Are Medicare DME Surety Bond Requirements About to Go Up?

The Department of Health and Human Services Office of Inspector General (“OIG”) recently announced that it would conduct a detailed review of the use of surety bonds by the Centers for Medicare & Medicaid Services (“CMS”) in regard to suppliers of durable medical equipment (“DME”).

Medicare-enrolled DME suppliers are required to maintain a surety bond against which CMS and its contractors can make claims and collect alleged Medicare overpayments. The required amount for the posted surety bond is generally $50,000 for each NPI the supplier maintains, but can be increased in certain circumstances. In theory, the bond provides a ready pool of funds from which CMS can collect overpayments without having to rely on recouping Medicare payments or forcing the supplier to pay the debt.

OIG asserts that it has long-raised concerns about fraudulent practices among DME suppliers and has reported that CMS underutilized surety bonds as a tool to protect Medicare from overpayments to DME suppliers. For example, OIG cites that CMS recovered only $263,000 from surety bonds of $50 million in overpayments identified for collection between October 2009 and April 2011. It is unclear why OIG is citing such out-of-date data or whether more recent data is available.

In any event, OIG plans to determine: (1) the total amount of outstanding DME overpayments that became eligible for surety bond collection in calendar year 2023, (2) the total amount of outstanding DME overpayments that have been collected and left uncollected from surety bonds, (3) potential obstacles DME Medicare Administrative Contractors and CMS face in collecting outstanding DME overpayments from surety bonds, and (4) potential changes that could make surety bonds a more effective tool to deter fraud and recover DME overpayments.

The amount of alleged Medicare DME-related fraud and the scrutiny of Medicare DME suppliers have both increased significantly over the decade. It is possible that OIG will recommend not only that CMS increase enforcement of surety bond requirements and attempt more collections from surety bonds, but also that CMS increase the required amount of the posted bond, possibly significantly. For example, nearly all allegations of DME-related Medicare fraud involve far more than $50,000 worth of claims, meaning the CMS can collect only a fraction of the alleged overpayment from the surety bond. Significantly raising the standard required bond amount might deter fraud by raising the barrier to entry and might increase CMS’ ability to recover overpayments, but would likely also increase costs and administrative burden for all Medicare DME suppliers.

For over 40 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters, and our attorneys can assist providers and suppliers in understanding new developments in healthcare law and regulation. If you or your healthcare entity has any questions pertaining to DME surety bonds or healthcare compliance, please contact an experienced healthcare attorney at 248-544-0888 or wapc@wachler.com.