Department of Health and Human Services 
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
S   B R
URETY  ONDS  EMAIN AN 
 
U   T T P
NUSED  OOL  O  ROTECT 
 
M  F H
EDICARE  ROM  OME 
 
H O  
EALTH  VERPAYMENTS
 
Daniel R. Levinson  
Inspector General 
 
September 2012 
OEI-03-12-00070   
   
EXECUTIVE SUMMARY:  SURETY BONDS REMAIN AN UNUSED TOOL TO 
PROTECT MEDICARE FROM HOME HEALTH OVERPAYMENTS 
OEI-03-12-00070 
 
 
WHY WE DID THIS STUDY  
 
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. 
 
HOW WE DID THIS STUDY 
 
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.   
 
WHAT WE FOUND 
 
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.     
 
WHAT WE RECOMMEND 
 
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. 
 
 
 
 
 
   
TABLE OF CONTENTS 
 
Objective ......................................................................................................1 
Background ..................................................................................................1 
Methodology ................................................................................................6 
Findings........................................................................................................7 
CMS could have recovered at least $39 million between 2007 and 
2011 if it had required HHAs to obtain $50,000 surety bonds ........7 
Twenty-one percent of HHAs had outstanding overpayment 
amounts, excluding interest, of more than $50,000 .........................7  
Conclusion and Recommendation ...............................................................9 
Agency Comments and Office of Inspector General Response .....10 
Appendix .................................................................................................... 11 
A:  Agency Comments ................................................................... 11 
Acknowledgments......................................................................................13 
 
Surety Bonds Remain an Unused Tool to Protect Medicare from Home Health Overpayments (OEI-03-12-00070) 
   
   
OBJECTIVE  
To determine how much in overpayments the Centers for Medicare & 
Medicaid Services (CMS) could have recovered had the home health 
agency (HHA) surety bond requirement been implemented. 
BACKGROUND  
To strengthen the integrity of Medicares home health benefit, the 
Balanced Budget Act (BBA) of 1997 established a surety bond 
requirement for HHAs.  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.  However, the BBA requirement 
remains unimplemented after nearly 15 years.   
In the years since enactment of the BBA of 1997, the home health benefit 
has remained highly vulnerable to fraud.  In recent years, numerous 
individuals were indicted on charges of fraudulently billing Medicare for 
millions in home health services.  In addition, the number of HHAs and 
the amount of home health care expenditures have increased since 1997.  
Not using the surety bond as a program integrity tool leaves Medicare at 
risk for losing millions of dollars in overpayments to HHAs.     
Medicare covers home health services for beneficiaries who need part-
time or intermittent care.  Home health care services include skilled 
nursing services, physical or occupational therapy, speech therapy, medical 
social services, and home health aide services.1   
To qualify for home health services, Medicare beneficiaries must be:    
  homebound (i.e., confined to the home);  
  in need of home health care services on a part-time or intermittent 
basis; 2  
  under a physicians care; and 
 
1
 The authority for coverage of home health services by Parts A and B is found throughout the 
Social Security Act.  Sections 1812(a) and 1832(a) establish home health services as a benefit 
under, respectively, Part A and Part B.  Section 1861(o) defines home health agency and 
establishes certain administrative requirements for participation in Medicare, including the 
submission of a surety bond.  Sections 1814(a)(2) and 1835(a)(2) establish certain limits on 
payment for services, including the requirement that the beneficiary be homebound.  Finally, 
section 1891 establishes the conditions of Medicare participation for home health agencies. 
2 Intermittent means skilled nursing care that is provided or needed fewer than 7 days each 
week, or less than 8 hours each day for periods of 21 days or less.  Social Security Act,           
 1861(m). 
Surety Bonds Remain an Unused Tool To Protect Medicare from Home Health Overpayments (OEI-03-12-00070)  1 
   
