Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
Medical Equipment and Supply Claims with 
Invalid or Inactive Physician Numbers 
JANET REHNQUIST 
Inspector General 
NOVEMBER 2001 
OEI-03-01-00110  OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, is to 
protect the integrity of the Department of Health and Human Services programs as well as the 
health and welfare of beneficiaries served by them.  This statutory mission is carried out through a 
nationwide program of audits, investigations, inspections, sanctions, and fraud alerts.  The 
Inspector General informs the Secretary of program and management problems and recommends 
legislative, regulatory, and operational approaches to correct them. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 
Inspector General.  It conducts short-term management and program evaluations (called 
inspections) that focus on issues of concern to the Department, the Congress, and the public.  The 
inspection reports provide findings and recommendations on the efficiency, vulnerability, and 
effectiveness of departmental programs. 
OEI's Philadelphia Regional Office prepared this report under the direction of Robert A. Vito, 
Regional Inspector General, and Linda M. Ragone, Deputy Regional Inspector General.  Principal 
OEI staff included: 
REGION  HEADQUARTERS 
David Tawes, Project Leader  Bambi Straw, Program Specialist 
Cortney Hayflinger, Program Analyst 
To obtain copies of this report, please call the Philadelphia Regional Office at (800) 531-9562. 
Reports are also available on the World Wide Web at our home page address: 
http://www.oig.hhs.gov/oei/  E X E C U T I V E   S U M M A R Y  
PURPOSE 
This inspection examined Medicare payments for medical equipment and supply claims 
submitted with invalid or inactive unique physician identification numbers. 
BACKGROUND 
Medicare beneficiaries covered by Part B are eligible to receive medical equipment and 
supplies deemed medically necessary by a physician.  Medicare regulations require 
suppliers to provide the unique physician identification number (UPIN) of the physician 
who ordered the equipment and/or supplies when submitting a claim.  Because Medicare 
payment for medical equipment and supplies is only authorized when items are ordered by 
a physician, claims with incorrect UPIN information should not be paid. 
The Consolidated Omnibus Budget Reconciliation Act of 1985 required the Centers for 
Medicare & Medicaid Services (CMS) to establish UPINs for all physicians who provide 
services to Medicare beneficiaries.  Each physician is assigned one and only one UPIN. 
The CMS contracts with one company to maintain a database, the UPIN Registry, that 
contains relevant data on all assigned UPINs.  Information regarding the practice settings 
(i.e., physical locations where the physician practices medicine) associated with a 
particular UPIN are included in the UPIN Registry.  Medicare requires physicians to notify 
their local Part B carriers of any practice setting changes.  In addition, local carriers have 
been instructed by CMS to inactivate practice settings for which there has been no claim 
activity during the previous 12 months.  For the purposes of this report, we will refer to 
UPINs without any active practice settings as inactive, and UPINs that have never been 
assigned by Medicare as invalid. 
We compared the UPINs listed on 1999 medical equipment and supply claims to 
information contained in the UPIN Registry.  We then identified Medicare payments for 
claims where the listed UPIN was either invalid or inactive on the date of service. 
FINDINGS 
Medicare paid $32 million for medical equipment and supply claims with invalid 
UPINs in 1999 
In 1999, Medicare allowed charges for medical equipment and supply claims with invalid 
UPINs totaled $32 million.  Approximately 14,000 different invalid UPINs were used on 
