Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

S F S 

OUTH  LORIDA  UPPLIERS
C W M
OMPLIANCE  ITH  EDICARE 

S :  R F
TANDARDS ESULTS  ROM 

U V
NANNOUNCED  ISITS 

Daniel R. Levinson

Inspector General 

March 2007

OEI-03-07-00150
 Office of Inspector General 

http://oig.hhs.gov 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 
as amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs.  This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The Office of Audit Services (OAS) provides all auditing services for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others. 
Audits examine the performance of HHS programs and/or its grantees and contractors 
in carrying out their respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations.  These assessments help reduce waste, 
abuse, and mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 
HHS, Congress, and the public with timely, useful, and reliable information on 
significant issues.  Specifically, these evaluations focus on preventing fraud, waste, or 
abuse and promoting economy, efficiency, and effectiveness in departmental programs.  
To promote impact, the reports also present practical recommendations for improving 
program operations. 
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 
and of unjust enrichment by providers.  The investigative efforts of OI lead to criminal 
convictions, administrative sanctions, or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support in OIG's internal operations. OCIG imposes program exclusions and civil 
monetary penalties on health care providers and litigates those actions within HHS. 
OCIG also represents OIG in the global settlement of cases arising under the Civil False 
Claims Act, develops and monitors corporate integrity agreements, develops compliance 
program guidances, renders advisory opinions on OIG sanctions to the health care 
community, and issues fraud alerts and other industry guidance.    E X E C U T I V E   S U M M A R Y  

OBJECTIVE 
To conduct unannounced site visits of suppliers of Medicare durable 
medical equipment, prosthetics, orthotics, and supplies (DMEPOS) in 
three South Florida counties (Miami-Dade, Broward, and Palm Beach) 
to determine their compliance with selected Medicare supplier 
standards. 
BACKGROUND 
The Centers for Medicare & Medicaid Services (CMS) reported that 
payments for DMEPOS reached $10 billion in fiscal year 2005.  
DMEPOS are covered under Medicare Part B and include items such as 
hospital beds, wheelchairs, respirators, walkers, and artificial limbs.  
DMEPOS suppliers must enroll in the Medicare program to sell or rent 
medical equipment and supplies to Medicare beneficiaries and to submit 
claims for Medicare reimbursement. At the time of our review, 
DMEPOS suppliers had to comply with 21 Medicare DMEPOS supplier 
standards to enroll in the Medicare program. 
CMS contracts with the National Supplier Clearinghouse (NSC) to 
manage the enrollment of suppliers in the Medicare program. 
According to NSC supplier enrollment data, Miami-Dade County has 
the highest concentration of suppliers per Medicare beneficiary of any 
county in the nation.  Broward and Palm Beach Counties also have high 
concentrations of suppliers.  As a result of allegations in Miami-Dade 
and Broward Counties, NSC reported that, during the last two quarters 
of 2005, Florida led the nation for allegations of supplier noncompliance 
with Medicare standards. We undertook a review of the suppliers in 
three South Florida counties to assess their compliance with Medicare 
supplier standards. 
We focused on three supplier standards that could be verified quickly 
through direct observation and desk review. These three standards 
include five specific requirements, which state that suppliers must: 
(1) maintain a physical facility, (2) be accessible (open and staffed) 
during business hours, (3) have a visible sign, (4) have hours of 
operation posted, and (5) maintain a primary business telephone listed 
under the name of the business.  We conducted unannounced site visits 
in late 2006 to determine whether 1,581 DMEPOS suppliers in  
Miami-Dade, Broward, and Palm Beach Counties were in compliance 
with these 5 requirements. 
  OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  i  EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY

FINDINGS 
Thirty-one percent of suppliers in three South Florida counties did 
not maintain a physical facility or were not open and staffed during 
unannounced site visits. A total of 491 of 1,581 suppliers (31 percent) 
failed to maintain a physical facility or were not open and staffed during 
our unannounced site visits. Suppliers located in Miami-Dade County 
represented 64 percent of the suppliers we visited, but accounted for 
80 percent of suppliers that did not maintain physical facilities or were 
not accessible during business hours. 
Six percent of the suppliers we visited (98 of 1,581) did not maintain 
physical facilities. Instead of finding operational facilities, site reviewers 
found vacant facilities or facilities in which another type of business was 
operating. 
An additional 25 percent of suppliers (393 of 1,581) were not accessible 
during reasonable business hours. Of these suppliers, 385 were closed 
during unannounced site visits on a minimum of 2 weekdays during 
reasonable or posted business hours. Eight suppliers were open but 
not staffed during a minimum of two unannounced site visits. These 
suppliers doors were unlocked, but site reviewers saw no one in the 
facilities. 
Another 14 percent of suppliers were open and staffed but did not 
meet at least one of three additional requirements for the standards 
we reviewed. Fourteen percent of suppliers (216 of 1,581) were open 
and staffed but did not meet at least 1 of the 3 remaining requirements 
we reviewed (having posted hours of operation, a visible sign, and a 
listed telephone number). Two hundred and six of these suppliers did 
not comply with 1 of these requirements and 10 suppliers did not 
comply with 2 or more of these requirements. 
The remaining 55 percent of suppliers we visited met all of the 
5 requirements included in our review. 
RECOMMENDATION 
Based on unannounced site visits to 1,581 Medicare DMEPOS suppliers 
in 3 counties in South Florida, we identified 491 suppliers (31 percent) 
that did not maintain physical facilities or were not accessible during 
reasonable business hours. We referred these suppliers to CMS so that 
it could consider potential revocation of the suppliers Medicare billing 
numbers. Another 216 suppliers (14 percent) were open and staffed but 
OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  ii  E X E C U T I V E   S U M M A R Y  
failed to meet at least 1 of the other 3 requirements included in our 
review.  
Because nearly half of the suppliers we visited were not in compliance 
with the Medicare supplier standards we reviewed, our findings 
warrant further attention by CMS to protect the integrity of the 
Medicare DMEPOS benefit.  Therefore, we recommend that CMS:  
Strengthen the Medicare DMEPOS Supplier Enrollment Process and 
Ensure That Suppliers Meet Medicare Supplier Standards 
Options to implement this recommendation could include: 
	 conducting more unannounced site visits to suppliers; 
	 implementing an enhanced review of all new enrollment 
applications by DMEPOS suppliers in South Florida; 
	 prioritizing processing reenrollment applications for current 
suppliers over processing new supplier applications;   
	 performing more rigorous background checks of applicants; 
	 assessing the fraud risk of suppliers and targeting monitoring and 
enforcement on high-risk suppliers; 
	 increasing prepayment review of DMEPOS claims; 
	 requiring all DMEPOS suppliers to post a surety bond; 
	 implementing a competitive bidding acquisition program for 
DMEPOS within high-vulnerability areas; if a competitive bidding 
program is implemented in these areas, the number of suppliers 
should be limited to those that demonstrate compliance with 
Medicare standards and that can provide the best value to the 
Medicare program and its beneficiaries;  
	 requiring suppliers in areas particularly vulnerable to fraud and 
abuse to reenroll with NSC more frequently than every 3 years;   
	 strengthening the Medicare supplier standards by establishing a 
minimum number of hours of operation required for each supplier 
and establishing minimum inventory requirements for product 
and service types provided by a supplier; and 
	 deactivating the Medicare billing numbers of DMEPOS suppliers 
that have been inactive for a 90-day period. 
  OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  iii  E X E C U T I V E   S U M M A R Y

AGENCY COMMENTS  
CMS agreed with or will consider the options we recommended for 
strengthening the Medicare DMEPOS supplier enrollment process and 
ensuring that suppliers meet Medicare supplier standards.  CMS noted 
that it is taking several steps to strengthen DMEPOS supplier 
standards. Some of these steps include requiring suppliers to become 
accredited, drafting a proposed regulation requiring suppliers to post 
surety bonds, revisiting NSC contract requirements to increase 
unannounced supplier site visits, and developing a proposal to revise 
deactivation requirements for inactive Medicare billing numbers. CMS 
stated that it appreciated working collaboratively with NSC and the 
Office of Inspector General (OIG) to conduct unannounced site visits in 
South Florida to determine compliance with Medicare supplier 
enrollment standards.  CMS noted that the data collection protocol used 
for the South Florida supplier site visits was valuable, but provided less 
information than the NSC-established site visit protocol to support 
supplier number revocation decisions when suppliers submit appeals. 
OFFICE OF INSPECTOR GENERAL RESPONSE 
Previous work conducted by OIG has demonstrated that the Medicare 
DMEPOS benefit is highly vulnerable to fraud and abuse.  These 
vulnerabilities can only be reduced by ensuring that Medicare does 
business with legitimate DMEPOS suppliers. 
The findings of this review detail the business practices of more than 
1,500 DMEPOS suppliers that were the subject of our review during 
visits to suppliers. We found that 45 percent of the suppliers we visited 
did not meet at least one of the five requirements that we reviewed, 
raising substantial concerns as to whether DMEPOS suppliers in South 
Florida are in compliance with the most basic of supplier standards.  
As CMS states in its comments, we worked closely with CMS and NSC 
staff in developing the protocol for this study.  This joint effort allowed 
for unannounced site visits to a large population of DMEPOS suppliers 
during a several week period.  Visiting a large number of suppliers 
without forewarning in a short period of time was crucial to ensuring 
that suppliers were not alerted to our efforts. 
Given the overwhelming evidence of noncompliance with supplier 
standards in South Florida, it is essential that our recommendations be 
promptly implemented to ensure the integrity of the Medicare program 
and to protect beneficiaries from potentially unscrupulous suppliers. 
  OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  iv    T A B L E   O F   C O N T E N T S  

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

I N T RO DUC T IO N  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

F I N D IN G S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8  

Thirty-onepercent of suppliers did not maintain physical facilities   

or were notaccessible during unannounced visits. . . . . . . . . . . . . . 8
 
Another 14 percent of suppliers failed to meet at least one of

three additional requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9

R E C O MMEN D A T ION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10

  AgencyComments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11

Office of Inspector General Response. . . . . . . . . . . . . . . . . . . . . . .  11

APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13

A:	  Medicare DMEPOS Supplier Standards  . . . . . . . . . . . . . . . . .  13

B: 	Primary Specialty Types for Suppliers Visited in  

South Florida  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16

C:	  CountyLocations for SuppliersVisited in South Florida  . . . .  17

D:	  AgencyComments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18

A C K NO WL E D G M E N T S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
   I N T R O D U C T I O N  