   
  under a plan of care established and reviewed periodically by a 
physician.3   
As of 2011, a physician must also certify through a face-to-face encounter 
that a beneficiary needs home health services.  This encounter must occur 
no more than 90 days before or 30 days after services begin.4 
Home health services are covered under Part A and Part B of Medicare.  
Most Medicare services require beneficiary copayments; home health 
services do not.5        
Growth and Vulnerabilities Related to Home Health Care 
Medicare expenditures for home health services grew considerably from 
1990 to 1997, increasing from $4 billion to $18 billion.  During the same 
period, the number of HHAs nearly doubled.  This growth led to concerns 
from Congress regarding fraud and abuse, increased spending, and 
inadequate oversight.  In particular, concern arose that unscrupulous 
HHAs were being allowed to participate in Medicare.  Some HHAs 
accumulated large overpayments that could not be recovered because the 
HHAs had closed or declared bankruptcy.6  
In recent years, Medicare expenditures and the number of HHAs have 
grown to levels exceeding the highs they reached in 1997.  In 2009, 
Medicare paid $19.3 billion for home health care, and in 2010, the number 
of HHAs reached 11,488.7, 8   
CMS continues to cite home health care as an area highly vulnerable to 
waste, fraud, and abuse.9  To address this vulnerability, CMS has 
established new enrollment requirements for moderate- and high-risk 
providers and has also established payment caps.10  However, the recent 
 
3 Social Security Act,  1814(a)(2)(C) and 1835(a)(2)(A).  
4 Medicare Benefit Policy Manual (MBPM), Pub. 100-02, ch. 7  30.5.1.1. 
5 Social Security Act  1813 and 1833 and MBPM, Pub. 100-02, ch.7,  60.3. 
6 General Accounting Office (now the Government Accountability Office) (GAO), Medicare 
Home Health Agencies:  Overpayments Are Hard To Identify and Even Harder to Collect, 
GAO/HEHS/AIMD-00-132, April 2000. 
7 Medicare Payment Advisory Committee (MedPAC), Home Health Care Services Payment 
System, October 2011.  Accessed  at 
http://www.medpac.gov/documents/MedPAC_Payment_Basics_11_HHA.pdf on                    
June 22, 2012. 
8 MedPAC, Report to the Congress: Medicare Payment Policy, ch. 8, March 2011.  Accessed 
at http://www.medpac.gov/chapters/Mar11_Ch08.pdf on June 22, 2012 . 
9 Reducing Fraud, Waste, and Abuse in Medicare:  Hearing Before the U.S. House of 
Representatives Committee on Ways and Means, Subcommittee on Health, Subcommittee on 
Oversight, 112 Cong. (2011) (Statement of Kimberly Brandt, Director, Program Integrity 
Group, Office of Financial Management, CMS, U.S. Department of Health and Human 
Services). 
10
 42 CFR  424.518. 
Surety Bonds Remain an Unused Tool To Protect Medicare from Home Health Overpayments (OEI-03-12-00070)  2 
   
   
indictments of numerous individuals for fraudulently billing Medicare for 
home health services illustrate the need for additional oversight of the 
HHA benefit.  For instance, a Texas physician was indicted in       
February 2012 for allegedly certifying beneficiaries plans of care so that 
HHAs were able to bill Medicare for home health services that were not 
medically necessary and not provided.  This physician also allegedly 
performed unnecessary home visits and ordered unnecessary medical 
services.  This is the largest home health fraud indictment in U.S. history, 
involving more than $350 million in allegedly fraudulent Medicare 
payments.11    
Collection of Overpayments 
Medicare Administrative Contractors (MAC) are responsible for 
processing claims for home health services.  Overpayments may be 
identified by MACs or other Medicare contractors, such as Zone Program 
Integrity Contractors.  The recovery of overpayments is part of the MACs 
claims processing responsibilities.  Overpayments may be recovered 
through methods such as the establishment of a repayment plan, reduction 
of Medicare payments by the amount owed, or suspension of payments.   
Surety bonds are a method for recovering outstanding overpayments when 
established methods are unsuccessful.  A surety bond is issued by a 
company, known as a surety, guaranteeing that the bond purchaser will 
fulfill its financial obligation to Medicare.  The surety bond guarantees 
that the surety will pay CMS the amount of any overpayments, civil 
monetary penalties, or assessments, plus accrued interest, for which the 
purchaser (e.g., an HHA) is responsible, up to the suretys maximum 
obligation.12  Surety bonds have been a condition of enrollment for certain 
suppliers of durable medical equipment, prosthetics, orthotics, and 
supplies (DMEPOS) since 2009.13  
Use of Surety Bonds to Limit Medicare Vulnerability 
To address concerns created by growth in home health care, the BBA of 
1997 amended the Social Security Act to require HHAs to obtain surety 
bonds.14  To implement the BBA requirement, CMS promulgated a final 
rule on January 5, 1998, requiring each HHA to obtain a surety bond that 
 
