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What is a surety bond and why do I need one for DMEPOS accreditation?

This is an excerpt of my ultimate guide to DMEPOS accreditation, which gives you step-by-step instructions for filling out the CMS-855S and the application process.


Today is a short post but something I hope clarifies an important piece of the DMEPOS accreditation process: the surety bond.


In order to bill Medicare for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS), Medicare requires a $50,000 Surety Bond be submitted with the CMS-855S application. There are numerous companies in the business of selling these "Medicare Bonds."


But what exactly is that and why does Medicare require a pharmacy to have it?


Unfortunately, Fraud, Waste, and Abuse (FWA) is all-too common in the medical business; in fact, Medicare recovered $1.8 Billion and had 1,157 convictions related to FWA in 2017. A surety bond is actually a guarantee against fraudulent claims. Here's how it works:

  1. A pharmacy, with a Medicare surety bond, over-bills Medicare due to FWA

  2. Upon discovery, Medicare responds by attempting to recover the losses, but the pharmacy is unable or unwilling to repay the debt.

  3. Medicare responds by requesting payment from the bond company, up to the bond amount (again, $50,000 is the requirement) to recover the lost money.

  4. Upon paying it, the bond company will then attempt to recover the money from the pharmacy.

Requiring a surety bond protects Medicare from FWA, can help deter FWA, and is considered more of a line of credit than insurance. The pharmacy does not have a right to the $50,000 in the case they do not pay Medicare for over-billed claims. This is important to understand because the surety bond protects Medicare, not the pharmacy. It is still the pharmacy's responsibility to accurately bill claims and not doing so can put the pharmacy at significant risk of financial and potentially criminal charges.


The Surety Bond is only one part of the DMEPOS process. For step-by-step instructions to the entire CMS 855S application and process, check out my ultimate guide.

References:

https://www.vgminsurance.com/bonds/common/docs/MedicareBondFAQs.pdf


https://oig.hhs.gov/oei/reports/oei-09-18-00180.pdf