medical equipment and supply claims paid by Medicare.  Seventy-eight percent of the 
Claims with Invalid or Inactive Physician Numbers  OEI-03-01-00110
i  invalid UPINs appearing on these claims in 1999 were associated with less than $1,000 in 
Medicare allowed charges.  However, 106 of the invalid UPINs had more than $50,000 in 
allowed charges associated with them.  One invalid UPIN was listed as the ordering 
physician by seven different suppliers on $1.1 million in Medicare claims. 
Medicare paid $59 million for medical equipment and supply claims with inactive 
UPINs in 1999 
In 1999, Medicare allowed $59 million for medical equipment and supply claims with 
UPINs that were inactive on the date of service.  More than 28,000 inactive UPINs were 
listed on claims paid by Medicare in 1999.  Thirty percent of these UPINs had been 
inactive for at least 3 years, and accounted for $10 million in payments.  Some UPINs 
listed on medical equipment and supply claims had been inactive for more than 9 years as 
of the claims date of service. 
A small number of suppliers accounted for a significant share of allowed charges 
for claims with invalid or inactive UPINs 
Almost 25,000 (28 percent) of the approximately 90,000 suppliers that submitted claims 
to Medicare in 1999 used an invalid or inactive UPIN on at least one claim.  One hundred 
suppliers alone accounted for $17 million of the $91 million in allowed charges for claims 
with invalid or inactive UPINs.  Allowed charges for claims with invalid or inactive UPINs 
made up a very small share (less than 2 percent) of the average suppliers 1999 
reimbursement.  However, we identified 1,053 suppliers that had more than 30 percent of 
their 1999 allowed charges associated with invalid or inactive UPINs. 
RECOMMENDATIONS 
We believe that our findings illustrate a significant vulnerability in Medicares claims 
processing system for medical equipment and supplies.  Carriers should only pay for 
medical equipment and supply claims that include accurate UPINs.  While it is possible 
that some of the equipment and supplies that we identified were medically necessary, the 
inability of Medicare systems to determine whether claims are submitted with invalid or 
inactive UPINs creates the potential for widespread abuse. 
In order to address the issues identified by this report, we recommend that CMS: 
Revise claims processing edits to ensure that UPINs listed on medical equipment and 
supply claims are valid and active. 
Emphasize to suppliers the importance of using accurate UPINs when submitting 
claims to Medicare. 
Claims with Invalid or Inactive Physician Numbers  OEI-03-01-00110
ii  We have provided CMS with 1999 data on medical equipment and supply claims with 
invalid or inactive UPINs for further analysis and review.  The CMS, if necessary, will 
forward any suspected problematic claims to our Office of Investigations. 
Agency Comments 
The CMS concurred with our recommendation concerning the revision of claims 
processing edits.  The agency indicated that it has developed instructions, system changes, 
and edits which will reject claims listing a deceased physicians UPIN.  Once this initiative 
is implemented in April 2002, CMS plans to expand it to include all invalid and inactive 
UPINs.  The CMS also agreed with our recommendation concerning supplier education. 
The full text of CMS comments is presented in Appendix A. 
We agree that CMS recent actions indicate that positive first steps are being taken, and 
look forward to its future initiatives involving UPINs.  However, until these initiatives are 
in place, we believe that CMS should perform post-payment reviews in order to detect the 
use of invalid and inactive UPINs on medical equipment and supply claims. 
Claims with Invalid or Inactive Physician Numbers  OEI-03-01-00110
iii  T A B L E   O F   C O N T E N T S  
PAGE