OBJECTIVE 
To conduct unannounced site visits of suppliers of Medicare durable 
medical equipment, prosthetics, orthotics, and supplies (DMEPOS) in 
three South Florida counties (Miami-Dade, Broward, and Palm Beach) 
to determine their compliance with selected Medicare supplier 
standards. 
BACKGROUND 
The Centers for Medicare & Medicaid Services (CMS) reported that 
Medicare payments for DMEPOS reached $10 billion in fiscal year 2005. 
DMEPOS are covered under Medicare Part B and include items such as 
hospital beds, wheelchairs, respirators, walkers, and artificial limbs.1 
Medicare pays for DMEPOS that are necessary and reasonable for the 
treatment of a beneficiarys illness or injury, or to improve the 
functioning of a malformed body member.  Medicare only covers medical 
equipment when it is ordered for a beneficiary by a physician or in some 
cases a nonphysician practitioner.   
Medicare Enrollment of DMEPOS Suppliers 
CMS contracts with the National Supplier Clearinghouse (NSC), 
operated by Palmetto Government Benefits Administrators, to manage 
the enrollment of suppliers.  Suppliers must complete applications and 
comply with 21 Medicare DMEPOS supplier standards to enroll in the 
program.2  CMS requires DMEPOS suppliers to comply with these 
supplier standards to ensure that only qualified suppliers are enrolled 
in the Medicare program.  A supplier must report to CMS any changes 
in the information provided in the application (including change of 
address) within 30 days of the change. 
If DMEPOS suppliers operate businesses at multiple physical locations, 
they are required to apply for a different Medicare billing number for 
each location. 
1 Social Security Act,  1832, 1861. 
2 42 CFR  424.57(c).  This citation refers to 25 supplier standards because 4 additional 
supplier standards were added by Federal Register notice dated August 18, 2006.  The 
additional supplier standards relate to accreditation of suppliers and are provided in 
Appendix A.  However, CMS has not set a deadline for DMEPOS suppliers to become 
accredited in order to retain/obtain a billing number.  At the time of this review, suppliers 
needed to comply with only 21 standards to enroll in the Medicare program. 
  OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  1  I N T R O D U C T I O N  
Standards. Federal regulations state that DMEPOS suppliers must 
meet the Medicare DMEPOS supplier standards to receive payment for 
a Medicare-covered item.  If a supplier fails to comply with all 
standards, CMS may revoke the suppliers billing privileges (42 CFR  
 424.57(d)).  Appendix A contains a complete list of the Medicare 
standards. 
Application. DMEPOS applicants must complete the Medicare 
enrollment application (Form CMS-855S) to be considered for 
enrollment.  Before the application can be completed, however, new 
applicants must first obtain their National Provider Identifier (NPI), a 
unique identifier for health care providers that is assigned by the 
National Plan and Provider Enumeration System.  Only after obtaining 
this NPI can applicants submit Form CMS-855S and supporting 
documents to NSC.3 
Site visit. NSC must conduct a site visit to verify that a DMEPOS 
supplier applicant complies with the 21 Medicare supplier standards 
before approving an applicant and assigning a Medicare billing 
number.4  NSC or its contractor conducts unannounced site visits while 
the application is being processed.5  During these site visits, inspectors 
complete a questionnaire based on the standards.  In addition to this 
questionnaire, site inspectors review files, request copies of required 
licenses, and document the suppliers inventory.  Generally, if the 
supplier is not in compliance, NSC denies the application.  However, if 
the deficiency is very minor, NSC educates the provider about the 
required change(s) rather than denying the application. After the 
initial enrollment site visit, suppliers are generally not visited by NSC 
inspectors until they are due for reenrollment every 3 years. 
3 Supporting documents include, but are not limited to, copies of Federal, State, and/or 
local professional and business licenses, certifications, and/or registrations; liability 
insurance policies; written confirmation from IRS confirming Tax Identification Number; 
completed Authorization Agreement for Electronic Funds Transfer (Form CMS-588); and 
NPI notification. 
4 Available online at:  
http://www.palmettogba.com/palmetto/providers.nsf/44197232fa85168985257196006939dd/ 
85256d580043e75485256fe20049923e?OpenDocument. Accessed on October 19, 2006. 
5 In South Florida, two inspectors from the NSC Supplier Audit and Compliance Unit 
conduct all the site visits.  The processing time for initial enrollment of a DMEPOS supplier 
is approximately 60 days. 
  OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  2  III NNN TTT RRR OOO DDD UUU CCC TTT III OOO NNN
Reenrollment. DMEPOS suppliers are required to reenroll in the 
Medicare program every 3 years to continue receiving Medicare 
reimbursement (42 CFR  424.57 (e)). Prior to their reenrollment date, 
suppliers receive a reenrollment package from NSC. Suppliers have 
35 days from the date on the reenrollment letter to submit the 
completed CMS-855S and required documentation. A one-time 
extension can be requested by suppliers; however, suppliers failing to 
reenroll within the given timeframe are subject to deactivation of their 
Medicare billing number. NSC conducts an unannounced reenrollment 
site visit to ensure that a supplier continues to meet Medicare 
standards. Generally, if the supplier is not in compliance during the 
reenrollment visit, NSC issues a revocation notice. However, if the 
deficiency is very minor, NSC educates the provider about the required 
change(s) rather than issuing a revocation notice. 
Appeals Process. When NSC denies or revokes a suppliers billing 
number, the supplier has two options to contest the determination: the 
supplier may submit a corrective action plan (CAP) or request a 
hearing. CMS and NSC negotiate the terms of the CAP with the 
supplier to ensure that the supplier complies with current supplier 
standards. If CMS and NSC are satisfied that issues of noncompliance 
have been resolved, the suppliers billing number may be reissued or 
reinstated. If CMS and NSC uphold the denial or revocation, the 
supplier may request a formal hearing before a Hearing Officer. This 
hearing can be conducted by telephone or in person. The next level of 
appeal is review of the case by an Administrative Law Judge.6 
Vulnerabilities in the Current Medicare Enrollment Process in South Florida 
