Department  of  Health  and  Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
CARRIERS  STILL  NEED  TO  PURGE 
UNUSED  PROVIDER  NUMBERS   
CARRIERS  STILL  NEED  TO  PURGE  UNUSED  PROVIDER  NUMBERS 
In a May  1991  report  the  Office  of Inspector  General  (OIG)  found  that  most  carriers  did

not  systematically  update  provider  files. 1  The  OIG  found  that  carriers  could  reduce

Medicares  vulnerability  to abuse  and  save  administrative  costs  by periodically  deactivating

provider  numbers  with  no billing  history.

At that  time,  the  OIG  recommended  that  the  Health  Care  Financing  Administration

(HCFA)  require  carriers  to deactivate  all provider  numbers  without  current  billing  history.

In October  1994  HCFA  instructed  the  carriers  to deactivate  a provider  number  if no  claims

were  submitted  over  a 3-year  period.2  Between  October  1994  and  February  1995  the

carriers  completed  deactivation  of provider  numbers  that  met  this  criterion.

During  May  and  June  1995,  in the  course  of gathering  survey  data  for  a study  on

encouraging  physicians  to use  paperless  claims,  we  obtained  from  the  carriers  listings  of

active  physician  provider  numbers,  with  December  1994 claim  volumes  noted  for  each.  As

was  the  case  in  1991,  we find  a substantial  percentage  of these  physician  provider  numbers

are unused,  that  is, they  have  no recent  billing  history.

From  a samp[e  of active  paper-biller  physician  provider  numbers  at eight  carriers, 
we project  that  65 percent  were  not  used for  billing  Medicare  in December  1994. 
In the  table  below  we  show  the  unused  provider  number  percentages  at the  carriers  in our 
sample,  and  the  projection  to all carriers.  Projecting  the  sample  results  to a total  of 
485,787  active  paper-biller  physician  provider  numbers  at all 29  carriers,  we  estimate  that 
315,762  such  numbers  were  unused  nationwide. 
TABLE:  UNUSED  PHYSICIAN  PROVIDER  NUMBERS 
CARRIER  PAPER  NUMBERIN  NUMBER  PERCENT  MARGINOF 
BILLERS  SAMPLE  UNUSED  UNUSED  ERROR 
A  690  140  44  31  * 7.70/0 
B  18,307  320  212  66  f  5.20/0 
c  6,187  200  98  49  k 6.90/0 
D  14,736  300  187  62  &5.5% 
E  2,233  255  97  38  + 6.00/0 
F  2,791  260  178  68  * 5.7% 
G  6,971  300  189  63  &5.5% 
H  39,263  300  216  72  + 5.1%0 
All Carriers  485,787      65  * 5.7% 
Source: OIG Survey of Medicare carriers, May 1995. 
1
 We have  included  a description  of our  two-stage  sampling  methodology  in a note  at the

end  of this  repoti.  It is important  to note  here  four  points  concerning  the  data  in the  table.

First,  the  data  reflect  claim  activity  for  one  arbitrarily  chosen  calendar  month,  December

1994.  We held  discussions  with  carrier  staffs,  reviewed  monthly  and  yearly  claim  volumes

reported  to HCFA,  and  noted  another  reviewers  conclusion  that  seasonal  changes  do not

lead  to  significant  differences  in Medicare  Part  B claim  characteristics.3  From  this

analysis  we believe  that  1 month  fairly  represents  the  incidence  of unused  active  physician

billing  numbers.  Vacations,  illness,  varied  billing  schedules,  or other  factors  can  account

for  some  of the  unused  provider  numbers  in any  one  given,  but  are unlikely  to  account  for

a substantial  percentage  of unused  numbers.

Second,  we relied  on the  carriers  then-current  (May  or June  1995)  provider  number

listings.  It would  have  been  an onerous  task  for the  carriers  to  reconstruct  provider

number  listings  for  December.  Changes  in provider  populations  are gradual.  Initiation  of

new  practices  and  termination  of established  practices  will  change  the  carrier  listings  from

month  to month.  As  these  incremental  changes  are unlikely  to  lead  to  substantial  overall

change  in the  course  of several  months,  we believe  the  December  claim  history

substantially  reflects  billing  number  use  among  the  May  or June  provider  population.

