DEPARTMENT OF HEALTH &. HUMAN SERVICES 	 Office of Inspector General 
Washington, D.C.  20201 
NOVO.12010 
TO: 	 Donald M. Berwick, M.D. 
Administrator 
Centers for Medicare & Medicaid Services 
FROM:  Stuart Wright 
Deputy Inspector General 
for Evaluation and Inspections 
SUBJECT: 	 Memorandum Report:  The Use ofPayment Suspensions To Prevent 
Inappropriate Medicare Payments, OEI-OI-09-001S0 
This memorandum report presents the findings of our recent work that (1) describes 
Medicare payment suspensions implemented by the Centers for Medicare & Medicaid 
Services (CMS) in 2007 and 2008 and (2) assesses CMS's process for approving and 
implementing Medicare payment suspensions. 
CMS may suspend payments to a Medicare provider or supplier (hereinafter referred to 
as a provider) under any of three circumstances:  (1) fraud or willful misrepresentation, 
(2) when an overpayment exists but the amount has not been determined, or (3) when 
payments made or to be made may be incorrect. 1 CMS may suspend payments based on 
requests from its contractors or from law enforcement. 
We analyzed 253 suspensions that eMS imposed in 2007 and 2008.  Part B providers 
composed 85 percent ofthose suspensions.  Overpayments to providers in those years 
totaled at least $206 million.  eMS extended more than half of payment suspensions, 
generally because its contractors needed more time to calculate overpayments or the 
Office of Inspector General (OIG) was considering an administrative action against a 
provider, such as a civil monetary penalty or permissive exclusion. 
The great majority of providers that eMS suspended in 2007 and 2008 exhibited 
characteristics that suggest fraud.  eMS recommends that providers suspended due to 
fraud receive no advance notice; in all but three of the suspensions, no such advance 
notice was given.  Seventy-four percent of suspended providers showed questionable 
billing patterns.  Sixty-three percent of suspensions were supported by information from 
beneficiaries or from other providers; this information included evidence that the 
suspended providers had billed for services that were never received or were medically 
142 CFR  40S.371(a)(l).  Page 2  Donald M. Berwick, M.D. 
 
 
unnecessary and had used other providers billing numbers to seek payment for items or 
services that had not been authorized.  Twenty-four percent of suspended providers billed 
Medicare before their suspensions despite having vacant physical locations. 
 
We also found that CMS provides some inconsistent guidance on payment suspensions, 
particularly in specifying the types of information that its contractors should submit with 
a request for a suspension, as well as in describing to contractors and law enforcement the 
circumstances in which an extension is permitted. 
 
We conclude that payment suspensions were used in 2007 and 2008 almost exclusively 
as a tool to fight fraud.  Since the time when we collected data for this evaluation, the 
Patient Protection and Affordable Care Act (hereinafter referred to as the Affordable Care 
Act) was signed into law.  The Affordable Care Act states that a providers payments 
may be suspended based on a credible allegation of fraud, unless there is good cause not 
to suspend such payments.  It also states that CMS must consult with OIG in determining 
whether a credible allegation of fraud exists.2  On September 23, 2010, CMS issued 
proposed regulations for these provisions.3  The information provided in this report may 
be useful to CMS when it finalizes these regulations.  In the guidance that CMS develops 
for the new provisions for payment suspensions, CMS could also address the 
inconsistencies that this report identifies. 
 
BACKGROUND 
 
Improper Medicare Payments and Payment Suspensions 
CMS may suspend payments to any Medicare provider when it possesses reliable 
information that the provider was overpaid for previously submitted claims.  CMS 
imposes suspensions under any of three circumstances:  (1) fraud or willful 
misrepresentation, (2) when an overpayment exists but the amount has not been 
determined, and (3) when payments made or to be made may be incorrect.4  
 
Payment suspensions are a strong tool for CMS to use to protect the Medicare program 
from improper payments.  In 2008, CMS highlighted payment suspensions as a means of 
fighting fraud, waste, and abuse by home health providers in Miami-Dade County, 
Florida.5   
 
CMS may suspend payments based on requests from its contractors or from law 
enforcement.  CMS contractors that typically request payment suspensions include 
Program Safeguard Contractors and Zone Program Integrity Contractors, both of which 
                                                 