11 Department of Justice, Justice News:  Dallas Doctor Arrested for Alleged Role in Nearly 
$375 Million Health Care Fraud Scheme, February 28, 2012.  Accessed at 
http://www.justice.gov/opa/pr/2012/February/12-crm-260.html on June 22, 2012. 
12
 42 CFR  489.66(a). 
13
 42 CFR  424.57(d)(1). 
14
 BBA of 1997,  4312(b), amending the Social Security Act,  1861(o). 
 
 
Surety Bonds Remain an Unused Tool To Protect Medicare from Home Health Overpayments (OEI-03-12-00070)  3 
   
   
is the greater of $50,000 or 15 percent of the annual amount paid to the 
HHA by Medicare.15  
Certain members of Congress objected to some provisions of CMSs 
surety bond rule, such as the requirement that some HHAs obtain bonds 
equal to 15 percent of the amount paid to the HHA by Medicare.  
Members of Congress also objected to requirements that all HHAsnot 
just new onesobtain bonds and that HHAs must obtain bonds every 
year.  A joint resolution expressing disapproval of CMSs rule was 
ultimately introduced in the Senate and House.  Although the resolution 
was never voted upon, in July 1998, CMS indefinitely postponed the 
implementation dates for HHAs to comply with the surety bond 
requirement.16     
GAO issued a report in January 1999 concluding that a surety bond 
requirement would increase scrutiny of HHAs entering Medicare and 
provide them with incentives to avoid overpayments.  GAO recommended 
that CMS revise the original regulation so that each HHA, regardless of its 
total payments from Medicare, would be required to obtain a $50,000 
surety bond.  Although CMS agreed with this recommendation, the HHA 
surety bond requirement has remained unimplemented. 
The Patient Protection and Affordable Care Act (ACA) of 2010 adds 
language to the Social Security Act stating that the amount of the surety 
bond can be set based on the HHAs billing volume.17  In 2011, CMS staff 
testified before Congress that the agency would issue additional surety 
bond requirements established under the ACA for home health agencies.18  
However, CMS has not yet done so. 
CMS is drafting a proposed rule that, among other topics, addresses the 
issue of surety bonds for HHAs.  As of July 2012, the agency does not 
have an estimate as to when this proposed rule will be completed. 
Related Office of Inspector General Work 
The Office of Inspector General (OIG) has issued reports identifying 
vulnerabilities in the home health care benefit and weaknesses in CMSs 
use of surety bonds to recover overpayments from DMEPOS suppliers. 
 