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

INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

FINDINGS

Invalid UPINs  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Inactive UPINs  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Suppliers Using Invalid or Inactive UPINs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

RECOMMENDATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

APPENDIX

A.  Centers for Medicare & Medicaid Services Comments  . . . . . . . . . . . . . . . . . . . . . . . 7

Claims with Invalid or Inactive Physician Numbers  OEI-03-01-00110
iv
 I N T R O D U C T I O N  
PURPOSE 
This inspection examined Medicare payments for medical equipment and supply claims 
submitted with invalid or inactive unique physician identification numbers. 
BACKGROUND 
Title XVIII of the Social Security Act establishes coverage and benefits under Part B of 
the Medicare program.  Medicare beneficiaries covered by Part B are entitled to receive 
medical equipment and supplies that are deemed medically necessary by a physician.  This 
benefit includes durable medical equipment (e.g., wheelchairs, hospital beds, home oxygen 
equipment) and supplies, as well as prosthetics and orthotics.  The Centers for Medicare & 
Medicaid Services (CMS) contracts with four durable medical equipment regional carriers 
to process and pay medical equipment and supply claims.  In 1999, Medicare reimbursed 
$6.2 billion for medical equipment and supplies. 
To obtain reimbursement for equipment and supplies provided to Medicare beneficiaries, 
suppliers submit a HCFA 1500 claim form to the durable medical equipment regional 
carrier serving their area.  Medicare regulations require suppliers to provide the unique 
physician identification number (UPIN) of the physician who ordered the equipment on 
the HCFA 1500 claim form.  Because Medicare payment for medical equipment and 
supplies is only authorized when it is ordered by a physician, claims with incorrect UPIN 
information should not be paid.  However, according to CMS, Medicare claims processing 
systems only verify that the UPIN listed on a claim meets certain format requirements. 
Computer system edits are not performed to ensure that the UPIN has been assigned or is 
currently active. 
Assignment and Use of UPINs 
The Consolidated Omnibus Budget Reconciliation Act of 1985 required CMS to establish 
UPINs for all physicians who provide services to Medicare beneficiaries.  In 1994, CMS 
expanded the use of UPINs to other medical providers, such as nurse practitioners, and to 
group physician practices.  In this report, we use the term physician to describe both 
physicians and other medical providers who are assigned UPINs.  The CMS contracts with 
one company to maintain a database containing relevant information on all assigned 
UPINs.  This database is known as the UPIN Registry. 
To be assigned a UPIN a physician completes Form HCFA 855 and submits it to the 
Part B carrier serving his or her geographic area.  This form requires physicians to 
Claims with Invalid or Inactive Physician Numbers  OEI-03-01-00110
1  provide information such as their Social Security numbers, State licensing information, and 
medical specialties.  Physicians also must provide a listing of all of their associated practice 
settings (i.e., physical locations where they practice medicine).  As part of enrollment, 
carriers validate that the provider requesting the UPIN has the appropriate license(s) 
required by State law.  Carriers then contact the contractor that maintains the UPIN 
Registry to request that a UPIN be issued to the physician.  Each physician is assigned one 
and only one UPIN, though local carriers assign separate identifiers for each practice 
setting.  Information regarding the practice settings associated with a particular UPIN are 
included in the UPIN Registry. 
Medicare requires physicians to notify their local Part B carriers of any address changes or 
practice setting closings.  In addition, local carriers have been instructed by CMS to 
inactivate practice settings for which there has been no claim activity during the previous 
12 months.  The local carrier is then responsible for notifying the contractor that maintains 
the UPIN Registry of these changes. 
Related Work by the Office of Inspector General 
In 1999, the Office of Inspector General released a report entitled, Accuracy of Unique 
Physician Identification Number Data, (OEI-07-98-00410).  This report found that 
although CMS has taken meaningful actions to enhance the accuracy of UPIN data, some 
problems continue to exist.  For example, almost 23 percent of UPINs listed as active in 
the UPIN Registry had no claims activity within the previous year.  The report 
