Department of Health and Human Services
OFFICE OF 
   
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
SOUT  H FLORIDA DURABLE 
 
M E
EDICAL  QUIPMENT 
 
 
S : R
UPPLIERS    ESULTS OF 
 
  A  
PPEALS
 
 
 
 
Daniel R. Levinson  
Inspector General 
 
October 2008 
OEI-03-07-00540   
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 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.  These evaluations focus on preventing fraud, waste, or abuse and promoting 
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of fraud and misconduct related to HHS programs, operations, and 
beneficiaries.  With investigators working in all 50 States and the District of Columbia, OI 
utilizes its resources by actively coordinating with the Department of Justice and other 
Federal, State, and local law enforcement authorities.  The investigative efforts of OI often 
lead to criminal convictions, administrative sanctions, and/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 for OIGs internal operations.  OCIG represents OIG in all civil and 
administrative fraud and abuse cases involving HHS programs, including False Claims 
Act, program exclusion, and civil monetary penalty cases.  In connection with these cases, 
OCIG also negotiates and monitors corporate integrity agreements.  OCIG renders 
advisory opinions, issues compliance program guidance, publishes fraud alerts, and 
provides other guidance to the health care industry concerning the anti-kickback statute 
and other OIG enforcement authorities.   
   
 E X E C U T I V E   S U M M A R Y  
OBJECTIVES
 
1.  To determine the number of South Florida durable medical 
equipment suppliers that were removed from the Medicare program 
(as a result of an Office of Inspector General (OIG)-led initiative) 
and later appealed and were reinstated by hearing officers. 
2.  To determine the types of evidence that hearing officers reviewed for 
the South Florida suppliers that were reinstated.       
3.  To determine the number of reinstated South Florida suppliers that 
were later removed from the Medicare program or indicted for fraud. 
BACKGROUND 
Suppliers of durable medical equipment, prosthetics, orthotics, and 
supplies (hereinafter referred to as suppliers) must enroll in the 
Medicare program to sell or rent medical equipment and supplies to 
Medicare beneficiaries and to submit claims for Medicare 
reimbursement.  The Centers for Medicare & Medicaid Services (CMS) 
contracts with the National Supplier Clearinghouse (NSC) to manage 
the enrollment of suppliers in the Medicare program.   
Suppliers must comply with Medicares supplier standards.  If a 
supplier fails to comply with all supplier standards, CMS may deny or 
revoke the suppliers billing privileges.  A supplier whose Medicare 
billing privileges have been denied or revoked may appeal the 
determination.  A suppliers billing privileges can also be inactivated at 
any time for several reasons, such as failure to submit Medicare claims 
for four consecutive quarters.   
A significant amount of supplier fraud and abuse has recently been 
identified in South Florida.  The Department of Health and Human 
Services and the Department of Justice formed a Medicare Fraud Strike 
Force (Strike Force) comprised of Federal, State, and local investigators 
to combat fraud through the use of real-time analysis of Medicare 
billing data.  Over a 3-month period in 2007, 56 individuals were 
charged in South Florida with fraudulently billing Medicare more than 
$258 million.  As of March 2008, the Strike Force had brought charges 
against 120 defendants, resulting in 101 convictions.  According to CMS, 
as of April 2007, over three-quarters of all supplier revocations (734 of 
938) nationwide during fiscal year 2007 occurred in Miami-Dade, 
Broward, and Palm Beach Counties. 
  OEI-03-07-00540  SOUTH FLORIDA DURABLE MEDICAL EQUIPMENT SUPPLIERS:  RESULTS OF APPEALS  i   
   
E X E C U T I V E   S U M M A R Y  
In March 2007, OIG issued a report about South Florida suppliers.  OIG 
staff, along with CMS and its contractor staff, conducted unannounced 
site visits to 1,581 suppliers located in Miami-Dade, Broward, and Palm 
Beach Counties.  OIG found 491 suppliers that failed to maintain a 
physical facility or were not open and staffed during the unannounced 
site visits.  OIG referred these 491 suppliers to CMS so that CMS could 
consider revocation.  CMS revoked these suppliers billing privileges.   
For the suppliers that appealed their billing privileges revocations and 
received hearings, we reviewed the appeal files.  We determined the 
types of evidence suppliers submitted to appeal the revocations of their 
billing privileges.  We also reviewed CMS policies, procedures, and 
written responses to our questions regarding the supplier hearing 
process and hearing officer criteria.   
NSC conducted a follow-up project to review suppliers that were 
reinstated as a result of appeals.  We used NSC data as of March 2008 
to identify the status of reinstated suppliers.  We obtained information 
on indictments and convictions from our Office of Investigations as of 
April 2008.    
FINDINGS 
Nearly half of the 491 revoked South Florida suppliers appealed and 
received hearings; hearing officers reinstated the billing privileges 
for 91 percent of these suppliers.  After our prior study, hearing 
officers conducted hearings for 243 of the 491 revoked South Florida 
suppliers.  Billing privileges were reinstated for 91 percent of these 
suppliers (222 of 243).   
Because there are no criteria regarding the types of evidence 
necessary to reinstate supplier billing privileges, hearing officers 
reinstated billing privileges based on a variety of evidence.  
Although CMS has developed procedural guidelines for hearings, it has 
not provided hearing officers with criteria regarding the types of 
evidence revoked suppliers must submit to have their billing privileges 
reinstated.  Therefore, hearing officers reviewed various types of 
evidence to reinstate the revoked South Florida suppliers billing 
privileges.  Examples of evidence that suppliers provided include 
photographs, affidavits, utility bills, and leases. 
  OEI-03-07-00540  SOUTH FLORIDA DURABLE MEDICAL EQUIPMENT SUPPLIERS:  RESULTS OF APPEALS  ii   
   