Third,  the  data  are  limited  to physician  provider  numbers.  Physicians  account  for the  vast

majority  of all provider  numbers,  and  the  carriers  have  responsibility  for  issuing  (or

deactivating)  physician  provider  numbers.  Non-physician  supplier  numbers,  by contrast,

are often  issued  by  a central  registry  (durable  medical  equipment)  or the  certification

process  (independent  laboratories).  In this  context  we  note  that  the  OIG  found  30 percent

of all provider  numbers  were  unused,  at the  one  carrier  examined  in detail  in  1991.

Fourth,  we  selected  the  samples  for the  table  from  physician  provider  numbers  that  are not

authorized  to use  paperless  claims  (paper  billers).  Nationwide  the  485,787  paper-biller

numbers  accounted  for  59 percent  of all active  physician  provider  numbers,  but  they

represented  just  17 percent  of physician  claims  in December  1994.

We have  some  indication  that  the  incidence  of unused  provider  numbers  among  paperless

billers  may  be substantial.  if perhaps  not  so high  as the  65 percent  found  for paper  billers.

Among  nine  carriers  that  sent  us data  for both  categories,  paper  and  paperless  billers,  we

found  that  unweighed  averages  of 66 percent  of paper,  29 percent  of paperless,  and  57

percent  of all  provider  numbers  were  unused.

We  sought  carrier  explanations  for the  high  percentage  of active  but  unused  physician

provider  numbers.  The  carriers  stressed  that  this  situation  tends  to develop  because

physicians  neglect  to notify  the  carriers  to deactivate  solo  billing  numbers  when  they  close

an individual  office  to join  a group  practice  or managed  care  organization.

2
 Except  in cases  of sanctions,  most  carriers  rely  on physicians  to report  voluntarily  on 
changes  in their  billing  situation,  such  as a move  out  of State.  Often,  the  carriers  report, 
they  learn  of the  move  only  by returned  mail.  There  is no  incentive  for physicians  to 
report  changes  in billing  arrangements,  nor  is there  a disincentive  to neglect  reporting. 
The  extent  to  which  carriers  actively  seek  to purge  unused  numbers  is unclear.  According 
to HCFA,  between  October  1994  and  February  1995 the  carriers  completed  the  deactivation 
of provider  numbers  for  which  no  claims  were  submitted  over  a 3-year  period.  Our  data 
reflect  the  carrier  files  afler  this  deactivation  was  completed. 
We do know  that  the  carrier  in our  sample  with  the  smallest  percentage  of active  but 
unused  numbers  (the  Montana  carrier)  has  long  had  in place  a system  to identifi  and  purge 
unused  provider  numbers  every  3 years.  The  1991  OIG  report  referenced  above  cited  the 
Montana  carrier  for its  effective  practice  in sending  out  information  verification  letters  to 
providers. 
The large  number  of active  but  unused  numbers  poses  signl~cant  issues  regarding 
integrity  and  efficiency. 
  MISUSING PROVIDERNUMBERS:  Billing  numbers  can  be misused  by physicians, 
their  office  staffs,  or billing  agents  who  process  and  submit  claims.  With  two  of 
more  billing  numbers  controlled  by  one  physician  it becomes  easier  for  duplicate 
billings,  unbundling,  fragmentation,  or global  service  period  violations  to occur,  by 
accident  or by design. 
  SKEWINGUT1LIZATIONREVIEWS:  Utilization  parameters  can be rendered 
inaccurate,  or even  be manipulated,  by holders  of multiple  numbers.  Postpayment 
screens  can  be more  costly,  or even  impracticable,  to apply.  Quality  of service 
reviews,  which  need  to look  at claims  in the  context  of all other  services  by the 
billing  physician,  can  be affected. 
  EVADING SANCTIONS: A sanctioned  physician  can evade  deactivation  of the 
primary  provider  number.  Unless  all the  carriers  and  the  registries  with  which  a 
sanctioned  provider  trades  fully  and  accurately  coordinate  information,  exclusion 
might  not  be effective. 
  KNOWiNG ACCURATE GROUP COMPOSITION: Group  membership  can  be concealed 
or reported  improperly.  Carriers  are required  to keep  current  information  on the 
composition  of physician  group  practices  in order  to control  abusive  billing,  to 
monitor  program  payments,  and to assess  reasonableness  and  necessity  of  services 
claimed. 
3
   