2  P.L. 111-148,  6402(h)(1) and (2).  
3 75 Fed. Reg. 58204, 58239 (Sept. 23, 2010). 
4 42 CFR  405.371(a)(1); CMS, Program Integrity Manual (PIM),  3.9.1. 
5 CMS, CMS Strengthens Efforts to Fight Medicare Waste, Fraud and Abuse.  Accessed at 
http://www.cms.gov/apps/media/press_releases.asp on May 3, 2010.   
OEI-01-09-00180                The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments  Page 3  Donald M. Berwick, M.D. 
 
 
conduct data analysis and identify potential Medicare fraud on CMSs behalf.6  Law 
enforcement entities, including OIG and the Department of Justice (DOJ), request 
payment suspensions from CMS through these contractors.7  In addition, the Office of 
General Counsel in the Department of Health & Human Services (HHS) reviews requests 
for payment suspensions prior to their approval.  
 
The Process for Payment Suspensions 
Two documents outline procedures for payment suspensions.  For contractors, 
Section 3.9 of the PIM details those procedures.  For law enforcement, the Joint 
Guidance on CMS Administrative Actions and the Impact on Health Care Fraud Cases 
(hereinafter referred to as the Joint Guidance) provides information regarding payment 
suspensions and law enforcement investigations.  Authored by CMS, OIG, and DOJ and 
released in July 2009, the Joint Guidance describes the types of administrative sanctions 
that CMS may impose, including payment suspensions, and their effect on ongoing 
investigations and litigation. 
 
Requesting a payment suspension.  The process for requesting a payment suspension is 
the same whether a contractor initiates it based on the contractors own analysis or at 
CMSs request, or at the behest of law enforcement.8  The contractor provides CMS with 
a draft notification letter (hereinafter referred to as a suspension notice) and a summary of 
the reliable information.  The suspension notice must include the reason for the 
suspension, which must be specific enough to justify the action being taken and allow 
the provider an opportunity to identify the problem.9  In addition to that requirement, the 
notice must also include 10 other elements: 
 
  that the suspension will be imposed, 
  the extent of the suspension (all claims, certain types of claims, 100 percent 
suspension, or partial suspension), 
  that the suspension is not appealable, 
  that CMS has approved the suspension, 
  when the suspension will begin, 
  the items and services affected, 
  how long the suspension is expected to be in effect, 
  the reason for suspending payment, 
                                                 
6 In 2008, CMS established Zone Program Integrity Contractors, which will consolidate benefit integrity 
work for Medicare Parts A and B.  Seven of them will replace the Program Safeguard Contractors.  As of 
October 2010, three are operational. 
7 CMS, PIM,  3.9.1.1.C. 
8 A memorandum of understanding between OIG and CMS allows OIG to request a payment suspension 
based on a declaration signed by an OIG Special Agent.  This declaration includes a description of the 
fraud and the evidence supporting the request for a payment suspension.  The memorandum of 
understanding was established in January 2009 and amended in June 2010.   
9 CMS, PIM,  3.9.1.1.C. 
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  that the provider has the opportunity to submit a rebuttal statement within 
15 days of the suspension notice, and  
  where to mail the rebuttal. 10 
 
Payment suspension approval and provider notification.  CMS decides whether to 
suspend a providers payments based on reliable information that it receives from the 
contractor.  After CMS approves a suspension, it determines whether the provider should 
be notified before or after the date of the suspension.  If CMS suspends a provider 
because of suspected fraud, willful misrepresentation, or harm to the Medicare Trust 
Funds, CMS directs the contractor to send the notice to the provider on or after the 
effective date of the suspension, but no later than 15 days after this date.11  For 
suspensions imposed for other reasons, CMS instructs the contractor to send the 
suspension notice at least 15 calendar days before the suspension takes effect.12   
 
Opportunity for rebuttal.  Payment suspensions may not be appealed to an administrative 
law judge within HHS.  However, a suspended provider may submit a rebuttal to explain 
why CMS should remove the suspension.  A provider must submit a rebuttal letter within 
15 days of the date of the suspension notice, but the contractor can shorten or extend this 
period for cause.13  CMS directs its contractors to respond within 15 days of receiving a 
rebuttal letter with CMSs decision for continuing or removing the suspension.  The 
process for responding to rebuttal letters is similar to that for requesting suspensions; the 
contractor drafts a response to the rebuttal and forwards italong with the providers 
rebuttal letterto CMS for approval. 
 
