HEALTH & HUMAN SERVICES .Office of Inspector General
"''''0 NOV 2 6 2008
(g-'''VICES"." DEPARTMENT OF 
o....yJ Washington, D.C. 20201
TO: Kerr Weems
Acting Administrator
Centers for Medicare & Medicaid Services
FROM: Daniel R. Levinson
Inspector General
SUBJECT: Early Alert Memorandum: Payments to Medicare Suppliers and Home Health
Agencies Associated With "Curently Not Collectible" Overpayments,
OEI -06-07 -00080
SUMMARY
This early alert memorandum describes the associations between selected suppliers of durable
medical equipment, prosthetics, orthotics, and supplies (DMEPOS) with debt owed to the
Medicare program and other businesses that received Medicare payments.1 In 2005, DMEPOS
suppliers collectively had $352 milion in debt deemed "curently not collectible" (CNC) by the
Centers for Medicare & Medicaid Services (CMS). In 2006, the amount ofDMEPOS supplier
debt deemed CNC rose to $402 milion. In addition, anecdotal information from the Offce of
Inspector General (DIG) investigators and assistat United States attorneys indicates that
DMEPOS suppliers with outstading Medicare debt may inappropriately receive Medicare
publicly fronted by business
payment by, among other means, operating businesses that are 
associates, family members, or other individuals posing as owners. Information about the
associations between DMEPOS suppliers with Medicare debt and other businesses that receive
Medicare payment may be useful to CMS in its oversight of the program, to the extent that those
associations are a means of avoiding debt repayment or engaging in fraudulent biling.
We selected a random sample of 10 DMEPOS suppliers in Texas that each had Medicare debt of
at least $50,000 deemed CNC by CMS durng 2005-2006. CMS deems a Medicare
an overpayment to a DMEPOS supplier remains uncollected 210 days
overpayment to be CNC if 
the first demand letter despite recovery attempts by CMS contractors. We
after the date of 
attempted to identify all owners and managers of these 10 DMEPOS suppliers with CNC debt.
We then used information from public records, DMEPOS supplier and home health agency
the sample
(HHA) enrollment applications, and Medicare claims to determine whether any of 
DMEPOS suppliers were associated with other businesses that received Medicare payment
during 2002-2007 through shared ownership or management, family relationship, address, or
i DMEPOS suppliers are hereinafter referred to as "DMEPOS suppliers" or "suppliers."
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Page 2  Kerry Weems 
 
 
telephone number.  Although we reviewed DMEPOS suppliers deemed to owe CNC debt in 2005 
and 2006, analyzing Medicare payments from 2002 to 2007 allowed us to detect networks of 
associated businesses that existed both before and after CMS deemed the sample DMEPOS 
suppliers overpayments to be CNC.   
 
We found that 6 of the 10 DMEPOS suppliers that we reviewed were associated with 15 other 
DMEPOS suppliers or HHAs that received Medicare payments totaling $58 million during  
20022007.  Most associated DMEPOS suppliers had lost billing privileges by January 2005 and 
had accumulated a total of $6.2 million of their own CNC debt to Medicare; however, most 
HHAs received Medicare payments as recently as December 2007.  We also found that most of 
the DMEPOS suppliers we reviewed were connected with their associated DMEPOS suppliers 
and HHAs through shared owners or managers.  Finally, 11 of the 15 associated businesses 
enrollment applications did not include the name of at least one individual listed as an owner or a 
manager in public records.   
 
Although the associations among DMEPOS suppliers with CNC debt and their associates that 
received Medicare payments are not, taken alone, sufficient to establish improper or illegal 
activity, CMS may determine that such associations justify enhanced oversight, e.g., comparison 
of ownership and management information provided by HHA providers and DME suppliers to 
information in public records and following up on apparent inconsistencies.  Because this initial 
review examined a small number of DMEPOS suppliers and a limited set of issue questions, we 
intend to conduct follow-up work regarding the issues and vulnerabilities raised in this 
memorandum. 
 