It becomes  especially  important  to remove  these  risks  as Medicare  moves  toward  a unified 
national  system  for processing  health  care  claims.  Within  the  Medicare  Transaction 
System  (MTS),  HCFA  plans  to maintain  a national  provider  file that  will  make  available  to 
claims  processing  sites  provider  data  with  a unique  numbering  system.  If carrier  files 
continue  to contain  so many  unused  provider  numbers,  the transition  to MTS  could  become 
unnecessarily  complicated  and  could  even  be jeopardized. 
Just  keeping  a large  number  of active  but  unused  numbers  in provider  files  can  impose 
needless  administrative  expenses  on Medicare  and  the  carriers.  Professional  relations 
outreach  activities  are duplicated,  if only  through  printing  and  mailing  costs.  Calculations 
of pricing  screens  and  charge  histories  need  to address  unused  numbers,  ofien  futilely, 
because  they  can  be used  at any  time  without  notice.  Even  routine  maintenance  of 
provider  files  incurs  larger  than  needed  staffing  and  information  resource  management 
costs. 
RECOMMENDATION.  The HCFA  should  require  the  carriers  to deactivate  annually 
all provider  numbers  without  current  billing  history  and  to  update  provider  records 
periodically. 
This  recommendation  follows  from  one  made  by  OIG  in  1991.  With  the  approach  of 
MTS,  the  recommendation  appears  to be even  more  pertinent  now  than  at that  time. 
Further,  it relates  very  directly  to HCFAS  priority  interest  in addressing  fraud  and  abuse 
and  to the  goal  set forth  in its strategic  plan  to be a leader  in health  care  information 
resources  management. 
The  carriers  can  proactively  identify  unused  provider  numbers  whose  holders  intend  not  to 
use them  again  by  contacting  the  physicians.  One  way  to do this  would  be to  send  a 
mailer  with  a tear-off  return  postcard  for the  physician  to indicate  intent  to use  the  provider 
number,  or not.  Failure  to respond  could  trigger  a warning  notice,  and  timely  deactivation. 
Social  Security  has  found  that  a mailer  assists  in screening  disabled  beneficiaries  who  are 
due  to have  mandated  periodic  reviews.4 
In the  Medicare  Carrier  Manual,  HCFA  has  established  3 years  as an acceptable  time  limit 
for inactivity.  Our  finding  that  65 percent  of physician  provider  numbers  were  unused, 
after  the  first  round  of deactivation  by the  carriers,  suggests  that  a lower  limit  would  be 
more  appropriate  for timely  closing  of unused  numbers.  A  1-year  limit  would  allow 
provider  numbers  with  just  one  claim  a year  to remain  active. 
HCFA  Comments 
The  HCFA  agrees  with  our recommendation  in the  draft  report  that  carriers  deactivate 
unused  provider  numbers.  but believes  that  3 years  of inactivity  offers  an appropriate 
threshold  before  carriers  deactivate  an unused  number.  The  HCFA  also  agrees  with  our 
4
 suggestion  that  many  inactive  addresses  occur  when  physicians  neglect  to notify  carriers  to 
deactivate  solo  billing  numbers.  The  full  text  of HCFAS  comments  is in the  Appendix. 
OIG  Response 
While  we appreciate  HCFAS  agreement  regarding  the  importance  of deactivating  unused

numbers,  we must  emphasize  the  need  for  carriers  to act  more  quickly  and  more  assertively

in this  area.  Thus  we  have  revised  our  recommendation  to explicitly  reflect  our  belief  that

a  1-year  time  period  for  deactivation  should  be established.

In  1991  HCFA  accepted  our previous  recommendation  to deactivate  unused  provider

numbers.  Instructions  were  issued  in October  1994  and  deactivation  completed  by the

carriers  in February  1995.  Our  data  from  May  and  June  1995  show  that  this  deactivation,

with  a 3-year  threshold,  lefl many  unused  provider  numbers  active  in carrier  files.

