Department of Health and Human Services
 
OFFICE OF 

   
INSPECTOR GENERAL 

 
 
 
 
 
 
 
 
L A C S 
 
OS  NGELES  OUNTY  UPPLIERS  
 
C   W M
OMPLIANCE  ITH  EDICARE 

 
S :  R F  
TAND  ARDS    ESULTS  ROM 

 
U V  
NANNOUNCED  ISITS 

 
 
 
 
 
Daniel R. Levinson 
  
Inspector General 

 
February 2008 
 
OEI-09-07-00550 
  Office of Inspector General 

 
http://oig.hhs.gov 
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452,  
as amended, is to  protect the integrity of  the Department of Health and Human Services 
(HHS)  programs, as well as the health and welfare of beneficiaries  served by those 
programs.  This statutory mission  is  carried  out through  a nationwide network  of  audits, 
investigations, and inspections conducted by the  following operating components:  
Office of Audit Services 
The Office of Audit Services (OAS) provides all auditing services  for HHS, either by  
conducting audits with its  own audit resources or by overseeing audit work done by others.   
Audits examine the performance of HHS programs and/or its grantees and  contractors  
in carrying out  their respective responsibilities and are intended  to provide independent  
assessments of  HHS programs and operations.  These assessments help reduce waste, 
abuse, and mismanagement  and  promote economy and  efficiency throughout HHS. 
Office of Evaluation and Inspections  
The Office  of  Evaluation and Inspections (OEI)  conducts national evaluations to  provide 
HHS, Congress, and the public with timely, useful, and reliable information on 
significant issues.  Specifically, these evaluations focus on preventing fraud,  waste,  or  
abuse and promoting  economy, efficiency, and effectiveness  in departmental programs.  
To promote impact, the reports also present practical recommendations for improving 
program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative  
investigations  of  allegations of wrongdoing  in HHS  programs or to HHS  beneficiaries  
and of unjust enrichment by  providers.  The investigative  efforts  of OI lead to  criminal  
convictions, administrative sanctions,  or  civil monetary penalties.  
Office of Counsel to the Inspector General 
The  Office of Counsel to the Inspector General (OCIG)  provides  general legal services  to  
OIG, rendering  advice and opinions on HHS programs and operations and  providing all  
legal support in OIG's internal operations.   OCIG imposes program exclusions and civil 
monetary penalties  on health care providers and litigates  those actions  within HHS.   
OCIG also  represents OIG in the global settlement of  cases  arising under the Civil False 
Claims Act, develops and monitors corporate integrity agreements, develops compliance 
program guidances, renders advisory opinions on OIG sanctions to  the health care  
community,  and issues fraud alerts  and other industry  guidance.  
    
   
  E X E C U T I V E   S U M M A R Y  
OBJECTIVE 
 
To conduct unannounced site visits of suppliers of Medicare durable 
medical equipment, prosthetics, orthotics, and supplies (DMEPOS) in 
Los Angeles County to (1) determine their compliance with selected 
Medicare supplier standards and (2) identify their atypical 
characteristics. 
BACKGROUND 
DMEPOS are covered under Medicare Part B and include items such as 
hospital beds, wheelchairs, respirators, walkers, and artificial limbs.  
DMEPOS suppliers must enroll in the Medicare program to  submit 
claims for Medicare reimbursement.  DMEPOS suppliers are required 
to comply with 5 conditions and 25 supplier standards to enroll in the 
Medicare program and receive payment for a Medicare-covered item.   
The Centers for Medicare & Medicaid Services (CMS) contracts with the 
National Supplier Clearinghouse (NSC) to manage the enrollment and 
reenrollment of suppliers in the Medicare program. 
According to the Department of Health and Human Services, Los 
Angeles is a high-risk area for fraudulent activity involving DMEPOS 
suppliers. Supplier site inspections conducted by NSC underscore the 
risks in Los Angeles County.  In 2006, NSC conducted 401 inspections 
in Los Angeles County and revoked the billing privileges of 95 suppliers.   
In the 12 months beginning July 1, 2006, Medicare allowed 
approximately $245 million for DMEPOS provided in Los Angeles 
County and $8.6 billion nationwide.  
We focused  on four requirements with which compliance could be 
verified quickly through direct observation:  suppliers must (1) maintain  
physical facilities, (2) be accessible during business hours, (3) have 
visible signs, and (4) post hours of  operation.  We conducted 
unannounced site visits  of 905 suppliers in Los Angeles County in late 
2007. In addition, we analyzed the suppliers billing patterns. 
FINDINGS 
In Los Angeles County,  115 of 905 suppliers (13 percent) did not 
maintain physical facilities or were not open during unannounced site 
visits.   Thirteen percent of the suppliers we visited (115 of 905) did not 
maintain physical facilities or were  not open during our unannounced 
  OEI-09-07-00550   LOS  ANGELES  COUNTY  SUPPLIERS  COMPLIANCE  WITH  MEDICARE STANDARDS   i    
   
EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY    
site visits. Thirty suppliers did not maintain physical facilities, and 
85 suppliers were not accessible during business hours. Medicare 
allowed $21 million in the 12 months beginning July 1, 2006, for these 
suppliers claims. 
Another 79 suppliers (9 percent) were open but did not meet at least 
one of the two  additional requirements for the standards we reviewed.  
Seventy-eight suppliers did not post hours of operation, but were  open  
during reasonable business hours (10 a.m. to 4 p.m.). Five suppliers did 
not post signs indicating a business  name. Four suppliers did not meet  
either requirement. 
An additional 124 suppliers (14 percent) met the requirements for the 
standards we reviewed, but their claims had in common an atypical 
characteristic. More than half of the Medicare beneficiaries for these 
124 suppliers did not receive other Medicare services (such as an office 
visit) from the ordering  physician within a 6-month period preceding the 
DMEPOS claim. Eighty-nine percent of these suppliers have the 
primary specialty Medical Supply CompanyOther.      
RECOMMENDATION 
Our findings in this report, along with past Office of Inspector General 
(OIG) work in Florida, demonstrate that noncompliant suppliers are 
enrolled in the Medicare program.   We recognize that CMS recently has  
taken action to address vulnerabilities in the DMEPOS benefit, 
particularly in Florida and California, including initiating a 2-year 
DMEPOS demonstration project in November 2007. Although this 
demonstration project has potential to prevent fraud, permanent 
corrective action is warranted to prevent fraudulent providers from  
entering and participating in Medicare. Therefore, we recommend that  
CMS: 
Strengthen the Medicare DMEPOS supplier enrollment process and 
ensure that suppliers meet Medicare supplier standards. OIG 
presented a number of options to CMS in its March 2007 report, South 
Florida Suppliers Compliance With Medicare Standards: Results From 
Unannounced Visits (OEI-03-07-00150). CMS has made progress 
toward implementing some of those options for strengthening the 
Medicare DMEPOS supplier enrollment process and compliance with 
supplier standards. We continue to recommend that CMS: 
 	  conduct more unannounced site visits to suppliers, which could 
include full site inspections and abbreviated site inspections, to 
OEI-09-07-00550   LOS  ANGELES  COUNTY  SUPPLIERS  COMPLIANCE  WITH  MEDICARE STANDARDS   ii    
   