E X E C U T I V E   S U M M A R Y  
Two-thirds of suppliers whose billing privileges were reinstated 
have subsequently had their privileges revoked or inactivated, and 
some individuals connected to reinstated suppliers have been 
indicted.  Half of suppliers whose billing privileges were reinstated   
(111 of 222) have subsequently had their privileges revoked.  An 
additional 17 percent of suppliers (37 of 222) have had their billing 
privileges inactivated.  As a result, two-thirds of suppliers whose billing 
privileges were reinstated by hearing officers (148 of 222) had their 
privileges revoked again or inactivated. 
In addition, between April and September 2007, the U.S. Attorneys 
Office indicted 18 individuals connected to 15 of the 222 reinstated 
suppliers.  As of April 2008, 10 of the 18 defendants had been convicted 
and were each ordered to pay between $90,000 and $11 million in 
restitution.  These 10 defendants were also sentenced to jail terms 
ranging from 1 to 4 years.   
RECOMMENDATION 
To protect beneficiaries and the integrity of Medicare payments, CMS 
has developed standards that suppliers must meet to enroll in Medicare.  
CMS has also taken steps to ensure suppliers compliance with these 
standards.  For example, CMS has announced a 2-year demonstration 
project designed to identify noncompliant suppliers and detect 
potentially fraudulent supplier behavior.  These efforts may result in 
CMS denying or revoking billing privileges for suppliers that do not 
meet all Medicare enrollment standards.   
All suppliers whose billing privileges have been denied or revoked may 
appeal and request a hearing.  However, there are no criteria for 
hearing officers regarding the types of evidence required to reinstate a 
suppliers billing privileges.  Hearing officers generally accept all 
documentation submitted by suppliers as legitimate, unless they have 
reason to believe otherwise.  Our findings suggest that a more critical 
review of the types of evidence submitted by suppliers is warranted to 
ensure that fraudulent suppliers are not reinstated.   
Therefore, we recommend that CMS:   
Strengthen the appeal process by developing criteria regarding the types of 
evidence required for hearing officers to reinstate suppliers billing 
privileges.  
 
 
  OEI-03-07-00540  SOUTH FLORIDA DURABLE MEDICAL EQUIPMENT SUPPLIERS:  RESULTS OF APPEALS  iii   
   
 
E X E C U T I V E   S U M M A R Y  
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
In responding to our report, CMS stated that it has been taking 
aggressive steps to prevent fraud and abuse in the Medicare program.  
For example, CMS points out that all suppliers will need to become 
accredited by October 1, 2009, which CMS believes will ensure that only 
legitimate suppliers serve Medicare beneficiaries.   
CMS agreed that it should consider establishing guidelines regarding 
the evaluation of evidence that a hearing officer will review.  CMS 
believes that it would be useful for OIG to provide specific suggestions 
regarding appropriate criteria for hearing officers.  However, CMS 
stated that any guidance provided should not impinge on a hearing 
officers ability to make an independent determination or with a 
suppliers ability to submit any evidence that it believes will support the 
reversal of a revocation or denial decision.   
We agree that CMS should develop criteria that maintain the 
independence of hearing officers and suppliers ability to submit any 
evidence they wish to send.  We suggest that CMS develop a list of 
evidence that it believes would support a decision to overturn various 
reasons for revocation and that such evidence should be germane to the 
reason for revocation.  For example, if CMS revokes a suppliers billing 
privileges because staff was not present at the suppliers facility after 
multiple site visit attempts during reasonable business hours, the 
supplier should not be reinstated based on the submission of cell phone 
bills, leases, drivers licenses, or photographs.  Instead, reinstatement 
should be based on evidence that the supplier met the Medicare 
standard requiring it to maintain a physical facility that is accessible to 
beneficiaries and CMS during reasonable business hours.  CMS should 
also develop criteria that enable hearing officers to verify the legitimacy 
and credibility of documents submitted by suppliers as evidence during 
appeals.  
  OEI-03-07-00540  SOUTH FLORIDA DURABLE MEDICAL EQUIPMENT SUPPLIERS:  RESULTS OF APPEALS  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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7  
Hearing officers reinstated 91 percent of suppliers that                    
received hearings   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7  
With no criteria regarding the types of evidence necessary                  
to reinstate supplier billing privileges, hearing officers              
accepted various types of evidence. . . . . . . . . . . . . . . . . . . . . . . . . . 7  
  Two-thirds of suppliers whose billing privileges were                
reinstated have subsequently been revoked or inactivated,              
and some individuals have been indicted. . . . . . . . . . . . . . . . . . . . . 8  
   
