[Federal Register Volume 63, Number 42 (Wednesday, March 4, 1998)] [Proposed Rules] [Pages 10732-10733] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 98-5654] Federal Register / Vol. 63, No. 42 / Wednesday, March 4, 1998 / Proposed Rules [[Page 10732]] DEPARTMENT OF HEALTH AND HUMAN SERVICES Health Care Financing Administration 42 CFR Chapter IV [HCFA-1038-N] RIN 0938-AI82 Medicare and Medicaid Programs; Surety Bond Requirements for Home Health Agencies AGENCY: Health Care Financing Administration (HCFA), HHS. ACTION: Notice of Intent to Amend Regulations. ----------------------------------------------------------------------- SUMMARY: This document announces our present intent to make technical revisions to the surety bond and capitalization regulations for home health agencies (HHAs) published on January 5, 1998 (63 FR 292-355). These intended revisions include: generally limiting the Surety's liability on the bond to the term when it is determined that funds owed to Medicare and Medicaid have become ``unpaid,'' regardless of when the payment, overpayment or other action causing such funds to be owed took place; establishing that a Surety will remain liable on a bond for an additional two years after the date an HHA leaves the Medicare or Medicaid program; and giving a Surety the right to appeal an overpayment, a civil money penalty, or an assessment if the HHA to which the bond has been issued fails to pursue its rights of appeal. These revisions should help smaller, reputable HHAs, such as non-profit visiting nurse associations, obtain surety bonds without weakening protections to Medicare and Medicaid inherent in the bond requirements. FOR FURTHER INFORMATION CONTACT: Ralph Goldberg, (410)786-4870 (Medicare Provisions). Mary Linda Morgan, (410)786-2011 (Medicaid Provisions). SUPPLEMENTARY INFORMATION: I. Background The Balanced Budget Act of 1997 (BBA'97) requires each home health agency (HHA) to furnish a surety bond in an amount of at least $50,000 in order to participate in either the Medicare or the Medicaid program. This requirement applies to all participating Medicare and Medicaid HHAs, regardless of the date their participation began. These provisions were implemented in a final rule published in the Federal Register (63 FR 292-355) on January 5, 1998. The comment period for that rule continues until March 6, 1998. Generally, the rule requires each HHA participating in Medicare to obtain from an acceptable authorized Surety and then to furnish to its fiscal intermediary a surety bond in an amount that is the greater of $50,000 or 15 percent of the annual amount paid to the HHA by the Medicare program, as such annual amount appears in the HHA's most recently accepted cost report. Although the regulation currently states 15 percent, this percentage is open to reconsideration. The rule also prohibits payment to a State for home health services furnished to Medicaid recipients unless the HHA has furnished the State Medicaid agency with a surety bond comparable to one that meets Medicare requirements. II. Provisions of this Notice of Intent The purpose of this document is to advise the public of our present intent to make technical revisions to the January 5, 1998 final rule as a result of concerns that have been raised thus far. The public will be given the opportunity to comment on these and any other revisions or supplements to the rule. The current comment period extends through March 6, 1998, and we will consider all comments received through that period. However, based on our analysis of the comments received to date, we believe that certain technical changes to the regulation will benefit the Medicare and Medicaid programs, the surety industry, and responsible HHAs. Concerns have been raised by representatives of the surety industry, including the Surety Association of America, the American Insurance Association, and the National Association of Surety Bond Producers, as well as home health agency representatives. These technical issues were not apparent during our previous discussions with the associations prior to the publication of the final rule. Described below are the changes that we are considering, as well as a discussion of their intended effect. In general, these contemplated changes address concerns regarding the uncertainty of the scope of a Surety's liability under the regulation, which appears to have resulted in less than a fully robust market for obtaining bonds. 