BACKGROUND 
 
  DMEPOS are covered under Medicare Part B and include such items as oxygen supplies, 
wheelchairs, prosthetic limbs, and surgical dressings.2 3  Medicare covers DMEPOS only 
when ordered for a beneficiary by a physician or, in some cases, a nonphysician practitioner.4  
CMS reported that Medicare expenditures for DMEPOS were $9.2 billion in fiscal year 
2006.5  OIG later determined that a sizable percentage of these expenditures were 
inappropriate overpayments.6  Overpayments are Medicare payments that a Medicare 
participating provider or supplier has received in excess of amounts due and payable.7     
 
                                                 
2 Social Security Act  1832(a), 1834(h), 1861(n), 1861(s)(6), and 1861(s)(8). 
3 The complete list of covered items by Healthcare Common Procedure Coding System can be found online at 
http://www.cms.hhs.gov/DMEPOSFeeSched/LSDMEPOSFEE/list.asp.  Accessed on June 27, 2008. 
4 Medicare Program Integrity Manual, Pub. No. 100-08, ch. 5,  5.2. 
5 Figure cited is for DMEPOS claims for the 12-month period ending September 30, 2006.  Available online at 
https://www.cms.hhs.gov/apps/er_report/preview_er_report_print.asp?from=public&which =long&reportID=6.  
Accessed on July 2, 2008. 
6 An OIG study found in two separate reviews that DMEPOS overpayment errors in fiscal year 2006 were  
17.3 percent and 28.9 percent.  Department of Health and Human Services, OIG, Medical Review of Claims for the 
Fiscal Year 2006 Comprehensive Error Rate Testing Program (A-01-07-00508), August 2008. 
7 Medicare Financial Management Manual, Pub. No. 100-06, ch. 3,  10.  
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Overpayments Deemed Currently Not Collectible  
When a Medicare overpayment is made, CMS and its contractors make recovery attempts, which 
involve contacting the DMEPOS supplier through a series of written demand letters and/or by 
telephone.  If the DMEPOS supplier fails to make any payment within 210 days of the first 
demand letter, CMS classifies the debt as CNC.  CMS then refers CNC debt to the Department of 
the Treasury, which makes its own efforts to collect the overpayment.8  
 
Medicare Participation Requirements for Suppliers and Home Health Agencies 
To participate in the Medicare program, all providers and suppliers must complete an enrollment 
application and adhere to a series of requirements set forth in 42 CFR Part 424,  
Subpart P; DMEPOS suppliers must adhere to additional requirements at 42 CFR  424.57.  
Pursuant to these requirements, all providers and suppliers must submit an enrollment 
application to CMS, which is self-reported but must contain complete, accurate, and truthful 
responses to all information requested.9  Application forms for both DMEPOS suppliers and 
HHAs require applicants to disclose the identity of any person or business that has an ownership, 
financial, or controlling interest in the business, or that functions in a management role.10  For 
each person or business, applicants must also report adverse legal actions, including payment 
suspensions, billing number revocation, or exclusion from a Federal or State health care 
program.11   
 
The regulation specific to DMEPOS suppliers requires that a supplier repeat the application 
process for each business location.  (See Appendix A for a more detailed description of the 
enrollment process.)  Further, the regulation requires, among other things, that DMEPOS 
suppliers certify that they meet, and will continue to meet, 25 standards specified by regulation; 
report any changes in information on their enrollment application within 30 days of the change; 
and renew their application every 3 years to continue submitting claims to Medicare.12   
 
Likewise, regulations applicable to HHAs (and all providers and suppliers) specify that they 
must report not only any changes in information on their enrollment application within 90 days 
of the change, but also changes in ownership or control within 30 days.13  In addition, HHAs 
must resubmit and recertify the accuracy of its enrollment every 5 years, and CMS may choose 
to perform more frequent off-cycle revalidations to assess the validity of enrollment 
information when warranted.14 
 
CMS may deny enrollment or revoke billing privileges for lack of compliance with enrollment 
requirements or supplier participation standards.15  Furthermore, in instances in which CMS 
denies a provider or supplier enrollment, or revokes their Medicare billing number, Federal 
                                                 