R E C O MMEN D A T ION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 
  Agency Comments and Office of Inspector General Response. . . .  11 
   
   
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 
  A:  Medicare Supplier Standards. . . . . . . . . . . . . . . . . . . . . . . . . . 13 
  B:  Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 
   
A C K NO WL E D G M E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20   
   
 I N T R O D U C T I O N  
OBJECTIVES 
1.  To determine the number of South Florida durable medical 
equipment suppliers that were removed from the Medicare program 
(as a result of an Office of Inspector General (OIG)-led initiative) 
and later appealed and were reinstated by hearing officers. 
2.  To determine the types of evidence that hearing officers reviewed for 
the South Florida suppliers that were reinstated.       
3.  To determine the number of reinstated South Florida suppliers that 
were later removed from the Medicare program or indicted for fraud. 
BACKGROUND 
Medical equipment is covered under Medicare Part B and includes 
items such as hospital beds, wheelchairs, respirators, walkers, and 
artificial limbs.1   
A supplier of durable medical equipment, prosthetics, orthotics, and 
supplies (hereinafter referred to as a supplier) is any entity or 
individual that sells or rents Part B-covered items to Medicare 
beneficiaries.2  The Centers for Medicare & Medicaid Services (CMS) 
contracts with the National Supplier Clearinghouse (NSC), operated by 
Palmetto Government Benefits Administrators, to manage the 
enrollment of suppliers into the Medicare program.   
Supplier Enrollment Process 
Suppliers must meet all supplier standards to receive payment for a 
Medicare-covered item.3  Appendix A contains a complete list of the 
Medicare standards. 
Supplier applicants must complete a Medicare enrollment application to 
be considered for enrollment.  Applicants must certify in their 
applications that they meet and will continue to meet the Medicare 
 
1 Social Security Act  1832(a)(2)(G), 42 U.S.C.  1395k(a)(2)(G);  1832(a)(2)(I), 42 U.S.C. 
 1395k(a)(2)(I);  1834(a)(13), 42 U.S.C.  1395m(a)(13);  1861(n), 42 U.S.C  1395x(n). 
2 42 CFR  424.57(a).   
3 42 CFR  424.57(b) and (c).  Four new supplier standards were added to the original  
21 and published in the Federal Register.  71 Fed. Reg. 48354, 48409 (Aug. 18, 2006).  The 
additional supplier standards relate to accreditation of suppliers and are provided in 
Appendix A.  However, CMS is phasing in the accreditation process, along with its Medicare 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies Competitive Bidding 
Program.  Any supplier that wishes to participate in competitive bidding must be 
accredited.  The deadline for all suppliers to obtain accreditation is September 30, 2009. 
  OEI-03-07-00540  SOUTH FLORIDA DURABLE MEDICAL EQUIPMENT SUPPLIERS:  RESULTS OF APPEALS  1   
   
I N T R O D U C T I O N  
supplier standards.  Once granted billing privileges, suppliers must 
reenroll in the Medicare program every 3 years to continue receiving 
Medicare reimbursement.4   
For most suppliers, the NSC conducts an unannounced site visit before 
approving an applicant and granting Medicare billing privileges.  NSC 
can also conduct an unannounced reenrollment site visit every 3 years.  
Unannounced site visits may take place at any other time as deemed 
necessary, but generally site visits occur only when suppliers enroll and 
reenroll in the Medicare program.  According to CMS, site visits are an 
important component of successful oversight of supplier enrollment 
because they ensure that CMS conducts business only with legitimate 
suppliers.  In many cases, site visits are the only method CMS has to 
ensure that suppliers actually exist and meet the requirements to 
participate in the Medicare program.5       
Revocation of Billing Privileges  
If after a reenrollment site visit, or any other unannounced site visit, 
NSC finds that a supplier no longer meets the supplier standards, NSC 
can revoke the suppliers billing privileges.  When NSC revokes a 
suppliers billing privileges, NSC sends the supplier a letter that 
explains the reason for revocation, the effective date of the revocation 
(15 days from the date the notice is mailed), and appeal rights and 
procedures.  The supplier cannot receive reimbursement from Medicare 
for medical equipment furnished on or after the effective date of the 
revocation.   
Appeal Process  
A supplier whose Medicare enrollment application has been denied or 
whose Medicare billing privileges have been revoked may appeal the 
determination.  When NSC denies a suppliers application or revokes a 
suppliers billing privileges, the supplier has two options to contest the 
determination:  the supplier may submit a corrective action plan or 
request a reconsideration (hereinafter referred to as a hearing).  A 
supplier must submit its corrective action plan or request a hearing 
within 90 days from the postmark of the denial or revocation letter.  A 
supplier may not submit a corrective action plan and request a hearing 
at the same time.   
 