15
 42 CFR  489.65, 63 Fed. Reg. 292 (Jan. 5, 1998). 
16
 63 Fed. Reg. 41170 (July 31, 1998). 
17
 ACA  6402(g), amending the Social Security Act,  1861(o). 
18
 New Tools for Curbing Waste and Fraud in Medicare and Medicaid:  Hearing Before the 
U.S. Senate Committee on Homeland Security and Governmental Affairs, 112 Cong. (2011) 
(Statement of Peter Budetti, Deputy Administrator and Director, Center for Program Integrity, 
CMS, U.S. Department of Health and Human Services).   
Surety Bonds Remain an Unused Tool To Protect Medicare from Home Health Overpayments (OEI-03-12-00070)  4 
   
   
A 2006 report found that improperly coded claims for home health 
services led to $48 million in overpayments.  CMS had not established the 
controls needed to code claims correctly.  OIG recommended that CMS 
establish needed controls and recover these overpayments.19   
In a 2009 report, OIG found aberrant outlier payments to HHAs in  
Miami-Dade County, Florida, and 23 other counties nationwide, indicating 
that home health is an area vulnerable to fraud.  The report recommended 
strengthening enrollment standards for HHAs to prevent illegitimate 
agencies from obtaining Medicare billing privileges.20      
In a September 2011 memorandum report, OIG found that CMS did not 
have finalized procedures for recovering DMEPOS overpayments through 
surety bonds.  In addition, as of July 2011, no overpayments had been 
recovered through surety bonds since the surety bond requirement became 
effective for all DMEPOS suppliers in October 2009.21    
In 2012, OIG reviewed home health medical records for a sample of         
495 beneficiaries to determine whether Medicare coverage requirements were 
met.  OIG found that HHAs submitted 22 percent of claims in error in 
2008 because services were unnecessary or claims were coded 
inaccurately, resulting in $432 million in improper payments.22    
OIG has also collaborated with the Department of Justice on a number of 
investigations of fraudulent home health providers.  In one case, a 
provider pleaded guilty to falsifying patient records and billing Medicare 
for unneeded services.  The provider paid cash kickbacks to a doctor for 
referring patients to the provider for services.23  In another case, a provider 
fraudulently billed $20 million to Medicare by falsifying patient records 
and paying kickbacks to patient recruiters.24    
 
19 OIG, Review of Home Health Agencies Billing for Services Preceded by a Hospital 
Discharge, A-01-04-00527, March 2006.   
20 OIG, Aberrant Medicare Home Health Outlier Payment Patterns in Miami-Dade County 
and Other Geographic Areas in 2008, OEI-04-08-00570, December 2009. 
21 OIG, Use of Surety Bonds to Recover Overpayments Made to Suppliers of Durable Medical 
Equipment, Prosthetics, Orthotics, and Supplies:  Early Findings, OEI-03-11-00351, 
September 2011. 
22 OIG, Documentation of Coverage Requirements for Medicare Home Health Claims,      
OEI-01-08-00390, March 2012. 
23
 Department of Justice, Home Health Care Administrator Pleads Guilty to Federal 
Healthcare Fraud and Scheme, April 20, 2012.  Accessed at 
http://www.justice.gov/usao/iln/pr/rockford/2012/pr0420_01.pdf on April 23, 2012. 
24
 Department of Justice, Two Owners and Two Employees of Miami Home Health Company 
Plead Guilty in $20 Million Health Care Fraud Scheme, April 2, 2012.  Accessed at 
http://www.justice.gov/opa/pr/2012/April/12-crm-420.html on April 23, 2012. 
Surety Bonds Remain an Unused Tool To Protect Medicare from Home Health Overpayments (OEI-03-12-00070)  5 
   
   
METHODOLOGY 
Data Collection and Analysis  
We collected information from CMS on HHA overpayments identified 
from 2007 through 2011 that were still outstanding as of February 29, 
2012.  For each calendar year and for each HHA, CMS provided the total 
amount of overpayments identified, the total amount of any current 
outstanding overpayments, and the total amount of debt (i.e., outstanding 
overpayments plus accrued interest) as of February 29, 2012.   
We calculated the amount that CMS could have recoveredbased on the 
amount of each HHAs debtif each HHA had been required to obtain a 
$50,000 surety bond.  For those HHAs that owed less than $50,000 in a 
given year, we used the debt amount (outstanding overpayments plus 
accrued interest) as the amount CMS could have recovered from the HHA.   
For those HHAs that owed $50,000 or more, we used $50,000the base 
amount for a surety bondas the amount that CMS could have recovered.  
Had we instead used a recovery amount equal to 15 percent of an HHAs 
annual payments from Medicare, the total estimate of potential recoveries 
would have been greater.  For that reason, our estimate of potential 
recoveries is a conservative one.     
We also determined the number of HHAs with outstanding overpayments 
(not including accrued interest) greater than $50,000 and calculated the 
amount of outstanding overpayments.  
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General 
on Integrity and Efficiency. 
   
