Wednesday, 16 November 2016

CMS Surety Bonds / Claims against Surety Bonds

 Surety Bonds 

 A.  Background  

1.  Surety Bond Exemptions  

All DMEPOS suppliers are subject to the surety bond requirement, except: 

• Government-operated DMEPOS suppliers are exempted if the supplier has provided CMS with a comparable surety bond under State law.  

• State-licensed orthotic and prosthetic personnel (which, for purposes of the surety bond requirement, does not include pedorthists) in private practice making custom- made orthotics and prosthetics are exempted if—  

• The business is solely-owned and operated by the orthotic and prosthetic personnel, and   

• The business is only billing for orthotic, prosthetics, and supplies.  
• Physicians and non-physician practitioners, as defined in section 1842(b)(18) of the Social Security Act, are exempted if the items are furnished only to the physician or non-physician practitioner’s own patients as part of his or her physician service.  

The non-physicians covered under this exception are: physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, certified nurse-midwives, clinical social workers, clinical psychologists, and registered dietitians or nutrition professionals.  

• Physical and occupational therapists in private practice are exempted if—  

• The business is solely-owned and operated by the physical or occupational therapist;   

• The items are furnished only to the physical or occupational therapist’s own patients as part of his or her professional service; and   

• The business is only billing for orthotics, prosthetics, and supplies.  If a previously-exempted DMEPOS supplier no longer qualifies for an exception, it must submit a surety bond to the NSC - in accordance with the requirements in 42 CFR §424.57 - within 60 days after it knows or has reason to know that it no longer meets the criteria for an exception.  

2.  Bond Submission  

Effective May 4, 2009, DMEPOS suppliers submitting: (1) an initial enrollment application to enroll in the Medicare program for the first time, (2) an initial application to establish a new practice location, or (3) an enrollment application to change the ownership of an existing supplier, are required to obtain and submit a copy of its required surety bond to the NSC with their CMS-855S enrollment application. 

(NOTE: Ownership changes that do not involve a change in the status of the legal entity as evidenced by no change in the tax identification number, or changes that result in the same ownership at the level of individuals (corporate reorganizations and individuals incorporating) are not considered to be “changes of ownership” for purposes of the May 4, 2009, effective date – meaning that such suppliers are considered “existing” suppliers). 

For any CMS-855S application submitted on or after May 4, 2009, by a supplier described in this section (2), the NSC shall reject the application if the supplier does not furnish a valid surety bond at the time it submits its application.  The rejection shall be done in accordance with existing procedures (e.g., reject application after 30 days).  

3.  Amount and Basis  

The surety bond must be in an amount of not less than $50,000 and is predicated on the NPI, not the tax identification number.  Thus, if a supplier has two separately-enrolled DMEPOS locations, each with its own NPI, a $50,000 bond must be obtained for each site.  A supplier may obtain a single bond that encompasses multiple NPIs/locations.  For instance, if a supplier has 10 separately-enrolled DMEPOS locations, it may obtain a $500,000 bond that covers all 10 locations.  As stated in 42 CFR §424.57(d)(3), a supplier will be required to maintain an elevated surety bond amount of $50,000 for each final adverse action imposed against it within the 10 years preceding enrollment or reenrollment.  

This amount is in addition to, and not in lieu of, the base $50,000 amount that must be maintained.  Thus, if a supplier has had two adverse actions imposed against it, the bond amount will be $150,000.  A final adverse action is one of the following:  

• A Medicare-imposed revocation of Medicare billing privileges; 

• Suspension or revocation of a license to provide health care by any State licensing authority;  

• Revocation or suspension by an accreditation organization; 

• A conviction of a Federal or State felony offense (as defined in §424.535(a)(3)(i)) within the last 10 years preceding enrollment or re-enrollment; or   

• An exclusion or debarment from participation in a Federal or State health care program.  

