congress appears to be running in favor of a fraud bond, the representative told HHBR.

"Even with a financial guarantee bond you have to look at the details," the representative warned. Depending on how the regulations are written, a financial bond could allow HCFA to go after the bond immediately, or it could allow the agency to enter into a repayment program or pursue an appeal before that occurs. "That is a very different kind of program than a program that says the bond is immediately liable," said the representative. "The devil is in the details, and every little detail makes a huge difference."

Under the agreement HCFA reached with Congress last year, home health agencies will have at least 60 days following the publication of a regulation to meet the surety bond requirements.