8 Medicare Financial Management Manual, Pub. No. 100-06, ch. 4,  80.2. 
9 42 CFR  424.510(d)(2)(i).  See also 42 CFR  424.57(c)(2). 
10 Sections 5 and 6 of Forms CMS-855S and CMS-855A.          
11 Sections 3 and 6 of Forms CMS-855S and CMS-855A. 
12 42 CFR  424.57. 
13 42 CFR  424.520(b).  See also 42 CFR  424.540(a)(2). 
14 42 CFR  424.515 and 424.515(d). 
15 42 CFR  424.530(a), 424.535(a), and 424.57(d). 
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regulations stipulate that CMS review . . . all other related Medicare enrollment files that the 
denied provider or supplier has an association with (for example, as an owner or managing 
employee) to determine whether the denial warrants an adverse action of the associated Medicare 
provider or supplier.16 
 
Recent Program Integrity Initiatives 
CMS has recently implemented several additional safeguards to protect against improper 
DMEPOS supplier enrollment, including additional quality standards, pursuant to  
section 302(a)(1)(B) of the Medicare Prescription Drug, Improvement, and Modernization Act of  
2003 (MMA) (P.L. No. 108-173).  In addition, pursuant to section 1834(a)(16)(B) of the Social 
Security Act, CMS issued a notice of proposed rulemaking, but has not issued the final rule, that 
would require DMEPOS suppliers to submit a surety bond.17  The surety bond requirement is 
intended to limit the Medicare program risk to fraudulent DMEPOS suppliers, enhance the 
Medicare enrollment process, and ensure that the Medicare program recoups erroneous payments 
that result from fraudulent or abusive billing practices.  Also, the MMA established a DMEPOS 
competitive acquisition program but, implementation has been delayed until 2009 by recent 
legislation.18  Finally, CMS published a proposed rule that seeks to clarify several of the 
DMEPOS supplier standards to ensure that DMEPOS suppliers understand how CMS interprets 
the DMEPOS supplier standards.  The rule proposes to add new standards which, among other 
things, would prohibit a DMEPOS supplier from sharing a practice location with another 
Medicare supplier.19 
 
METHODOLOGY 
 
Scope 
This study examines:  (1) a small random sample of DMEPOS suppliers in Texas that had at least 
$50,000 in Medicare overpayments deemed CNC by CMS during 20052006 and (2) other 
DMEPOS suppliers and HHAs that received Medicare payments during 20022007 and were 
associated with the sample DMEPOS suppliers.   
    
Methods 
We drew on multiple data sources, including the National Claims History Standard Analytical 
File (SAF), DMEPOS supplier and HHA enrollment information, public records, enrollment data 
from the National Supplier Clearinghouse (NSC) and the Online Survey and Certification and 
Reporting system (OSCAR), CNC debt data from the Durable Medical Equipment Medicare 
Administrative Contractors (DME MAC), and the Department of Health and Human Services 
Fraud Investigations Database (FID).  Our review took place from September to December 2007 
and followed a multistep sequential process.    
 
                                                 
16 42 CFR  424.530(d) and 424.535(e). 
17 72 Fed. Reg. 42001 (Aug. 1, 2007).  
18 MMA  302(b)(1) established the Competitive Bidding Program.  Section 154 of the Medicare Improvements for 
Patients and Providers Act of 2008 (P.L. No. 110-275), however, delayed further implementation. 
19 73 Fed. Reg. 4503 (Jan. 25, 2008). 
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We randomly selected a sample of 10 DMEPOS suppliers in Texas that each had Medicare debt 
of at least $50,000 deemed CNC during 20052006.  We chose Texas because the database of 
public records that we used (described below) contains more data for Texas than for many other 
States.  We chose a minimum debt of $50,000 to ensure that our analysis included DMEPOS 
suppliers with debt of sufficient size.  A total of 807 DMEPOS suppliers in Texas had debt 
deemed CNC by CMS during 20052006, and 134 of these each had CNC debt of at least 
$50,000.  We randomly selected 10 of the 134 DMEPOS suppliers for review.  Collectively, 
these 10 DMEPOS sample suppliers received Medicare payments of $15 million during  
20022007 and had $8.6 million in CNC debt.  The Medicare billing numbers of 8 of the  
10 DMEPOS sample suppliers were revoked in either 2003 or 2004.  During 20052006, these 
eight DMEPOS suppliers had a total of $6.7 million in CNC debt.  The two remaining DMEPOS 
suppliers we reviewed went into inactive billing status during 2000 and 2001 and had a total of 
$1.8 million in debt deemed CNC during 20052006.20   
 
