Considering DME? HCFA preparing to throw hurdle your way
Considering DME? HCFA preparing to throw hurdle your way
Florida program used as model: Medicare could be detrimental business
Successful home infusion agencies are constantly looking for ways to diversify and expand their service base. In fact, many say that expansion and diversification are key to long-term success. But if your agency is considering offering durable medical equipment (DME) as an ancillary service to home infusion, you may find a formidable hurdle in your path in the near future or at the very least, additional red tape and monetary requirements you’ll have to deal with to acquire a Medicare supplier number.
The Health Care Financing Administration (HCFA) is preparing a regulation designed to fight fraud that would require DME suppliers to post a surety bond as a condition of enrollment in the Medicare program. HCFA is studying Florida’s program, which is part of that state’s fight against Medicaid fraud. Experts say the program will save Florida taxpayers nearly $192.5 million over two years. (See story, p. 75.)
A HCFA official tells Home Infusion Therapy Management that the agency is working on the proposal, and that it is too soon to provide specifics. It’s unclear when the proposal will be released, what its content will be, or when a possible implementation date might be. As a result, experts say they can’t predict the affects on the industry. However, regulation could spell trouble for many small infusion agencies.
Will national providers have an advantage?
Frank Case, JD, a partner and head of the health care section for Schmeltzer, Aptaker & Shepard in Washington, DC, says small companies that receive a sizable percentage of revenue from Medicare could find it difficult to get a surety bond.
"Under federal law, you can’t factor Medicare receivables, so you can’t borrow on them," Case explains. "So what assets is that surety holder going to seek? Smaller companies are going to be in a position where they may not be able to have that security."
Case says it’s a Catch-22: Agencies that don’t rely heavily on Medicare will have the necessary receivables to acquire a surety bond, but small agencies that do rely heavily on Medicare, because they can’t factor Medicare receivables into their worth, may find themselves unable to acquire a surety bond.
"You’re talking about a measure that would be in economic terms a barrier for entry into the marketplace as well as one that favors the large companies," Case says.
Sandy Berger, a spokeswoman for the Florida Agency for Healthcare Administration in Tallahassee, notes that an agency typically is required to put down 10% of the surety bond amount. The bond’s issuing company, usually an insurance or bonding company, then assumes the risk for the remaining amount of the bond.
"That’s why they check your background and find out what kind of a risk you are," says Berger.
Should fraudulent activity be proven against a company with a surety bond, Florida can take action and recoup any money considered lost through the fraudulent activity.
Even for the most honest agencies, the economic impact of the 10% upfront requirement could be a significant "economic barrier," as Case points out. Keep in mind that HCFA is studying Florida’s Medicaid surety bond program carefully. While Florida’s program requires a $50,000 surety bond for new DME suppliers, transportation companies, clinics that are not physician-owned, and home health agencies, it seems HCFA is considering instituting a much steeper amount.
"HCFA says they’re looking at the success Florida has had," says Steven Haracznak, vice president of communication for the National Association for Medical Equipment Services in Alexandria, VA. "We’re hearing rumors it could be $50,000 [surety bond requirement] or higher."
The Health Industry Distributors Association (HIDA), also in Alexandria, says it hears that HCFA is looking at numbers much larger than Florida’s current requirement.
"Fifty thousand dollars is the number in Florida, but that is not by any means the number HCFA is going to use," says Mark Hobratschk, associate director of government relations for HIDA. "The latest indication is that HCFA wants a number that is much higher than $50,000. That’s certainly a concern of ours, and that’s why we’d like to see the proposal."
Hobratschk adds that HIDA also is concerned with who HCFA will target: new or existing DME suppliers, or certain segments of the market.
Not without support
The industry apparently is split on how helpful a surety bond requirement will be in reducing fraud. Haracznak says he agrees with HCFA’s contention that such a regulation would help reduce fraud in the Medicaid system.
"We’re in favor of surety bonds," he says. "We think it will help eliminate fraud and abuse" by requiring insurance companies and bonding agents to investigate DME providers. This will eliminate the unscrupulous companies that have hurt the industry in the past, he says.
HIDA agrees. "We’re not against the concept of surety bonds," says Hobratschk. "In order to obtain one, you would have to be a legitimate supplier, which will obviously favor us."
Hobratschk notes that to acquire a surety bond, the issuing bonding agent or insurance company often conducts an on-site visit to verify. Agencies typically are required to put up 10% of the total amount of the bond, he says.
Not everyone favors requiring surety bonds, though. Some don’t see how the regulation would reduce fraud.
"I don’t think it’s going to solve the problem that HCFA is trying to solve," says Kevin P. O’Donnell, MIM, president of Healthcare Resources of America, a consulting firm in Lewisville, TX. "Because someone has money doesn’t mean they’re honest, and if someone doesn’t have enough money to put up it doesn’t mean they’re dishonest. I don’t think you can regulate ethics."
It’s also unclear how the implementation of a surety bond requirement would affect the industry. Pumps and poles are the only home-infusion-specific DME equipment reimbursed by Medicare Part B, and even those aren’t always covered. Depending on who Medicare decides to require a surety bond from, many home infusion agencies could be faced with a tough decision.
"Medicare is not a major part of most home infusion agencies’ business, and I don’t know if [HCFA is] going to make them [acquire a surety bond]," says O’Donnell. "But if they do it for every Part B provider as a DME company, agencies will have to look and see if that’s a big part of their business, and some may just let their Part B provider number go."
Because Part B only covers parenteral and enteral nutrition, you may be faced with weighing the benefits of that portion of your business with the cost of getting a surety bond. And if you operate both DME and home infusion companies, you’ll likely have no choice but to abide by the regulation.
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