4 42 CFR  424.57(c) and (e).   
5 71 Fed. Reg. 20754, 20755 (Apr. 21, 2006). 
  OEI-03-07-00540  SOUTH FLORIDA DURABLE MEDICAL EQUIPMENT SUPPLIERS:  RESULTS OF APPEALS  2   
   
I N T R O D U C T I O N  
Corrective Action Plan.  If a supplier chooses to submit a corrective action 
plan to NSC, the plan must contain evidence of compliance.  The plan 
must also provide sufficient assurance of the suppliers intent to comply 
with the supplier standards.  If CMS and NSC are satisfied that issues of 
noncompliance have been resolved, the suppliers billing privileges may be 
granted or reinstated.   
Hearing.  A hearing is an independent review by a hearing officer of the 
initial determination and the entire body of evidence, including any new 
information submitted by the supplier or NSC.  It is the responsibility of 
the supplier to show that its billing privileges were denied or revoked 
erroneously.6   
Once the supplier submits its request for a hearing, NSC has 15 days to 
forward the hearing package to a hearing officer.  The hearing officer 
then has 90 days to schedule and conduct a hearing and render a 
decision.   
Fraudulent and Abusive Supplier Activity in South Florida 
The Department of Health and Human Services (HHS), the Department 
of Justice (DOJ), and others have recently identified and documented a 
significant amount of supplier fraud in South Florida.  This fraud 
includes suppliers billing for services that are not rendered and billing 
for services that are not medically necessary.  NSC reports that Florida 
led the Nation for allegations of supplier noncompliance with Medicare 
standards during the last two quarters of 2006, as a result of allegations 
in Miami-Dade and Broward Counties.7  According to CMS, as of April 
2007, 78 percent of all supplier revocations (734 of 938) nationwide 
during fiscal year 2007 occurred in Miami-Dade, Broward, and Palm 
Beach Counties.8      
Response to Fraud and Abuse in South Florida 
In March 2007, HHS and DOJ formed a Medicare Fraud Strike Force 
(Strike Force) made up of Federal, State, and local investigators to 
combat the fraudulent activities of suppliers in South Florida through 
the use of real-time analysis of Medicare billing data.  During a 3-month 
 
6 CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch. 10,  19A. 
7 Supplier Audit and Compliance Unit Intelligence Report.  Palmetto Government 
Benefits Administrators, NSC, pp. 1415.  April 19, 2007.  
8 HHS, Medicare Provider Enrollment Demonstration Involving Suppliers of DMEPOS 
in High-Risk Areas.  Available online at 
http://www.hhs.gov/news/facts/medicarefraud/index.html.  Accessed on December 12, 2007. 
  OEI-03-07-00540  SOUTH FLORIDA DURABLE MEDICAL EQUIPMENT SUPPLIERS:  RESULTS OF APPEALS  3   
   
I N T R O D U C T I O N  
period in 2007, 56 individuals were charged in South Florida with 
fraudulently billing Medicare more than $258 million.  As of March 
2008, the Strike Force had brought charges against 120 defendants, 
resulting in 101 convictions.9 
In June 2007, CMS announced a 2-year demonstration project to 
strengthen its ability to detect and prevent fraudulent activity in South 
Florida.10  The demonstration was designed to detect potential 
fraudulent behavior at both the preenrollment stage as well as after 
suppliers are enrolled in Medicare.  Under this demonstration, all 
suppliers in South Florida are required to submit a Medicare 
enrollment application to NSC.  A suppliers Medicare billing privileges 
will be revoked if the supplier fails to meet certain requirements, such 
as reporting a change of ownership or address.  Finally, suppliers whose 
billing privileges are not revoked will be subject to an enhanced review 
and will be assigned a fraud-level indicator by NSC.  To determine the 
appropriate fraud-level indicator for each supplier, NSC will consider 
factors such as supplier location, fraud potential of products and 
services provided by the supplier, and site visit results.            
Office of Inspector General Site Visits  
In March 2007, OIG issued a report entitled South Florida Suppliers 
Compliance With Medicare Standards:  Results From Unannounced 
Site Visits (OEI-03-07-00150).  OIG staff, along with CMS and its 
contractor staff at NSC, conducted unannounced site visits to          
1,581 suppliers located in Miami-Dade, Broward, and Palm Beach 
Counties.  OIG conducted these site visits to determine whether each 
supplier was in compliance with two supplier standards, which included 
four specific requirements:11   
  The supplier must maintain a physical facility (Standard 7). 
  The facility must be accessible during business hours 
(Standard 8). 
  The facility must have a visible sign (Standard 8). 
 