E X E C U T I V E   S U M M A R Y   
supplement,  not replace full site inspections and to determine 
whether suppliers still exist at the addresses on record; 
 	  perform more rigorous background checks of applicants and 
currently enrolled high-risk suppliers (including business owners 
and managing employees); 
 	  assess the fraud risk of suppliers and focus monitoring and 
enforcement on high-risk suppliers;  
 	  increase prepayment review of DMEPOS claims, especially claims 
from new suppliers and suppliers deemed high risk; 
 	  require suppliers in areas particularly vulnerable to fraud and 
abuse to reenroll with NSC more frequently than every 3 years; 
and 
 	  strengthen the Medicare supplier standards by establishing a 
minimum number of hours of operation and establishing 
minimum inventory requirements for product and service types. 
In addition, we recommend that CMS: 
 	  require all suppliers to pay a Medicare enrollment application 
  fee to cover the costs of:  (1) full site inspections or abbreviated 
  site inspections to monitor suppliers compliance with Medicare 
  standards and (2) criminal background checks;  
 	  require a supplier to pay an additional Medicare enrollment fee if,  
  during a site visit (conducted during business hours), the 
  suppliers facility is closed or inaccessible, necessitating an 
  additional site visit; and  
 	  seek legislative authority to impose  temporary  moratoriums, on  
  an as-needed basis, on supplier enrollment in high-fraud areas.  
In addition, we sent to CMS information about the suppliers we visited 
that did not meet one or more  of the four requirements.  Based on our  
findings and its own followup, CMS should take appropriate action. 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL  
RESPONSE 
CMS stated that it believes that it has already addressed the majority of 
the options  we recommend in this report that also appear in South 
Florida Suppliers Compliance With Medicare Standards:  Results From 
Unannounced Visits (OEI-03-07-00150).  Specifically, CMS modified its 
  OEI-09-07-00550   LOS  ANGELES  COUNTY  SUPPLIERS  COMPLIANCE  WITH  MEDICARE STANDARDS   iii    
   
E X E C U T I V E   S U M M A R Y   
scope of work with NSC  to increase the frequency of unannounced site  
visits and to assess the fraud risk of suppliers in certain high fraud 
areas. CMS will consider increasing  prepayment review of suppliers 
claims and is in the process of conducting targeted background checks 
on suppliers.  CMS may consider establishing more frequent  
reenrollment requirements for suppliers. CMS is seeking public 
comment on a proposed  rule that would establish a minimum number of  
hours of operation required for suppliers.   
Regarding the new recommendations in this report, CMS stated that 
suppliers must pay a fee to the accrediting organization for an initial 
site visit and that criminal background checks are conducted as 
required by State standards.   We  note that our new recommendations 
regarding site inspections and application fees pertain to NSCs actions 
to enforce compliance with Medicare supplier standards:  the fees we  
suggest would be paid to the Federal Government.  The accrediting 
organization and NSC are independent of one another and address 
different standards. We have modified our recommendation to clarify 
this point. Finally, CMS will consider seeking legislative authority to  
impose temporary moratoriums on supplier enrollment.     
CMS did not indicate whether it concurred with our recommendation to  
establish minimum inventory requirements.  We ask that, in its final 
management decision, CMS more clearly indicate whether it concurs  
with this recommendation and what steps, if any, it will take to 
implement it. 
  OEI-09-07-00550   LOS  ANGELES  COUNTY  SUPPLIERS  COMPLIANCE  WITH  MEDICARE STANDARDS   iv    T A B L E   O F   C O N T E N T S  
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  i
  
 
 
I N T RO DUC T IO N  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1  

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

  In Los Angeles County, 115 of 905 suppliers (13 percent)  
         did not maintain physical facilities or were not open  
         during unannounced site visits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
 
  Another 79 suppliers (9 percent) were open but  

         did not meet at least one of the two additional requirements  

         for the standards we reviewed . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11 
  
  An additional 124 suppliers (14 percent) met the requirements  

         for the standards we reviewed, but their claims had in common  

         an atypical characteristic.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
  
   
R E C O MMEN D A T ION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14 
  
  Agency Comments and  

         Office of Inspector General Response. . . . . . . . . . . . . . . . . . . . . . .  16 
  
   
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18 
  
  A: 	Conditions for Medicare Payments for Durable Medical 

               Equipment, Prosthetics, Orthotics, and Supplies 

        (DMEPOS). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18 
  
  B:	  Medicare DMEPOS Supplier Standards  . . . . . . . . . . . . . . . . .  19 
  
  C:	  Supplier Site Visit Process . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24 
  
  D: 	Primary Specialty Supplier Types Visited in  

               Los Angeles County  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  26 
  
  E:	  Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27 
  
 
 
A C K NO WL E D G M E N T S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30 
    
I N T R O D U C T I O N  
  I N T R O D U C T I O N  
OBJECTIVE 
To conduct unannounced site visits of suppliers of Medicare durable 
medical equipment, prosthetics, orthotics, and supplies (DMEPOS) in 
Los Angeles County to (1) determine their compliance with selected 
Medicare supplier standards and (2) identify their atypical 
characteristics. 
BACKGROUND 
Medicare Coverage of Durable Medical Equipment, Prosthetics, Orthotics, 
and Supplies 
Pursuant to Title XVIII of the Social Security Act, DMEPOS are covered 
under Medicare Part B and include such items as hospital beds, 
wheelchairs, respirators, walkers, artificial limbs, and wound care 
supplies.1  Medicare pays for DMEPOS that are necessary and 
reasonable for the treatment of a beneficiarys illness or injury or to  
improve the function of a malformed  body member.  Medicare covers 
medical equipment only when it is  ordered for a beneficiary by a 
physician or, in some cases, a nonphysician practitioner.  
Medicare Enrollment of Durable Medical Equipment, Prosthetics, Orthotics, 
and Supplies Suppliers 
The Centers for Medicare & Medicaid Services (CMS) contracts with the 
National Supplier Clearinghouse (NSC), operated by Palmetto 
Government Benefits Administrator (Palmetto GBA), to manage the 
enrollment  of suppliers.  Suppliers must enroll in Medicare to submit 
claims for reimbursement.2  The enrollment process involves obtaining a 
National Provider Identifier (NPI), completing a Medicare enrollment 
application, and satisfying the Medicare DMEPOS conditions and 
supplier standards. 
Supplier conditions and standards.  Pursuant to 42 CFR  424.57(b), 
DMEPOS suppliers must meet five conditions to be eligible to receive 
payment for a Medicare-covered item.  (See Appendix A for a list of 
these conditions.)  In addition to meeting these conditions, suppliers 
must meet and certify that they meet and will continue to meet the 
 
1 Social Security Act  1832, 1834, and 1861.    
2 42 CFR  424.505. 
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25 standards imposed pursuant to 42 CFR  424.57(c).3 (See  
Appendix B for a list of the standards.) CMS can revoke suppliers 
billing privileges if they fail to meet the conditions and standards.4      
Application. New applicants must obtain their NPIs before they can 
complete an application.5  The NPI is a unique identifier for health care 
providers that is assigned by the National Plan and Provider  
Enumeration System. Suppliers also must submit supporting 
documentation with every application.6 A supplier must complete and 
submit the Medicare Enrollment Application when: 
   enrolling in Medicare for the first time, 
   reporting certain changes from the initial application, 
   adding another business location, 
   verifying the accuracy of information on an original application, or 
   reenrolling or deactivating a billing number.7    
Site visits. NSC can inspect a suppliers site to ascertain compliance 
with the conditions and standards8 and to verify enrollment  
information.9   After a supplier submits an enrollment application, NSC 
conducts an unannounced site visit to ensure that the supplier complies 
with the conditions and standards. Following the inspection, NSC 
notifies the supplier in writing, generally within 60 days, whether it has 
 