According to NSC supplier enrollment data, Miami-Dade County has 
the highest concentration of suppliers per Medicare beneficiary of any 
county in the nation. Broward and Palm Beach Counties also have high 
concentrations of suppliers. As a result of allegations in Miami-Dade 
and Broward Counties, NSC reported that, during the last two quarters 
of 2005, Florida led the nation for allegations of supplier noncompliance 
with Medicare standards. 
6 42 CFR  405.874; also available online at: 
http://www.palmettogba.com/palmetto/providers.nsf/$$ViewTemplate+for+Docs?ReadForm 
&Providers/National+Supplier+Clearinghouse/Supplier+Enrollment/Appeals+Process. 
Accessed on January 30, 2006. 
OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  3  I N T R O D U C T I O N  
Once a DMEPOS supplier has received an enrollment or reenrollment 
site visit, the supplier generally is not visited again outside the 3-year 
cycle.  Though an unannounced, out-of-cycle site visit may occur if NSC 
becomes aware that a supplier may be in violation of one or more 
Medicare standards, typically DMEPOS suppliers are only visited at the 
end of their 3-year reenrollment period. 
Out-of-cycle site visits have proven to be effective in detecting   
noncompliant suppliers. According to NSC, in the first quarter of 2006 
it initiated a project to conduct out-of-cycle visits to approximately 500 
DMEPOS suppliers in Miami-Dade, Broward, and Palm Beach 
Counties.  As a result of this project, NSC revoked the Medicare billing 
numbers for 286 of these suppliers. Many of these suppliers facilities 
were found to be vacant or occupied by some other business. This 
suggests that DMEPOS suppliers may take advantage of the standard 
site visit cycle by establishing businesses that are not maintained or 
staffed after NSC conducts the initial or reenrollment site visit.   
Related Studies 
A September 2005 Government Accountability Office (GAO) report 
(GAO-05-656) examined the procedures NSC uses to ensure that 
DMEPOS suppliers are legitimate businesses and are qualified to bill 
Medicare. GAO found that the screening procedures used by NSC, 
including on-site visits and checking State licensure, were insufficient to 
prevent illegitimate businesses from enrolling in the Medicare program. 
GAO estimated that NSC did not conduct 605 required on-site visits to 
suppliers in Florida, Illinois, Louisiana, and Texas.  GAO made several 
recommendations, including establishing a minimum number of 
out-of-cycle, on-site inspections that NSC must perform each year as 
part of its contract. CMS generally concurred with the reports findings 
and stated that, beginning in fiscal year 2006, the requirement to 
perform out-of-cycle, on-site visits would be added to NSCs contractual 
duties. 
In 1997, OIG issued the report Medical Equipment Suppliers:  
Assuring Legitimacy (OEI-04-96-00240).  In this study, OIG examined 
Medicare supplier enrollment practices in 12 large metropolitan areas 
in 5 States, including Florida.  Based on unannounced site visits, the 
study concluded that the enrollment process was unreliable for 
detecting unethical and improper practices of suppliers, particularly 
because supplier enrollment at that time did not involve on-site 
verification of supplier application data.  One of the options OIG 
  OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  4  II NN TT RR OO DD UU CC TT II OO NN
recommended for ensuring the integrity of Medicare suppliers was for 
CMS to conduct on-site visits at applicants physical locations. CMS 
concurred, but stated that limited resources allowed on-site visits to be 
conducted only in high-risk areas. 
In 2001, OIG issued a follow-up report (OEI-04-99-00670) that assessed 
how well DMEPOS suppliers were meeting the Medicare standards. 
OIG found that the expansion of the CMS site inspection program 
improved supplier compliance with the Medicare standards. OIG made 
several recommendations to increase the compliance rates further, such 
as instituting random, unannounced site visits. CMS concurred with 
the recommendations. 
METHODOLOGY 
Scope of Review 
We focused on three supplier standards that could be verified quickly 
through direct observation and desk review. These three standards 
(7, 8, and 9 in Appendix A) include five specific requirements: 
	 The supplier must maintain a physical facility (Standard 7). 
	 The facility must be accessible during business hours (Standard 8). 
	 The facility must have a visible sign (Standard 8). 
	 The suppliers hours of operation must be posted (Standard 8). 
	 The supplier must maintain a primary business telephone listed 
under the name of the business (Standard 9). 
Our review focused on 1,581 suppliers in the South Florida area, 
specifically in Miami-Dade, Broward, and Palm Beach Counties. We 
identified all active DMEPOS suppliers in these counties using NSC 
enrollment data as of October 16, 2006. NSC enrollment data are 
updated each day as additions and changes are received from suppliers. 
From this list, we selected 10 primary specialty supplier types for 
inclusion in our review. Appendix B lists the primary specialty types. 
We excluded large chain suppliers (25 stores or more) from our review. 
We also excluded suppliers under investigation by OIG and suppliers 
that had, or were in the process of having, their Medicare billing 
numbers revoked by NSC. This resulted in a total of 1,581 suppliers for 
our review. The number of suppliers located in each county is presented 
in Appendix C. 
OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  5  III NNN TTT RRR OOO DDD UUU CCC TTT III OOO NNN
Data Collection and Analysis 
We conducted unannounced site visits to all 1,581 suppliers to 
determine whether suppliers were in compliance with the 
4 requirements related to Standards 7 and 8. We recorded all 
observations using a standardized protocol. OIG staff, along with 
CMS and its contractor staff, conducted all site visits in late 2006. 
Working with CMS, we developed parameters to define supplier 
compliance with the requirements to maintain a physical facility and be 
accessible to beneficiaries during business hours: 
	 We determined that a supplier did not maintain a physical facility 
if the supplier did not exist at the business address on file with 
NSC. 
	 We determined that a supplier was not accessible during 
business hours if the supplier was closed (i.e., the door was 
locked) or not staffed during site visits that occurred on two 
different weekdays (Monday through Friday). The first visit 
was conducted during reasonable business hours (9 a.m. to 