1. We would generally limit the Surety's liability on the bond to the term during which we determine that funds owed to Medicare or Medicaid have become ``unpaid,'' regardless of when the payment, overpayment, or other action causing such funds to be owed took place. This change would address concerns relating to the cumulative liability that could result from the current regulation which links liability on the bond to the term during which payments are made or civil money penalties or assessments are imposed. Specifically, the concern is that the potential liability for overpayments, civil money penalties, and assessments incurred during the term of the bond would continue for a number of years. Due to the sometimes lengthy process for determining overpayments, a surety might not find out that it owes money to Medicare or Medicaid under a particular bond until several years later. Moreover, in cases of fraud, there generally is no statute of limitations. This long-term exposure makes it very difficult for sureties to accurately gauge the risk in underwriting a bond. A significant advantage of changing the regulation to relate the bond to the ``period of discovery'' (rather than the year of Medicare or Medicaid payment) is that it extends the protection of the bond to cover payments made in prior years. That is, a bond written in 1998 would also extend the liability to payments made in prior years as long as the overpayments determined from such payments become ``unpaid'' in 1998. This would benefit the Medicare and Medicaid programs by providing coverage for overpayments arising out of payments made in prior years, but for which overpayments become ``unpaid'' in 1998 or subsequent years. It would also benefit the sureties by allowing them to know with greater certainty their potential liability under the bonds, which in turn would facilitate underwriting the bonds. The proposed change would convert the bond to a ``claims made'' type of coverage and would place the risk of losses discovered in future years on the then current Surety. 2. Establish that a Surety will have liability for an additional two years after a home health agency leaves the Medicare or Medicaid program. Both the Medicare and Medicaid regulations would be amended to require that the bond must provide that if the HHA's participation in the program terminates, whether voluntarily or involuntarily, the term of the bond would automatically be extended for a period of two years after the date of termination. This contingency period would protect Medicare and Medicaid in the event that, for example, an overpayment is discovered after an HHA terminates. This provision complements change 1, and is necessary because the terminated HHA would not have submitted a ``current'' surety bond. [[Page 10733]] 3 Give bond companies the right to appeal overpayments, civil money penalties, and assessments. This change would grant the Surety the HHA's appeal rights if the HHA fails to exercise them. The present Medicare regulation gives a Surety legal standing only upon assignment by the HHA. The present Medicaid regulation limits a Surety's appeal rights to those established by the State Medicaid agency. We would amend the regulation to ensure that the Surety will automatically succeed to the HHA's appeal rights if the HHA does not appeal--even if the HHA has not assigned its rights to the Surety. However, if the HHA has appealed, the Surety would not have the right to assert an appeal. We intend to proceed expeditiously at the close of the March 6 comment period to make whatever changes are necessary in the final regulation so that it is as strong as it can be in protecting Medicare and Medicaid, while not unduly burdening reputable HHAs. The regulation, as published on January 5, 1998, required an HHA to submit a surety bond to HCFA and/or the Medicaid State agency, as appropriate, by February 27, 1998. Elsewhere in this Federal Register edition is a final rule that removes the date when HHAs must submit an initial surety bond to HCFA and/or the State Medicaid agency. We have been advised that some HHAs have already obtained surety bonds. For those HHAs, the bond should be submitted to HCFA and/or the State Medicaid agency. We have also been advised that many HHAs have been unable to obtain a surety bond. We request that HHAs that are unable to secure a bond notify their Medicare fiscal intermediary or State Medicaid agency of this fact in writing by March 31, 1998 so that we can make an accurate assessment of the number of HHAs without bonds. In the final rule contemplated by this notice, the compliance date for submitting bonds will be specified and will be 60 days after the publication of that final rule. Until that compliance date, no action will be taken to initiate termination of, or withhold Federal Financial Participation with respect to, an HHA that has not furnished a surety bond. The possible technical changes discussed in this notice and the additional time for HHAs to obtain surety bonds appear to be both appropriate and prudent. In accordance with the provisions of E.O. 12866, this document was reviewed by the Office of Management and Budget. (Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh)). (Catalog of Federal Domestic Assistance Program No. 93.774, Medicare--Hospital Insurance Program, and Program No. 93.778, Medical Assistance Program) Dated: February 26, 1998. Nancy-Ann Min DeParle, Administrator, Health Care Financing Administration. Dated: February 26, 1998. Donna E. Shalala, Secretary. [FR Doc. 98-5654 Filed 2-27-98; 5:05 pm] BILLING CODE 4120-01-P