4.  Bond Terms  

The supplier is required to submit a copy of the bond that - on its face - reflects the requirements of 42 CFR §424.57(d).  Specific terms that the bond must contain include:  

• A guarantee that the surety will - within 30 days of receiving written notice from CMS containing sufficient evidence to establish the surety's liability under the bond of unpaid claims, civil monetary penalties (CMPs), or assessments - pay CMS a total of up to the full penal amount of the bond in the following amounts:  

• The amount of any unpaid claim, plus accrued interest, for which the DMEPOS supplier is responsible, and  

• The amount of any unpaid claims, CMPs, or assessments imposed by CMS or the OIG on the DMEPOS supplier, plus accrued interest.  

• A statement that the surety is liable for unpaid claims, CMPs, or assessments that occur during the term of the bond.  

• A statement that actions under the bond may be brought by CMS or by CMS contractors. 

• The surety's name, street address or post office box number, city, State, and zip code.  

• Identification of the DMEPOS supplier as the Principal, CMS as the Obligee, and the surety (and its heirs, executors, administrators, successors and assignees, jointly and severally) as the surety.  The term of the initial surety bond must be effective on the date that the application is submitted to the NSC.  Moreover, the bond must be continuous.  

5.  Sureties  

The list of sureties from which a bond can be secured is found at Department of the Treasury's “Listing of Certified (Surety Bond) Companies;” the Web site is www.fms.treas.gov/c570/c570_a-z.html.  

For purposes of the surety bond requirement, these sureties are considered “authorized” sureties, and are therefore the only sureties from which the supplier may obtain a bond.  

6.  Bond Cancellations and Gaps in Coverage  

A DMEPOS supplier may cancel its surety bond, but must provide written notice of such to the NSC and the surety at least 30 days before the effective date of the cancellation.  

Cancellation of a surety bond is grounds for revocation of the supplier's Medicare billing privileges unless the supplier provides a new bond before the effective date of the cancellation.  

The liability of the surety continues through the termination effective date.  If a gap in coverage exists, the NSC shall revoke the supplier’s billing privileges.  If a supplier changes its surety during the term of the bond, the new surety is responsible for any overpayments, CMPs, or assessments incurred by the DMEPOS supplier beginning with the effective date of the new surety bond; the previous surety is responsible for any overpayments, CMPs, or assessments that occurred up to the date of the change of surety. 

Pursuant to 42 CFR 424.57(d)(6)(iv), the surety must notify the NSC if there is a lapse in the surety’s coverage of the DMEPOS supplier.  This can be done via letter, fax, or email to the NSC; the appropriate addresses can be found on the NSC’s Web site at www.palmettogba.com/nsc.  

7.  Reenrollment and Reactivation  

The supplier must furnish the paperwork described in subsection (A)(4) above with any CMS-855S reenrollment or reactivation application it submits to the NSC unless it already has the information on file with the NSC.  

For example, if a supplier has submitted a continuous surety bond to the NSC prior to submission of its reenrollment application, a new copy of surety bond is not be required unless the NSC specifically requests it.  

B.   Bond Changes  

A DMEPOS supplier must submit an addendum to the existing bond (or, if the supplier prefers, a new bond) to the NSC in the following instances: (1) change in bond terms, (2) change in bond amount, or (3) a location on a bond covering multiple non-chain locations is being added or deleted.  

Claims against Surety Bonds 

Pursuant to 42 CFR §424.57(d)(5)(i), the surety must pay CMS - within 30 days of receiving written notice to do so - the following amounts up to the full penal sum of the bond:  
(1) The amount of any unpaid claim, plus accrued interest, for which the supplier of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) is responsible.  
(2) The amount of any unpaid claim, civil monetary penalty (CMP) or assessment imposed by CMS or the Office of Inspector General (OIG) on the DMEPOS supplier, plus accrued interest.  This section 15.21.7.1 describes the procedures involved in making a claim against a surety bond.  

A.   Unpaid Claims  

1. Background  For purposes of the surety bond requirement, 42 CFR §424.57(a) defines an “unpaid claim” as an overpayment (including accrued interest, as applicable) made by the Medicare program to the DMEPOS supplier for which the supplier is responsible. 