recommended that CMS take steps to ensure that its carriers follow the issued guidelines 
concerning the inactivation of UPINs. 
METHODOLOGY 
Data Collection and Analysis 
We created a file containing 100 percent of 1999 medical equipment and supply claims 
from CMS National Claims History File.  We obtained UPIN information by accessing a 
CMS database extracted from the UPIN Registry.  The CMS UPIN database is composed 
of two separate files: one containing information on the active practice settings associated 
with a UPIN, and the other on the inactive practice settings. 
We first compared all of the UPINs listed on the 1999 claims to UPINs listed on the active 
practice settings file.  As long as a UPIN on the claim had at least one active practice 
setting, or was a surrogate UPIN, we considered it to be active.  Surrogate UPINs are five 
generic identifiers established by CMS to represent physicians who do not have a UPIN, 
e.g., resident physicians, retired physicians. 
The UPINs appearing on 1999 claims that did not appear in the active practice settings file 
and were not surrogate identifiers were then compared to the UPINs listed in the 
Claims with Invalid or Inactive Physician Numbers  OEI-03-01-00110
2  inactive practice settings file.  Based on this comparison, we placed a UPIN into one of 
two categories: 
(1) Invalid: The UPIN listed on the claim does not appear in either the active or 
inactive practice settings file.  The UPIN has not been assigned by Medicare. 
(2) Inactive: The UPIN listed on the claim appears in the inactive practice settings file 
but not the active file.  The UPIN has been assigned, but it has either been inactivated 
by the physician, or all of its associated practice settings have been inactivated by 
carriers. 
We determined the number of invalid or inactive UPINs listed on 1999 medical equipment 
and supply claims.  We then calculated the amount Medicare paid in 1999 for claims with 
UPINs that were invalid.  We also calculated the amount Medicare paid in 1999 for claims 
with inactive UPINs, arraying the data by the length of time the UPINs had been inactive. 
We determined how long a UPIN had been inactive by comparing the date of service listed 
on its earliest 1999 claim to the most recent inactivation date of an associated practice 
setting. 
We summarized the UPIN data by procedure code.  We also determined the allowed 
charges each supplier had with invalid or inactive UPINs, and whether or not any suppliers 
received a significant share of their Medicare reimbursement through the use of invalid or 
inactive UPINs.  We used 10-digit supplier numbers when analyzing supplier data.  Ten-
digit numbers identify each physical location where a supplier conducts business. 
However, each location may be part of a larger medical equipment supply company. 
Claims with Invalid or Inactive Physician Numbers  OEI-03-01-00110
3  F I N D I N G S  
Medicare paid $32 million for medical equipment and supply 
claims with invalid UPINs in 1999 
In 1999, Medicares allowed charges for medical equipment and supply claims with invalid 
UPINs totaled $32 million.  Approximately 14,000 different invalid UPINs were used on 
medical equipment and supply claims paid by Medicare.  Three-quarters of the invalid 
UPINs had the correct format and started with an appropriate letter.  The remaining 
invalid UPINs began with a letter for which no UPINs had ever been issued.  This means 
that the UPIN could easily be identified as one which was never assigned. 
Seventy-eight percent of the invalid UPINs appearing on medical and supply claims in 
1999 were associated with less than $1000 in Medicare allowed charges.  However, 106 
of the invalid UPINs were associated with more than $50,000 in allowed charges.  One 
invalid UPIN was listed as the ordering physician by seven different suppliers on  $1.1 
million in Medicare claims.  Out of the nearly 500,000 UPINs that were used on Medicare 
medical equipment and supply claims in 1999, this invalid UPIN ranked  fifty-second 
in overall allowed charges. 
Medicare paid $59 million for medical equipment and supply 
claims with inactive UPINs in 1999 
In 1999, Medicare paid $59 million in allowed charges for medical equipment and supply 
claims with UPINs that were inactive on the date of service.  Almost $8 million of this 
amount involved UPINs for physicians who had died prior to the dates of service listed on 
the claims.  More than 28,000 inactive UPINs were listed on medical equipment and 
supply claims paid by Medicare in 1999.  Thirty percent of these UPINs had been inactive 
for at least 3 years, and accounted for $10 million in Medicare payments.  Some UPINs 
listed on medical equipment and supply claims had been inactive for more than  9 years 