3 Initially there were 21 supplier standards. Four additional supplier standards were 
added by a Federal Register notice dated April 10, 2007. The additional supplier  
standards relate to competitive bidding and supplier accreditation. However, applicable 
suppliers had until September and  October 2007, respectively, to meet the competitive 
bidding and accreditation requirements. 
4 42 CFR  424.57(d). 
5 Centers for Medicare & Medicaid Services (CMS), Medicare Enrollment for Durable 
Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Suppliers, May 2007. 
Available online at 
http://www.cms.hhs.gov/MedicareProviderSupEnroll/Downloads/DurableMedicalEquip.pdf. 
Accessed November 5, 2007. 
6 42 CFR  424.510. 
7 Palmetto Government Benefits  Administrator (Palmetto GBA),  Helpful Hints on 
Completing the 855S for an Additional Location, revised February 5, 2007. Available 
online at 
http://www.palmettogba.com/palmetto/providers.nsf/Attachments/2343214C3D5F4CE685 
25734E0048000C/$FILE/Helpful+Hints+on+completing+the+855S+-
+Additional+Locations.pdf. Accessed November 5, 2007. 
8 42 CFR  424.57(c)(8). 

9 42 CFR  424.510(d)(8). 

OEI-09-07-00550  LOS  ANGELES  COUNTY  SUPPLIERS  COMPLIANCE  WITH  MEDICARE STANDARDS  2   
I N T R O D U C T I O N   
approved the application. To  continue billing Medicare, the supplier 
must renew its application every 3 years.10  NSC then may conduct an 
additional site visit to confirm whether the supplier complies with the 
conditions and standards.  (See Appendix C for more details on the site  
visit process.) 
Vulnerabilities in the Site Inspection Process 
Generally, once a DMEPOS supplier has had an enrollment  or 
reenrollment site visit, NSC does not revisit the supplier for 3 years.   
NSC may conduct additional site visits if it suspects that a supplier is in 
violation of one or  more Medicare standards.  Recent Office of Inspector 
General (OIG) findings11  suggest that suppliers can defraud Medicare 
by establishing businesses that are not maintained or staffed after NSC 
conducts the initial or reenrollment site visit. 
Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
Vulnerabilities in South Florida and Los Angeles County  
This report is one of a series of recent OIG reports on vulnerabilities in 
the Medicare DMEPOS benefit, including the March 2007 report, 
South Florida Suppliers Compliance With Medicare Standards:  
Results From Unannounced Visits (OEI-03-07-00150).  OIG reviewed 
suppliers in three South Florida counties (Miami-Dade, Broward, and 
Palm Beach) to assess their compliance with selected Medicare supplier 
standards. The review focused on three supplier standards with which 
compliance could be verified quickly through direct observation and 
desk review. OIG conducted 1,581 unannounced site visits and 
identified 491 suppliers (31 percent) that did not maintain physical 
facilities or were not accessible during reasonable business hours.  OIG 
referred these suppliers to CMS to consider revoking their Medicare 
billing numbers. 
Recent work by NSC indicates that  DMEPOS suppliers in Los Angeles 
County may have characteristics similar to those of suppliers in South 
Florida. In 2006, NSC conducted 401 inspections in Los Angeles County 
and revoked the billing privileges of 95 suppliers.12 From 2002 
 
10 42 CFR  424.57 (e). 
11 Office of Inspector General (OIG), Medical Equipment Suppliers:  Compliance With 
Medicare Enrollment Requirements (OEI-04-05-00380), March 2007. 
12 CMS, Medicare Provider Enrollment Demonstration Involving Suppliers of Durable 
Medical Equipment, Prosthetics, Orthotics, and  Supplies in High-Risk Areas,  
July 2, 2007.  Available online at  
http://www.hhs.gov/news/facts/medicarefraud/index.html. Accessed July 19, 2007. 
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I N T R O D U C T I O N   
through 2006, the number of DMEPOS suppliers, the amount of 
DMEPOS billing, and the number of  revocations all increased in  
Los Angeles County.13  In the 12 months beginning July 1, 2006, 
Medicare allowed approximately $245 million for DMEPOS provided in 
Los Angeles County and $8.6 billion nationwide.14    
Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
Demonstration Project  
On November 1, 2007, CMS began a 2-year demonstration project15  
involving all DMEPOS suppliers located in Miami-Dade, Broward, and 
Palm Beach Counties in Florida and Los Angeles, Orange, Riverside, 
and San Bernardino Counties in California.  CMS designed the project  
to improve its ability to detect and prevent fraud.  In the first 3 months 
of the demonstration, NSC required  all suppliers in these seven counties 
to submit new Medicare Enrollment Applications.  If a supplier does not 
submit an application within 30 days, NSC will immediately revoke its 
billing privileges.  For suppliers that submit new applications, NSC will 
conduct new site inspections.  In addition, NSC will revoke suppliers  
billing privileges if suppliers: 
 	  fail to report changes in  ownership or addresses within 30 days of 
the effective date of the change, 
 	  are required by NSC to obtain accreditation and fail to do so  
within 90 days, 
 	  have owners or managing employees who were convicted  of 
felonies in the last 10 years, or 
 	  no longer meet each requirement for enrollment.  
Suppliers covered under the demonstration project will be subject to 
additional, enhanced review designed to detect fraud.   
Related Office of Inspector General Studies 
In 1997, OIG issued Medical Equipment Suppliers:  Assuring 
Legitimacy (OEI-04-96-00240).  OIG examined Medicare supplier 
enrollment  practices in 12 large metropolitan areas in five States.  
 