A surety is liable for any overpayments incurred during the term of the surety bond.  This includes overpayment determinations made on or after the surety bond effective date.  These overpayment determinations can relate to payments made on or after March 3, 2009.  Thus, the policies in this section 15.21.7.1(A) only apply to overpayment determinations that relate to services performed on or after March 3, 2009.  

2. Collection   

a. Delinquency Period  

If the Durable Medical Equipment Medicare Administrative Contractor (DME MAC) determines – in accordance with CMS’s existing procedures for making overpayment determinations - that (1) the DMEPOS supplier has an unpaid claim for which it is liable, and (2) no waiver of recovery under the provisions of Section 1870 of the Social Security Act is warranted, the DME MAC shall attempt to recover the overpayment in accordance with the instructions in CMS Pub. 100-06, chapter 4.  

If 80 days have passed since the initial demand letter was sent to the DMEPOS supplier and full payment has not been received, the DME MAC shall attempt to recover the overpayment.  

The DME MAC shall review the “List of Bonded Suppliers” the last week of each month to determine which suppliers that have exceeded this 80-day period have a surety bond.  Said list:  

• Will be electronically sent to the DME MACs by the Provider Enrollment & Oversight Group on a monthly basis.   

• Will be in the form of an Excel spreadsheet.  

• Will contain the supplier’s legal business name, tax identification number, National Provider Identifier, surety bond amount and other pertinent information. 

If the supplier does not have a surety bond (i.e., is exempt from the surety bond requirement), the DME MAC shall continue to follow the instructions in Pub. 100-06, chapter 4 regarding collection of the overpayment.  

b.   Request for Payment from Surety   

If, however, the supplier has a surety bond (and subject to situations (1) through (6) below), the DME MAC shall send an “Intent to Refer” (ITR) letter to the supplier and a copy thereof to the supplier’s surety.  The letter and copy shall be sent (a) on the same date and (b) between 80 and 90 days after the initial demand letter was sent.  (The copy to the surety can be sent via mail, e-mail, or fax.)  

(NOTE: Under federal law, a delinquent debt must be referred to the Department of Treasury within 120 days.  (Per the chart below, this represents Day 150 of the entire collection cycle.)  To ensure that the DME MAC meets this 120-day limit yet has sufficient time to prepare the surety letter as described in the following paragraph, it is recommended that the DME MAC send the ITR letter several days prior to the 90-day limit referenced in the previous paragraph. 

This will give the DME MAC a few additional days beyond the 30-day deadline referenced in the next paragraph to send the surety letter.)  If the DME MAC does not receive full payment from the supplier within 30 days of sending the ITR letter (and subject to situations (1) through (6) below), the contractor shall notify the surety via letter that in accordance with 42 CFR §424.57(d)(5)(i)(A), the surety must make payment of the claim to CMS within 30 days from the date of the surety letter.  (The DME MAC shall send a copy of the surety letter to the supplier on the same date.)  

The DME MAC shall send the surety letter no later than 30 days after sending the ITR letter (subject to the previous paragraph), depending on the facts of the case.  Consider the following situations:  

(1) If a DMEPOS supplier has withdrawn from Medicare or has had its billing privileges deactivated or revoked, the contractor shall send the ITR and the surety letter on the earliest possible days.  

(2) If the supplier has an extended repayment schedule (ERS) and is currently making payments, the DME MAC shall not send an ITR letter or a surety letter.  If the DME MAC is currently reviewing an ERS application from the supplier, the contractor shall delay sending the ITR letter and the surety letter until after the ERS review is complete.  

(3) If the aggregated principal balance of the debt is less than $25, the DME MAC shall not send an ITR letter or a surety letter.  It shall instead follow the instructions in CMS Pub. 100-06, chapter 4 regarding collection of the overpayment.  

(4) If the DME MAC believes the debt will be collected through recoupment, it shall not send an ITR letter or a surety letter.  It shall instead follow the instructions in Pub. 100-06, chapter 4 regarding collection of the overpayment.  