Calculating overpayments during a suspension.  After suspending payments to a provider, 
the contractor calculates the overpayment, which consists of all claims in a specific time 
period determined to have been paid incorrectly.14  The contractor selects a statistically 
valid random sample of claims, requests medical records for these claims from the 
suspended provider, and reviews the records to determine the amount of the 
overpayment.15  If the contractor does not receive records from the provider, then the 
contractor determines that 100 percent of the claims were paid in error.   
 
During the suspension, the provider may continue to submit claims.  Amounts from valid 
claims submitted by the provider during this period are held in suspense.  Those funds 
must first be applied to reduce the amount of the overpayment and then to reduce any 
                                                 
10 CMS, PIM,  3.9.2.2.2. 
11 42 CFR  405.372(a)(3); CMS, PIM,  3.9.2.2. 
12 CMS, PIM,  3.9.2.2.1. 
13 42 CFR  405.374(b). 
14 CMS, PIM,  3.9.2.3.1. 
15 CMS, PIM,  3.6. 
OEI-01-09-00180                The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments  Page 5  Donald M. Berwick, M.D. 
 
 
other debt owed to CMS or HHS.  Any remaining funds held in suspense are then 
released to the provider. 16 
 
Extension of payment suspensions.  Payment suspensions generally last 180 days.  
However, based on written requests from contractors or law enforcement, CMS may 
extend payment suspensions under certain circumstances (see Table 1).  
Table 1:  CMSs Provisions for Extending Payment Suspensions 
Entity Requesting an  Time Limit for  Circumstance Under Which CMS May Grant the Entity an 
Extension  the Extension  Extension Based on a Written Request 
Contractor, OIG, or  180 days  The entity is unable to complete its examination of the information or 
DOJ  investigation (including calculation of the overpayment). 
DOJ  180 days  An additional 180-day extension may be granted based on an 
ongoing investigation and the anticipated filing of criminal and/or civil 
actions. 
OIG  No limit  The time limits for extensions do not apply if the provider has been 
referred to, and is being considered by, OIG for administrative action 
(such as permissive exclusion or civil monetary penalty). 
Source:  42 CFR  405.372(d); CMS, PIM,  3.9.2.4. 
 
Removal of payment suspensions.  After the contractor calculates the overpayment, it 
issues a letter to the provider that includes the overpayment amount.  The contractor then 
refers the overpayment to the Medicare claims processor.  The claims processor issues a 
letter (called a demand letter) to the provider demanding refund of the overpayment and 
maintains the responsibility for collecting the overpayment.17  Once the claims processor 
has issued the demand letter and the suspended payments have been applied to the 
overpayment and/or released to the provider, the suspension is removed.18 
 
The Affordable Care Act and Payment Suspensions 
Signed into law on March 23, 2010, the Affordable Care Act established the following 
provisions for payment suspensions: 
  CMS may suspend payments to a provider pending an investigation of a credible 
allegation of fraud against the provider, unless CMS determines there is good 
cause not to suspend such payments; 
  CMS shall consult with OIG in determining whether there is a credible allegation 
of fraud against a provider of services or supplier; and  
  CMS shall promulgate regulations to implement the provisions listed above.19 
(CMS issued the proposed regulations on September 23, 2010.20) 
                                                 
16 42 CFR  405.372(e). 
17 CMS, PIM,  3.8. 
18 Joint Guidance, p. 5. 
19 P.L. 111-148  6402(h). 
20 75 Fed. Reg. 58204, 58239. 
OEI-01-09-00180                The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments  Page 6  Donald M. Berwick, M.D. 
 
 
METHODOLOGY 
 
Scope 
This evaluation examined payment suspensions for fee-for-service Medicare providers 
that CMS imposed in 2007 and 2008 in the 50 States, the District of Columbia, and 
Puerto Rico (hereinafter referred to as States).  It also examined CMSs processes for 
payment suspensions.  This evaluation did not examine CMSs decisions on individual 
payment suspensions or the appropriateness of payment suspensions.  
 