After selecting the sample of 10 DMEPOS suppliers, we obtained their Medicare enrollment 
applications (Form CMS-855S) from the NSC and reviewed these applications to identify all 
individuals and organizations that CMS requires to be reported on the application, including 
those with the following ownership or managerial relationship with the sample DMEPOS 
suppliers: 
 
  direct or indirect ownership totaling 5 percent or more; 
 
  partnership interest, regardless of the percentage of ownership; and 
 
  operational or managerial control of the DMEPOS supplier, or responsibilities to conduct the 
day-to-day operations of the DMEPOS supplier. 
 
We then used a database that contains a variety of public records to corroborate and supplement 
the ownership and managerial information identified on the enrollment applications.  
Lexis/Nexis Accurint (hereafter referred to as Accurint) is a database available to law 
enforcement agencies that culls a broad array of public records and consumer information to 
facilitate in-depth searches for information on both businesses and individuals.  For business 
searches, Accurint draws from corporate filings, property information, phone listings, 
professional licenses, and Securities and Exchange Commission filings, among other data.  For 
personal searches, Accurint contains information on Social Security numbers, drivers licenses, 
and professional licenses.  Information on property assets and court proceedings is also available 
for both individuals and businesses.  
 
Using Accurint, we determined whether the individuals identified as owners or managers of the 
10 sample DMEPOS suppliers were associated with any other DMEPOS suppliers or HHAs.  We 
                                                 
20 Although we did not review CMSs overpayment collection process, the overpayments of eight DMEPOS 
suppliers that we reviewed were not deemed CNC until 18 to 21 months after their billing number was revoked.  The 
other two DMEPOS suppliers we reviewed were inactive for about 5 and 6 years, respectively, prior to their 
overpayments being deemed CNC.   
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considered another DMEPOS supplier or HHA to be associated with a sample DMEPOS supplier 
if it shared an owner or a manager or if it was owned or operated by a family member of an 
owner/manager of the sample DMEPOS supplier.21  We noted when sample DMEPOS suppliers 
also shared telephone numbers and addresses.  However, because of our conversations with OIG 
investigators about the nature of DMEPOS fraud, we considered connections based on shared 
telephone numbers and addresses to be of secondary importance to connections through shared 
owners/managers and/or family.  To uncover additional associations, we applied the same 
analysis methods to the associated DMEPOS suppliers and HHAs and found businesses that 
were indirectly associated with the sample DMEPOS suppliers.    
 
Once we had identified DMEPOS suppliers and HHAs associated with owners/managers of the 
sample DMEPOS suppliers, we used enrollment data from the NSC and OSCAR to identify 
Medicare billing numbers.  For those with a Medicare billing number, we calculated the amount 
of Medicare payments that associated DMEPOS suppliers and HHAs received during 20022007 
using data from the SAF.  For DMEPOS suppliers, we also referenced the NSC enrollment data 
to determine their enrollment status, i.e., active, inactive, or revoked. 
 
We then reviewed the enrollment applications of the associated DMEPOS suppliers and HHAs to 
determine whether their applications contained the same ownership and managing control 
information as presented in Accurint.  We also checked CNC debt data to determine whether the 
associated DMEPOS suppliers had any CNC debt.  Finally, we obtained information from the 
FID to determine whether any of the associated businesses were under investigation.   
 
Limitations 
Because this study examines a random sample of 10 DMEPOS suppliers in Texas, its findings 
cannot be projected beyond those DMEPOS suppliers.  Although Accurint revealed a variety of 
business associations, we limited our analysis of businesses associated with the sample 
DMEPOS suppliers to those that were either DMEPOS suppliers or HHAs because of data 
availability constraints.   
 