Surety Bonds Remain an Unused Tool To Protect Medicare from Home Health Overpayments (OEI-03-12-00070)  6 
   
   
FINDINGS 
CMS could have recovered at least $39 million 
between 2007 and 2011 if it had required HHAs to 
obtain $50,000 surety bonds 
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.  Of these 
HHAs, 198 had overpayments identified in multiple years.  Table 1 
provides the amount of overpayments CMS identified for each year from 
2007 through 2011 as well as potential recoveries.  If CMS had required 
each HHA to obtain a $50,000 surety bond, the agency could have 
potentially recovered a minimum of $39 million.   
 
Table 1:  Potential Recoveries if HHAs With Overpayment Debt Had a $50,000 Surety Bond  
Potential 
Recoveries 
Total  Total  Total Debt1  if Each HHA 
Number  Total 
Year  Outstanding  Accrued  (Amount Owed  Had a 
of HHAs  Overpayments 
Overpayments  Interest  to CMS)  $50,000 
Surety 
Bond 
2007  1,087  $102,584,189  $34,604,552  $15,345,161  $49,949,713  $17,526,563  
2008  118  $48,338,042  $28,533,239  $8,594,117  $37,127,357  $2,435,444  
2009  161  $91,177,813  $55,989,749  $10,036,756  $66,026,505  $4,220,852  
2010  217  $149,449,406  $116,028,090  $12,299,595  $128,327,685  $5,760,193  
2011  421  $198,351,973  $119,190,213  $7,001,053  $126,191,266  $9,160,602  
     Total  2,004  $589,901,423  $354,345,843  $53,276,682  $407,622,526  $39,103,654  
 
Source: OIG analysis of CMS overpayment data, 2012.
 
1 As of February 29, 2012. 
 
Twenty-one percent of HHAs had outstanding 
overpayment amounts, excluding interest, of more 
than $50,000  
Four hundred fourteen HHAs each had outstanding overpayment amounts 
(excluding accrued interest) of more than $50,000 in at least 1 year.   
Thirty-four HHAs each had outstanding overpayments of more than 
$50,000 for multiple years.  As shown in Table 2, the 414 HHAs had 
outstanding overpayments totaling $341 million.25  If each of these        
414 HHAs had a surety bond of $50,000, CMS would have recovered   
 
25
 With the addition of accrued interest, these HHAs owed a total of $388 million to CMS.   
Surety Bonds Remain an Unused Tool To Protect Medicare from Home Health Overpayments (OEI-03-12-00070)  7 
   
   
$21 million, which is only 6 percent of the $341 million outstanding 
overpayment amount.           
Table 2:  Outstanding Overpayments for HHAs 
Number of HHAs  Number of HHAs 
With $50,000 or  Total  With More Than  Total 
Year  Less in  Outstanding  $50,000 in  Outstanding 
Outstanding  Overpayments   Outstanding  Overpayments 
Overpayments  Overpayments 
2007  975  $8,071,071  112  $26,533,481 
2008  89  $743,732  29  $27,789,508 
2009  100  $932,882  61  $55,056,867 
2010  131  $1,223,020  86  $114,805,071 
2011  295  $2,746,598  126  $116,443,615 
     Total  1,590  $13,717,303  414  $340,628,542 
S ource: OIG analysis of CMS overpayment data, 2012. 
 
