The $50,000 DMEPOS Surety Bond, and When It Goes Up

Every non-exempt DMEPOS supplier must post a surety bond with Medicare before it can enroll, and keep it in force for as long as it bills. The rules are in 42 CFR 424.57(d), and they are stricter than many suppliers expect: the bond is counted per NPI, it rises with your history, it must be continuous, and a gap in coverage is a revocation.

One thing first: we do not sell, broker or write bonds, and we take no commissions. We gather the documents a supplier's own licensed surety agent needs and check the bond against the rule before it goes in.

How much is the DMEPOS surety bond?

The base amount is $50,000. A supplier "enrolling in the Medicare program, making a change in ownership, or responding to a revalidation or reenrollment request must submit to the CMS contractor a surety bond from an authorized surety of $50,000" (424.57(d)(2)(i)). The bond is "predicated on the NPI, not the tax identification number," according to the CMS Program Integrity Manual, so a supplier with two separately enrolled locations, each with its own NPI, needs $50,000 for each. A single bond can cover several locations; the manual's example is a $500,000 bond covering 10 locations.

Adding a location means "a new surety bond from an authorized surety or an amendment or rider to the existing bond," showing an additional $50,000 for the new location (424.57(d)(2)(iii)).

When does the bond go above $50,000?

When the supplier has a history. "The CMS contractor prescribes an elevated surety bond amount of $50,000 per occurrence of an adverse legal action within the 10 years preceding enrollment, revalidation, or reenrollment" (424.57(d)(3)(ii)). The elevated amount is on top of the base bond, not instead of it; the manual's example is a supplier with two adverse actions needing $150,000.

The manual lists what counts as a final adverse action for this purpose:

• a Medicare-imposed revocation of any 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 federal or state felony conviction within the last 10 years preceding enrollment or reenrollment;
• an exclusion or debarment from a federal or state health care program.

Those are the same events you report in section 3 of the 855S, and for owners and managers in sections 5B and 6B. An unreported action surfaces anyway, and then the bond is short as well as the disclosure.

Who has to post a bond, and who is exempt?

All DMEPOS suppliers, except four groups listed in 424.57(d)(15):

1. Government-operated suppliers that have given CMS a comparable surety bond under state law.
2. State-licensed orthotic and prosthetic personnel in private practice making custom-made orthotics and prosthetics, if the business is solely owned and operated by them and bills only for orthotics, prosthetics and supplies. The manual notes that pedorthists are not included in this exception.
3. Physicians and nonphysician practitioners furnishing items only to their own patients as part of their professional service.
4. Physical and occupational therapists in a solely owned private practice, furnishing items only to their own patients and billing only for orthotics, prosthetics and supplies.

Pharmacies are not on the list. A pharmacy may qualify for an accreditation exemption, but it still needs the bond (see the pharmacy accreditation exemption). A supplier that loses an exception "must submit a surety bond ... within 60 days after it knows or has reason to know" (424.57(d)(15)(ii)).

What does the bond have to say on its face?

CMS "revokes or denies a DMEPOS supplier's billing privileges based upon the submission of a bond that does not reflect the requirements" of the rule (424.57(d)(4)(ii)(B)), so the wording matters. The bond must:

• come from an "authorized surety," meaning one holding a Treasury Certificate of Authority; the manual points to the Treasury's list of certified surety companies;
• be continuous, and for an initial enrollment be effective on the date the application is submitted;
• name the supplier as Principal, CMS as Obligee, and the surety (with its heirs, successors and assigns) as surety;
• guarantee that the surety will pay CMS, within 30 days of written notice with sufficient evidence, up to the full penal amount for unpaid claims, civil money penalties or assessments, plus interest;
• state that the surety is liable for amounts that arise during the term of the bond, and that actions under the bond may be brought by CMS or its contractors;
• give the surety's name and full address.

The 855S asks for a copy of the original bond "signed by a Delegated or Authorized Official." The manual tells contractors to reject an application from a non-exempt supplier that does not furnish a valid bond when it applies.

What happens if coverage lapses?

Nothing good. "If CMS receives notification of a lapse in bond coverage from the surety, the DMEPOS supplier's billing privileges are revoked," and Medicare does not pay for items furnished during the gap; the supplier cannot charge the beneficiary for them either (424.57(d)(6)(iii)). For an enrolled supplier that fails to maintain the bond, the revocation "is effective the date the bond lapsed," and payments for items furnished on or after that date must be repaid (424.57(d)(11)(i)).

Two timing rules prevent most lapses:

• Cancelling: written notice to the contractor and the surety at least 30 days before the cancellation date, and a new bond in place before that date (424.57(d)(6)).
• Switching sureties: the replacement bond must reach the contractor "at least 30 days prior to the expiration of the previous surety bond," with no gap (424.57(d)(9)).

The surety's liability continues for a period after a supplier stops furnishing a bond or is revoked: the last bond remains liable for overpayments and penalties tied to its term that CMS or the OIG imposes within two years (424.57(d)(5)(iii)).

What does the bond cost?

CMS does not set premiums. The surety prices the bond, usually based on the owners' credit and financial statements, so quotes vary. Ask your agent for the premium, the indemnity agreement the owners must sign, and whether the bond form already matches the CMS wording. We do not quote premiums.

When in the enrollment sequence should you buy it?

After accreditation and shortly before the 855S goes in, because the bond must be effective on the submission date. Revalidation and ownership changes need a bond too, and so does each new location. Medicaid programs may require their own bond on top; see Texas Medicaid's surety bond for one example.

Our Medicare DMEPOS Enrollment Package ($1,295 for the first location, $595 for each additional location) includes bond coordination: we prepare the information your agent needs, check the bond's face against 424.57(d) before submission, and add it to the application. You buy the bond from your own surety and pay the premium directly. For the order of steps, see DMEPOS enrollment step by step.