Additionally, Accurint is a provider of third-party data from a variety of public sources, including 
State civil, property, and criminal records.  Verification of the information contained in Accurint 
is beyond the scope of this review.  Because of this limitation, the findings in this memorandum 
should not be the basis of any action with respect to any DMEPOS supplier or HHA prior to 
verifying that the information obtained from Accurint is correct.      
 
Further, we had CNC debt data from the DME MACs for all DMEPOS suppliers in 20052006, 
but did not have any CNC debt data for HHAs.  Therefore, we could not determine whether 
associated HHAs had any CNC debt.  Lastly, we had enrollment status data for DMEPOS 
suppliers, but not for HHAs.  We used HHA claims themselves as a proxy for enrollment status, 
i.e., if an HHA received Medicare payment as recently as 2007, we considered its status to be 
active.  
 
                                                 
21 Accurint identifies individuals who are likely to be relatives based on a proprietary algorithm.   
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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. 
 
RESULTS 
 
Six of Ten Suppliers Reviewed Were Associated With 15 Other Suppliers and Home Health 
Agencies That Received Medicare Payments During 20022007 
Based on data from public records, enrollment applications, and Medicare claims, we identified 
instances in which owners or managers of 6 of the 10 sample DMEPOS suppliers were 
associated with other DMEPOS suppliers or HHAs that received Medicare payments of  
$58 million during 20022007.  (See Table 1 on the next page.)  Our review did not find 
associations with DMEPOS suppliers or HHAs for the other four sample DMEPOS suppliers.  
For the six sample DMEPOS suppliers that were associated with businesses that received 
Medicare payment, we found a total of 15 associated businesses:  eight DMEPOS suppliers and 
seven HHAs.   
 
The eight associated DMEPOS suppliers received Medicare payments totaling $33 million 
during 20022007.  Eighty percent of these payments went to one DMEPOS supplier, which 
received $26.5 million during this time.  The seven associated HHAs received Medicare 
payments totaling $25 million during 20022007.  Payments made to these HHAs ranged from 
$152,000 to one HHA to $11.8 million to another. 
 
Most Associated Suppliers Had Lost Billing Privileges by January 2005 and Accumulated 
Their Own CNC Debt to Medicare, Although Most Associated Home Health Agencies 
Received Payments as Recently as December 2007   
As of December 2007, five of the eight associated DMEPOS suppliers had revoked billing 
numbers, two had inactive Medicare billing numbers, and one was actively receiving Medicare 
payments.  Among the two DMEPOS suppliers with inactive billing numbers, one became 
inactive in November 2003 and the other became inactive in January 2005.  According to 
information in the FID, the one remaining DMEPOS supplier actively receiving Medicare 
payments in December 2007 was under investigation (as of May 2008) for providing false claims 
to Medicare.  At the time of our review, in addition to the CNC debt owed by the sample 
DMEPOS suppliers, six of the eight associated DMEPOS suppliers had CNC debt totaling  
$6.2 million.22  Of the five associated DMEPOS suppliers that had their Medicare billing number 
revoked, four were revoked for making a false statement or misrepresenting a material fact on 
their enrollment application, in addition to committing other violations of the Medicare 
participation standards. 
 
In contrast, five of the seven associated HHAs received Medicare payments as recently as 
December 2007.  One of the associated HHAs last received Medicare payments in  
                                                 
22 The six sample DMEPOS suppliers with which these DMEPOS suppliers were associated had CNC debt totaling 
$7.3 million. 
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November 2007, and the remaining HHA last received Medicare payments in November 2006.  
According to the FID, none of the associated HHAs were under active investigation as of May 
2008, and, because of the data limitations described above, OIG was not able to determine 
whether CNC debt is owed by any of these associated HHAs.     
 