Many of these HHAs (281 of 414) had outstanding overpayment amounts 
 
  of more than twice the standard surety bond amount of $50,000.  Within 
this group, 130 HHAs had outstanding overpayments of over $500,000.      
For the 414 HHAs, the lowest amount owed in a single year was $52,881 
and the highest amount owed was $16,360,555.  The average debt was      
$937,337 and the median debt was $217,822.   
CMSs final rule on the surety bond requirement stated that HHAs were to 
obtain a surety bond that is the greater of $50,000 or 15 percent of the 
annual amount paid to the HHA by Medicare.  For an HHA to be required 
to obtain a surety bond greater than $50,000, its annual Medicare 
payments would need to be greater than $333,333.  Between 2007 and 
2011, 144 HHAs had outstanding overpayments alone totaling more than 
$333,333.26  The total amount of outstanding overpayments for these 
HHAs is $306 million.  As of February 29, 2012, these HHAs owed a total 
of $344 million (outstanding overpayments plus accrued interest).  
   
 
26
 An overpayment may not have necessarily occurred in the same year it was identified. 
Surety Bonds Remain an Unused Tool To Protect Medicare from Home Health Overpayments (OEI-03-12-00070)  8 
   
   
CONCLUSION AND RECOMMENDATION 
The BBA of 1997 mandated the use of surety bonds for HHAs to 
strengthen program integrity over home health services.  In 1999, GAO 
concluded that a surety bond requirement would increase scrutiny of 
HHAs entering Medicare and provide them with incentives to return 
overpayments.   However, the HHA surety bond requirement remains 
unimplemented and home health expenditures and the number of HHAs in 
Medicare have increased.   
Medicare continues to lose millions of dollars in outstanding HHA 
overpayments.  From 2007 through 2011, CMS identified $590 million in 
HHA overpayments that were still outstanding as of February 29, 2012. 
The total debt still owed to Medicare was approximately $408 million.  In 
addition, 21 percent of HHAs had outstanding overpayment amounts 
(excluding accrued interest) of more than $50,000 in at least 1 year. 
In the past, OIG has conducted work on CMSs tracking and collection of 
overpayments, identifying vulnerabilities that highlight the need for CMS 
to be more effective in its recoupment efforts.  The surety bond 
requirement is not the only tool that CMS can use to protect the program 
from vulnerabilities in the home health benefit.  However, requiring the 
use of surety bonds would discourage fraudulent HHAs entry into the 
program and guarantee CMSs ability to recoup some portion of 
overpayments.   
We recommend that CMS: 
Implement the HHA Surety Bond Requirement  
CMS suspended its implementation of the surety bond requirement in 
1998.  CMS should promulgate a new implementation date for the existing 
regulations or promulgate new regulations that implement the statutory 
requirement for HHAs to obtain surety bonds.  The regulation published in 
1998 required HHAs to obtain a surety bond that is the greater of $50,000 
or 15 percent of the annual amount paid to the HHA by Medicare.  We 
found that many of the HHAs with outstanding overpayments each owed 
more than twice the $50,000 surety bond amount.    
The ACA further amended the surety bond requirement by allowing CMS 
to establish the surety bond amount based on the HHAs billing volume.  
To provide CMS with the ability 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.  
Surety Bonds Remain an Unused Tool To Protect Medicare from Home Health Overpayments (OEI-03-12-00070)  9 
   
   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred that implementing a surety bond requirement for HHAs 
may help reduce potential payment vulnerabilities.  It stated that it is 
evaluating its options in implementing this requirement.   
The full text of CMS's comments is provided in Appendix A. 
 