5 p.m.) and the second visit was conducted during the suppliers 
posted business hours or during reasonable business hours 
(9 a.m. to 5 p.m.) if no business hours were posted. 
	 We also determined that a supplier was not accessible during 
business hours if the supplier (1) was closed (i.e., the door was 
locked) during the first site visit; (2) had posted a sign indicating 
that the supplier was out on delivery or out to lunch during 
the second site visit; and (3) was closed, not staffed, or had 
posted the same sign during a third site visit. The second and 
third visits were conducted during the suppliers posted business 
hours or during reasonable business hours (9 a.m. to 5 p.m.) if 
no business hours were posted. 
We aggregated site visit results to determine the number of suppliers 
that had visible signs and hours of operation posted. We also 
reviewed and categorized site reviewers observations about the 
physical facilities. 
In addition to site visits, we conducted Internet searches to determine 
whether each supplier had a listed telephone number as specified in 
Standard 9. The searches included WhitePages.com, 
YellowPages.com, and SuperPages.com. We used the suppliers 
OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  6  I N T R O D U C T I O N  
business name or alias (i.e., an alternate name the supplier uses to 
conduct business) to conduct the Internet searches. 
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspections issued by the Presidents Council on Integrity and 
Efficiency and the Executive Council on Integrity and Efficiency. 
  OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  7    F I N D I N G S  
Thirty-one percent of suppliers in three South  A total of 491 of 1,581 DMEPOS 
Florida counties did not maintain a physical  suppliers (31 percent) failed to 
maintain a physical facility or were 
facility or were not open and staffed during 
not open and staffed during our 
unannounced site visits 
unannounced site visits to 
suppliers locations in 3 South Florida counties. These suppliers did not 
maintain appropriate physical facilities or their facilities were not 
accessible to beneficiaries during reasonable or posted business hours 
on at least two visits.  As of November 30, 2006, the 491 suppliers billed 
Medicare for almost $237 million and Medicare allowed over $97 million 
for services provided between January 1 and November 30, 2006. 
Of the 491 suppliers, 394 were located in Miami-Dade County, 59 were 
located in Broward County, and 38 were located in Palm Beach County. 
Suppliers located in Miami-Dade County represented 64 percent of the 
suppliers we visited, but accounted for 80 percent of suppliers that did 
not maintain physical facilities or were not accessible during business 
hours.  Appendix C provides the number of suppliers visited in each 
county. 
Medical supply companyother was the primary business specialty 
listed in NSC enrollment data for the majority of suppliers that did not 
maintain physical facilities or were not accessible during reasonable 
business hours (413 of 491). Suppliers with this primary specialty 
accounted for 53 percent of all South Florida suppliers in our review, 
but accounted for 84 percent of suppliers that did not maintain physical 
facilities or were not open and staffed during business hours.  The 
remaining specialty types for suppliers are provided in Appendix B. 
Six percent of suppliers (98 of 1,581) did not maintain physical facilities  
Medicare requires all medical equipment suppliers to maintain a 
physical facility on an appropriate site.  However, 98 of the suppliers 
we visited did not maintain physical facilities.  Instead of finding 
operational facilities, site reviewers found vacant facilities or facilities 
in which another type of business was operating.   
Twenty-five percent of suppliers (393 of 1,581) were not accessible during 
reasonable business hours 
One-quarter of the 1,581 medical equipment suppliers we visited were 
not accessible during reasonable or posted business hours. When 
business hours were not posted, we considered reasonable business 
hours to be between 9 a.m. and 5 p.m. on weekdays. 
  OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  8  F I N D I N G S  
Of the 393 suppliers, 385 were closed during site visits on a minimum of 
two weekdays during reasonable or posted business hours.  Eight 
suppliers were open but not staffed during a minimum of two site visits.  
These suppliers doors were unlocked, but site reviewers saw no one in 
the facilities. 
Site reviewers visited some locations housing multiple suppliers that 
were not open and staffed during posted or reasonable business hours. 
At one building, 15 suppliers were not open and staffed.  On the same 
street, another building housed nine suppliers that were not open and 
staffed. Other locations often had two to six suppliers that were not 
open and staffed. 
Some of these 393 suppliers also failed to meet 1 or more of 3 additional 
requirements.  Site visits revealed that 41 of the 393 suppliers did not 
meet the requirement that suppliers hours of operation be posted. 
Based on signs at their facilities, all suppliers with posted business 
hours were open an average of 35 hours per week.  However, those 
found to be closed or open and not staffed posted business hours that 
averaged only 26 hours per week.  Ten of these 393 suppliers also failed 
to meet the requirement that visible signs be posted at their facilities.  
Finally, Internet searches revealed that 14 of the 393 suppliers did not 
have listed telephone numbers. 
Another 14 percent of suppliers were open and staffed  Fourteen percent of suppliers (216 
of 1,581) were open and staffed 
but did not meet at least one of three additional 
but did not meet at least 1 of the 
requirements for the standards we reviewed 
3 remaining requirements we 
reviewed (having posted hours of 
operation, a visible sign, and a listed telephone number).  Two hundred 
and six of these suppliers did not comply with 1 of these requirements 
and 10 did not comply with 2 or more of these requirements. 
Of the 216 suppliers that were open and staffed but failed to meet 1 or 
more of three additional requirements in our review, 204 suppliers did 
not have posted hours of operation. Thirteen suppliers did not meet the 
requirement of having a visible sign, and 10 suppliers did not have 
listed telephone numbers.   
The remaining 55 percent of suppliers we visited (874 of 1,581) met all 
of the 5 requirements included in our review. 
  OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  9    R E C O M M E N D A T I O N  