9 DOJ, Miami Jury Convicts Physician and Three Business Owners of Medicare Fraud.  
Available online at http://www.usdoj.gov/opa/pr/2008/March/08_crm_183.html.  Accessed on 
March 26, 2008. 
10 HHS, Medicare Provider Enrollment Demonstration Involving Suppliers of DMEPOS 
in High-Risk Areas.  Available online at 
http://www.hhs.gov/news/facts/medicarefraud/index.html.  Accessed on December 12, 2007. 
11 42 CFR  424.57(c)(7) and (8). 
  OEI-03-07-00540  SOUTH FLORIDA DURABLE MEDICAL EQUIPMENT SUPPLIERS:  RESULTS OF APPEALS  4   
   
  
I N T R O DD UU CC TT II OO NN   
   TThhee  ssuupppplliieerrss  hhoouurrss  ooff  ooppeerraattiioonn  mmuusstt  bbee  ppoosstteedd  ((SSttaannddaarrdd  88))..  
IIff  dduurriinngg  aann  oonnssiittee  rreevviieeww  aa  ffaacciilliittyy  iiss  ffoouunndd  cclloosseedd  dduurriinngg  bbuussiinneessss  
hhoouurrss,,  tthhiiss  bbeeccoommeess  ggrroouunnddss  ffoorr  rreevvooccaattiioonn  iinn  tthhaatt  tthhee  ffaacciilliittyy  wwaass  ffoouunndd  
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vveerriiffyy  ccoommpplliiaannccee  wwiitthh  tthhee  MMeeddiiccaarree  ssuupppplliieerr  ssttaannddaarrddss..    OOppeerraattiioonnaall  
mmeeaannss  tthhee  ssuupppplliieerr  hhaass  aa  qquuaalliiffiieedd  pphhyyssiiccaall  pprraaccttiiccee  llooccaattiioonn;;  iiss  ooppeenn  ttoo  
tthhee  ppuubblliicc  ffoorr  tthhee  ppuurrppoossee  ooff  pprroovviiddiinngg  hheeaalltthh  ccaarree  rreellaatteedd  sseerrvviicceess;;  iiss  
pprreeppaarreedd  ttoo  ssuubbmmiitt  vvaalliidd  MMeeddiiccaarree  ccllaaiimmss;;  aanndd  iiss  pprrooppeerrllyy  ssttaaffffeedd,,  
eeqquuiippppeedd,,  aanndd  ssttoocckkeedd..1122  
SSiittee  VViissiitt  RReessuullttss.  A total of 491 of 1,581 suppliers (31 percent) failed to 
maintain physical facilities or were not open and staffed during the 
unannounced site visits.  These suppliers did not maintain appropriate 
physical facilities, or their facilities were not accessible to beneficiaries 
during reasonable or posted business hours on at least two visits.  OIG 
referred these suppliers to CMS so that CMS could consider revocation of 
the suppliers Medicare billing privileges.   
Effective January 1, 2007, CMS revoked the billing privileges of these     
491 suppliers.  NSC sent letters to the 491 suppliers stating that a recent 
site visit was unsuccessful because the suppliers . . . site was either no 
longer at the location on file or not open on multiple attempts.  Because 
[NSC] could not complete an inspection of [the suppliers] facility, [NSC] 
could not verify [the suppliers] compliance with the standards.  
Therefore, NSC considered these suppliers to be out of compliance with all 
supplier standards.   
After CMS revoked the suppliers billing privileges, hearing officers 
conducted hearings and determined whether to reinstate suppliers that 
appealed the revocations. 
Follow-Up Site Visit Project   
After hearing officers conducted the supplier hearings, NSC began a 
follow-up project to determine suppliers compliance with Medicare 
standards.  NSC conducted unannounced site visits to suppliers, 
including those whose billing privileges were initially revoked as a 
result of the OIG study and then reinstated by hearing officers.  Most of 
the suppliers that NSC visited were located in Miami-Dade County and 
had been in the Medicare program only for a short amount of time.  
NSC conducted most of the site visits between March and July 2007.  
 