Data Sources and Analysis 
Our evaluation relied on four data sources:  documents for payment suspensions that 
CMS approved in 2007 and 2008, interviews with CMS officials, site visits at three 
purposively selected contractors, and a review of CMS regulations and guidance. 
 
To examine the payment suspensions that CMS implemented, we reviewed contractor-
provided documents pertaining to 253 payment suspensions imposed in these 2 years.21  
We identified the types and sources of reliable information that supported payment 
suspensions to determine the circumstances in which CMS approved suspensions.   
 
To examine CMSs processes for approving and implementing payment suspensions, we 
used data from our review of payment suspension documents and a review of all relevant 
regulations and guidance for payment suspensions.  We also relied on information from 
interviews with CMS officials and site visits at three contractors; in these interviews and 
site visits, we collected information about processes and procedures for implementing 
payment suspensions. 
 
Standards 
This evaluation was conducted in accordance with the Quality Standards for Inspections 
approved by the Council of the Inspectors General on Integrity and Efficiency. 
 
RESULTS 
 
Payment Suspensions in 2007 and 2008 Were Concentrated in Medicare Part B, and 
Most Were Located in Four States 
Part B providers composed 85 percent of suspensions in 2007 and 2008.  We divided the 
Part B providers into two categories:  those that supply durable medical equipment, 
prosthetics, and other supplies (DMEPOS); and other providers, such as physicians and 
                                                 
21 According to CMSs Fraud Investigations Database, the agency imposed 260 suspensions in this 2-year 
period.  However, contactors were unable to provide us with the files on 7 of these suspensions, leaving us 
with 253 suspensions that had information we could use. 
OEI-01-09-00180                The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments  Page 7  Donald M. Berwick, M.D. 
 
 
home health agencies.  We examined these two groups separately because of concerns 
that OIG has raised about fraud among DMEPOS suppliers.22  (See Table 2.) 
 
Table 2:  Number of Payment Suspensions by Year and Provider Type 
Provider Type  2007  2008*  Total 
Part A  10 (6%)  28 (32%)  38 (15%) 
Part BDMEPOS  23 (14%)  41 (47%)  64 (25%) 
Part Bnon-DMEPOS  132 (80%)  19 (22%)  151 (60%) 
   Total  165  88  253 
Source:  OIG analysis of payment suspension documents, 2010. 
* Percentages do not total 100 percent because of rounding.  
 
Seventy-nine percent of providers that CMS suspended in 2007 and 2008 were located in 
four States; more than half were located in Medicare Fraud Strike Force areas.  CMS 
suspended payments to providers located in 23 States, with most of the suspended 
providers located in Florida, Puerto Rico, California, and Michigan (see Figure 1; also 
see Appendix A for the number of payment suspensions by State). 
 
Figure 1:  Percentage of Providers Suspended in 2007 and 2008 by State 
Florida
35%
Puerto Rico
26%
All other  California
States (N=19) 13%
21%
Michigan
5%
 
Source:  OIG analysis of payment suspension documents, 2010. 
 
                                                 
22 See OIG, South Florida Suppliers Compliance With Medicare Standards:  Results From Unannounced 
Visits, OEI-03-07-00150, March 2007; and OIG, Los Angeles County Suppliers Compliance With 
Medicare Standards:  Results From Unannounced Visits, OEI-09-07-00550, February 2008. 
OEI-01-09-00180                The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments  Page 8  Donald M. Berwick, M.D. 
 
 
Furthermore, 53 percent (135 of 253) of providers with payment suspensions were 
located in the seven U.S. Attorneys Office districts in which a Medicare Fraud Strike 
Force currently operates.23  The Medicare Fraud Strike Force, a joint initiative between 
HHS and DOJ that began in March 2007, targets chronic fraud as well as emerging or 
migrating schemes perpetrated by criminals operating as health care providers or 
suppliers.24   
 
Overpayments totaled at least $206 million.  As of August 2009, CMS had removed 
182 (72 percent) of the payment suspensions that it approved in 2007 and 2008.  The 
median overpayment amount that contractors calculated for the removed suspensions was 
$1,288,136 (see Table 3), with overpayments ranging from $23,344 to $6,071,470.  For 
23 of the 182 suspensions that CMS removed, the contractor determined that there was 
no overpayment to calculate or recoup.  
 