Table 1:  Provider Type, Medicare Payments, Debt, and Billing Status for DMEPOS             
Suppliers and HHAs Associated With DMEPOS Suppliers With CNC Debt 
 
Sample    Home 
DMEPOS  Associated  DMEPOS  Health  Medicare Payments  Currently Not 
Suppliers   Business  Supplier  Agency  Received 20022007  Collectible Debta  Billing Statusb 
Supplier A           
  A1      $3,836,339  #  Active 
Supplier B           
  B1      $331,151  $326,387  Revoked 
  B2      $791,386  $930,989  Revoked 
  B3      $11,882,096  #  Active 
  B4      $6,353,730  #  Active 
  B5      $152,157  #  Active 
  B6      $862,674  #  Inactive 
  B7      $521,112  #  Active 
Supplier C           
  C1      $2,236,664  $2,357,015  Revoked 
Supplier D            
  D1      $434,380  $34,258  Revoked 
Supplier E             
  E1      $2,541,744  $2,594,996  Revoked 
  E2      $1,187,631  #  Active 
Supplier F            
  F1      $3,500  $48,342  Inactive 
  F2      $26,521,875  $0  Active 
  F3      $309,826  #  Inactive 
Active= 7 
Revoked= 5 
Totals    8  7  $57,966,265  $6,291,987  Inactive= 3 
Source:  OIG analysis, 2008. 
a=We did not have any CNC debt data for associated HHAs. 
b=HHAs were considered active if they received Medicare payments in 2007.   
#=Data not available. 
 
Most Sample Suppliers Were Connected to Associated Businesses Through Shared 
Owners/Managers  
Analysis of public records revealed that 11 associated DMEPOS suppliers and HHAs were 
connected to sample DMEPOS suppliers through shared ownership/management, e.g., the 
owner/manager of the sample DMEPOS supplier also owned/managed the associated DMEPOS 
supplier or HHA.  (See Table 2 on the next page.)   Five associated businesses were connected 
through a family member, e.g., a mother owned the sample DMEPOS supplier and her son 
managed a separate DMEPOS supplier.  Some sample DMEPOS suppliers and associated 
businesses also shared business or residential addresses (10) or business telephone numbers (4). 
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In some cases, we identified a web of relationships among the individuals involved with the 
sample DMEPOS suppliers and the associated businesses, as well as between the associated 
businesses themselves.  (See Appendix B for illustrations of such associations.)  For example, a 
relative (and cohabitant) of the owner of DMEPOS Supplier A owned and operated an HHA at 
DMEPOS Supplier As address and used DMEPOS Supplier As business telephone number.  In 
another case, the principal owner of DMEPOS Supplier B also owned five other DMEPOS 
suppliers or HHAs, four of which operated out of the same office building.  In this same case, a 
manager at one of the businesses also managed four associated businesses.   
 
Table 2:  Nature of the Association Between 6 Sample DMEPOS Suppliers and  
15 Associated DMEPOS Suppliers or Home Health Agencies 
 
Sample   
DMEPOS  Associated  Owner/ 
Suppliers   Business  Manager  Family Member  Address  Telephone Number 
Supplier A    
  A1         
Supplier B   
  B1         
  B2         
  B3         
  B4         
  B5         
  B6         
  B7        
Supplier C   
  C1        
Supplier D   
  D1         
Supplier E   
  E1         
  E2         
Supplier F   
  F1         
  F2        
  F3        
       
Totals    11  5  10  4 
Source:  OIG analysis, 2008. 
 
Eleven Associated Supplier and Home Health Agency Enrollment Applications Did Not 
Include the Name of at Least One Owner or Manager Listed in Accurint  
To enroll in the Medicare program, providers and suppliers must complete an enrollment 
application, which requires applicants to disclose the identity of any person or business with 
ownership, financial, or controlling interest in the company, as well as all individuals who 
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function in a management role.23  If a DMEPOS supplier or an HHA submitted false or 
misleading information with respect to ownership or control, its billing privileges would be 
subject to revocation, among other administrative and criminal penalties.24 
 
Eleven of fifteen associated DMEPOS suppliers or HHAs enrollment applications did not 
contain the name of at least one owner or manager listed in Accurint.  Seven of the eleven were 
HHAs and four were DMEPOS suppliers.  Six of these eleven applications did not contain the 
name of two or more owners or managers.  Based on Accurint data, some of these owners or 
managers who were not listed on enrollment applications appear to be relatives of the listed 
owners or managers of sample DMEPOS suppliers.     
 