(5) If the supplier has had a recent offset, the DME MAC may wait to see if future offsets will close the debt, without sending the surety a letter.  If the debt is still not paid in full or an ERS has not been established, the DME MAC shall send the surety letter no later than the 115th day after the initial demand letter was sent.  

(6) A payment demand letter shall not be sent to the surety if the DME MAC is certain that the $50,000 surety bond amount in question has been completely exhausted. 

The DME MAC may choose to aggregate debts from the same supplier into one surety letter, provided they are at least 30 days delinquent.  The surety letter shall:  

• Follow the format of the applicable model letter in section 15.21.7.1.1 of this chapter.  

• Identify the specific amount to be paid and be accompanied by “sufficient evidence” of the unpaid claim. “Sufficient evidence” is defined in 42 CFR §424.57(a) as documents that CMS may supply to the DMEPOS supplier’s surety to establish that the supplier had received Medicare funds in excess of the amount due and payable under the statute and regulations.    

• Be accompanied by the following documents, which constitute “sufficient evidence” for purposes of §424.57(a):  (1) A computer-generated “Overpayment Services Report” containing the following information:  

(i) Date of service  
(ii) Date on which supplier was paid 
(iii) Code for type of service 
(iv) Billed Amount 
(v) Allowed Amount 
(vi) Deductible Amount 
(vii) Co-Insurance Amount 
(viii) Paid Amount 
(ix) Overpayment Amount  

(NOTE:  The report shall not include beneficiary name, HICN, or any information otherwise protected under the Privacy Act.) 

(2) A copy of the overpayment determination letter that was sent to the supplier.  

• State that payment shall be made via check or money order and that the Payee shall be the DME MAC.  

• Identify the address to which payment shall be sent.  The DME MAC shall only seek repayment up to the full penal sum amount of the surety bond.  Thus, if the supplier has a $60,000 unpaid claim and the amount of the supplier’s bond coverage is $50,000, the DME MAC shall only seek the $50,000 amount.  The remaining $10,000 will have to be obtained from the supplier via the existing overpayment collection process.  

c.   Follow-Up Contact  

Between 8 and 12 calendar days after sending the surety letter, the DME MAC shall contact the surety by telephone or e-mail to determine whether the surety received the letter and, if it did, whether and when payment will be forthcoming.  If the surety indicates that it did not receive the letter, the DME MAC shall immediately fax or e-mail a copy of the letter to the surety.  

The surety will have 30 days from the original date of the letter – not 30 days from the date the letter was resent to the surety – to submit payment.  To illustrate, suppose the DME MAC on April 1 sends the surety letter, which is also dated April 1.  It places the follow-up call to the surety on April 11.  The surety states that it never received the letter, so the contractor e-mails a copy of it to the surety that same day.  Payment must be received by May 1, or 30 days from the original date of the letter.  

If the surety cannot be reached (including situations where a voicemail message must be left) or if the surety indicates that it did receive the letter and that payment is forthcoming, no further action by the contractor is required.  

If the surety indicates that payment is not forthcoming, the contractor shall (1) attempt to ascertain the reason, and (2) follow the steps outlined in section (A)(3)(b) below after the 30-day period expires.  The contractor shall document any attempts to contact the surety by telephone and the content of any resultant conversations with the surety.  

3. Verification of Payment  

a.   Full Payment Is Made  If full payment (including interest, as applicable) is made within the aforementioned 30day period, the DME MAC shall, no later than 15 calendar days after payment was made: 

• Update all applicable records to reflect that payment was made. (Payment from the surety shall be treated as payment from the supplier for purposes of said record updates.) 

• Notify the supplier via letter (on which the NSC shall be copied) that payment has been made and that the supplier must, within 30 calendar days of the date of the letter, obtain and submit to the NSC additional bond coverage so as to ensure that the amount equals or exceeds $50,000 (or higher if an elevated bond amount is involved due to a final adverse action).  