After the contractor calculates the overpayment, Medicare claims processors are 
responsible for collecting it.  However, recent OIG work found that claims processors 
collected only 7 percent of overpayments that contractors referred to them for collection 
in 2007.25   
 
Table 3: Overpayments Calculated During Payment Suspensions 
by Provider Type* 
Provider Type  N  Median  Minimum  Maximum  Total 
Part A  21  $1,645,026  $166,200  $4,596,538  $43,223,576 
Part B  DMEPOS  57  $1,237,153  $23,344  $5,881,115  $72,779,627 
Part B  non-DMEPOS  65  $1,072,338  $35,204  $6,071,470  $89,918,810 
   Overall  143  $1,228,136  $23,344  $6,071,470  $205,922,014  
Source:  OIG analysis of payment suspension documents, 2010. 
* We base this analysis on the documents we received for 143 of the 182 removed suspensions.  As of 
August 2009, 71 suspensions had not been removed, so the amount of any overpayment had not yet been 
determined.  For 23 suspensions, contractors calculated that no overpayment had been made; for 
16 suspensions, contractors did not provide information on the amount of overpayment. 
 
 
                                                 
23 As of July 2010, the Medicare Strike Force is in operation in the following U.S. Attorneys Office 
districts:  Southern District of Florida (Miami), Central District of California (Los Angeles), Eastern 
District of Michigan (Detroit), Southern District of Texas (Houston), Middle District of Louisiana (Baton 
Rouge), Eastern District of New York (Brooklyn), and Middle District of Florida (Tampa).  Medicare 
Fraud Strike Force Expands Operations into Brooklyn, N.Y.; Tampa, Fla.; and Baton Rouge, La.  
Accessed from http://www.stopmedicarefraud.gov/heatsuccess/taskforces.html on July 29, 2010.  
24 DOJ, Fact Sheet:  Medicare Fraud Strike Forces. Accessed from 
http://www.stopmedicarefraud.gov/heatsuccess/general_fact_sheet.pdf on July 29, 2010. 
25 See OIG, Collection Status of Medicare Overpayments Identified by Program Safeguard Contractors, 
OEI-03-08-00030, May 2010; and OIG, Medicare Overpayments Identified by Program Safeguard 
Contractors, OEI-03-08-00031, May 2010. 
OEI-01-09-00180                The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments  Page 9  Donald M. Berwick, M.D. 
 
 
Implementation of Suspensions Followed the Process Described in the Program 
Integrity Manual  
Suspension notices generally contained the required elements. Ninety-six percent (240) 
of the 250 suspension notices that we received included all required elements that the 
PIM specifies.26  The suspension noticewhich informs a provider that its payments 
have been suspended and provides information about the suspension processmust 
include (among other things) the suspensions start date, its expected duration, and 
information on the rebuttal process.  Of the 10 notices that lacked required elements, 
6  omitted information explaining that the provider has the opportunity to submit a 
rebuttal statement within 15 days of notification, and 4 omitted the date that the 
suspension began. 
 
Although the PIM contains no requirements for timeframes, CMS approved payment 
suspensions in a median of 4 calendar days. CMS approved about one-quarter of 
suspensions (46 out of 191) on the same day that contractors requested them (see 
Figure  2 for approval timeframes).  According to CMS officials with whom we spoke, 
they review each request for a payment suspension to assess the extent to which Medicare 
funds are at risk, as well as whether a payment suspension is the appropriate 
administrative tool to use. 
 
Figure 2: Number of Calendar Days Between the Date of Contractors 

Requests for Payment Suspensions and Date of CMSs Approval* 

 
0 
24%  1 
12% 
61 to  92 
1%  2 
8% 
31 to 60 
9% 
15 to  30 
9%  3 to  7 
27% 
8 to 14 
10% 
Source:  OIG analysis of payment suspension documents, 2010. 
* This analysis is based on 191 payment suspensions that were initiated by contractors/law enforcement.  We  
excluded the remaining 62 payment suspensions because these were initiated by CMS.  
 
                                                 
26 Contractors did  not  provide suspension notices for 3 of the 253 suspended  providers. 
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Few providers submitted rebuttals.  Of the 253 suspended providers, 41 (16 percent) 
submitted rebuttals to CMS.  Because payment suspensions cannot be appealed, the 
rebuttal serves as a providers only opportunity to submit information on why CMS 
should remove the suspension.  Of the 41 providers that submitted rebuttals, CMS 
removed suspensions for 3.   
 
