Medicare Surety Bonds: Essential Compliance

This post is part of a series sponsored by Old Republic Surety.

A Medicare bond from Old Republic Surety can protect suppliers of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) from financial risks, ensure compliance with regulations, and help maintain Medicare billing privileges.

The healthcare industry operates under strict regulations to ensure that Medicare beneficiaries receive quality care from trustworthy providers. As part of this regulatory framework, the Centers for Medicare & Medicaid Services (CMS) mandates that suppliers of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) post a Medicare bond to participate in the Medicare program. Old Republic Surety’s Medicare Bond is a key solution that helps DMEPOS suppliers meet this requirement, protecting both the Medicare system and patients from fraud while ensuring that suppliers can maintain their billing privileges.

Why are Medicare bonds required?

The Medicare bond requirement was introduced under the Balanced Budget Act of 1997 as a safeguard against fraudulent activities within the DMEPOS sector. CMS had identified that improper and fraudulent payments to medical equipment suppliers were a growing concern, resulting in financial losses for the Medicare program and compromising patient care.

As a result, the $50,000 surety bond requirement was established for most DMEPOS suppliers. This bond acts as a financial guarantee that the supplier will operate in compliance with Medicare regulations, safeguarding against potential fraud and ensuring that Medicare can recover unpaid claims, civil monetary penalties (CMPs), or assessments in case of violations.

How Medicare bonds work

Medicare bonds are financial safeguards designed to protect Medicare from losses due to noncompliance or fraudulent activities by DMEPOS suppliers. Here’s how an Old Republic Surety Medicare bond works:

1. Coverage of unpaid claims and penalties: The bond guarantees that if a DMEPOS supplier fails to meet their obligations — such as paying outstanding claims or civil monetary penalties — the bond will cover those losses. Upon receiving a written notice from CMS, the surety is required to pay up to the full penal amount of the bond within 30 days. This includes the amount of any unpaid claims, accrued interest and penalties imposed by CMS or the Office of Inspector General.
2. Continuous coverage: The Medicare bond is continuous and should remain in effect as long as the DMEPOS supplier is participating in the Medicare program. The bond must be submitted with the supplier’s initial application to CMS or when establishing a new practice location, and it must comply with the terms outlined in 42 CFR § 424.57(d), ensuring that the supplier stays in good standing with Medicare requirements.
3. Increased bond amounts for adverse actions: For suppliers with a history of adverse actions — such as previous Medicare revocations or legal violations — the bond amount may be increased above the standard $50,000. This heightened requirement helps mitigate the risk posed by suppliers with a track record of noncompliance, offering additional protection to the Medicare system.

Who needs a Medicare bond?

The Medicare bond requirement applies to all DMEPOS suppliers, except for certain exemptions, including the following:

• Government-operated DMEPOS suppliers that provide CMS with a comparable bond under state law.
• Pharmacies and pharmaceutical companies that sell to Medicare.
• Solely owned and operated orthotic and prosthetic suppliers who provide custom-made products, as long as they only bill for orthotics, prosthetics and related supplies.
• Physicians and nonphysician practitioners, such as nurse practitioners and clinical specialists, who provide DMEPOS items solely to their own patients as part of their services.
• Physical and occupational therapists in private practice, under similar conditions to the orthotic and prosthetic exemption.
• Other physicians and nonphysician practitioners, for example:
  • dentists;
  • medical centers, clinics, including sleep clinics, and hospitals;
  • optical suppliers of eye glasses and eye prosthetics, as well as eye doctors; and
  • providers of mastectomy supplies.

If previously exempt suppliers no longer qualify for an exception, they must secure a Medicare bond within 60 days to remain compliant with CMS regulations.

Navigating the National Provider Identifier requirement

The Medicare bond requirement is based on a supplier’s National Provider Identifier (NPI), rather than their tax identification number. Each DMEPOS location that has its own NPI must have a corresponding $50,000 bond.

For example, if a supplier operates five locations, each with a unique NPI, they must obtain five separate bonds, totaling $250,000 in coverage. However, suppliers can opt for a single, comprehensive bond that covers multiple locations, simplifying the process while ensuring compliance.

This NPI-based structure ensures that each Medicare-participating location has adequate coverage, helping to mitigate the risk of fraud or noncompliance across different branches of a supplier’s operations.

Accreditation and compliance

In addition to securing a Medicare bond, DMEPOS suppliers have the option to become accredited by an “approved” national accreditation organization (AO), which would provide exemption for routing surveys by state survey agencies to determine compliance with Medicare conditions. Accreditation would also enhance patient trust, may assist in obtaining grants and reimbursements, and could provide a competitive advantage in choosing a health care provider.

Accreditation ensures that DMEPOS suppliers meet specific quality standards related to their business practices and the services they provide. This step is crucial for maintaining the integrity of the Medicare program and ensuring that beneficiaries receive necessary and legitimate medical supplies.

What happens if a bond is canceled or lapses?

A lapse in Medicare bond coverage can have significant consequences for DMEPOS suppliers. If the bond is canceled or not renewed, CMS can revoke the supplier’s billing privileges, effectively cutting them off from the Medicare program. To avoid this, suppliers must ensure that their bond remains active and that they maintain continuous compliance with CMS requirements.

Old Republic Surety offers flexible bond terms and renewal options to help DMEPOS suppliers stay in compliance without interruption. The application process is straightforward, and Old Republic’s team of surety experts can assist suppliers in securing the right coverage to meet their needs.

Why choose an Old Republic Surety Medicare bond?

Old Republic Surety has a long-standing reputation for providing reliable and competitive surety bond solutions. Here are a few reasons why DMEPOS suppliers should consider Old Republic Surety for the Medicare bond needs:

1. Ease of application: Old Republic Surety makes the application process simple and efficient. By offering clear terms and quick approvals, suppliers can obtain their bonds with minimal hassle.
2. Flexible coverage options: Whether a supplier has one NPI or multiple locations requiring several bonds, Old Republic Surety can tailor coverage to fit the business’s needs.
3. Competitive rates: Old Republic Surety offers competitive pricing on Medicare bonds, helping suppliers meet CMS requirements without undue financial strain.
4. Expert guidance: With decades of experience in the surety industry, Old Republic Surety’s team is equipped to guide DMEPOS suppliers through the Medicare bond process, providing expert support every step of the way.

A Medicare bond is a critical compliance requirement for DMEPOS suppliers. By partnering with Old Republic Surety, suppliers can ensure they meet Medicare’s bonding requirements while safeguarding their business and maintaining their billing privileges. With flexible coverage options, competitive rates and a straightforward application process, Old Republic Surety’s Medicare bond is the ideal solution for DMEPOS suppliers seeking peace of mind and compliance assurance in a highly regulated industry.

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