13 Ibid. 

14 OIG analyses of Medicare National Claims History, 2007. 

15 Palmetto GBA, Medicare Provider Enrollment Demonstration Project, 

October 2007. Available online at  
http://www.palmettogba.com/palmetto/providers.nsf/Attachments/85256D580043E754852 
57360004A7023/$FILE/NSC+News+-+October+2007.pdf. Accessed November 5, 2007. 
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I N T R O D U C T I O N   
Based on unannounced site visits, OIG found that the enrollment 
processdesk review and verification of applicantswas unreliable for 
detecting unethical and improper practices of suppliers, particularly 
because supplier enrollment at the time did not involve onsite 
verification of supplier application data.  One of the options  OIG 
recommended for ensuring the integrity of Medicare suppliers was for 
CMS to conduct onsite visits at applicants physical locations.  CMS 
concurred but stated that limited resources allowed onsite visits to be 
conducted only in  
high-risk areas. 
In August 2001, OIG issued a follow-up report entitled Medical 
Equipment Suppliers:  Compliance  With Medicare Standards  
(OEI-04-99-00670) that assessed how well DMEPOS suppliers were 
meeting the  Medicare standards.  OIG found that the expansion of the 
CMS site inspection program improved supplier compliance with the 
Medicare standards.  OIG made several recommendations to increase 
the compliance rates further, such  as instituting random, unannounced 
site visits. CMS concurred with the recommendations. 
In March 2007, OIG issued Medical Equipment Suppliers:  Compliance 
With Medicare Enrollment Requirements (OEI-04-05-00380).  OIG 
conducted unannounced site visits in 2005 and found that 10 of the  
169 DMEPOS suppliers that were reviewed did not exist at their 
business addresses. However, these 10 suppliers billed Medicare almost 
$393,000 in the 2 months after OIG had determined that they were 
nonexistent and received almost $197,000 in reimbursements.  The 
report concluded that out-of-cycle site visits may help to prevent fraud, 
waste, and abuse in the  Medicare program.  
METHODOLOGY 
Scope of Review  
We focused on two supplier standards with which compliance could be 
verified quickly through direct observation.  These standards include 
four specific requirements: 
 	  The supplier must maintain a physical facility (Standard 7). 
 	  The facility must be accessible during reasonable business hours  
  (Standard 8). 
 	  The facility must have a visible sign (Standard 8). 
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I N T R O D
  U C T I O N   
 	  The suppliers hours of operation must be posted (Standard 8). 
Sample 
Our review focused on 905 suppliers  in Los Angeles County.  Using NSC 
enrollment data as of August 22, 2007, we identified all active DMEPOS 
suppliers in Los Angeles County.  NSC enrollment data are updated 
each day as additions and changes are received from suppliers.  From 
this list, we selected seven primary  specialty supplier types for inclusion  
in our review. Appendix D lists the primary specialty supplier types.  
To be consistent with our 2006 review of South Florida DMEPOS 
suppliers, we excluded large chain suppliers (25 stores or more) from  
our review.  We also excluded suppliers under investigation by OIG and 
suppliers whose Medicare billing numbers had been revoked by NSC.  
Data Collection and Analysis 
We conducted unannounced site visits to all 905 suppliers to determine 
whether suppliers complied with the four requirements related to 
Standards 7 and 8.  We recorded all observations using a standardized 
protocol.  OIG staff conducted all site visits in September and  
October 2007. We developed the following parameters to define supplier 
compliance with the requirements to  maintain a physical facility and be 
accessible to beneficiaries during business hours:  
 	  We determined that a supplier did not maintain a physical facility 
  if it did not exist at the business address on file with NSC. 
 	  We determined that a supplier was not accessible during business 
  hours if it was closed during site visits that occurred on two 
  different weekdays (Monday through Friday).  We considered the 
  facility closed if (1) the door was locked (and there was no 
  doorbell) or  (2) the door  was locked and no one responded to the 
  doorbell (if there was a doorbell).  We conducted all visits during 
  the suppliers posted business hours.  If a supplier did not post 
  business hours, we conducted the visits during reasonable 
  business hours (10 a.m. to 4 p.m., Monday through Friday). 
 	  We also determined that a supplier was not accessible during 
  business hours on multiple visits if it (1) was closed (i.e., the door  
  was locked) during the first site visit; (2) had posted a sign 
  indicating that the supplier was out on delivery or out to lunch 
  during the second site visit; and (3) was closed or had posted the 
  same sign during a third site visit. 
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In total, we conducted more than 1,200 unannounced visits.  We 
aggregated the site visit results to determine the number of suppliers 
that were not in compliance with the four requirements. We  reviewed  
and categorized our direct observations of the physical facilities to 
provide more detailed information about the site visits and to compare 
and contrast the suppliers observable features. During our site visits, 
we took photographs of selected suppliers. 
In addition, we analyzed the Medicare claims patterns of the  suppliers 
we visited and the national population of active  and revoked suppliers. 
(See Table 1 on page 12.)16 Data for the suppliers claims came from  
Medicares National Claims History. Supplier enrollment information  
came from NSCs supplier enrollment files. We used SAS analytical 
software to analyze all data. 
Limitations 
We designed this review to collect data about DMEPOS suppliers while 
remaining undetected during unannounced site visits. Our review was 
limited to providing compliance data on two Medicare supplier 
standards that include four requirements. We did not conduct full 
compliance reviews that would address all 25 standards. 
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. 
 
16 For this analysis, we limited the population to suppliers that billed more than $10,000 
for DMEPOS in the 12 months beginning July 1, 2006. 
OEI-09-07-00550  LOS  ANGELES  COUNTY  SUPPLIERS  COMPLIANCE  WITH  MEDICARE STANDARDS  7   
  F I N D I N G S  
Thirteen percent of the suppliers we 
In Los Angeles County, 115 of 905 suppliers  
visited (115 of 905) did not maintain 
(13 percent) did not maintain physical facilities or 
physical facilities or were not open 
were not open during unannounced site visits  
during our unannounced site visits to  
their locations in Los Angeles County.  
These suppliers did not maintain appropriate physical facilities, or their 
facilities were not open during posted or reasonable business hours on 
at least two visits.  In the 12 months beginning July 1, 2006, Medicare 
allowed $21 million for these suppliers claims.17  
Medical Supply CompanyOther was the primary specialty supplier 
type listed in NSC enrollment data for the majority of suppliers that did 
not maintain physical facilities or were not accessible during posted or 
reasonable business hours (99 of 115).  Suppliers with this primary 
specialty accounted for 45 percent of  all Los Angeles County suppliers in 
our review but accounted for 86 percent of suppliers in this category.  
(See Appendix D for a breakout of all 115 suppliers by primary specialty 
supplier type.) 
Three percent of suppliers (30 of 905) did not maintain physical facilities 
Medicare requires all DMEPOS suppliers to maintain a physical 
facility on an appropriate site.18  However, 30 of the suppliers we 
visited did not maintain physical facilities.  Instead of finding  
operational facilities, we found vacant facilities or facilities in which 
other types of businesses were operating. 
Twenty facilities were vacant. These facilities were vacant and closed for 
business. Although these suppliers have active enrollment files and 
most have recent paid Medicare claims, we found no operational 
businesses at the suppliers locations.  For all but 5 of these  
20 suppliers, Medicare allowed claims in the 12 months beginning  
July 1, 2006.  In total, Medicare allowed approximately $3 million for 
these suppliers in the 12 months beginning July 1, 2006.  For example, 
one supplier associated with a vacant facility was allowed $301,687 in 
the 12 months beginning July 1, 2006.  We observed the same two signs 
stating out for delivery and return at 2:15 p.m. in the facilitys 
window on two visits on different weekdays.  The signs appeared to be 
permanent fixtures, and the facility was devoid of medical supplies or 
 
17 At the time that we issued this report, the most recent Medicare claims data 
available to us covered the 12 months beginning July 1, 2006.  
18 42 CFR  424.57(c). 
OEI-09-07-00550  LOS  ANGELES  COUNTY  SUPPLIERS  COMPLIANCE  WITH  MEDICARE STANDARDS  8   
F I N D I N G S  
any evidence suggesting that it was an operational business.  (See Photo 
1 below.)   
PHOTO 1      
The supplier was 
actively enrolled in  
Medicare, but the 
facility was vacant. 
 