Therefore,  we  believe  additional  corrective  action  is necessary.

The  HCFA  believes  that  deactivating  provider  numbers  more  frequently  than  every  3 years

would  be labor  intensive  and  not  cost  effective.  We are not  aware  of analyses

documenting  just  how  labor  intensive  and  cost  effective  a  1-year  deactivation  threshold

would  be.  It would  appear  efficient  to mail  a postcard  to holders  of the  inactive  numbers,

and  deactivate  the  nonrespondents.  Carriers  could  be allowed  discretion  to retain

nonrespondents  for whom  they  had  independent  information  to  show  continuing  activity.

METHODOLOGICANLOTE: We defined a physician provider number as a billing number assigned to a 
physician (defined in Section  1861(r) of the Social Security Act) or to a group of physicians.  Many 
physicians in a billing group can share one provider number, but a group (or a solo physician) can have more 
than one provider number  if the carrier assigns them, for example, to identifi  multiple practice locations. 
We defined an active physician provider number as one that had not been deactivated by the carrier by reason 
of death, moving  out of State. sanction, or similar occurrence.  An active number entered in item 33 of the 
Health Insurance Claim Form. HCFA-1500, can induce a carrier to process the claim and issue payment, if 
all the other data entered on the claim form is consistent. 
We defined an unused active physician provider number as one that was not used for a claim processed by 
the carrier during December  1994.  This was the most recent complete month at the time we began the study. 
We asked the carriers to count processed claims rather than submitted  claims so that we could also count 
amounts allowed on a comparable basis, and we could use the carrier performance  report (HCFA-1565) 
numbers as a reality check. 
We selected 8 (out of 29) carriers at random in the first stage of a two-stage random sample of physician 
providers.  We then selected  100 active physician provider numbers at each carrier.  When we found the first 
100 selected included a substantial percentage of unused numbers (no claims during December  1994), we 
inflated the selection to give approximately  100 used numbers.  Thus the sample sizes in the Table. 
For the margin of error in the table we used standard statistical formulas to compute confidence intervals that 
apply to the sample design used to select this sample. 
5
 NOTES: 
1.	 US Department  of Health and Human Services, Office of Inspector General, Carrier A4ainfenance J# 
Medicare Provider Numbers, 0EI-06-89-O0870,  May 1991. 
2.	 US Department  of Health and Human Services, Health Care Financing Administration,  Medicare 
Carriers Manual,  Part 4 Professional Relations, Section 1001.2. 
3.	 United States General Accounting  Office, Medicare Claims: Commercial  Technology Could Save 
Billions Lost to Billing Abuse, Report AIMD-95-135,  Washington DC, May 1995, Note 6. 
4.	 Social Security Administration,  1994 Annual Report to the Congress, SSA Publication  03-005, July 
1994, page  11. 
6
  