at the time of the claims dates of service. 
There may be explanations why inactive UPINs are associated with certain types of 
services.  For instance, once beneficiaries qualify for oxygen therapy, they may use it for 
the rest of their lives.  Therefore, procedure codes for oxygen equipment and supplies 
could be billed for a period of time after the UPIN of the physician who initially ordered 
the equipment and supplies had been inactivated.  Furthermore, certain other pieces of 
medical equipment, such as wheelchairs and hospital beds, are usually rented for an 
extended period of time.  Suppliers bill Medicare a rental fee for this equipment, known as 
capped-rental items, for up to 15 consecutive months.  In these cases, a claim submitted 
with a UPIN that had been inactive for less than a year would not necessarily 
Claims with Invalid or Inactive Physician Numbers  OEI-03-01-00110
4  be problematic.  The physician who originally ordered the equipment may have retired or 
died within the rental period.  However, if the UPIN had been inactive for over 2 years on 
the claims date of service, this would indicate that the UPIN was inactive at the time the 
item was ordered.  Of the $59 million paid in 1999 for claims with inactive UPINs, $14 
million was for oxygen-related services and almost $7.3 million was for  capped-
rental items.  However, 42 percent ($3 million) of the allowed charges for capped-rental 
items were associated with UPINs that had been inactive for more than 2 years. 
A small number of suppliers accounted for a significant 
share of allowed charges for claims with invalid or inactive 
UPINs 
Almost 25,000 (28 percent) of the approximately 90,000 suppliers that submitted claims 
to Medicare in 1999 used an invalid or inactive UPIN on at least one claim.  One hundred 
suppliers alone accounted for $17 million of the $91 million in allowed charges for claims 
with invalid or inactive UPINs.  One supplier was responsible for $1.2 million in Medicare 
allowed charges for claims with invalid or inactive UPINs, using over 1,700 of these 
UPINs on medical equipment and supply claims in 1999. 
Allowed charges for claims with invalid or inactive UPINs made up a very small share 
(less than 2 percent) of the average suppliers 1999 reimbursement.  However, we 
identified 1,053 suppliers that had more than 30 percent of their 1999 allowed charges 
associated with invalid or inactive UPINs.  One supplier had 62 percent of its allowed 
charges ($365,849 of $588,563) associated with one invalid UPIN. 
Claims with Invalid or Inactive Physician Numbers  OEI-03-01-00110
5  R E C O M M E N D A T I O N S  
We believe that our findings illustrate a significant vulnerability in Medicares claims 
processing system for medical equipment and supplies.  Carriers should only pay for 
medical equipment and supply claims that include accurate UPINs.  While it is possible 
that some of the equipment and supplies that we identified were medically necessary, the 
inability of Medicare systems to determine whether claims are submitted with invalid or 
inactive UPINs creates the potential for widespread abuse. 
In order to address the issues identified by this report, we recommend that CMS: 
Revise claims processing edits to ensure that UPINs listed on medical equipment and 
supply claims are valid and active. 
Emphasize to suppliers the importance of using accurate UPINs when submitting 
claims to Medicare. 
We have provided CMS with 1999 data on medical equipment and supply claims with 
invalid or inactive UPINs for further analysis and review.  The CMS, if necessary, will 
forward any suspected problematic claims to our Office of Investigations. 
Agency Comments 
The CMS concurred with our recommendation concerning the revision of claims 
processing edits.  The agency indicated that it has developed instructions, system changes, 
and edits which will reject claims listing a deceased physicians UPIN.  Once this initiative 
is implemented in April 2002, CMS plans to expand it to include all invalid and inactive 
UPINs.  The CMS also agreed with our recommendation concerning provider education. 
The full text of CMS comments is presented in Appendix A. 
We agree that CMS recent actions indicate that positive first steps are being taken, and 
look forward to its future initiatives involving UPINs.  However, until these initiatives are 
in place, we believe that CMS should perform post-payment reviews in order to detect the 
use of invalid and inactive UPINs on medical equipment and supply claims. 
Claims with Invalid or Inactive Physician Numbers  OEI-03-01-00110
6  APPENDIX A 
Centers for Medicare & Medicaid Services Comments

Claims with Invalid or Inactive Physician Numbers  OEI-03-01-00110
7