       Source:  OIG unannounced  site visits to DMEPOS facilities in Los Angeles County, September 2007.  
Eight facilities did not appear to be DMEPOS facilities. Instead of finding 
medical equipment suppliers, we found other businesses operating at 
the addresses on record with NSC.  In six instances, the businesses 
were an art gallery, a tutoring business, a trucking company, an 
insurance sales office, a vitamin supplement company, and physicians 
offices.  Two additional locations were private residences, with no 
business signs or posted business hours.   
For the supplier whose facility is now an art gallery, Medicare allowed 
approximately $5 million in the 12 months beginning July 1, 2006.  
Suppliers have 30 days from the date of an address change to inform  
NSC.19    However, at the time of our visits, the art gallery had been 
open at the suppliers address for about 5 months.  Medicare allowed 
more than $1 million during the first 3 months of this 5-month period.20   
The only other address listed in NSC files for this supplier is a post 
 
19 42 CFR  424.57(c)(2). 
20 At the time we  issued this report, we did not have access to the last 2 months of  
DMEPOS claims for the 5-month period. 
OEI-09-07-00550  LOS  ANGELES  COUNTY  SUPPLIERS  COMPLIANCE  WITH  MEDICARE STANDARDS  9   
F I N D I N G S  
office box, which is shared by two other suppliers.  These other two 
suppliers failed NSC site inspections and currently are not enrolled  
with NSC as active suppliers.  For all three suppliers, the post office box 
is listed as the pay to addressthe  address to which Medicare sends 
reimbursement checks.  
The addresses listed with NSC were not valid for two suppliers, and we 
could not confirm the suppliers existence.   In both cases, the street  
addresses existed; however, the suite numbers associated with the 
suppliers did not.  There was no sign indicating that the supplier had 
moved, or that the supplier occupied  another suite in the building.  
Nine percent of suppliers (85 of 905) were not open during business hours  
Nine percent of the 905 DMEPOS suppliers were not open during 
posted or reasonable business hours.  The average weekly hours of 
operation posted for these suppliers was 30 hours compared  to 44 hours 
among the suppliers that were open during business hours.21   When 
business hours were not posted, we considered 10 a.m. to 4 p.m. on  
weekdays to be reasonable business hours and conducted our visits 
accordingly.  
In the 12 months beginning July 1, 2006, Medicare allowed 
approximately $11 million for these 85 suppliers claims.  The median 
allowed per supplier was $82,314.  For example, Medicare allowed 
$219,226 for one supplier we found inaccessible during its posted 
business hours.  This supplier appeared to share space with a tax return 
preparation service and a notary public.  We photographed the facility 
during its posted business hours.  (See Photo 2 on the next page.)  We 
visited another supplier three times during reasonable business hours, 
but the supplier changed its posted business hours prior to each of our 
visits and was closed during each visit.  During  each visit, we observed 
no DMEPOS visible through the facilitys windows.  Medicare allowed 
$152,485 for that suppliers claims in the 12 months beginning  
July 1, 2006.   
 
21 To calculate the average hours of operation, we included only the suppliers that 
posted hours of  operation.  Five  of the eighty-five suppliers that were closed did  not post 
hours of operation.  Of the 790 suppliers that were open during business hours, 78 did not 
post hours of operation.    
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F I N D I N G S  

PHOTO 2      
The supplier 
was actively 
enrolled in  
Medicare but 
not accessible 
during its 
posted 
business hours 
on two 
unannounced 
visits. 
 
 
Source:  OIG unannounced  site visits to DMEPOS facilities in Los Angeles County,   
September 2007.  Supplier-identifying information was redacted.  
 
Nine percent of suppliers (79 of 
Another 79 suppliers (9 percent) were open but 
905) were open but did not post 
did not meet at least one of the two additional 
hours of operation and/or did not 
requirements for the standards we reviewed   post signs with their business 
names.  
Seventy-eight suppliers did not post hours of operation but were open  
during reasonable business hours. Five suppliers did not post signs 
indicating a business name. Four suppliers did not meet either 
requirement.  
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The remaining 79 percent of suppliers we visited (711 of 905) met all 
four of the requirements included in our review.22  
Fourteen percent of the suppliers we  
An additional 124 suppliers (14 percent) met the 
visited met the four requirements, but 
requirements for the standards  
more than half of the Medicare 
 we reviewed, but their claims had in common  beneficiaries for these 124 suppliers  
an atypical characteristic  did not receive other Medicare  
services (such as an office visit) from 
the physicians who ordered the DMEPOS within the 6-month period  
preceding the DMEPOS claims23 (see Table 1). Generally, physicians 
provide services prior to  ordering medical equipment for their patients. 
However, Medicare does not require physicians to conduct face-to-face 
examinations of patients to write a prescription for any DMEPOS 
except power mobility devices.24    
TABLE 1  Suppliers Whose Claims Had 
More than half of the      An Atypical Characteristic 
DMEPOS Suppliers 
beneficiaries for 
(Allowed more than $10,000 in Medicare claims 
whom the suppliers  for DMEPOS)   Population  Number  Percentage 
billed did not  receive  Los Angeles Review Population       
other Medicare 
 -Met the four requirements we reviewed    427  124  29% 
services (such as an  
-Did not meet one or more of the 
office visit) from the  requirements we  reviewed  119  63  53% 
physicians who  National Population       
ordered the DMEPOS.  -Actively billing suppliers  54,913  4,415  8% 
  -Revoked suppliers 
  (July 1, 2006, to present)  919  619  67% 
      Source: OIG analysis of Medicare  National Claims History, 2007.  
 
22 The percentage of suppliers that met the requirement plus the percentage of  
suppliers that did not meet the requirements does not total 100 percent because of 
rounding.    
23 We reviewed Medicare claims data to determine that the beneficiaries did not see 
the ordering  physician  within a 6-month period  preceding the DMEPOS claim.   The total 
Los Angeles review population is 905 suppliers. One hundred and seven suppliers had no 
allowed DMEPOS claims in 12 months beginning July 1, 2006, and were excluded from 
this table. Two hundred and fifty-two suppliers were allowed less than $10,000 in the 
same period and also were excluded from the table. Therefore, we analyzed 546 of the 905 
suppliers in the Los Angeles review population.  
24 Power mobility device means a covered item of durable medical equipment that is 
in a class of wheelchairs that includes a power wheelchair (a  four-wheeled motorized  
vehicle whose steering is operated by an electronic device or a joystick to control direction  
and turning) or a power-operated vehicle (a three or four-wheeled motorized scooter that 
is operated by a tiller) that a beneficiary uses in the home. 42 CFR  410.38(c)(2)(i). 
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This characteristic is prevalent among noncompliant suppliers.  
Sixty-seven percent of suppliers nationally whose billing privileges were 
revoked by NSC had a majority of claims for beneficiaries who did not 
receive other Medicare services from the ordering physicians during the 
6 months prior to the DMEPOS claim.  Similarly, in this review,  
53 percent of the suppliers that we found to be noncompliant with 
Medicare standards exhibited this characteristic.   In contrast, only   
8 percent of actively billing suppliers nationally exhibited this pattern.    
One primary specialty supplier type stands out among suppliers that 
exhibited this characteristic. Eighty-nine percent of these suppliers 
(110 of 124) have the primary specialty Medical Supply Company 
Other.  Similarly, 86 percent of the suppliers that did not maintain 
physical facilities or were not open during unannounced site visits have 
the primary specialty Medical Supply CompanyOther. However, 
this specialty accounts for only 45 percent of the Los Angeles County 
suppliers in our review. 
OEI-09-07-00550  LOS  ANGELES  COUNTY  SUPPLIERS  COMPLIANCE  WITH  MEDICARE STANDARDS  13   
  R E C O M M E N D A T I O N  
 