Thus, if the surety made payment on a $10,000 claim, the supplier must obtain $10,000 worth of additional surety bond coverage by either: (1) adding to the amount of the existing surety bond, or (2) cancelling its current surety bond and securing a new $50,000 surety bond.  (Obtaining a separate $10,000 surety bond is impermissible.)  If the NSC does not receive the additional bond coverage within this 30-day period, it shall revoke the supplier’s Medicare billing privileges in accordance with existing procedures. 

b.   Full Payment Is Not Made  

If the surety fails to make full payment within 30 calendar days of the date of the letter to the surety, the DME MAC shall:  

(1) Refer the debt to the Department of Treasury immediately upon the expiration of said 30-day timeframe (i.e., preferably on the same day or the day after, but in all cases no later than the 120-day deadline for sending delinquent debts to the Department of Treasury) and as outlined in Pub. 100-06, chapter 4;  

(2) No later than 14 days after the 30-day period expires, contact the surety via e-mail or telephone to ascertain the reason for non-payment.  Only one contact is necessary.  A voice mail message may be left.  The contractor shall document any attempts to contact the surety by telephone and the content of any resultant conversations with the surety.  

(3) No later than 14 days after Step 2 has been completed – and if full payment still has not been received -- send the letter identified in section 15.21.7.1.1(E) to the surety.  

(4) Include information relating to the surety’s non-payment in the report identified in section 15.21.7.1(C). 

c.   Successful Appeal  

If the supplier successfully appeals the overpayment and the surety has already made payment to the DME MAC on the overpayment, the DME MAC shall – within 30 calendar days of receiving notice of the successful appeal - notify the surety via letter of the successful appeal and repay the surety via check or money order.  

4. Summary  

The following chart outlines the timeframes involved in the surety bond collection process for overpayments:   B.   Assessments and CMPs 

1.Request for Payment from Surety  Per 42 CFR §424.57(a), an assessment is defined as a “sum certain that CMS or the OIG may assess against a DMEPOS supplier under Titles XI, XVIII, or XXI of the Social Security Act.”  Under 42 CFR §424.57(a), a CMP is defined as a sum that CMS has the authority, as implemented by 42 CFR §402.1(c) (or the OIG has the authority, under section 1128A of the Act or 42 CFR Part 1003) to impose on a supplier as a penalty.  

CMS will notify the DME MAC of the need for the latter to collect payment from the surety on an assessment or CMP imposed against a particular bonded DMEPOS supplier.  Upon receipt of this notification, the DME MAC shall – regardless of the amount of the assessment or CMP - notify the surety via letter that, in accordance with 42 CFR § 424.57(d)(5)(i)(B), payment of the assessment or CMP must be made within 30 calendar days from the date of the letter.  The letter (on which the NSC and the supplier/debtor shall be copied) shall:  

• Follow the format of the applicable model letter in section 15.21.7.1.1 of this chapter.  

• Identify the specific amount to be paid and be accompanied by “sufficient evidence.”  This includes all documentation that CMS (in its notification to the DME MAC as described above) requests the DME MAC to include with the letter (e.g., OIG letter).   

• State that payment shall be made via check or money order and that the Payee shall be CMS.  

• Identify the address to which payment shall be sent.  

2.   Follow-Up Contact  

Between 8 and 12 calendar days after sending the surety letter, the DME MAC shall contact the surety by telephone or e-mail to determine whether the surety received the letter and, if it did, whether and when payment is forthcoming;  If the surety indicates that it did not receive the letter, the DME MAC shall immediately fax or e-mail a copy of the letter to the surety.  

The surety will have 30 days from the original date of the letter – not 30 days from the date the letter was resent to the surety – to submit payment.  To illustrate, suppose the DME MAC on April 1 sends the surety letter, which is also dated April 1.  It places the follow-up call to the surety on April 11.  The surety states that it never received the letter, so the contractor e-mails a copy of it to the surety that same day.  

Payment must be received by May 1, or 30 days from the original date of the letter.  If the surety cannot be reached (including situations where a voicemail message must be left) or if the surety indicates that it received the letter and that payment is forthcoming, no further action by the contractor is required.  