12 42 CFR  424.502. 
  OEI-03-07-00540  SOUTH FLORIDA DURABLE MEDICAL EQUIPMENT SUPPLIERS:  RESULTS OF APPEALS  5   
   
I N T R O D U C T I O N  
Using the standard NSC site visit protocol, NSC determined whether 
the reinstated suppliers were in compliance with the supplier 
standards.   
METHODOLOGY 
Data Collection and Analysis 
We requested appeal files from NSC for any of the 491 suppliers whose 
billing privileges were revoked as a result of OIGs work in South 
Florida.  Between April and September 2007, we received the supplier 
files from NSC.  We reviewed the files to determine the number of 
suppliers that received hearings and were reinstated by hearing 
officers.   
We reviewed the documents in the appeal files to determine the number 
and types of evidence submitted by suppliers.  We also reviewed CMS 
policies and procedures, including 42 CFR  424.57, the CMS Medicare 
Program Integrity Manual, and NSCs Statement of Work.  
Additionally, in December 2007, CMS provided written responses to our 
questions regarding hearing officer criteria and the hearing process.   
We requested regular updates from NSC on its follow-up project and the 
status of reinstated suppliers.  We used NSC data as of March 2008 to 
identify whether suppliers that were reinstated by hearing officers 
subsequently had their billing privileges revoked or inactivated.  We 
obtained information on indictments and convictions from our Office of 
Investigations as of April 2008. 
Limitations 
We requested all appeal files from NSC for the 491 revoked suppliers.  
We relied on NSC to provide us with complete appeal files.  Our review 
of the suppliers appeal files was based only on the documents NSC 
provided to us in response to our request. 
Because our review was focused on suppliers that appealed and received 
hearings, we did not provide details on suppliers that submitted 
corrective action plans.    
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. 
  OEI-03-07-00540  SOUTH FLORIDA DURABLE MEDICAL EQUIPMENT SUPPLIERS:  RESULTS OF APPEALS  6   
   
 F I N D I N G S  
 
Nearly half of the 491 revoked South Florida 
Hearing officers conducted 
suppliers appealed and received hearings;  hearings for 243 of the            
hearing officers reinstated the billing privileges  491 South Florida suppliers 
for 91 percent of these suppliers   whose billing privileges NSC 
revoked as a result of our prior 
study.  These suppliers appealed the revocations of their Medicare 
billing privileges and requested hearings.  Based on submitted evidence 
and hearing testimony, hearing officers determined whether to reinstate 
the suppliers billing privileges.  Hearing officers reinstated the billing 
privileges for 91 percent of the suppliers that appealed and received 
hearings (222 of 243).    
Three hearing officers conducted all of the hearings for the 243 South 
Florida suppliers.  One of these hearing officers conducted 54 supplier 
hearings and reinstated billing privileges for all 54 suppliers.  Another 
hearing officer reinstated billing privileges for 87 of 93 suppliers         
(94 percent), and the third hearing officer reinstated billing privileges 
for 81 of 96 suppliers (84 percent).   
Many suppliers were represented by attorneys or consultants during the 
appeal process and at the suppliers hearings.  Six firms represented   
60 percent of the suppliers that appealed and received hearings        
(145 of 243).  An attorney who represented 15 suppliers during the 
appeal process was indicted and pled guilty to Medicare fraud in  
March 2007.  As alleged in court documents, the attorney facilitated the 
fraudulent sale of 67 South Florida suppliers to nominee (or straw) 
purchasers who acted in place of the true purchasers of the companies.  
The attorney used various legal documents to conceal the true 
purchasers of the companies.   
Information regarding the 
Because there are no criteria regarding the types 
hearing process is found in 
of evidence necessary to reinstate supplier billing 
Federal Regulations, CMSs 
privileges, hearing officers reinstated billing 
Medicare Program Integrity 
privileges based on a variety of evidence  
Manual, and NSCs 
Statement of Work.13  These 
 
13 CMS specifically cited the following three authorities as applicable:  42 CFR  424.57; 
CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch.10,  19; and Statement of 
Work, NSC.  We note that 42 CFR  405.874 is also a key applicable regulatory section.  
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F I N D I N G S  
documents include procedural guidelines for hearing officers, such as 
timeframes for conducting hearings and issuing determinations.  
However, these documents do not include criteria regarding the types of 
evidence hearing officers must receive from suppliers to reinstate their 
billing privileges.  According to CMS, hearing officers accept all 
documentation submitted by suppliers, unless there is reason to believe 
the information is not legitimate.14      
Because there are no criteria regarding the types of evidence necessary 
to reinstate supplier billing privileges, suppliers reinstated by hearing 
officers submitted various types of evidence to appeal the revocations of 
their billing privileges.  For example, at least 75 percent of reinstated 
suppliers submitted photographs, licenses and permits, or evidence 
related to medical equipment.  Suppliers also provided affidavits or 
statements from suppliers owners stating that their businesses were 
open on the dates of the site visits.  Over half of reinstated suppliers 
submitted evidence related to their businesses facilities, such as leases 
or utility bills.  The types of evidence submitted by suppliers and the 
percentage of reinstated suppliers that submitted each type of evidence 
are presented in Table 1 on the next page. 
The billing privileges of half of the 
Two-thirds of suppliers whose billing 
suppliers (111 of 222) that were 
privileges were reinstated have subsequently 
reinstated by hearing officers have 
had their privileges revoked or inactivated, 
subsequently been revoked as a 
and some individuals connected to reinstated 
result of NSCs follow-up project and 
suppliers have been indicted 
its continuing efforts to identify 
suppliers that do not meet Medicare 
standards.  In addition, 17 percent of suppliers (37 of 222) have had 
their billing privileges inactivated.  As a result, two-thirds of suppliers 
whose billing privileges were reinstated by hearing officers (148 of 222) 
had their privileges revoked again or inactivated.   
In addition, the U.S. Attorneys Office has indicted 18 individuals 
connected to suppliers whose billing privileges were reinstated by 
hearing officers.  These 18 people were indicted between April and 
September 2007 and were connected to 15 of the 222 suppliers that 
hearing officers reinstated.  As of April 2008, 10 of the 18 defendants 
had been convicted and each was ordered to pay between $90,000 and 
 
14 CMS written response to OIG questions.  December 2007. 
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F I N D I N G S  
$11 million in restitution.  These 10 defendants were also sentenced to 
jail terms ranging from 1 to 4 years.   
 
Table 1:  Types of Evidence Submitted by Suppliers at Hearings 
Percentage of Reinstated Suppliers 
That Submitted at Least One  Examples of Documents Submitted 
Types of Evidence 
Document Related to This Type of  by Suppliers 
Evidence 
Photographs of suppliers facilities, 
Photographs  79%  employees, posted hours, signs, 
medical equipment supplies 
Occupational license, drivers license, 
Licenses and permits  78% 
insurance certificate, State permit 
Vendor invoice, delivery slip,  
Medical equipment evidence  75% 
equipment maintenance agreement 
Affidavits/statements from owners, 
Affidavits/statements  70% 
employees, neighboring businesses 
Physical facility evidence  57%  Lease, electric bill, rent receipt 
Delivery receipt from bottled water 
Other  51%  company, business cards, On delivery 
signs 
Phone evidence  46%  Land-line phone bill, cell phone bill 
Banking evidence  41%  Bank statement, copy of check 
Summary of claims, Medicare 
Claims evidence  35% 
remittance notice  
Fax evidence   29%  Fax cover sheet, fax confirmation sheet 
Site inspection evidence   28%  NSC report on previous site inspection 
Log evidence  13%  Visitor log, alarm system log 
Employee evidence   13%  Employee timesheet 
Patient evidence  10%  Form with patient signature 
         
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 R E C O M M E N D A T I O N  
 
