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Surety Bonds Remain an Unused Tool to Protect Medicare from Home Health Overpayments


In January 1998, the Centers for Medicare & Medicaid Services (CMS) promulgated a final rule requiring each home health agency (HHA) to obtain a surety bond in the amount of $50,000 or 15 percent of the annual amount paid to the HHA by Medicare, whichever is greater. However, this regulation remains unimplemented after nearly 15 years. The surety bond requirement is an important program integrity tool that provides a sentinel effect of keeping fraudulent providers out of the program and a means for Medicare to guarantee recoupment of some overpayments. Not implementing this tool leaves Medicare at risk of losing millions of dollars in overpayments.


We collected information from CMS on overpayments to HHAs identified from 2007 through 2011. For each year, CMS provided the total amount of debt (outstanding overpayments plus any accrued interest) still owed by HHAs as of February 29, 2012. We calculated the amount that CMS could have recovered if HHAs had each been required to obtain a $50,000 surety bond.


As of February 29, 2012, 2,004 HHAs still owed CMS a total of approximately $408 million for $590 million in overpayments that the agency identified for these HHAs between 2007 and 2011. CMS could have recovered at least $39 million between 2007 and 2011 if it had required each HHA to obtain a $50,000 surety bond. Of the 2,004 HHAs, 21 percent still had overpayment amounts, excluding interest, of more than $50,000 each, and more than a quarter of these HHAs had outstanding overpayments of greater than $500,000.


We recommend that CMS implement the HHA surety bond requirement. To recoup a higher percentage of overpayments made to HHAs, CMS should consider increasing surety bond amounts above $50,000 for those HHAs with high overall Medicare payment amounts. CMS concurred with the recommendation.