CMS extended more than half of payment suspensions.  The suspensions that CMS had 
removed lasted a median of 267 days.  For Part A providers, the median length was 
179 days; for Part B providers, it was 341 days.  CMS extends suspensions based on 
requests from contractors and law enforcement.  CMS approved extensions for 145 of the 
253 payment suspensions (57 percent).  Two-thirds of the extensions (96 out of 145) 
were one-time extensions of 180 days.  CMS also approved a second 180-day extension 
for three suspensions.  
 
In most cases, contractors requested that CMS extend suspensions so that they could 
complete their calculations of the overpayments made to the providers.  Contractor staff 
told us that because of several factors, they might need additional time to calculate 
overpayments.  These factors include the amount of time that the provider takes to submit 
medical records and the complexity of the medical record reviews that contractors 
conduct. 
 
CMS extended 46 of 145 (32 percent) suspensions for indefinite time periods.  CMS may 
extend a suspension indefinitely based on a request from OIG when OIG is considering 
an administrative action against a provider, such as a civil monetary penalty or 
permissive exclusion.27   
 
The Great Majority of Providers That CMS Suspended in 2007 and 2008 Exhibited 
Characteristics That Suggest Fraud 
Although the circumstances for each suspension are unique, the timing of suspension 
notices and the reliable information that supported the suspensions demonstrate that CMS 
suspended most providers because of suspected fraud. 
 
All but three suspended providers received no advance notice, indicating suspected fraud 
or willful misrepresentation.  If CMS suspends a provider because of suspected fraud, 
willful misrepresentation, or harm to the Medicare Trust Funds, CMS instructs its 
contractors to send the notice on or after the effective date of the suspension, but no later 
than 15 days after this date.  For suspensions imposed for other reasons, CMS instructs its 
contractors to give providers at least 15 calendar days of prior notice.28   
 
                                                 
27 42 CFR 405.372(d)(3); CMS, PIM,  3.9.2.4. 
28 CMS, PIM,  3.9.2.2.1. 
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Contractors sent 99 percent of notices (243 of 246) to providers on or after the day the 
suspension took effect.29  Contractors sent notices to the remaining three suspended 
providers just 1 day prior to the date the suspension took effect.   
 
Seventy-four percent of suspended providers had questionable billing patterns.  For 
187 out of 253 suspended providers, contractors included analysis of claims data that 
showed unusual billing patterns.   
 
The contractors analyses showed billing patterns common in instances of suspected 
fraud, including aberrantly high amounts of services provided within a short timeframe 
and spikes in billing as a result of multiple claims submitted for the same beneficiary.  
The contractors analyses also showed that some of the suspended providers billed 
Medicare using stolen identities.  In these instances, suspended providers billed for 
services using beneficiary identification numbers that were known to have been 
compromised.  Other suspended providers aberrantly billed for medical equipment, 
submitting claims that listed neurosurgeons, pediatricians, and pathologists as the 
ordering physicians.  Those specialties do not typically order such equipment. 
 
Sixty-three percent of suspensions were supported by information from beneficiaries or 
from other providers that raised questions.  For 159 out of 253 suspensions, complaints or 
attestations from beneficiaries and/or from other providers contributed reliable 
information needed to implement a suspension.  They filed their complaints either with 
contractors or with law enforcement.  The attestations from beneficiaries and providers 
resulted from interviews conducted by law enforcement or contractors, as well as from 
signed statements collected by these entities.  In some instances, the information provided 
through complaints and attestations led a contractor to initiate payment suspensions.   
 
Beneficiary complaints and attestations indicated that the suspended providers billed 
them for services that they never received or that were medically unnecessary.  For 
example, some complaints concerned out-of-State providers that had billed the 
beneficiaries for services that they never received.  The beneficiaries had neither heard of 
the providers nor been to the States in which the providers were located.  Beneficiaries 
also attested that medical equipment suppliers billed them for equipment that they never 
received.  These beneficiaries indicated that they did not know the supplier or referring 
physician listed on the claim.  In addition, beneficiaries told contractors or law 
enforcement that they received home health services even though they were not 
homebound, as Medicare requires. 
 
