A new proposed rule would require a higher surety bond amount for suppliers of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) who want to participate in the upcoming Remote Item Delivery (RID) portions of the Medicare competitive bidding program.
The proposed rule — Medicare Program; Inpatient Rehabilitation Facility Prospective Payment System for Federal Fiscal Year 2027 and Updates to the IRF Quality Reporting Program — was published April 6 in the Federal Register. The proposed rule is open for public comment through June 1.
The current $50,000 surety bond requirement for prospective competitive bidding program (CBP) participants began in 2021 “to help ensure suppliers can back their bids,” the U.S. Government Accountability Office (GAO) said in an August 2021 article.
Suppliers “were required to get a $50,000 surety bond for each area they bid in,” a change that “didn’t stop small suppliers (less than $3.5 million in sales) from participating in the program, as they received 58% of the contracts in 2021,” the GAO added.
But now, the Centers for Medicare & Medicaid Services (CMS) wants to raise that surety bond amount to $100,000 for suppliers seeking to win a RID competitive bidding contract.
CMS noted in the Federal Register that competitions for items included in RID “may involve larger competitive bidding areas (CBAs), including nationwide CBAs. To discourage DMEPOS suppliers from submitting non-serious or disingenuous bids and to ensure genuine commitment from suppliers awarded contracts under a RID CBP, we propose requiring one bid surety bond at the maximum allowable amount of $100,000 for any and all bids submitted by a bidding entity for RID CBAs in a round of the DMEPOS CBP.
“This maximum bond amount is justified because a RID CBA, even when structured as a regional competition, can span multiple states and serve beneficiaries across a vast geographic footprint, far exceeding the scope of a traditional CBA, which is typically confined to a single metropolitan statistical area within one state.”
CMS said the “significantly greater scale, complexity and beneficiary population associated with a RID CBA warrant is the highest available level of financial commitment from bidders. This higher amount would also provide a stronger incentive for suppliers bidding on a RID CBA to submit bona fide bids and accept contract offers, thereby supporting the core objective of the DMEPOS CBP to reduce the amount Medicare pays for competitively bid DMEPOS and bring payment amounts more in line with those of a competitive market.”
The $50,000 surety bond amounts related to competitive bidding would remain in place “for all non-RID competitions.”
In the Federal Register, CMS described its RID initiative as “the most practical approach” versus “implementing hundreds of separate local CBPs and CBAs,” which would have created an “unnecessary administrative burden on both the bidding program and suppliers.”
Surety bonds were added to the competitive bidding program in 2021 to make suppliers accountable for their bids.
“Historically, winning suppliers could reject any contract offer to furnish CBP-covered items without penalty,” the GAO noted in an August 2021 article. “This allowed them to help set CBP payment amounts without being held accountable for furnishing items at those amounts. However, beginning with round 2021 — the most recent round of the CBP — bidding suppliers were required by law to obtain a $50,000 bid surety bond for each CBP area in which they submitted a bid.
“These bonds require a supplier to accept a contract offer when its bid amount is at or below the median of the winning suppliers’ bids used to calculate the CBP payment amount offered for each product category. If it does not, the supplier forfeits the bond.”