In total, 194 of the 905 suppliers (22 percent) that we visited did not 
meet one or more  of the  requirements for the Medicare DMEPOS 
standards we reviewed.  These suppliers did not maintain physical 
facilities, were not accessible to beneficiaries during posted or 
reasonable business hours, and/or failed to post signs indicating a 
business name and/or hours of operation.  An additional 124 suppliers 
(14 percent) met the requirements for the standards we reviewed but 
more than half of their Medicare beneficiaries did not receive other  
Medicare services (such as an office visit) from the physicians who 
ordered the DMEPOS within the 6-month period preceding their 
DMEPOS claims. 
These findings show continued vulnerabilities in the Medicare 
DMEPOS benefit.  In March 2007, OIG reported the results of our 
unannounced visits to 1,581 suppliers in South Florida.  We identified 
491 suppliers that did not maintain physical facilities or were not 
accessible during business hours.  Our work in Florida and California 
demonstrates that noncompliant suppliers are enrolled in the Medicare 
program. Our work also demonstrates that abbreviated site visits may 
be an efficient use of limited resources to identify suppliers that do not 
meet the most basic of supplier standardsexisting at the locations 
they report to CMS. 
We recognize that CMS recently has taken action to address  
vulnerabilities in the DMEPOS benefit, particularly in Florida and 
California, including initiating a 2-year DMEPOS demonstration project 
in November 2007. Although this demonstration project has potential 
to prevent fraud, permanent corrective action is warranted to prevent 
fraudulent providers from entering  and participating in Medicare.  
Therefore, we recommend that CMS:  
Strengthen the Medicare DMEPOS Supplier Enrollment Process and Ensure 
That Suppliers Meet Medicare Supplier Standards 
OIG presented a number of options to CMS in its March 2007 report, 
South Florida Suppliers Compliance With Medicare Standards:  
Results From Unannounced Visits (OEI-03-07-00150).  CMS has made 
progress toward implementing some of those options for strengthening 
the Medicare DMEPOS supplier enrollment process and compliance 
with supplier standards. We continue to recommend the following: 
OEI-09-07-00550  LOS  ANGELES  COUNTY  SUPPLIERS  COMPLIANCE  WITH  MEDICARE STANDARDS  14   
 R	 E C O M M E N D A T I O N   
 	  conduct more unannounced site visits to suppliers, which could 
include full site inspections and abbreviated site inspections, to 
supplement,  not replace full site inspections and to determine 
whether suppliers still exist at the addresses on record; 
 	  perform more rigorous background checks of applicants and 
currently enrolled high-risk suppliers (including business owners 
and managing employees); 
 	  assess the fraud risk of suppliers and focus monitoring and 
enforcement on high-risk suppliers;  
 	  increase prepayment review of DMEPOS claims, especially claims 
from new suppliers and suppliers deemed high risk; 
 	  require suppliers in areas particularly vulnerable to fraud and 
abuse to reenroll with NSC more frequently than every 3 years; 
and 
 	  strengthen the Medicare supplier standards by establishing a 
minimum number of hours of operation required for each supplier 
and establishing minimum inventory requirements for product 
and service types provided by a supplier. 
In addition, we recommend that CMS: 
 	  require all suppliers to pay a Medicare enrollment application fee 
to cover the costs of:  (1) full site inspections or abbreviated site 
inspections to monitor suppliers compliance with Medicare 
standards and (2) criminal background checks;  
 	  require a supplier to pay an additional Medicare enrollment fee if,  
during a site visit (conducted during business hours), the 
suppliers facility is closed or inaccessible, necessitating an 
additional site visit; and  
 	  seek legislative authority to impose  temporary  moratoriums, on  
an as-needed basis, on supplier enrollment in high-fraud areas.  
In addition, we sent to CMS information about the suppliers we visited 
that did not meet one or more  of the four requirements.  Based on our  
findings and its own followup, CMS should take appropriate action. 
OEI-09-07-00550  LOS  ANGELES  COUNTY  SUPPLIERS  COMPLIANCE  WITH  MEDICARE STANDARDS  15   
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AGENCY COMMENTSAND OFFICE OF INSPECTOR GENERAL  
RESPONSE 
CMS stated that it believes that it has already addressed the majority of 
the options  we recommend in this report that also appear in South 
Florida Suppliers Compliance With Medicare Standards: Results From 
Unannounced Visits (OEI-03-07-00150). Specifically, CMS modified its 
scope of work with NSC  to increase the frequency of unannounced site  
visits and to assess the fraud risk of suppliers in certain high fraud 
areas. Once NSC applies fraud risk indicators to suppliers, CMS will 
consider increasing prepayment review of suppliers claims.  CMS stated  
that it is in the process of conducting targeted  background  checks on  
suppliers.  Depending on the outcome of the DMEPOS demonstration 
project, CMS may consider more frequent reenrollment requirements 
for suppliers. In addition, CMS is seeking public comment on a 
proposed rule that would establish a minimum number of hours of 
operation required for suppliers. 
For the first two new recommendations(1) to establish an application 
fee to cover the costs of site visits and rigorous background checks and 
(2) to require a supplier to pay an additional fee if, during a site visit 
(conducted during business hours), the suppliers facility is closed or 
inaccessible, necessitating an additional site visitCMS referred to the 
new accreditation process for DMEPOS suppliers. CMS stated that 
suppliers must pay a fee to the accrediting organization for an initial 
site visit and that criminal background checks are conducted as 
required by State standards. We note that our  new recommendations 
regarding site inspections and application fees pertain to NSCs actions 
to enforce compliance with Medicare supplier standards: the fees we  
suggest would be paid to the Federal Government. The accrediting 
organization and NSC are independent of one another and address 
different standards. We have modified our recommendation to clarify 
this point.  
For the third new recommendation, CMS stated that it will consider 
seeking legislative authority to impose enrollment moratoriums, 
depending on the outcome of its enrollment demonstrations.   
CMS did not indicate whether it concurred with our recommendation to  
establish minimum inventory requirements. We ask that, in its final 
management decision, CMS more clearly indicate whether it concurs  
with this recommendation and what steps, if any, it will take to 
OEI-09-07-00550  LOS  ANGELES  COUNTY  SUPPLIERS  COMPLIANCE  WITH  MEDICARE STANDARDS  16   
R E C O M M E N D A T I O N   
implement it.  The full text of CMSs comments is provided in  
Appendix E. 
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  A P P E N D I X ~ A
 
Conditions for Medicare Payments for Durable Medical Equipment, 
Prosthetics, Orthotics, and Supplies (DMEPOS)  
The following conditions appear in 42 CFR  424.57(b): 
 
1. 	  The supplier has submitted a completed application to CMS to 
furnish Medicare-covered items including required enrollment 
forms. (The supplier must enroll separate physical locations it 
uses to furnish Medicare-covered DMEPOS, with the exception 
of locations that it uses solely as warehouses or repair 
facilities.) 
2. 	  The item was furnished  on or after the date CMS issued to the 
supplier a DMEPOS supplier number conveying billing 
privileges.  (CMS issues only one supplier number for each  
location.)  This requirement does not apply to items furnished 
incident to a physicians service. 
3. 	  CMS has not revoked or excluded the DMEPOS suppliers 
privileges during the period which the item was furnished has 
not been revoked  or excluded. 
4. 	  A supplier that furnishes a drug used as a Medicare-covered 
supply with durable medical equipment or prosthetic devices 
must be licensed by the State to dispense drugs.   (A supplier of 
drugs must bill and receive payment for the drug in its own 
name.  A physician, who is enrolled as a DMEPOS supplier, 
may dispense, and bill for, drugs under this standard if 
authorized by the State as part of the physicians license.) 
5. 	  The supplier has furnished to CMS all information or 
documentation required  to process the claim. 
 
