GAO releases surety bond report

The long-awaited General Accounting Office (GAO) report on proposed surety bond requirements was released in March and was mostly good news for home care providers. The non-partisan investigative arm of Congress recommended that bond requirements be capped at $50,000; exemptions be granted to agencies that have a proven financial track record; and separate bonds be required for agencies who participate in both Medicare and Medicaid.

Now, providers are waiting for the Health Care Financing Administration (HCFA) to publish its final rules. Upon publication in the Federal Register, providers will have 60 days to comply.

The original deadline for home health agencies to secure surety bonds dates back to January 1998. But pressure from Congress and provider difficulty in securing bonds under the proposed rules has led to a series of postponements. Industry protest prompted Congress to request GAO to study the proposal.

So far, HCFA is unable to give a definitive answer as to whether the regulation will be reinstated or what changes it might face.

The current surety bond requirement calls for home health providers to secure the larger of a $50,000 surety bond or one equal to 15% of annual Medicare reimbursement. Many home health providers, especially small or rural agencies, have been unsuccessful in meeting the Health Care Financing Administration’s requirement and complained that it was an unfair financial burden.

The provision was originally designed to fight the existence of fly-by-night home health operators seeking to defraud Medicare, but grew into an indemnity policy against overpayment. The net effect, its critics claimed, was that instead of weeding out fraudulent home care providers, the new rule seems to be so restrictive that surety bond companies are reluctant to provide bonding.

These conditions have the potential of wiping out small agencies that are finding it difficult to find companies to underwrite the bonds, critics say. According to HCFA, 60% of home health agencies have yet to purchase bonds.