On January 20, 2012, CMS released change request (CR) 7167, which provides the DME MACs with instructions on how to obtain payment from a DME supplier’s surety bond. Effective February 21, 2012, if a supplier has not made at least partial payment towards an identified overpayment within 101 days of the date on the payment demand letter, the DME MACs are to request payment from the supplier’s surety.
Preventing Debits to Your Bond:
It’s important to note that the new instructions do not alter your appeal rights and your surety bond will be tapped as a last resort. Suppliers will still be able to have payments offset from their pending claims to settle a debt. As long as you are actively billing Medicare (defined as at least once per year) and an offset is actively taking place for any overpayments for which you do not appeal timely or lose your appeal, this will satisfy the partial payment requirement. In the case of most overpayments, providers typically will see automatic offsets if full payment is not received timely. While interest does begin to accrue and you end up paying more money in the end, this process will actually keep most suppliers from facing the threat of having their surety bonds tapped into.
However, if your cash flow dries up and you are unable to remit payment in full or offset claims to make good on an overpayment, you will want to contact your MAC and request an extended repayment plan (ERP) immediately. To be considered for an ERP, you must submit your request in writing and explain your current situation. ERP requests must reference the specific overpayment, the number of months requested for repayment, the monthly payment amount, and must include the first month’s payment. In addition, you must provide specific documentation to support your financial hardship. For more detailed information on what must be included in an ERP request, see the Overpayments and Refunds chapter of your DME MAC’s Supplier Manual.
The whole intent behind surety bonds is to ensure Medicare has a way to retrieve owed debts from suppliers who may otherwise just pack up and walk away. By providing a bond, the surety is agreeing to repay Medicare any debts owed by the bonded supplier (up to the amount of the bond) in the event attempts to collect money from the supplier prove unsuccessful. The surety is only liable for overpayments incurred during the term of the bond.
The following procedures have been laid out in CR7167 for collecting overpayments from a DME supplier’s surety:
- An electronic list of bonded suppliers will be sent to the DME MACs by the Provider Enrollment Operations Group on a monthly basis.
- The DME MACs will review the list monthly and identify any suppliers who have not remitted full or partial payment for an overpaid claim within 101 days of a demand letter being sent.
- The DME MAC will send the supplier’s surety a letter informing them that they must remit payment for the amount owed within 30 days. The surety will be responsible for any debt incurred under the term of the bond, up to the amount of the supplier’s bond, including any accrued interest.
- The DME MAC will provide the surety with sufficient evidence that the supplier owes the delinquent debt. The MACs are given significant discretion to determine what constitutes “sufficient” evidence.
- Once payment is received from the surety, the DME MAC will send a letter to both the supplier and the NSC within 15 days, notifying them that the debt has been paid.
If the bond ends up being reduced, suppliers must obtain additional coverage to maintain the required $50,000 bond minimum within 30 days of being notified that their bond has been debited by the DME MAC. If just a portion of your bond is debited and you do not wish to obtain a new $50,000 bond, your only option is to obtain the additional amount needed to meet the minimum $50,000 bond requirement through your current surety and have it added to your current bond. CMS will not allow suppliers to obtain any new bonds in amounts less than $50,000. If you are unhappy with your surety and do not want to purchase additional coverage from them (or they refuse to sell you additional coverage), you have two options:
- Cancel the remaining bond and obtain a new $50,000 bond with another surety. In this scenario you will be losing any money you have paid on the current term of the bond
- Keep the remaining amount with your current surety in addition to purchasing a new $50,000 bond from another surety. In this scenario, you will have a total coverage of greater than $50,000. With this option, you will be able to ride out the term of your current bond, having it serve as backup coverage.
Although obtaining surety bonds became a mandatory part of enrollment into the Medicare program in 2009, up until now there have been no procedures in place for how to retrieve owed monies from a supplier’s surety. As a consequence of the new regulations, suppliers may see an increase in the fees paid to obtain or renew bonds once sureties begin to feel the sting of repaying monies owed by their bonded suppliers. Additionally, suppliers who have had their credibility damaged by a debit from their bond may find it challenging to obtain additional coverage with their current surety, or a new surety, in order to maintain the required minimum bond amount of $50,000.
The Appeals Process:
While not specifically discussed in the change request, we do not expect bond debits to impact the appeals process. Under current guidelines, suppliers may stave off recoupment attempts by entering into an appeal at the first level, redeterminations, within 40 days of the date on the demand letter. If the final determination is unfavorable, you then have an additional 60 days from the date of the determination to enter into an appeal at the second level, reconsiderations, before CMS may begin recoupment attempts. In this scenario, it will be greater than 101 days before a final determination is made at the second level. However, it is our expectation that if a supplier staves off recoupment by entering into a timely appeal at the first and second levels, the supplier will not be required to remit payment until the final determination is received (even if 101 days passes). Again, you have the option of remitting a check or voluntarily offsetting claims once it comes time to pay the piper. As a reminder, there are no additional protections to prevent recoupments after the second level of appeals. If your appeal comes back as unfavorable recoupment will resume with interest. Pursuit of an Administrative Law Judge Hearing (third level of appeals) in and of itself will not prevent recoupments until you procure a favorable response.