 
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  A P P E N D I X ~ B
 
Medicare DMEPOS Supplier Standards 
The following standards appear in 42 CFR  424.57(c): 
 
1. 	  Operates its business and furnishes Medicare-covered items in 
compliance with all applicable Federal and State licensure and 
regulatory requirements; 
2. 	  Has not made, or caused to be  made, any false statement or 
misrepresentation of a material fact on its application for 
billing privileges.  (The supplier must provide complete and 
accurate information in response to questions on its 
application for billing privileges. The supplier must report to 
CMS any changes in information supplied on the application 
within 30 days of the change.); 
3. 	  Must have the application for billing privileges signed by an 
individual whose signature binds a supplier; 
4. 	  Fills orders, fabricates, or fits items from its own inventory or 
by contracting with other companies for the purchase of items 
necessary to fill the order.  If it does, it must provide, upon 
request, copies of contracts or other  documentation showing 
compliance with this standard.  A supplier may not contract 
with any entity that is currently excluded from the Medicare  
program, any State health care programs, or from any other  
Federal Government Executive Branch procurement or  
nonprocurement program or activity; 
5. 	  Advises beneficiaries that they may either rent or purchase 
inexpensive or routinely purchased  durable medical 
equipment, and of the purchase option for capped rental 
durable medical equipment, as defined in  414.220(a) of this 
subchapter.  (The supplier must provide, upon request, 
documentation that it has provided beneficiaries with this 
information, in the form  of copies of letters, logs, or signed 
notices.); 
6. 	  Honors all warranties expressed and implied under applicable 
State law. A supplier must not  charge the beneficiary or the 
Medicare program for the repair or replacement  of Medicare  
covered items or for services covered under warranty. This 
standard applies to all purchased and rented items, including 
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A P P E N D I X   ~   B  
capped rental items, as described in  414.229 of this 
subchapter.  The supplier must provide, upon request, 
documentation that it has provided beneficiaries  with 
information about Medicare covered items covered under 
warranty, in the form of copies of letters, logs, or  signed  
notices;  
7. 	  Maintains a physical facility on an appropriate site.  The 
physical facility must contain space for storing business 
records including the suppliers delivery, maintenance, and 
beneficiary communication records.  For purposes of this 
standard, a post office box or commercial mailbox is not  
considered a physical facility. In the case of a multi-site 
supplier, records may be maintained at a centralized location; 
8. 	  Permits CMS, or its agents to conduct onsite inspections to  
ascertain supplier compliance with the requirements of this 
section.   The supplier location must be accessible during 
reasonable business hours to beneficiaries and to CMS, and 
must maintain a visible sign and posted hours of operation; 
9. 	  Maintains a primary business telephone listed under the name  
of the business locally or toll-free for beneficiaries. The 
supplier must furnish information to beneficiaries at the time 
of delivery of items on how the beneficiary can contact the 
supplier by telephone.  The exclusive use of a beeper number,  
answering service, pager, facsimile machine, car phone, or an 
answering machine may not be used as the primary business 
telephone for purposes of this regulation; 
10.  Has a comprehensive liability insurance policy in the amount  
of at least $300,000 that covers both the suppliers place of 
business and all customers and employees of the supplier.  In  
the case of a supplier that manufactures its own items, this 
insurance must also cover product liability and completed 
operations. Failure to maintain required insurance at all 
times will result in revocation of the suppliers billing 
privileges retroactive to  the date the insurance lapsed; 
11.  Must agree not to contact a beneficiary by telephone when 
supplying a Medicare-covered item unless one of the following 
applies: 
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i. 	  The individual has given written permission to the supplier 
to contact them by telephone concerning the furnishing of a 
Medicare-covered item that is to be rented or purchased.  
ii. 	  The supplier has furnished a Medicare-covered  item to the  
individual and the supplier is contacting the individual to  
coordinate the delivery of the item. 
iii. 	  If the contact concerns the furnishing of a Medicare-covered  
item other than a covered item already furnished to the  
individual, the supplier has furnished at least one covered 
item to the individual during the 15-month period preceding 
the date on which the supplier makes such contact. 
12.  Must be responsible for the delivery of Medicare covered items 
to beneficiaries and maintain proof of delivery.   (The supplier 
must document that it or another qualified party has at an 
appropriate time, provided beneficiaries with necessary 
information and instructions on how  to use Medicare-covered  
items safely and effectively); 
13.  Must answer questions  and respond to complaints a 
beneficiary has about the Medicare-covered item  that was sold  
or rented.  A supplier must refer beneficiaries with Medicare 
questions to the appropriate carrier.  A supplier must 
maintain documentation of contacts with beneficiaries 
regarding complaints or questions; 
14.  Must maintain and replace at no charge or repair directly, or 
through a service contract with another company,  
Medicare-covered items it has rented to beneficiaries. The 
item must function as required and intended after being 
repaired or  replaced; 
15.  Must accept returns from beneficiaries of substandard (less 
than full quality for the particular item or unsuitable items, 
inappropriate for the beneficiary at the time it was fitted and 
rented or sold); 
16.  Must disclose these supplier standards to each beneficiary to  
whom it supplies a Medicare-covered item; 
17.  Must comply with the disclosure provisions in  420.206 of this 
subchapter; 
18.  Must not convey or reassign a supplier number; 
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19.  Must have a complaint resolution protocol to address 
beneficiary complaints that relate to supplier standards in 
paragraph (c) of this section and keep written complaints, 
related correspondence  and any notes of actions taken in  
response to written and oral complaints.  Failure to maintain 
such information may be considered evidence that supplier 
standards have not been met.  (This  information must be kept  
at its physical facility and made available to CMS, upon 
request.);  
20.  Must maintain the following information on all written and 
oral beneficiary complaints, including telephone complaints, it 
receives: 
i. 	  The name, address, telephone number, and health insurance  
claim number of the beneficiary. 
ii. 	  A summary of the complaint; the date it was received; the 
name of the person receiving the complaint, and a summary  
of actions taken to resolve the complaint. 
iii. 	  If an investigation was not conducted, the name of the 
person making the decision and the reason for the decision. 
21.  Provides to  CMS, upon request, any information required by 
the Medicare statute and implementing regulations. 
22.  All suppliers of DMEPOS and other items and services must 
be accredited by a CMS-approved accreditation organization in 
order to receive and retain a supplier billing number. The 
accreditation must indicate the specific products and services, 
for which the supplier is accredited in order for the supplier to 
receive payment for those specific products and  services. 
23.  All DMEPOS suppliers must notify their accreditation 
organization when a new DMEPOS location is opened.  The 
accreditation organization may accredit the new supplier 
location for three months after it is operational without 
requiring a new site visit. 
24.  All DMEPOS supplier locations, whether owned or 
subcontracted, must meet the DMEPOS quality standards and 
be separately accredited in order to bill Medicare.  An 
accredited supplier may be denied enrollment or their 
OEI-09-07-00550  LOS  ANGELES  COUNTY  SUPPLIERS  COMPLIANCE  WITH  MEDICARE STANDARDS  22   
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enrollment  may be revoked, if CMS determines that they are 
not in compliance with the DMEPOS quality standards. 
25.  All DMEPOS suppliers must disclose upon enrollment all 
products and services, including the addition of new product  
lines for which they are seeking accreditation. If a new 
product line  is added after enrollment, the DMEPOS supplier 
will be responsible for notifying the accrediting body of the 
new product so that the DMEPOS supplier can be re-surveyed 
and accredited for these new products. 
OEI-09-07-00550  LOS  ANGELES  COUNTY  SUPPLIERS  COMPLIANCE  WITH  MEDICARE STANDARDS  23   
   A P P E N D I X ~ C
Supplier Site Visit Process 
According to Palmetto Government  Benefits Administrator (Palmetto 
GBA), supplier site inspections  are unannounced and inspectors 
generally will attempt to conduct a second site visit if the supplier is 
inaccessible during the initial visit.    
Unannounced Site Visits. The following appears on the Palmetto GBA Web 
site, in the supplier-guidance document, Can I make an appointment for 
my site visit? 
  