Likewise, complaints or attestations from providers indicated that their billing numbers 
had been used by suspended providers to bill for items or services that they had not 
authorized.  For example, providers attested that they had never ordered medical 
                                                 
29 Contractors provided us with 250 suspension notices, of which 4 notices lacked an effective date, leaving 
a denominator of 246 notices.   
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equipment from the providers that aberrantly billed, nor had they ever treated the patients 
for whom the equipment was ordered.  These physicians include anesthesiologists and 
neurologists who also indicated that they do not order medical equipment for their 
patients.  Other physicians made complaints upon discovering that the suspended 
providers used their identities to establish new billing numbers in their names.   
 
Fifty-five percent of suspended providers failed to submit medical records.  Of the 
182 providers in 2007 and 2008 for which suspensions had been removed, 100 providers 
failed to submit medical records to the contractor for calculating the overpayment.  
According to contractor staff with whom we spoke, failing to submit medical records 
during the course of a suspension demonstrates that the provider may have never existed 
or may have moved without notifying CMS.  Such notification is a requirement to 
continue participating in the Medicare program.  
 
Twenty-four percent of suspended providers billed Medicare before their suspensions 
despite vacant physical locations.  For 61 of the 253 suspensions we analyzed, 
contractors, law enforcement, and/or CMS staff found that the providers office did not 
appear to be in business prior to the suspension.  They uncovered vacant offices and 
locked doors during posted business hours, as well as eviction notices posted on a 
providers office door.  In one instance, they went to the providers address and found a 
storage facility, rather than a medical office.  In addition, the site visits included 
interviews with landlords and tenants in neighboring businesses who attested that they 
had not observed any business activity at the providers location. 
 
CMS Provides Some Inconsistent Guidance on Payment Suspensions 
Two CMS-approved documents that provide guidance on the process remain incomplete 
or inconsistent with requirements for payment suspensions.  These documents include the 
PIM, which provides guidance to contractors; and the Joint Guidance, which provides 
information to law enforcement about CMSs administrative actions and their effect on 
health care fraud cases.  
 
The Program Integrity Manual fails to reflect CMSs current guidance to contractors for 
payment suspensions.  In 2009, CMS revised the PIMs section on payment suspensions, 
calling for contractors requesting suspension to submit other supportive information 
along with the suspension notice at the time of the suspension request.30  However, the 
revised PIM does not specify the type of supportive information needed.  CMS officials 
told us that when they suspend a provider, the information that they review includes 
whether the providers billing number was revoked, the amount of pending Medicare 
payments, and whether the providers claims are being reviewed prior to payment.31  If 
the contractor omits this information from the suspension request, it can result in a delay 
in CMSs approval of the suspension.   
                                                 
30 Ibid.,  3.9.2.2.2. 
31 This is known as a prepayment review.  See CMS, PIM,  3.4. 
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Furthermore, the model suspension notice contained in the PIM has not been updated 
since November 2000.32  Most notably, the model notice describes an outdated 
suspension approval process.  Since October 2006, the authority to approve payment 
suspensions has rested with the CMS central office, but the model notice describes the 
previous process, under which CMS regional offices approved suspensions.33  Although 
the text in the 2009 update to the PIM refers to the current arrangement, the notice 
itselfto which contractors presumably refer when preparing their requestscontinues 
to reflect the former regional arrangement.34 
 
The model notice also lacks the current legal language that CMS requires all suspension 
notices to contain.  That language includes the disposition of a providers payments after 
the removal of the suspension.35  Because the model notice omits this required 
information, contractor staff with whom we spoke told us that they rely on their own 
templates or refer to the most recent CMS-approved suspension notice to ensure that new 
suspension notices include the appropriate information.  CMSs lack of a standardized 
model suspension notice that includes all required information could potentially cause 
delays in the suspension process. 
 
CMS officials acknowledged that the PIM includes out-of-date guidance and told us that 
they were working with a contractor to thoroughly revise it.  CMS officials told us that 
they had conducted in-person training at each contractors location in the past year to 
review the suspension process with contractor staff.   
 