APPENDIX 
COMMENTS  ON  THE  DRAFT  REPORT 
Appendix-1  ,,
..- .$4,,,  ,.
DEP.IRT<MENT  OF HE.\LTH  & HU,}IAN  SERVICES  eafth  Care  Ftnanclng  Admlnfstratro~ 
:-<-,  
4+ 
,,>,, ,0 T!le  Admlnlstrator 
Washington.  D.C.  20201 
DATE  o~1619$xj 
A 
TO:	 June  Gibbs  Brown 
Inspector  Generai 
FROM:  Bruce  C. Wade 
Administrator 
% 
Camers  Still  Need to Purge  Unused 
SUBXECT	 Office of inspector  General  Draft  Report, 
Provider  PJumbers,  (OEI-O  1-94-0023  1) 
We reviewed  the above-referenced  reporton the continuing  need  for  Medicare  carriers  to  purge 
unused  provider  numbers  horn  their  files.  .Attached  are  our  comments  on  the  report 
recommendation. 
Thank you for the opportunity  to review and comment on this  drafl  report. 
Attachment   
Comments  of the Health Care Financirw Administration  (HCFA) 
on Office  of Inmector  General (OIG) 
Draft Re~ort: Carriers Still Need  to  Purge  Unused  Provider  Numbers, 
(OEI-01-94-00231] 
OIG Recommendation 
The HCFA should require the carriers to deactivate all provider numbers without current 
billing history and to update provider records periodically. 
HCFA Res~onse 
We agree that camiers should deactivate provider numbers without current billing history 
and update provider  records.  However, OIG suggested that HCFAS 3-year threshold  be 
reduced to 1 year,  and at this time  we believe  that  3 years  k  an appropriate  tirnefkne  as 
most carriers must maintain  3 years of provider tie  history to fulfill utilization  review 
requirements.  Deactivating  and reenrolling in a 1-year time period would be labor 
intensive an~  based  on current informatio~  not cost effective.  In October  1994, HCFA 
instructed the carriers  to deactivate a provider number if no claims were submitted over a 
3-year period.  Be~een  October  1994 and February  1995, the carriers completed 
deactivation of provider  numbers that met this criterion. 
Since that time, HCFA has had ongoing initiatives to maintain  an updated and cu.ment 
Provider Enrollment  File.  These initiatives should control entry into the system.  As we 
review the impact of these changes we will also review the need to change the procedures  -
for deactivating  provider/supplier  numbers. 
o  HCFA is cuxrently reviewing carrier provider enrollment  activity for the 
past 3 years to identi~  growth patterns and irends as well as the physician 
enrollment  totals for 1994- 1995 to identi&  and target potential areas for 
fraud and abuse. 
o	 HCFA is implementing  specific  criteria for Conditions  of Enrollment 
which all new and cu.mentproviders/supphers  must meet in order to obtain 
validation  or reenrollrnent  into the Medicare program. 
o	 HCFA requests ownership information for durable medical equipment 
suppliers  and clinical laboratories to determine if providers are subsidiaries 
or successors  of persons or entities previously sanctioned from the 
Medicare  or Medicaid  program.   
Page 2 
0	 HCFA also assigns unique identifiers (e.g., Unique  Physician  Identification 
Numbers,  National Supplier Clearinghouse numbers)  to physicians, 
nonphysician  practitioners,  medical group practices,  and suppliers who 
provide  services for  which Medicare payment is made.  The unique 
identifiers  are assigned to each provider whether  practicing  solo, in a 
partnership,  or in a group, and remain constant throughout  their Medicare 
afll.iiation. 
o	 Like ownership informatio~  these unique idenfiers  and information  are 
helpful  in identifying  sanctioned providers that either move to another state, 
join  a medical group practice, or are subsidities  or successors  of or 
controlled  by persons or entities previously debarred  flom the Medicare or 
Medicaid  program.  A listing of exciuded providers  is provided  to 
contractors  on an ongoing basis to ensure that sanctioned  providers  are not 
enroiled in the Medicare program and that the provider  file information is 
current. 
o	 In August  1994, due to fraudulent supplier activity,  HCFA devised more 
stringent provider enrollment verification procedures  which led to the 
revocation  of approximately  1,000 supplier numbers,  the validation  of over 
114,000 current supplier numbers, and over 2,500 pending supplier 
applications. 
We  also  agree  with  OIG  that  many  inactive  addresses  occur  when physicians  neglect to  

noti~  carriers to deactivate  solo biliing numbers.  However, as HCFA prepares for the

implementation  of the Medicare Transaction  System (MTS), ail existing data in the

Provider Enrollment  File will be validated.  Inactive and inappropriate  provider

information wiii be eliminated  from the Provider Enroihnent  File.  HCFA w-iiialso

standardize provider  enroiixnent forms, policies, and procedures  in preparation  for MTS

with the forms scheduled  to be implemented prior to Day One of  MTS operation.

These provider em-oilrnent data wiii furnish much of the information  needed for

processing claims after MTS is operational.

Additionaiiy, the National  Provider System (NPS), now being developed by HCFA, wili

address the problems  associated with multiple numbers such as dupiicate payments and

manipulation of utilization  parameters  by ensuring that only one number is assigned to a

provider.  When a provider requests  a new number through the NPS, a nationai  data base
  
Page 3 
will be searched to ensure that a number has not already been assigned to that provider. 
The NPS will not issue a new number when a physician changes or adds practice 
locations.  Further, the NPS will track physicians  participation  in group practices.  We 
expect the NPS to begin assigu.ing numbers  to existing Medicare providers  in April  1996.