Based on unannounced site visits to 1,581 Medicare DMEPOS suppliers 
in 3 counties in South Florida, we identified 491 suppliers (31 percent) 
that did not maintain physical facilities or were not accessible during 
reasonable business hours.  We referred these suppliers to CMS so that 
it could consider potential revocation of the suppliers Medicare billing 
numbers.  
An additional 14 percent of suppliers, while maintaining facilities that 
were open and staffed, did not meet at least 1 additional requirement 
from the Medicare standards that we reviewed.  
Because nearly half of the suppliers we visited were not in compliance 
with the Medicare supplier standards we reviewed, our findings 
warrant further attention by CMS to protect the integrity of the 
Medicare DMEPOS benefit.  Therefore, we recommend that CMS:  
Strengthen the Medicare DMEPOS Supplier Enrollment Process and 
Ensure That Suppliers Meet Medicare Supplier Standards 
Options to implement this recommendation could include: 
	 conducting more unannounced site visits to suppliers; 
	 implementing an enhanced review of all new enrollment

applications by DMEPOS suppliers in South Florida; 

	 prioritizing processing reenrollment applications for current

suppliers over processing new supplier applications;   

	 performing more rigorous background checks of applicants; 
	 assessing the fraud risk of suppliers and targeting monitoring and 
enforcement on high-risk suppliers; 
	 increasing prepayment review of DMEPOS claims; 
	 requiring all DMEPOS suppliers to post a surety bond; 
	 implementing a competitive bidding acquisition program for 
DMEPOS within high-vulnerability areas; if a competitive bidding 
program is implemented in these areas, the number of suppliers 
should be limited to those that demonstrate compliance with 
Medicare standards and that can provide the best value to the 
Medicare program and its beneficiaries;  
  OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  10  R	 E C O M M E N D A T I O N  
	 requiring suppliers in areas particularly vulnerable to fraud and 
abuse to reenroll with NSC more frequently than every 3 years;   
	 strengthening the Medicare supplier standards by establishing a 
minimum number of hours of operation required for each supplier 
and establishing minimum inventory requirements for product 
and service types provided by a supplier; and 
	 deactivating the Medicare billing numbers of DMEPOS suppliers 
that have been inactive for a 90-day period. 
AGENCY COMMENTS  
CMS agreed with or will consider the options we recommended for 
strengthening the Medicare DMEPOS supplier enrollment process and 
ensuring that suppliers meet Medicare supplier standards.  Specifically, 
CMS is revisiting the NSCs contract requirements to increase the 
number of unannounced supplier site visits; considering targeted 
background checks of supplier applicants; incorporating targeted 
monitoring and enforcement for high-risk suppliers into future contract 
solicitations; drafting a proposed regulation requiring suppliers to post 
surety bonds; requiring suppliers to become accredited as meeting 
DMEPOS quality standards; considering proposing more general 
minimum inventory and business hours requirements in a future 
rulemaking document; and developing a proposal to revise deactivation 
requirements for inactive Medicare billing numbers. CMS has already 
begun conducting enhanced reviews of new supplier applicants and 
prioritizing the processing of reenrollment applications over new 
supplier applications in South Florida and other high vulnerability 
areas. 
CMS stated that it appreciated working collaboratively with NSC and 
the Office of Inspector General (OIG) to conduct unannounced site visits 
in South Florida to determine compliance with Medicare supplier 
enrollment standards.  CMS believes that projects such as the one 
conducted in South Florida are both worthwhile and cost-effective, and 
states that the results of the project show there can be added value from 
quickly applying an abbreviated protocol to a large number of suppliers 
in a short period of time.  CMS further noted that it believes the data 
collection protocol used for the South Florida supplier site visits was 
valuable, but provided less information than the NSC-established site 
visit protocol to support supplier number revocation decisions when 
  OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  11  R E C O M M E N D A T I O N  
suppliers submit appeals.  The full text of CMSs comments is provided 
in Appendix D. 
OFFICE OF INSPECTOR GENERAL RESPONSE 
Previous work conducted by OIG has demonstrated that the Medicare 
DMEPOS benefit is highly vulnerable to fraud and abuse.  These 
vulnerabilities can only be reduced by ensuring that Medicare does 
business with legitimate DMEPOS suppliers. 
The findings of this review detail the business practices of more than 
1,500 DMEPOS suppliers that were the subject of our review during 
visits to suppliers. We found that 45 percent of the suppliers we visited 
did not meet at least one of the five requirements that we reviewed, 
raising substantial concerns as to whether DMEPOS suppliers in South 
Florida are in compliance with the most basic of supplier standards.  
As CMS states in its comments, we worked closely with CMS and NSC 
staff in developing the protocol for this study.  This joint effort allowed 
for unannounced site visits to a large population of DMEPOS suppliers 
during a several week period.  Visiting a large number of suppliers 
without forewarning in a short period of time was crucial to ensuring 
that suppliers were not alerted to our efforts. 
Given the overwhelming evidence of noncompliance with supplier 
standards in South Florida, it is essential that our recommendations be 
promptly implemented to ensure the integrity of the Medicare program 
and to protect beneficiaries from potentially unscrupulous suppliers.   
  OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  12    A P P E N D I X   A  
Medicare DMEPOS Supplier Standards 
(1) Operates its business and furnishes Medicare-covered items in compliance with all 
applicable Federal and State licensure and regulatory requirements; 
(2) Has not made, or caused to be made, any false statement or misrepresentation of a 
material fact on its application for billing privileges.  (The supplier must provide complete and 
accurate information in response to questions on its application for billing privileges.  The 
supplier must report to CMS any changes in information supplied on the application within 
30 days of the change.); 
(3) Must have the application for billing privileges signed by an individual whose signature 
binds a supplier; 
(4) Fills orders, fabricates, or fits items from its own inventory or by contracting with other 
companies for the purchase of items necessary to fill the order.  If it does, it must provide, 
upon request, copies of contracts or other documentation showing compliance with this 
standard. A supplier may not contract with any entity that is currently excluded from the 
Medicare program, any State health care programs, or from any other Federal Government
Executive Branch procurement or nonprocurement program or activity; 
(5) Advises beneficiaries that they may either rent or purchase inexpensive or routinely 
purchased durable medical equipment, and of the purchase option for capped rental durable 
medical equipment, as defined in Sec. 414.220(a) of this subchapter.  (The supplier must
provide, upon request, documentation that it has provided beneficiaries with this information, 