   
Surety Bonds Remain an Unused Tool To Protect Medicare from Home Health Overpayments (OEI-03-12-00070)  10 
  APPENDIX A 
Agency Comments 
{_;< P,'O.Q..,.i..._   	
DEPARTMENT OF HEALTH & HUMAN SERVICES  Centers for Medicare & Medicaid Services 
~<::~~ 
Administrator 
Washington, DC 20201 
DATE:  AUG  2 2 2012 
TO: 	 Daniel R. Levinson 

Inspector General 

FROM:  'MarilYn Tav-ellner 

Acting Adm'ini!;trator 

SUBJECI': 	 Office of Inspector General (OIG) Draft Report: "Surety Bonds Remain an 
Unused Tool to Protect Medicare from Home Health Overpayments" 
(OEI-03-12-00070) 
The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to review and 
comment on the OIG draft report entitled, "Surety Bonds Remain an Unused Tool to Protect 
Medicare from Home Health Overpayments." 
To strengthen the integrity of Medicare's home health benefit, the Balanced Budget Act of 1997 
established a surety bond requirement for home health agencies (HHA) enrolling in Medicare. 
Requiring surety bonds is an important program integrity tool that not only helps to keep 
fraudulent providers out of the program, but also provides a means for Medicare to guarantee 
recoupment of some overpayments. 
The Affordable Care Act further strengthens CMS's ability to address fraud in higher risk 
entities such as HHAs and provides CMS with important new tools to combat fraud and abuse, 
including enhanced provider and supplier screening requirements, authority to suspend payments 
pending investigations of credible allegations of fraud and, when necessary, the authority to 
impose moratoria on new providers and suppliers. One such tool CMS "implemented was a face
to-face encounter requirement as a condition of payment for Medicare home health services. In 
addition, the Affordable Care Act expands CMS's authority to require surety bonds. 
The Affordable Care Act amended the existing home health surety bond requirement at section 
1861(o)(7)(C) of the Social Security Act to require a bond amount that is commensurate with the 
volume of the HHA's billing.  Given the agency's prior experience with a surety bond 
requirement, which as described in the report was met with significant resistance, CMS is 
carefully evaluating the best way to implement a HHA surety bond. Whereas CMS is clearly 
committed to identifying and preventing fraud and improper payments, CMS is also mindful of 
the impact that our initiatives have on legitimate providers and suppliers, particularly smaller 
entities. 
Surety Bonds Remain an Unused Tool To Protect Medicare from Home Health Overpayments (OEI-03-12-00070)  11   
   
 
   
Surety Bonds Remain an Unused Tool To Protect Medicare from Home Health Overpayments (OEI-03-12-00070)  12 
   
   
ACKNOWLEDGMENTS 
This report was prepared under the direction of Robert A. Vito, Regional 
Inspector General for Evaluation and Inspections in the Philadelphia 
regional office, and Linda M. Ragone, Deputy Regional Inspector General.   
Tanaz Dutia served as the team leader for this study.  Other Office of 
Evaluation and Inspections staff from the Philadelphia regional office who 
conducted the study include Nancy Molyneaux and Russell Tisinger.  
Central office staff who provided support include Scott Manley and 
Christine Moritz.  
 
Surety Bonds Remain an Unused Tool To Protect Medicare from Home Health Overpayments (OEI-03-12-00070)  13 
   
Office of Inspector General 
http://oig.hhs.gov 
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs.  This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 
audits with its own audit resources or by overseeing audit work done by others.  Audits 
examine the performance of HHS programs and/or its grantees and contractors in carrying 
out their respective responsibilities and are intended to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, abuse, and 
mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 
HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  These evaluations focus on preventing fraud, waste, or abuse and promoting 
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 
of fraud and misconduct related to HHS programs, operations, and beneficiaries.  With 
investigators working in all 50 States and the District of Columbia, OI utilizes its resources 
by actively coordinating with the Department of Justice and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to criminal 
convictions, administrative sanctions, and/or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support for OIGs internal operations.  OCIG represents OIG in all civil and 
administrative fraud and abuse cases involving HHS programs, including False Claims Act, 
program exclusion, and civil monetary penalty cases.  In connection with these cases, OCIG 
also negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
opinions, issues compliance program guidance, publishes fraud alerts, and provides other 
guidance to the health care industry concerning the anti-kickback statute and other OIG 
enforcement authorities.