 
To protect beneficiaries and the integrity of Medicare payments, CMS 
has developed standards that suppliers must meet to enroll in Medicare.  
CMS has also taken steps to ensure suppliers compliance with these 
standards.  For example, CMS has announced a 2-year demonstration 
project designed to identify noncompliant suppliers and detect 
potentially fraudulent supplier behavior.  These efforts may result in 
CMS denying or revoking billing privileges for suppliers that do not 
meet all Medicare enrollment criteria found in 42 CFR  424.57.   
All suppliers whose billing privileges have been denied or revoked may 
appeal and request a hearing.  This is an important process to ensure 
that only billing privileges for suppliers that fail to meet the supplier 
standards are denied or revoked.   
There are no criteria for hearing officers regarding the types of evidence 
required to reinstate a suppliers billing privileges.  For suppliers that 
request a hearing, hearing officers generally accept all documentation 
submitted as legitimate, unless they have reason to believe otherwise.   
Hearing officers reinstated the billing privileges for 91 percent of the 
South Florida suppliers that were revoked as a result of OIGs prior 
study and received hearings.  These billing privileges were revoked 
based on the results of the OIG-led unannounced site visits, yet were 
reinstated after suppliers submitted a wide variety of evidence to 
hearing officers.  Two-thirds of these suppliers billing privileges have 
subsequently been revoked or inactivated, and individuals connected to 
some of these suppliers have been indicted.  Our findings suggest that a 
more critical review of supplier evidence is warranted to ensure that 
fraudulent suppliers billing privileges are not reinstated.   
Therefore, we recommend that CMS:   
Strengthen the Appeal Process by Developing Criteria Regarding the Types 
of Evidence Required for Hearing Officers To Reinstate Suppliers Billing 
Privileges 
CMS should develop clear criteria for hearing officers on the types of 
evidence suppliers should submit for hearing officers to reinstate the 
suppliers billing privileges.  CMS could develop a list of evidence that 
would support the need for overturning various types of revocations.  
CMS or hearing officers could provide this list of documents to suppliers 
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R E C O M M E N D A T I O N  
before a determination is made.  Once suppliers have submitted their 
evidence, hearing officers could also take steps to verify the legitimacy 
of certain types of evidence.  CMS could provide standard training to all 
hearing officers regarding the types of evidence required to reinstate 
supplier billing privileges.   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
In responding to our report, CMS stated that it has been taking 
aggressive steps to prevent fraud and abuse in the Medicare program.  
CMS points out that, most importantly, all suppliers will need to 
become accredited by October 1, 2009, which CMS believes will ensure 
that only legitimate suppliers serve Medicare beneficiaries.  
Additionally, CMS published a final rule in June 2008 which extends 
appeal rights to all providers and suppliers whose enrollment 
applications for Medicare billing privileges are denied or revoked by 
CMS or a Medicare contractor.15  The rule also limits the submission of 
new evidence during an Administrative Law Judge review, requiring 
providers and suppliers to submit evidence and documentation at the 
lower levels of appeal.  Finally, CMS stated that in March 2008, it 
established model provider enrollment letters, including letters 
regarding adverse provider enrollment determinations, that will help to 
ensure that applicants and enrolled providers and suppliers will be 
informed about the reason(s) for a denial or revocation and will be 
afforded the appropriate appeal rights. 
CMS agreed that it should consider establishing guidelines regarding 
the evaluation of evidence that a hearing officer will review.  CMS 
believes that it would be useful for OIG to provide specific suggestions 
regarding appropriate criteria for hearing officers.  However, CMS 
stated that any guidance provided should not impinge on a hearing 
officers ability to make an independent determination or with a 
suppliers ability to submit any evidence that it believes will support the 
reversal of a revocation or denial decision.  For the full text of CMSs 
comments, see Appendix B. 
We agree that CMS should develop criteria that maintain the 
independence of hearing officers and suppliers ability to submit any 
 
15  73 Fed. Reg. 36449 (June 27, 2008). 
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R E C O M M E N D A T I O N  
evidence they wish to send.  We suggest that CMS develop a list of 
evidence that it believes would support a decision to overturn various 
reasons for revocation and that such evidence should be germane to the 
reason for revocation.  For example, if CMS revokes a suppliers billing 
privileges because staff was not present at the suppliers facility after 
multiple site visit attempts during reasonable business hours, the 
supplier should not be reinstated based on the submission of cell phone 
bills, leases, drivers licenses, or photographs.  Instead, reinstatement 
should be based on evidence that the supplier met the Medicare 
standard requiring it to maintain a physical facility that is accessible to 
beneficiaries and to CMS during reasonable business hours.  CMS 
should also develop criteria that enable hearing officers to verify the 
legitimacy and credibility of documents submitted by suppliers as 
evidence during appeals.       
 
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 A P P E N D I X   A    
Medicare Supplier Standards, 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 Sec. 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 capped rental items, as described in Sec. 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 supplier's 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 multisite supplier, 
records may be maintained at a centralized location; 
 
(8) Permits CMS, or its agents to conduct on-site 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 
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A P P E N D I X ~ A  
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 supplier's 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: 
(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 Sec. 420.206 of this subchapter; 
 
(18) Must not convey or reassign a supplier number; 
 
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A P P E N D I X ~ A  
(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. 
 
The following items have been added as Medicare supplier standards in the Federal Register 
notice dated August 16, 2006.  The additional standards relate to the accreditation of 
suppliers.  However, CMS is phasing-in the accreditation process, along with its Medicare 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive 
Bidding Program.  Any supplier that wishes to participate in competitive bidding must be 
accredited or pending accreditation.  The deadline for all suppliers to obtain accreditation is 
September 30, 2009.     
 
(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 3 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 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. 
 
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 A P P E N D I X   B  
 
Agency Comments 
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 A C K N O W L E D G M E N T S  
 
 
This report was prepared under the direction of Robert A. Vito, Regional 
Inspector General for Evaluation and Inspections in the Philadelphia 
regional office, and Linda M. Ragone, Deputy Regional Inspector 
General.   
Emily Dolan Multari served as the project leader for this study.  Other 
principal Office of Evaluation and Inspections staff from the 
Philadelphia regional office who contributed to the report include 
Conswelia McCourt; central office staff who contributed include      
Kevin Farber and Scott Manley.    
 
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