[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