CONCLUSION 
Because of our limited sample size, we cannot conclude that the associations between DMEPOS 
suppliers with debt owed to the Medicare program and other businesses that received Medicare 
payments cited in this early alert memorandum also exist in the larger population.  Also, 
additional research and investigative work would be needed to confirm whether DMEPOS 
suppliers and HHAs associated with our sample DMEPOS suppliers are involved in fraudulent 
activities.  Accordingly, our results should not be viewed as conclusive evidence of either 
impropriety or illegal activity.   
 
Nonetheless, our analysis shows associations between 6 sample DMEPOS suppliers with 
Medicare debt totaling $7.3 million and 15 other DMEPOS suppliers and HHAs that received 
Medicare payments totaling $58 million during 20022007.  Although nearly all associated 
DMEPOS suppliers had lost their billing privileges or have discontinued billing Medicare, five 
of the seven associated HHAs received Medicare payments as recently as December 2007.  
These results indicate that the associations between DMEPOS suppliers and HHAs may be less 
frequently detected than those between DMEPOS suppliers alone.  Our findings also show that 
some enrollment applications for DMEPOS suppliers and HHAs associated with our sample 
DMEPOS suppliers did not contain the names of all owners or managers.  These results suggest 
that individuals associated with Medicare debt could inappropriately receive Medicare payments 
by omitting owner/manager information on their enrollment application and working through 
other DMEPOS suppliers and HHAs.   
 
Given these associations, CMS may deem it appropriate to conduct a similar review of DMEPOS 
suppliers with CNC debt to identify associations with other suppliers or home health agencies 
receiving Medicare payments.  Specifically, CMS could compare its list of suppliers with CNC 
debt against public records to determine if the owners or managers of these suppliers appear to own 
or manage other suppliers or home health agencies.  If these owner/manager associations are 
identified, CMS could review the associated businesses enrollment applications to determine if 
complete and accurate information was reported, and follow up on any apparent inconsistencies.25  
                                                 
23 Forms CMS-855S and CMS-855A.  CMS requests this information pursuant to authority under  
42 CFR  420.206. 
24 42 CFR  424.530(a)(4) and 424.535(a)(1) and (4). 
25 Pursuant to 42 CFR  424.515(d), CMS has the authority to conduct such off-cycle revalidations to assess the 
validity of enrollment information.    
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If CMS confirms that ownership or management information has been misreported on enrollment 
applications, it may consider whether denial or revocation of the DMEPOS supplier or HHAs 
enrollment is appropriate. 
 
Because this initial review examined a small number of DMEPOS suppliers using a limited set 
of issue questions, OIG intends to conduct follow-up work regarding the issues and 
vulnerabilities raised in this memorandum.   
 
This early alert memorandum is being issued directly in final form because it contains no 
recommendations.  If you have comments or questions about this early alert memorandum, 
please provide them within 60 days.  Please refer to report number OEI-06-07-00080 in all 
correspondence.   
 
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Page 12  Kerry Weems 
 
  AA PP PP EE NN DD II XX    ~~    AA   
A P P E N D I X   A  
Durable Medical Equipment Supplier and Home Health Agency Enrollment Primer 
Suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) and 
home health agencies (HHA) go through similar, but distinct, processes to enroll in the Medicare 
program.  To enroll in Medicare, each must first obtain a National Provider Identifier (NPI) 
number from the National Plan and Provider Enumeration System.  This requires completing an 
application with identifying information, such as the individual or business name, business 
location, and any provider identification numbers held prior to the establishment of the NPI.  
After receiving the NPI, the process for DMEPOS suppliers and HHAs differs.   
DMEPOS suppliers must obtain a billing number from the National Supplier Clearinghouse 
(NSC).  NSC is responsible for issuing Medicare billing numbers to DMEPOS suppliers, 
revoking billing numbers, and verifying compliance with the participation standards.  To obtain a 
billing number, the DMEPOS supplier must complete Form CMS-855S.  This detailed form 
requires the DMEPOS supplier to provide the following types of information: 
 
1.  identifying informationbusiness location, type of supplies sold, services offered, 
incorporation and accreditation information;  
 
