[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