Applicable Provider Types: Any individual or entity that receives Medicare reimbursement for selling or renting DMEPOS
Is Your Entity in Compliance?
Most durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) suppliers must maintain a $50,000 surety bond for each location it has enrolled in Medicare, with certain exceptions pursuant to 42 C.F.R. § 424.57(d)(15) — notably physicians and non-physician providers, such as nurse practitioners and physician assistants, when furnishing items only to their own patients. For example, if one DMEPOS supplier has 10 separately enrolled locations with 10 separate national provider identifiers, it must post surety bonds with a total of $500,000. Proof of the requisite surety bond must be provided when enrolling in Medicare, filing notice of a change of ownership and revalidating enrollment records. The surety bond must also be from an authorized surety, certified by the U.S. Department of Treasury (a list of such companies is available here).
Numerous DMEPOS suppliers maintain adequate surety bond coverage but fail to proactively monitor a surety bond’s expiration date, which can result in revocation of the supplier’s Medicare billing privileges. To avoid revocation, a DMEPOS supplier must provide the Centers for Medicare & Medicaid Services (CMS) with a replacement surety bond 30 days before a pre-existing bond expires. In addition, CMS must receive written notice 30 days before a DMEPOS supplier cancels a surety bond.
For any gaps in surety bond coverage, CMS may revoke the DMEPOS supplier’s billing privileges, and the DMEPOS supplier will be liable for all items and services furnished during the coverage gap. First time revocations can result in a ban on billing privileges from one to 10 years, while second time revocations can result in a 20-year ban.
How to Confirm Compliance?
To avoid revocation of billing privileges and liability for unpaid claims due to a lapse in surety bond coverage, DMEPOS suppliers not subject to a surety bond exception at 42 C.F.R.§ 424.57(d)(15) should consider the following recommendations:
- Log in to your Provider, Enrollment, Chain and Ownership System (PECOS) account to verify that each enrolled location maintains $50,000 in surety bond coverage (this requirement can be met by obtaining a separate $50,000 surety bond or adding $50,000 in coverage to an existing bond). DMEPOS suppliers should not solely rely on PECOS when verifying surety bond coverage. They should independently confirm expiration dates with their surety bond providers, renew policies as applicable and upload the updated policies to PECOS.
- If a surety bond has an impending expiration date, obtain a renewal or a new surety bond and provide it to CMS at least 30 days prior to the expiration date. If you plan to cancel an existing surety bond, notify CMS in writing 30 days before the cancellation and provide the replacement bond 30 days prior to cancellation. Obtaining a surety bond that prohibits the surety bond provider from unilaterally cancelling or changing the policy without prior notice can help avoid any unintended lapses in coverage.
- Create a mechanism for tracking all Medicare enrollment records, which includes periodic PECOS logins to verify surety bond expiration dates and coverage. A previous Ounce of Prevention Alert outlines recommendations to ensure compliance with DMEPOS enrollment requirements.
- Other requirements include ensuring that the bond must name CMS as the “obligee” and note that it will cover any unpaid claims or assessments CMS may impose on the DMEPOS supplier.
- Periodic internal review of all insurance policies, including surety bond coverage, can help ensure continued compliance with the requirements listed in 42 C.F.R. § 424.57.
If you need assistance ensuring that your DMEPOS surety bonds are in compliance with Medicare requirements, McGuireWoods attorneys can assist.
Ounce of Prevention is a McGuireWoods series that details healthcare laws and regulations and offers tips on how providers can ensure they are in compliance. To recommend a topic for a future installment, email Gretchen Heinze Townshend at [email protected] or Tim Fry at [email protected].