Medicare and Medicaid Programs; Surety Bond and Capitalization Requirements for Home Health Agencies

The Balanced Budget Act of 1997 (BBA '97) requires each home health agency (HHA) to secure a surety bond in order to participate in the Medicare and Medicaid programs. This requirement applies to all participating Medicare and Medicaid HHAs, regardless of the date their participation began. This final rule with comment period requires that each HHA participating in Medicare must obtain from an acceptable authorized Surety a surety bond that is the greater of $50,000 or 15 percent of the annual amount paid to the HHA by the Medicare program, as reflected in the HHA's most recently accepted cost report. The BBA '97 also requires that provider agreements be amended to incorporate the surety bond requirement; this rule deems such agreements to be amended accordingly. The BBA '97 prohibits payment to a State for home health services under Medicaid unless the HHA has furnished the State with a surety bond that meets Medicare requirements. This final rule with comment period requires that, in order to participate in Medicaid, each HHA must obtain from an acceptable authorized Surety, a surety bond that is the greater of $50,000 or 15 percent of the annual Medicaid payments made to the HHA by the Medicaid agency for home health services for which Federal Financial Participation (FFP) is available. In addition to the surety bond requirement, an HHA entering the Medicare or Medicaid program on or after January 1, 1998 must demonstrate that it actually has available sufficient capital to start and operate the HHA for the first 3 months. Undercapitalized providers represent a threat to the quality of patient care.