News Release

HHS Takes Further Steps to Protect Medicare From Fraudulent Durable Medical Equipment Suppliers

HHS today announced a proposed rule that will help limit the Medicare program’s risk by requiring all suppliers of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) to furnish the Centers for Medicare & Medicaid Services (CMS) with a surety bond.  The rule would ensure that Medicare can recover erroneous payments up to $65,000 that result from fraudulent or abusive supplier billing practices.

Acting CMS Deputy Administrator Herb Kuhn said, “A surety bond will not only limit Medicare’s risk to fraudulent billing, but will also help to ensure that only legitimate DMEPOS suppliers are enrolled in the program.”

The proposed rule represents another HHS step in an ongoing effort to combat Medicare fraud with particular focus on DMEPOS suppliers.  In May, HHS and the Department of Justice announced the establishment of a multi-agency team of federal, state and local investigators designed specifically to combat Medicare fraud through the use of real-time analysis of Medicare billing.  The proposed surety bond requirement follows announcements of two demonstration projects, one requiring that DMEPOS suppliers in South Florida and Southern California reapply to Medicare in order to maintain their billing privileges.  The other demonstration requires home health agencies in the Houston area and Southern California to reapply.

The rule proposed by CMS implements section 4312 of the Balanced Budget Act of 1997.  The rule would require all DMEPOS suppliers, except those that are government operated, to obtain and retain a surety bond in the amount of $65,000.  The $65,000 requirement is an inflation-adjusted figure from the $50,000 surety bond amount proposed in the 1997 Act.   

Earlier on Friday, CMS also issued a notice that it was extending the bidding window for DMEPOS competitive bidding for an additional 60 days.  This extension was granted to allow suppliers additional time to consider their bid submissions in the 10 bidding areas, and have the opportunity to update their bids based on this new proposal. “We wanted to make sure DMEPOS suppliers in the bidding areas had all the available information to them to make informed, yet competitive bids,” said Kuhn. 

The proposed rule also solicits comments on: 

• reasons to increase the surety bond amount for higher risk DMEPOS suppliers and the appropriate period of time that higher amount should be required;
• appropriate criteria to identify whether a physician or non-physician practitioner should be given an exception to the surety bond requirement; and
• establishing an exception to the surety bond requirement for licensed pharmacists and large, publicly traded chain suppliers of DMEPOS.

A copy of the proposed rule can be found at www.cms.gov.  For information about Medicare fraud, visit http://www.hhs.gov/medicarefraud/.

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Note: All HHS press releases, fact sheets and other press materials are available at http://www.hhs.gov/news.

Last revised: January 12, 2009