in the form of copies of letters, logs, or signed notices.); 
(6) Honors all warranties expressed and implied under applicable State law.  A supplier must 
not charge the beneficiary or the Medicare program for the repair or replacement of 
Medicare-covered items or for services covered under warranty.  This standard applies to all 
purchased and rented items, including capped rental items, as described in Sec. 414.229 of 
this subchapter. The supplier must provide, upon request, documentation that it has 
provided beneficiaries with information about Medicare-covered items covered under 
warranty, in the form of copies of letters, logs, or signed notices; 
(7) Maintains a physical facility on an appropriate site.  The physical facility must contain 
space for storing business records including the supplier's delivery, maintenance, and 
beneficiary communication records. For purposes of this standard, a post office box or
commercial mailbox is not considered a physical facility.  In the case of a multisite supplier, 
records may be maintained at a centralized location; 
(8) Permits CMS, or its agents to conduct on-site inspections to ascertain supplier compliance 
with the requirements of this section.  The supplier location must be accessible during 
reasonable business hours to beneficiaries and to CMS, and must maintain a visible sign and 
posted hours of operation; 
  OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  13  A P P E N D I X ~ A  
(9) Maintains a primary business telephone listed under the name of the business locally or 
toll-free for beneficiaries.  The supplier must furnish information to beneficiaries at the time 
of delivery of items on how the beneficiary can contact the supplier by telephone. The 
exclusive use of a beeper number, answering service, pager, facsimile machine, car phone, or
an answering machine may not be used as the primary business telephone for purposes of this 
regulation; 
(10) Has a comprehensive liability insurance policy in the amount of at least $300,000 that 
covers both the supplier's place of business and all customers and employees of the supplier. 
In the case of a supplier that manufactures its own items, this insurance must also cover 
product liability and completed operations.  Failure to maintain required insurance at all 
times will result in revocation of the suppliers billing privileges retroactive to the date the 
insurance lapsed; 
(11) Must agree not to contact a beneficiary by telephone when supplying a Medicare-covered  
item unless one of the following applies: 
(i) The individual has given written permission to the supplier to contact them by telephone 
concerning the furnishing of a Medicare-covered item that is to be rented or purchased.
(ii) The supplier has furnished a Medicare-covered item to the individual and the supplier is 
contacting the individual to coordinate the delivery of the item. 
(iii) If the contact concerns the furnishing of a Medicare-covered item other than a covered 
item already furnished to the individual, the supplier has furnished at least one covered item 
to the individual during the 15-month period preceding the date on which the supplier makes 
such contact. 
(12) Must be responsible for the delivery of Medicare covered items to beneficiaries and 
maintain proof of delivery.  (The supplier must document that it or another qualified party 
has at an appropriate time, provided beneficiaries with necessary information and 
instructions on how to use Medicare-covered items safely and effectively); 
(13) Must answer questions and respond to complaints a beneficiary has about the  
Medicare-covered item that was sold or rented. A supplier must refer beneficiaries with 
Medicare questions to the appropriate carrier.  A supplier must maintain documentation of
contacts with beneficiaries regarding complaints or questions; 
(14) Must maintain and replace at no charge or repair directly, or through a service contract 
with another company, Medicare-covered items it has rented to beneficiaries.  The item must 
function as required and intended after being repaired or replaced; 
(15) Must accept returns from beneficiaries of substandard (less than full quality for the 
particular item or unsuitable items, inappropriate for the beneficiary at the time it was fitted 
and rented or sold); 
(16) Must disclose these supplier standards to each beneficiary to whom it supplies a 
Medicare-covered item; 
(17) Must comply with the disclosure provisions in Sec. 420.206 of this subchapter; 
  OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  14  A P P E N D I X ~ A  
(18) Must not convey or reassign a supplier number; 
(19) Must have a complaint resolution protocol to address beneficiary complaints that relate to
supplier standards in paragraph (c) of this section and keep written complaints, related 
correspondence and any notes of actions taken in response to written and oral complaints. 
Failure to maintain such information may be considered evidence that supplier standards 
have not been met.  (This information must be kept at its physical facility and made available 
to CMS, upon request.); 
(20) Must maintain the following information on all written and oral beneficiary complaints, 
including telephone complaints, it receives: 
(i) The name, address, telephone number, and health insurance claim number of the 
beneficiary.
(ii) A summary of the complaint; the date it was received; the name of the person receiving the
complaint, and a summary of actions taken to resolve the complaint. 
(iii) If an investigation was not conducted, the name of the person making the decision and the 
reason for the decision. 
(21) Provides to CMS, upon request, any information required by the Medicare statute and 
implementing regulations. 
The following items have recently been added as Medicare suppliers standards in the Federal 
Register notice dated August 18, 2006.  However, CMS has not set a deadline for DMEPOS 
suppliers to become accredited in order to retain/obtain a billing number.  Therefore, at the 
time of our review, suppliers needed to comply with only 21 standards to enroll in the 
Medicare program. 
(22) All suppliers of DMEPOS and other items and services must be accredited by a 
CMS-approved accreditation organization in order to receive and retain a supplier billing 
number. The accreditation must indicate the specific products and services for which the 
supplier is accredited in order for the supplier to receive payment for those specific products 
and services. 
(23) All DMEPOS suppliers must notify their accreditation organization when a new 
DMEPOS location is opened.  The accreditation organization may accredit the new supplier 
location for 3 months after it is operational without requiring a new site visit. 
(24) All DMEPOS supplier locations, whether owned or subcontracted, must meet the 
DMEPOS quality standards and be separately accredited in order to bill Medicare. An 
accredited supplier may be denied enrollment or their enrollment may be revoked, if CMS 
determines that they are not in compliance with the DMEPOS quality standards. 
(25) All DMEPOS suppliers must disclose upon enrollment all products and services, 
including the addition of new product lines for which they are seeking accreditation. If a new 
product line is added after enrollment, the DMEPOS supplier will be responsible for notifying 
the accrediting body of the new product so that the DMEPOS supplier can be re-surveyed and
accredited for these new products. 
  OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  15    A P P E N D I X   B  