Site visits are unannounced and will take place during your posted 
hours of operation. Supplier Standard #8 requires the location 
must be accessible during reasonable business hours.  If a site 
inspector comes to your location outside of the posted hours of 
operation, the inspector will attempt a subsequent site visit during 
the posted hours.  
If, during the second attempt, a site inspector reports the facility is 
not open for business or could not complete the visit during the 
posted hours of operation, a denial shall not be issued.  In these 
cases, the applicant will receive a letter stating a site visit was 
unable to be conducted and informing the applicant to submit a 
new application at such a time when a site inspection can be 
completed.  If the site visit could not be completed for an existing 
supplier, the supplier number  may be revoked as appropriate.25  
Attempts  To Complete a Site Visit. The following appears on the Palmetto 
GBA Web site, in the supplier-guidance document, How many attempts 
are made to  complete a visit?  
 
Generally, two attempts are made to complete a visit.  However, if 
on the first attempt the inspector finds the facility is still under 
construction or other obvious indications the facility is not a true 
operating location, or there is no visible sign or office hours posted, 
the site inspector will not make a second attempt and the NSC will 
be notified the visit could not be completed.  
 
25 Available online at 
http://www.palmettogba.com/palmetto/providers.nsf/44197232fa85168985257196006939d 
d/85256d580043e75485256d5f00624eb1?OpenDocument. Accessed November 6, 2007.          
OEI-09-07-00550  LOS  ANGELES  COUNTY  SUPPLIERS  COMPLIANCE  WITH  MEDICARE STANDARDS  24   
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If an attempt is made  outside of the  posted hours of operation, the  
inspector may leave a notice and will make a second attempt 
during the posted hours of operation. However, if the business is 
still inaccessible during the second attempt, the site inspector will 
not make any further attempts. 
 
The hours of operation indicate when a supplier is open and  
available. During these hours,  a beneficiary, CMS or its agents 
should be able to visit the facility. If a supplier goes to lunch from 
1:00 pm to 2:00 pm, then this needs to be posted  along with the 
hours of operation. If your posted hours state you are open from  
9:00 am to 5:00 pm, then the supplier should be available from 
9:00 am to 5:00 pm. 
 
An initial application will not be denied because of the NSC or its 
subcontractors inability to conduct a site visit.  In these cases, the 
applicant will receive a letter stating a site visit was unable to be 
conducted and to submit a new application at such time when a 
site visit can be completed.26  
 
 
26 Available online at 
http://www.palmettogba.com/palmetto/providers.nsf/44197232fa85168985257196006939d 
d/85256d580043e7548525734800479abb?OpenDocument. Accessed November 6, 2007. 
OEI-09-07-00550  LOS  ANGELES  COUNTY  SUPPLIERS  COMPLIANCE  WITH  MEDICARE STANDARDS  25   
  A P P E N D I X ~ D
 
 Primary Specialty Supplier Types Visited in Los Angeles County    
Number of  Percentage of 
Suppliers That  Suppliers That 
Did Not Maintain  Did Not Maintain 
Physical Facilities   Physical Facilities  
Number Of  Percentage Of  or Were Not  or Were Not 
Primary specialty   Suppliers   Suppliers*  Accessible  Accessible* 
Pharmacy 452  49.9%  13  11.3% 
Medical Supply  CompanyOther  405  44.8%  99  86.1% 
Medical Supply  Company With 
23  2.5%  1  0.9% 
Respiratory Therapist 
Medical Supply  CompanyCertified 
11  1.2%  0  0.0% 
Orthotist/Prosthetist 
Medical Supply  CompanyCertified 
8  0.9%  1  0.9% 
Prosthetist 
Medical Supply  CompanyCertified 
5  0.6%  1  0.9% 
Orthotist 
Medical Supply  Company 
1  0.1%  0  0.0% 
Registered Pharmacist 
    Total  905  100.0%   115  100.1%** 
Source:  Office of  Inspector General analysis of primary specialty types listed in August 22, 2007, National Supplier Clearinghouse enrollment 
data.  
* Percentages are rounded. 

** Column does not total 100 percent because of rounding. 

OEI-09-07-00550  LOS  ANGELES  COUNTY  SUPPLIERS  COMPLIANCE  WITH  MEDICARE STANDARDS  26   
   A P P E N D I X ~ E  
Agency Comments 
OEI-09-07-00550  LOS ANGELES COUNTY SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  27   
A P P E N D I X   ~   E  
 
OEI-09-07-00550  LOS ANGELES COUNTY SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  28   
A P P E N D I X   ~   E  
 
OEI-09-07-00550  LOS ANGELES COUNTY SUPPLIERS COMPLIANCE WITH MEDICARE STANDARDS  29   
  A C K N O W L E D G M E N T S
 
This report was prepared under the direction of Timothy S. Brady, 
Regional Inspector General for Evaluation and Inspections in the San 
Francisco regional office, and Deborah W. Harvey, Deputy Regional 
Inspector General.    
Michael Henry and Steven Zerebecki served as the team leaders for this  
study, and China Tantameng served as the lead analyst.  Other 
principal Office of Evaluation and Inspections staff from the  San 
Francisco regional office  who contributed to the report include Scott  
Hutchison,  Cynthia Lemesh, Veronica Vallejo, and Marcia Wong. 
We would like to acknowledge the special contributions of the Office of 
Evaluation and Inspections in the Philadelphia regional office, under  
the direction of Robert A. Vito, Regional Inspector General for 
Evaluation and Inspections, and Linda M. Ragone, Deputy Regional 
Inspector General.  Contributing staff from the Philadelphia office 
include Eric Biersmith, Tanaz Dutia, Diane Epstein, Maria Johnson, 
Conswelia McCourt, Lauren McNulty, Emily Multari, Roman 
Strakovsky, and Stephanie Yeager. 
We would also like to acknowledge the contributions of each Office of 
Inspector General component, including:  the Immediate Office of the 
Inspector General, the Office of Audit Services, the Office of Counsel to  
the Inspector General, the Office of Evaluation and Inspections, the 
Office of Investigations, and the Office of Management and Policy.  
Contributing staff from these offices include Sarah Ambrose, Eddie 
Baker, Jr., Michael Barcelona, Anne Bracken, Marcus Britton, Megan 
Buck, Elaine Chin, Amelia Cojuangco, Sharon Colby, Peggy Daniel, 
Robert DeConti, David Denniston, Shon Dormoy, Jaime Durley, Taryn 
Eckstein, Debra Edgerson, Mandy Fong, Lucia Forte, Rob Gibbons, 
Gopa Guha, Camille Harper, Russ Hereford, Ana Hernandez, Doris 
Jackson, Il Yong Jeon, Jennifer Jones, Judy Kellis, Tom Komaniecki, 
Haidee Lee, Erin Lemire, Christina Lester, Christi Macrina, Kevin 
Manley, Scott Manley, Beth McDowell, Amber Meurs, Christine 
Moundas, Gerius Patterson, Brian Pattison, Gerry Roy, Marcia Sayer, 
Louise Schoggen, Alicia Simon, James Sinkamnoonsak, Amanda 
Thandi, Cynthia Thomas, Ivan Troy, Sue Waddell, Gregory Wellins, 
Brian Whitley, Marcia Wong, and Mina Zadeh. 
 
OEI-09-07-00550  LOS  ANGELES  COUNTY  SUPPLIERS  COMPLIANCE  WITH  MEDICARE STANDARDS  30