If the surety indicates that payment is not forthcoming, the contractor shall (1) attempt to ascertain the reason, and (2) follow the steps outlined in section (A)(3)(b) below after the 30-day period expires.    The contractor shall document any attempts to contact the surety by telephone and the content of any resultant conversations with the surety.  

3.  Verification of Payment  

a.   Full Payment Is Made   

If full payment (including interest, as applicable) is made within 30 calendar days of the date of the letter to the surety, the DME MAC shall, no later than 15 calendar days after payment was made: 

• Update all applicable records to reflect that payment was made.  (Payment from the surety shall be treated as payment from the supplier for purposes of said record updates.)  

• Notify the applicable CMS Regional Office (RO) via letter or e-mail that payment was made.  

• If the OIG imposed the CMP or assessment, notify the OIG via letter that payment was made. 

• Notify the supplier via letter (on which the NSC shall be copied) that payment has been made and that the supplier must, within 30 calendar days of the date of the letter, obtain and submit to the NSC additional bond coverage so as to ensure that the amount equals or exceeds $50,000 (or higher if an elevated bond amount is involved due to a final adverse action).  

Thus, if the surety made payment on a $10,000 CMP, the supplier must obtain $10,000 worth of additional surety bond coverage by either: (1) adding to the amount of the existing surety bond, or (2) cancelling its current surety bond and securing a new $50,000 surety bond.  (Obtaining a separate $10,000 surety bond is impermissible.) 

If the NSC does not receive the additional bond coverage within this 30-day period, it shall revoke the DMEPOS supplier’s Medicare billing privileges in accordance with existing procedures. 

b.   Full Payment 
Is Not Made  If the surety fails to make full payment within the aforementioned 30-day timeframe, the DME MAC shall: 

(1) Continue collection efforts as outlined in Pub.100-06,chapter 4; 

(2) No later than 14 days after the 30-day period expires, contact the surety via e-mail or telephone to ascertain the reason for non-payment.  Only one contact is necessary.  A voice mail message may be left.   

The contractor shall document any attempts to contact the surety by telephone and the content of any resultant conversations with the surety. 

(3) No later than 14 days after Step 2 has been completed – and if full payment still has not been received -- send the letter identified in section 15.21.7.1.1(E) to the surety.   

(4) Include information relating to the surety’s non-payment in the report outlined in section 15.21.7.1(C).    

c.   Successful Appeal  

If the DMEPOS supplier successfully appeals the CMP or assessment and the surety has already made payment, CMS will – within 30 days of receiving notice of the successful appeal - notify the surety via letter of the successful appeal and repay the surety. 

C.   Reporting Requirements  

DME MACs shall compile a report on a quarterly basis in the format prescribed in existing CMS directives. The report will capture the following elements:  

• Number of account receivables (debts) reviewed for possible surety bond letter development 

• Number of debts sent to the surety for recovery 
• Amount recovered via the surety collection process 
• Amount paid by the supplier after the surety collection process was initiated 
• Names of suppliers and NSC numbers for which letters were sent to the surety and/or surety bond recoveries were received • Names and addresses of sureties that have failed to make payment within the quarterly period.  For each instance of non-payment, the report shall identify (a) the amount that was requested, (b) the amount that was paid (if any), (3) the name and tax identification number of the supplier in question, and (4) the reason the surety did not pay (to the extent this can be determined).  

The quarterly reports shall encompass the following time periods: January through March, April through June, July through August, and September through December.  Reports shall be submitted to the Provider Enrollment & Oversight Group through the MAC COR by the 10th day of the month following the end of the reporting quarter.  

Information on surety collections shall be reported once for each demand letter.  That action shall be reported only when the collection process has been fully completed for that specific identified overpayment, which may be comprised of multiple claims.  

For example, suppose the surety was sent a letter in December but its payment was not received until January.  That action would be documented in the report encompassing the months of January, February, and March.  

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