2.  adverse legal actionsconvictions, exclusions, revocations, or suspensions; 
 
3.  ownership interest and/or managing control informationall organizations or individuals 
with 5-percent ownership or more; managing control of the DMEPOS supplier; or a 
partnership interest, including the adverse legal history for these organizations or 
individuals with ownership interest or managing control; and 
 
4.  listing of authorized or delegated officials.26 
 
In addition, the DMEPOS supplier must submit supporting documents along with Form CMS-
855S.  Supporting documents include: 
 
1.  Federal/State/local professional and business licenses, certifications, or registrations; 
2.  liability insurance policy; 
3.  tax identification number; 
4.  completed form for electronic funds transfer; 
5.  NPI notification;  
6.  adverse legal action documentation; 
7.  bank statements waiving Medicare offsets as loan collateral; and  
8.  copy of delegated officials Form W-2. 
                                                 
26 Section 15 of Forms CMS-855S and CMS-855A.  An authorized official is an appointed official to whom the 
organization has granted the legal authority to enroll it in the Medicare program; make changes or updates to the 
organizations status in the Medicare program; and commit the organization to fully abide by the statutes, 
regulations, and program instructions of the Medicare program.  A delegated official is an official who is 
delegated by an authorized official to report changes and updates to the DMEPOS suppliers enrollment record.   
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A P P E N D I X   A   ( C O N T I N U E D )  
 
 
HHAs must also complete a Medicare enrollment application, using Form CMS-855A.  This 
form requires information nearly identical to the CMS-855S, discussed above.  The form is 
submitted to the Regional Home Health Intermediary (RHHI) for the jurisdiction in which the 
HHA is located.  Once the RHHI has determined that the application is acceptable, it notifies 
both CMS and the State in which the HHA is located.  The State then decides whether to conduct 
a site visit to the HHA.  Once the State determines that it will grant permission for the HHA to 
participate in Medicare, it notifies CMS, and CMS makes the final decision to issue a Medicare 
Part A billing number.   
 
 
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A P P E N D I X   B 
Diagrams Showing Relationships Between Sample Durable Medical Equipment Suppliers 
and Their Associated Suppliers and Home Health Agencies 
The diagrams on the following pages contain detailed information about sample suppliers of 
durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) and associated 
DMEPOS suppliers and home health agencies (HHA) described in the early alert memorandum.   
We substituted fictitious names and addresses for real names and addresses in the diagrams.  We 
used consistent fictitious names and addresses across individuals and businesses.  For example, 
an individual named John Doe at one business is the same John Doe listed at another 
business.  The same is true for street addresses.  In this way, it is possible to see the recurrence of 
individuals and addresses across a network of associated businesses, despite the use of fictitious 
names.  Surnames were drawn from the U.S. Census Bureaus list of most common names.   
Information in oval shapes pertains to sample DMEPOS suppliers, including the DMEPOS 
suppliers business name, address, and billing number, as well as its total amount of currently 
not collectible (CNC) debt.   
 
Sample DMEPOS suppliers A, E, and B were chosen to provide examples of small, 
medium, and large networks of associated businesses, respectively.  Their networks, while 
unique, are good representations of the relationships seen in the other sample DMEPOS 
suppliers networks.   The rectangular shapes pertain to associated DMEPOS suppliers and/or 
HHAs, including their total payment amounts during 20022007.  For both the sample and 
associated businesses, the diagrams identify individuals operating in ownership or managerial 
roles.  In each case, the diagrams identify the relationship between the sample DMEPOS supplier 
and the associated business.  The diagrams also denote whether enrollment applications for 
associated businesses omitted the name of individuals listed as owners or managers in 
Lexis/Nexis Accurint, a database containing public records. 
  
 
 
 
 
 
 
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A P P E N D I X   B   ( C O N T I N U E D )   
 
 
Sample DMEPOS Supplier A  
 
 
 
 
 
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A P P E N D I X   B   ( C O N T I N U E D )   
 
 
Sample DMEPOS Supplier E 
 
 
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A P P E N D I X   B   ( C O N T I N U E D )   
 
 
Sample DMEPOS Supplier B 
    
   
 
 
 
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