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HCFA POSTPONES SURETY BOND DEADLINE

WILL REVIEW GAO REPORT ON BOND RULE

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WASHINGTON -- Home health care companies that treat Medicare beneficiaries have won a temporary reprieve from complying with a requirement to obtain surety bonds demonstrating their financial stability.

Home care agencies question the effectiveness of the surety bond requirement, which the Health Care Financing Administration published in January in response to a 1997 law. HCFA has postponed the compliance deadline until Feb. 15, 1999, after already postponing the rule once earlier this year.

HCFA, which administers the Medicare program, plans to issue a new regulation for home health care agencies after reviewing a General Accounting Office report on its surety bond requirement. The GAO report -- requested by the Senate Finance Committee -- will be available in September.

The HCFA regulations would implement a provision in the Balanced Budget Act of 1997 that requires any home health care agency treating Medicare and Medicaid beneficiaries to obtain a surety bond. The compliance deadline already had been postponed to July 31 from the original date of Feb. 27.

HCFA first published a final rule in January, requiring that each home health agency participating in Medicare obtain a surety bond of $50,000, or 15% of the annual amount Medicare pays to the agency, whichever is greater. These bonds would help Medicare recoup any overpayments made to home health care agencies.

An additional final rule published in June limits the liability of surety companies. Penny Thompson, HCFA's director of program integrity, testified before a House subcommittee that the June rule would limit surety bond writers' liability to overpayments made in the year for which a bond is written. Also, the company would be liable only for those overpayment determinations made within two years after an agency leaves the Medicare program. The revised rule also would give a surety bond company the right to appeal overpayment assessments if a home care agency has not appealed itself and has failed to assign its right of appeal to the bond company.

About 40 percent of home health care agencies have already purchased the required bonds, according to Ms. Thompson's testimony.

The surety industry is concerned, however, about its liability for bonds already written if HCFA ultimately changes the regulations again and cancels the bond requirement, said Lynn M. Schubert, president of The Surety Assn. of America in Washington.

Surety companies would be liable for the period the bond was in effect unless the bondholder or HCFA gave them a release, Ms. Schubert said. Any premium rebates would be governed by state laws.

The surety industry would prefer that HCFA require an anti-fraud bond rather than a financial guarantee bond, Ms. Schubert said. Fewer home health agencies are likely to be able to purchase the financial guarantee bonds because underwriting criteria are more stringent and the bonds are more expensive than anti-fraud bonds, she said.

A spokesman for the National Assn. for Home Care in Washington said, "We're not convinced a surety bond is the way to go to address compliance issues." Because a surety bond demonstrates only that the home health provider had the capital to purchase one, better ways of ensuring compliance might be certification or education of home health agency administrators, the spokes-man said.

If HCFA does require the bonds, the requirement should govern only those home health agencies that have been found to be in non-compliance, the spokesman said.