Primary Specialty Types for Suppliers Visited in South Florida 
Number of  Percentage of 
suppliers that did  suppliers that 
Number of  Percentage of  not maintain  did not maintain  
Primary specialty 
suppliers  suppliers1  physical facilities  physical facilities 
or were not  or were not 
accessible   accessible1 
Medical Supply CompanyOther  836  52.88  413  84.11 
Pharmacy  410  25.93  41  8.35 
Podiatry  234  14.80  21  4.28 
Medical Supply Company With 
34  2.15  8  1.63 
Respiratory Therapist 
Medical Supply CompanyCertified 
18  1.14  4  0.81 
Orthotist 
Independently Practicing Occupational 
17  1.08  1  0.20 
Therapist 
Independently Practicing Physical 
14  0.89  2  0.41 
Therapist 
Medical Supply CompanyCertified 
9  0.57  0  0.00 
Prosthetist 
Medical Supply CompanyCertified 
6  0.38  0  0.00 
Orthotist/ Prosthetist 
Unknown Physician Specialty  3  0.19  1  0.20 
Total  1,581  100  491  100 
Source:  Office of Inspector General analysis of suppliers primary specialty types listed in October 16, 2006, National Supplier Clearinghouse enrollment 
data. 
1Percentages are rounded. 
  OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  16    A P P E N D I X   C  

County Locations for Suppliers Visited in South Florida 
Number of  Percentage of 
suppliers that did  suppliers that 
Number of  Percentage of  not maintain  did not maintain  
County 
suppliers  suppliers1  physical facilities  physical facilities 
or were not  or were not 
accessible   accessible1 
Miami-Dade  1,013  64.07  394  80.24 
Broward  311  19.67  59  12.02 
Palm Beach  257  16.26  38  7.74 
Total  1,581  100  491  100 
Source:  Office of Inspector General analysis of suppliers addresses listed in October 16, 2006, National Supplier Clearinghouse enrollment data. 
1Percentages are rounded. 
  OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  17   
   
 
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Agency Comments 
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  A C K N O W L E D G M E N T S  

This report was prepared under the direction of Robert A. Vito, Regional 
Inspector General for Evaluation and Inspections in the Philadelphia 
regional office, and Linda M. Ragone, Deputy Regional Inspector 
General. 
Tanaz Dutia and Amy Sernyak served as the team leaders for this 
study. Other principal Office of Evaluation and Inspections staff from 
the Philadelphia regional office who contributed to this report include 
Jessica Demko, Diane Epstein, Cynthia Hansford, Maria Johnson, 
Conswelia McCourt, Emily Multari, Roman Strakovsky, and Stephanie 
Yeager; other regional and central office staff who contributed include 
Suzanne Bailey, Mark Biagioni, Diane Caves, Peggy Daniel, Jaime 
Durley, Deborah Harvey, Michael Henry, Scott Hutchison, Scott 
Manley, Gerius Patterson, Steven Zerebecki, and Mina Zadeh. 
We also would like to acknowledge the contributions of staff from the 
Office of Inspector Generals Office of Audit Services and Office of 
Investigations, the Centers for Medicare & Medicaid Services, and the 
National Supplier Clearinghouse. 
  OEI-03-07-00150  SOUTH FLORIDA SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  22