HCFA is moving to address some of the concerns of home health agencies about the cost and availability of surety bonds, but home health groups say even with the changes, the cost may be prohibitive.
The greatest impact of the surety-bond law may be felt by Medicaid beneficiaries as small home health agencies drop their Medicaid business to get out from under the requirements.
Last year's balanced-budget law required all home health agencies that do business with Medicare or Medicaid to post a surety bond as a way to weed out undercapitalized or fly-by-night agencies. Agencies that deal with both programs must carry separate bonds. According to a proposed HCFA regulation, the agencies must have a bond for the greater of $50,000 or 15% of the amount of Medicare or Medicaid revenues the agency receives.
Home health and hospital groups criticized the rule, arguing that the bonds would be too expensive for many agencies.
The Jacksonville, Fla.-based Home Care Association of America sued HCFA in federal court asking for an injunction against the new rule. There has been no action on the lawsuit.
The bond requirement was supposed to take effect at the end of February. However, HCFA said last month it would delay the effective date until 60 days after it releases the final regulation. That date is still unknown, but is not likely to be until next month at the earliest.
In its notice announcing the delay, HCFA said it would reopen many of the most controversial issues. For example, it said it would consider reducing the 15% of total revenues limit to an unspecified percentage.
But home health groups say that while the changes pondered by HCFA are all positive, the bonds remain too expensive.
"The cost will still be prohibitive for most small agencies," said Theresa Forster, vice president of policy for the National Association for Home Care.
State Medicaid officials are concerned that the new law will hit Medicaid beneficiaries particularly hard. That's because most home health agencies have few Medicaid patients and often lose money on the program. That means the agencies will have little incentive to spend the money for the required surety bond.
"If agencies are doing what they are supposed to be doing, they are not making much money on Medicaid; and if they have to quit either (Medicare or Medicaid) it will probably be Medicaid," said David Conradt, a manager with Myers and Stauffer, a Topeka, Kan.-based accounting firm that deals exclusively with state Medicaid agencies. At a recent conference Conradt hosted on surety bonds, more than 30 states expressed concern over the effect the bond requirement will have on Medicaid beneficiaries.
"What makes it even worse is that most of the small agencies that can't afford this are in rural areas where there are few other options available," Conradt added.