Basics of the Surety Bond Requirement

10.2.5.3.1 – Basics of the Surety Bond Requirement (Rev. 13355; Issued: 08-13-25; Effective: 05-05-25; Implementation: 05-05-25) A. Parties Subject and Not Subject to Surety Bond Requirement All DMEPOS suppliers are subject to the surety bond requirement except: (1) Government-operated DMEPOS suppliers are exempted if the supplier has provided CMS with a comparable surety bond under state law. (2) State-licensed orthotic and prosthetic personnel (which, for purposes of the surety bond requirement, does not include pedorthists) in private practice making custom- made orthotics and prosthetics are exempted if— • The business is solely-owned and operated by the orthotic and prosthetic personnel, and • The business is only billing for orthotic, prosthetics, and supplies. (3) Physicians and non-physician practitioners, as defined in section 1842(b)(18) of the Social Security Act, are exempted if the items are furnished only to the physician or non-physician practitioner’s own patients as part of the individual’s service. The non-physicians covered under this exception are: physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, certified nurse-midwives, clinical social workers, clinical psychologists, and registered dietitians or nutrition professionals. (4) Physical and occupational therapists in private practice are exempted if— • The business is solely-owned and operated by the physical or occupational therapist; • The items are furnished only to the physical or occupational therapist’s own patients as part of the individual’s professional service; and • The business is only billing for orthotics, prosthetics, and supplies. If a previously-exempted supplier no longer qualifies for an exception, it must submit a surety bond to the contractor - in accordance with the requirements in 42 CFR § 424.57 - within 60 days after it knows or has reason to know that it no longer meets the criteria for an exception. B. Bond Submission Effective May 4, 2009, DMEPOS suppliers submitting: (1) an initial enrollment application to enroll in the Medicare program for the first time, (2) an initial application to establish a new practice location, or (3) an enrollment application to change the ownership of an existing supplier, are required to obtain and submit a copy of its required surety bond to the contractor with their Form CMS-855S enrollment application. (NOTE: Ownership changes that do not involve a change in the status of the legal entity as evidenced by no change in the tax identification number (or changes that result in the same ownership at the level of individuals (corporate reorganizations and individuals incorporating)) are not considered to be “changes of ownership” for purposes of the May 4, 2009, effective date – meaning that such suppliers are considered “existing” suppliers). For any Form CMS-855S application submitted on or after May 4, 2009 by a non-exempt supplier described in this subsection (B), the contractor shall reject the application if the supplier does not furnish a valid surety bond at the time it submits its application. The rejection shall be done in accordance with existing procedures (e.g., reject application after 30 days). C. Amount and Basis The surety bond must be in an amount of not less than $50,000 and is predicated on the NPI, not the tax identification number. Thus, if a supplier has two separately-enrolled DMEPOS locations, each with its own NPI, a $50,000 bond must be obtained for each site. A supplier may obtain a single bond that encompasses multiple NPIs/locations. For instance, if a supplier has 10 separately-enrolled DMEPOS locations, it may obtain a $500,000 bond that covers all 10 locations. As stated in 42 CFR § 424.57(d)(3), a supplier will be required to maintain an elevated surety bond amount of $50,000 for each final adverse action imposed against it within the 10 years preceding enrollment or reenrollment. This amount is in addition to, and not in lieu of, the base $50,000 amount that must be maintained. Thus, if a supplier has had two adverse actions imposed against it, the bond amount will be $150,000. A final adverse action is one of the following: • A Medicare-imposed revocation of Medicare billing privileges; • Suspension or revocation of a license to provide health care by any State licensing authority; • Revocation or suspension by an accreditation organization; • A conviction of a federal or state felony offense (as defined in § 424.535(a)(3)(i)) within the last 10 years preceding enrollment or re-enrollment; or • An exclusion or debarment from participation in a federal or state health care program. D. Bond Terms The supplier is required to submit a copy of the bond that - on its face - reflects the requirements of 42 CFR §424.57(d). Specific terms that the bond must contain include: • A guarantee that the surety will - within 30 days of receiving written notice from CMS containing sufficient evidence to establish the surety's liability under the bond of unpaid claims, civil money penalties (CMPs), or assessments - pay CMS a total of up to the full penal amount of the bond in the following amounts: a. The amount of any unpaid claim, plus accrued interest, for which the DMEPOS supplier is responsible, and b. The amount of any unpaid claims, CMPs, or assessments imposed by CMS or the OIG on the DMEPOS supplier, plus accrued interest. • A statement that the surety is liable for unpaid claims, CMPs, or assessments that occur during the term of the bond. • A statement that actions under the bond may be brought by CMS or by CMS contractors. • The surety's name, street address or post office box number, city, state, and zip code. • Identification of the DMEPOS supplier as the Principal, CMS as the Obligee, and the surety (and its heirs, executors, administrators, successors and assignees, jointly and severally) as the surety. The term of the initial surety bond must be effective on the date that the application is submitted to the contractor. Moreover, the bond must be continuous. E. List of Sureties The list of sureties from which a bond can be secured is found at Department of the Treasury's “Listing of Certified (Surety Bond) Companies;” the Web site is https://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/c570_a-z.htm. For purposes of the surety bond requirement, these sureties are considered “authorized” sureties, and are therefore the only sureties from which the supplier may obtain a bond. F. Bond Cancellations and Gaps in Coverage A DMEPOS supplier may cancel its surety bond, but it must provide written notice of such to the contractor and the surety at least 30 days before the effective date of the cancellation. Cancellation of a surety bond is grounds for revocation of the supplier's Medicare billing privileges unless the supplier provides a new bond before the effective date of the cancellation. The liability of the surety continues through the termination effective date. The contractor shall: • Process post-dated surety bond cancellations within 45 calendar days from the date the contractor received the cancellation. • Process future-dated surety bond cancellations within 45 calendar days from the effective date of cancellation. (The contractor may apply a clock stoppage if a surety bond gap is involved and the case must be sent to PEOG for review. The clock stoppage remains in effect until the contractor receives PEOG’s final determination.) If a supplier changes its surety during the term of the bond, the new surety is responsible for any overpayments, CMPs, or assessments incurred by the DMEPOS supplier beginning with the effective date of the new surety bond. The previous surety is responsible for any overpayments, CMPs, or assessments that occurred up to the date of the change of surety. Pursuant to 42 CFR § 424.57(d)(6)(iv), the surety must notify the contractor if there is a lapse in the surety’s coverage of the DMEPOS supplier. This can be done via letter, fax, or e-mail to the contractor. G. Reenrollment and Reactivation The supplier must furnish the paperwork described above with any Form CMS-855S reenrollment or reactivation application it submits to the contractor unless it already has the information on file with the contractor. For example, if a supplier has submitted a continuous surety bond to the contractor prior to submission of its reenrollment application, a new copy of surety bond is not required unless the contractor specifically requests it. H. Surety Bond Changes A DMEPOS supplier must submit an addendum to the existing bond (or, if the supplier prefers, a new bond) to the contractor in the following instances: (1) change in bond terms; (2) change in bond amount; or (3) a location on a bond covering multiple non-chain locations is being added or deleted.