CMSs guidance on extending payment suspensions is contradictory.  In certain 
situations, CMS may extend payment suspensions indefinitely.  According to Medicare 
regulations, the suspension time limits do not apply when OIG is considering 
administrative action, such as a civil monetary penalty or permissive exclusion.36  Of the 
253 suspensions we examined, CMS approved indefinite extensions for 46 (18 percent). 
 
However, the PIM and the Joint GuidanceCMSs guidance documents for its 
contractors and for law enforcement, respectivelydiffer from one another in describing 
when a payment suspension may be extended.  The PIM states that CMS may grant an 
additional 180-day extension at the written request of DOJ, but the Joint Guidance states 
that CMS cannot grant DOJ an additional extension.  In addition, the PIM states that the 
                                                 
32 CMS, PIM, Exhibit 16Model Suspension of Payment Letters, Rev. 3, November 22, 2000.   
33 CMS memorandum, Re-Designation of the Payment Suspension Authority and Process, September 6, 
2006. 
34 CMS, PIM, ch. 3, Transmittal 282, January 8, 2009. 
35 In discussing the effect of payment suspension, we require the following language regarding the 
payment suspension in all notices:  When the payment suspension has been removed, any money withheld 
as a result of this action shall first be applied to reduce or eliminate the determined overpayment and then 
to reduce any obligation to CMS or HHS. (See 42 CFR 405.372(e).).  CMS presentation for Strike Force 
law enforcement, Medicare Payment Suspensions:  Myths and Facts, October 28, 2009.   
36 42 CFR  405.372 (d)(3). 
OEI-01-09-00180                The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments  Page 14  Donald M. Berwick, M.D. 
 
 
time limits for payment suspension do not apply if OIG is considering administrative 
sanctions.  In contrast, the Joint Guidance indicates that the payment suspension 
regulation does not explicitly establish a limit on the number of extensions, but it does 
not permit indefinite suspensions.37 
 
CONCLUSION  
 
In 2007 and 2008, CMS used payment suspensions almost exclusively as a tool to fight 
fraud.  Since the time when we collected data for this evaluation, the Affordable Care Act 
was signed into law.  This Act states that payments may be suspended to a provider 
pending an investigation of a credible allegation of fraud, unless there is good cause not 
to suspend such payments.  It also states that CMS must consult with OIG in determining 
whether a credible allegation of fraud exists.38  On September 23, 2010, CMS issued 
proposed regulations for these provisions.39  The information provided in this report may 
be useful to CMS when it finalizes these regulations.  In the guidance that CMS develops 
for the new provisions for payment suspensions, CMS could also address the 
inconsistencies that this report identifies.   
 
This report is being issued directly in final form because it contains no recommendations.  
If you have comments or questions about this report, please provide them within 60 days.  
Please refer to report number OEI-01-09-00180 in all correspondence. 
 
                                                 
37 CMS, PIM,  3.9.2.4; Joint Guidance, p. 4. 
38  P.L. 111-148  6402(h)(1) and (2).  
39 75 Fed. Reg. 58204, 58239 (September 23, 2010). 
OEI-01-09-00180                The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments  Page 15  Donald M. Berwick, M.D. 
 
 
APPENDIX A 
 
Number of Payment Suspensions by State in 2007 and 2008 
 
 
Number of Providers  Percentage of 
State  Suspended in 2007  Providers Suspended 
and 2008  in 2007 and 2008* 
Arizona  8   3.2% 
Arkansas  1  0.4% 
California  33  13.0% 
Florida  88  34.8% 
Idaho  2  0.8% 
Illinois  3  1.2% 
Louisiana  5  2.0% 
Massachusetts  3  1.2% 
Michigan  12  4.7% 
Mississippi  1  0.4% 
Missouri  2  0.8% 
Nebraska  1  0.4% 
Nevada  1  0.4% 
New Hampshire  1  0.4% 
New York  1  0.4% 
Ohio  4  1.6% 
Oklahoma  1  0.4% 
Oregon  3  1.2% 
Puerto Rico  66  26.1% 
Tennessee  5  2.0% 
Texas  5  2.0% 
Washington  5  2.0% 
Wisconsin  2  0.8% 
   Total  253  100% 
Source:  Office of Inspector General analysis of payment suspension documents, 2010. 
* Percentages do not total 100 percent because of rounding. 
 
OEI-01-09-00180                The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments