Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

P E , C
ROVIDER  NROLLMENT HAIN 

O S :

AND  WNERSHIP  YSTEM
E I
ARLY  MPLEMENTATION 

C
HALLENGES

Daniel R. Levinson

Inspector General 

April 2007

OEI-07-05-00100
 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 assess the early implementation of the Provider Enrollment, Chain 
and Ownership System (PECOS) related to the timely processing of 
Medicare provider enrollment applications and system access. 
BACKGROUND 
The PECOS is the repository of enrollment records for Medicare 
providers, such as physicians, hospitals, and laboratories.  It is the 
primary source for provider enrollment information and serves as the 
frontline defense to keep fraudulent providers from participating in 
Medicare.  The PECOS was expected to greatly reduce the amount of 
time needed to process provider enrollment applications.  When the 
PECOS began operating in 2002, implementation problems caused 
delays in processing enrollment applications.   
The PECOS began initial operations with Part A contractors in July 
2002; Part B contractors followed in November 2003.  It contains 
providers full names; unique identifiers, such as Social Security 
numbers or tax identification (ID) numbers; and relationships between 
providers (e.g., group practices and ownership).  The system is not fully 
populated with all Medicare providers, nor is it used to enroll all 
provider types (e.g., durable medical equipment suppliers).  Future 
plans for the PECOS include housing each providers National Provider 
Identifier and inclusion of enrollment information for durable medical 
equipment suppliers and Medicaid providers. 
The Office of Inspector General (OIG) collected records from contractors 
of all provider enrollment applications exceeding the Centers for 
Medicare & Medicaid Services (CMS) timeframes for July 2005.  OIG 
aggregated this data, selected stratified random samples of applications, 
and contacted the contractor that owned each application to determine 
the reason it was delayed. Between November 2005 and January 2006, 
OIG conducted structured interviews with all contractors regarding 
their experiences with PECOS, factors that commonly delay processing 
of applications, PECOS training and guidance received, their 
understanding of application-processing procedures, and their oversight 
by CMS. OIG also conducted structured interviews with provider 
enrollment and PECOS access staff in each CMS regional office and in 
CMSs central office. 
  OEI-07-05-00100  PROVIDER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM:  EARLY IMPLEMENTATION CHALLENGES  i  EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY

FINDINGS 
Because of misinterpretation of CMS guidance, the majority of Part 
A applications contractors reported as exceeding timeframes as of 
July 31, 2005, had not actually exceeded timeframes. Sixty-six 
percent of the Part A applications reported as exceeding the 99-percent 
processing timeframe had not actually exceeded it. The 
misclassification was due to the fact that contractors retained 
applications awaiting tie-in notices in pending inventory or failed to 
update the record status in the PECOS correctly. Eighteen percent of 
Part A applications reported as exceeding timeframes were delayed due 
to a backlog of applications waiting to be processed by one contractor. 
The remaining Part A applications were delayed for a variety of other 
reasons, including complex provider ownership structures requiring 
extensive documentation, contractor staff errors, and difficulty 
validating Social Security numbers. 
Part B applications contractors reported as exceeding timeframes 
as of July 31, 2005, were primarily the result of one contractors 
backlog and providers failure to respond to requests for 
information. One Part B contractor reported backlogs of applications 
waiting to be processed that accounted for an estimated 52 percent of 
Part B applications reported as exceeding timeframes. This contractor 
did not provide a specific explanation for the backlog. Forty-one percent 
of applications reported as exceeding processing timeframes were the 
result of providers failure to respond to requests for missing or 
corrected application information. 
Over half of all contractors reported difficulty accessing the PECOS. 
At the time of our review, 61 percent of contractors (25 of 41) reported 
receiving frequent, intermittent notices from CMS asking them to use 
PECOS only during certain time periods. In addition, over half of 
contractors reported difficulty obtaining and/or recertifying user IDs 
with PECOS access for their employees. Many contractors reported 
that these problems caused them difficulty in meeting 
application-processing timeframes. 
CONCLUSION 
Our review of the reasons for delayed application processing found that 
many current Part A applications identified as late had been incorrectly 
reported as late because of contractor staff misunderstanding of 
application-processing policy. The applications that were delayed 
OEI-07-05-00100  PROVIDER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM:  EARLY IMPLEMENTATION CHALLENGES  ii  E X E C U T I V E   S U M M A R Y  
because of workload backlogs were confined to two large contractors. 
The changes to the application-processing guidelines implemented in 
March 2006 specify that processing time does not begin until the 
contractor receives a complete and correct application.  This may reduce 
the potential for workload backlogs in the future.  Finally, over half of 
all contractors reported difficulty accessing the PECOS.   
Based on these findings, we offer to CMS the following suggestions for 
improvement.   
	 CMS could conduct updated training for Part A contractor staff 
to ensure consistent understanding of application-processing 
policy, specifically regarding when application-processing time 
ends in relation to receipt of tie-in notices to maintain 
compliance with the revised Program Integrity Manual. 
	 CMS may also want to address issues with system access and 
user IDs that could lead to future delays in application 
processing.  
	 CMS may also want to determine the need for increased system 
capacity to ensure that periods of limited access to the PECOS 
will not reoccur as planned initiatives, such as the National 
Provider Identifier and enrollment of Medicaid providers, are 
implemented. 
	 Finally, CMS could revise the Enterprise User Administration 
Workflow process to prevent user ID requests and 
recertifications from being denied because of factors such as 
incorrect approver e-mail addresses, approvers being on leave, or 
approvers not acting upon e-mails. 
AGENCY COMMENTS 
CMS indicated in its comments that the information in the report will 
assist in its ongoing management of the PECOS, but believes that the 
startup issues noted have been resolved.  With regard to training, CMS 
stated that it has worked with Part A contractors and its own staff to 
increase understanding of application processing timeframes, 
specifically with regard to delayed receipt of tie-in notices.  With regard 
to system access and capacity, CMS stated that it has addressed this 
issue by starting to transition PECOS from a DB2 to an Oracle 
environment to limit the interference that other CMS applications have 
  OEI-07-05-00100  PROVIDER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM:  EARLY IMPLEMENTATION CHALLENGES  iii  E X E C U T I V E   S U M M A R Y  
on PECOS. Finally, CMS stated that it will consider more effective 
ways to improve the Enterprise User Administration Workflow process. 
  OEI-07-05-00100  PROVIDER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM:  EARLY IMPLEMENTATION CHALLENGES  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  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9

Part A applications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9

Part B applications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10

Difficulty accessing thePECOS . . . . . . . . . . . . . . . . . . . . . . . . . . .  11

CONC LUSION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13

  AgencyComments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13

APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15

A:	  Flowchart of the EUA Workflow Process for Approving a  

CMS Computer Systems User ID. . . . . . . . . . . . . . . . . . . . . . .  15

B:	  Sample Sizes, Projections, and Confidence Intervals for

Reasons of  Delay in Application Processing . . . . . . . . . . . . . .  16

C:	  AgencyComments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17

A C K NO WL E D G M E N T S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
   I N T R O D U C T I O N  

OBJECTIVE 
To assess the early implementation of the Provider Enrollment, Chain 
and Ownership System (PECOS) related to the timely processing of 
Medicare provider enrollment applications and system access. 
BACKGROUND 
The PECOS is the repository of enrollment records for Medicare 
providers, such as physicians, hospitals, and laboratories.  It is the 
primary source for provider enrollment information and serves as the 
frontline defense to prevent fraudulent providers from participating in 
Medicare.  The PECOS was expected to greatly reduce the amount of 
time needed to process provider enrollment applications.  When the 
PECOS began operating in 2002, implementation problems caused 
delays in processing enrollment applications.  These delays attracted 
the attention of Congress and the American Medical Association (AMA).  
AMA concluded that the PECOS negatively impacted contractor 
workloads, resulting in delays to both provider enrollment and claims 
payment.1  We conducted this study, in part, because of concerns over 
reported delays.   
The PECOS began initial operations with Part A contractors in July 
2002; Part B contractors followed in November 2003.  It contains 
providers full names; unique identifiers, such as Social Security 
numbers or tax identification (ID) numbers; and relationships between 
providers (e.g., group practices and ownership).  The system is not fully 
populated with all Medicare providerscontractors are required to 
create PECOS records as providers submit initial applications or 
changes to existing information. The PECOS is not yet used to enroll 
all provider types (e.g., durable medical equipment suppliers).  
Therefore, existing providers who have not had cause to submit changes 
to their information do not have PECOS records yet.  Future plans for 
the PECOS include housing each providers National Provider Identifier 
and inclusion of enrollment information for durable medical equipment 
suppliers and Medicaid providers. 
1 Centers for Medicare & Medicaid Services Working to Improve Provider Enrollment 
Process, Medlearn Matters Number SE0417, May 4, 2004. 
  OEI-07-05-00100  PROVIDER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM:  EARLY IMPLEMENTATION CHALLENGES  1  II NN TT RR OO DD UU CC TT II OO NN
PECOS Role in the Provider Enrollment Process 
The primary purposes of the PECOS are to: 
	 collect information for an applying provider/supplier and 
record the associations between the applicant and those who 
have an ownership or control interest in the entity; 
	 permit informed enrollment decisions based on past and 
present business history and any reported exclusions, 
sanctions, and felonious behavior at their location or in 
multiple contractor jurisdictions; and 
	 ensure that claim payments are made to the correct payee.2 
To initiate an enrollment action, providers complete an application 
(Form CMS 855) and submit it to the appropriate contractor. There are 
three types of enrollment actions: (1) initial enrollment, 
(2) reassignment of providers benefits, and (3) change of information. 
Changes of information include changes of ownership from a seller and 
changes of ownership from a buyer. Upon receipt of any of these 
applications, contractor staff verify that the information is complete and 
correct and enter the data into the PECOS. 
Contractors verify numerous pieces of information during the provider 
enrollment process, including licensing; address; absence from the Office 
of Inspector General (OIG) exclusions list; and, for institutional 
providers, survey and certification information. In addition, contractors 
follow up with providers to resolve any missing or incorrect information 
(e.g., missing signature, incorrect date), which sometimes adds weeks or 
months to processing time. For institutional providers (e.g., hospitals, 
skilled nursing facilities), some types of applications require survey and 
certification by a State agency. After verifying the information in these 
applications, the contractor sends the application to the appropriate 
State agency for survey and certification. The Centers for Medicare 
& Medicaid Services (CMS) requires that a contractors processing time 
for this type of application end when the contractor sends its 
recommendation for approval or denial to the State agency, meaning 
that the application should no longer be listed as pending.3  After the 
2 66 Federal Register 51961 (2001). 
3 Medicare Program Integrity Manual, Pub. No. 100-08, chapter 10, section 2.3(D). 
During the review period, this requirement was located in an earlier version of chapter 10, 
section 15, effective March 26, 2004 (prior to Rev. 150, effective July 30, 2006). 
OEI-07-05-00100  PROVIDER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM:  EARLY IMPLEMENTATION CHALLENGES  2  I N T R O D U C T I O N  
State agency completes its certification of a provider and advises CMSs 
regional office of the results, CMSs regional office completes a notice to 
indicate its approval of the provider, called a tie-in notice, and submits 
this notice to the contractor to complete the enrollment process. 
Contractor Responsibilities. According to CMS requirements applicable 
during the review period, contractors were required to process 
90 percent of the applications received within 45 or 60 days (depending 
on application type) and 99 percent of the applications received within 
60 or 120 days (depending on application type).  Because CMS allowed 
processing times for 1 percent of applications to exceed either 60 or 
120 days, having applications that exceed these timeframes does not 
necessarily mean contractors were noncompliant.  Table 1 gives 
required timeframes for processing various types of applications during 
the review period, as described in the Medicare Program Integrity 
4 
Manual (PIM).
Table 1: Contractors Timeframes for Processing Provider 
Enrollment Applications by Type* 
Processing Timeframes 
Application Type  90 percent of  99 percent of 
Applications  Applications 
Processed Within  Processed Within 
Initial Enrollment  60 days  120 days 
Reassignment of Benefits  45 days  60 days 
Change of Information  45 days  60 days 
Change of Ownership  Seller  45 days  60 days 
Change of Ownership  Buyer  60 days  120 days 
Source: PIM, Pub. No. 100-08, chapter 10, section 15, effective March 26, 2004. 
*We received information from CMS officials regarding the processing timeframes for 
changes of ownership for sellers and buyers.  The version of the PIM in effect during 
the review period did not specify the timeframes for these application types.  The 
current version of the manual gives processing timeframes for these application types 
in chapter 10, sections 2.1 and 2.2. 
4 At the time of our review, the PIM was being revised to reflect changes in 
application-processing policy.  As of July 30, 2006, 80 percent of applications for initial 
enrollment and change of ownership from a buyer must be processed within 60 days, and 
80 percent of applications for change of information, reassignment of benefits, and change of 
ownership from a seller must be processed within 45 days.  Processing timeframes currently 
in effect are located in chapter 10, section 2 of the manual, Rev. 150. 
  OEI-07-05-00100  PROVIDER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM:  EARLY IMPLEMENTATION CHALLENGES  3  I N T R O D U C T I O N  
User IDs. To obtain a user identification (user ID) and password to 
access the PECOS, each potential user (requester) at a contractor 
submits an Application for Access to CMS Computer Systems (CMS 
Form 20037) to the appropriate CMS regional office.  This application is 
entered by CMS regional office staff into a CMS tracking system, called 
Enterprise User Administration (EUA) Workflow.  The request is then 
routed to two predefined approvers (one is the requesters manager, and 
one is a CMS employee); EUA Workflow contains information regarding 
the assigned approvers for each contractor.  These approvers receive 
system-generated e-mails notifying them that a request is awaiting 
approval.  If approvers do not act on the request within 4 days, they 
receive a second e-mail notice; if approvers still do not act within an 
additional 4 days, they receive a third notice.  Four days after the third 
notice, if the request has not received both approvals, the system closes 
the request and notifies the requester.  If the request receives two 
approvals, it is routed to a final CMS approver, who grants access to the 
PECOS. Once this final approval is complete, the requester receives an 
e-mail notification that a user ID has been assigned and access has been 
granted.  See Appendix A for a flowchart of this process. 
All PECOS users must recertify their user IDs annually.  The 
recertification process is similar to the user ID assignment process.  The 
PECOS users receive system-generated e-mails 45 days before their 
user IDs expire, advising them to recertify and providing a link to the 
EUA Workflow.  Users log into the EUA Workflow to verify personal 
information and needed applications and to complete privacy and 
security training.  Once these tasks are completed, the recertification 
request enters an approval process similar to that required for initial 
applications; however, the third approval is not necessary for 
recertification. 
METHODOLOGY 
To assess implementation of the PECOS regarding timely processing of 
Medicare provider enrollment applications and system access, we 
collected information from three sources: contractors, CMS regional 
offices, and CMSs central office.  We explored the possibility of 
collecting pending application information from the PECOS directly, but 
the PECOS was unable to produce the necessary information at that 
  OEI-07-05-00100  PROVIDER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM:  EARLY IMPLEMENTATION CHALLENGES  4  I N T R O D U C T I O N  
time.5  Therefore, we collected data on the number of applications 
pending as of July 31, 2005, from the contractors.  From these, we 
selected a sample of applications that exceeded 60 or 120 days, 
depending on application type, and asked contractors why the 
processing of the sampled applications had been delayed.  We also 
conducted structured interviews with provider enrollment staff from 
each of the contractors, CMS regional offices, and CMSs central office. 
Part A Sample.  From the contractors administering the 32 Part A 
contracts, we requested data on the number of applications pending as 
of July 31, 2005, including information on the age of the applications.  
We aggregated these data to create a national data set of Part A 
pending provider enrollment applications.  Part A contractors reported 
2,590 pending applications, 476 of which were pending longer than 
either 60 or 120 days, depending on the type of application.  Table 
2 displays the pending applications reported by Part A contractors. 
Table 2:  Part A Contractors' Pending Applications as of July 31, 
2005 
Pending Applications Exceeding 
Application Types  Total Pending  60 or 120 Days 
Number  Percentage 
Initial Applications  522  150  28.74% 
Changes of Information  1,583  140  8.84% 
Change of Ownership - Seller  191  97  50.79% 
Change of Ownership - Buyer  294  89  30.27% 
Total  2,590  476  18.38% 
Source:  OIG analysis of contractor pending application information, 2005. 
We limited the Part A population to the 476 applications that exceeded 
the timeframe for the appropriate application type (120 days for initial 
enrollments and changes of ownership from buyers and 60 days for 
changes of information and changes of ownership from sellers) and 
asked the contractors to provide identifying information on each of the 
476 applications.  We selected a stratified random sample from the 
476 applications to ensure that all application types and contractors 
were represented. 
5 Functionality to produce pending application information was added to the PECOS 
after the period of our review. 
  OEI-07-05-00100  PROVIDER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM:  EARLY IMPLEMENTATION CHALLENGES  5  III NNN TTT RRR OOO DDD UUU CCC TTT III OOO NNN
The strata are illustrated in Table 3. One large Part A contractor 
accounted for the majority of the change of ownership from buyer and 
change of ownership from seller application types. For these application 
types, we created substrata to ensure that applications were selected 
from a variety of contractors. Substratum A represents the contractor 
holding the majority of the change of ownership applications. 
Table 3: Part A Sample and Populations 
Application Type  Sample Size  Population 
Initial Enrollments  60  150 
Change of Information  75  140 
Substratum A 35  84 
Change of Ownership  Seller 
Substratum B 13  13 
Substratum A 40  77 
Change of Ownership  Buyer 
Substratum B 12  12 
Total  235  476 
Source: OIG analysis of contractor pending application information, 
2005. 
Part B Sample. From the contractors administering the 29 Part B 
contracts, we requested data on the number of applications pending as 
of July 31, 2005, including information on the age of the applications. 
We aggregated these data to create a national data set of Part B 
pending provider enrollment applications. Part B contractors reported 
48,477 pending applications, 673 of which were pending longer than 
60 or 120 days, depending on the type of application. Table 4 displays 
the pending applications reported by Part B contractors. 
Table 4: Part B Contractors' Pending Applications as of 
July 31, 2005 
Pending Applications 
Application Types  Total Pending  Exceeding 60 or 120 Days 
Number  Percentage 
Initial Applications  31,873  120  0.38% 
Changes of Information  8,434  424  5.03% 
Reassignment of Benefits  8,170  129  1.58% 
Total  48,477  673  1.39% 
Source: OIG analysis of contractor pending application information, 2005. 
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We limited the Part B population to the 673 applications that exceeded 
the timeframe for the appropriate application type (120 days for initial 
enrollments and 60 days for changes of information and reassignment of 
benefits) and asked the contractors to provide us with identifying 
information on each of the 673 applications. We selected a stratified 
random sample from the 673 applications to ensure that all application 
types and contractors were represented.  
The strata are illustrated in Table 5.  One large Part B contractor held 
the majority of the change of information application type. For this 
application type, we created substrata to ensure that applications were 
selected from a variety of contractors; substratum A represents the 
contractor holding the majority of the change of information 
applications.  We reduced our sample size from 190 to 185 because, as a 
result of contractor errors, 5 applications that contractors provided did 
not exceed the timeframe for the application type. 
Table 5:  Part B Sample and Populations 
Application Type  Sample Size  Adjusted Sample  Population 
Initial Enrollments  60  58  120 
Substratum A 40  40  311 
Change of Information 
Substratum B 30  28  113 
Reassignment of Benefits  60  59  129 
Total  190  185  673 
Source:  OIG analysis of contractor pending application information, 2005. 
Contractor Interviews. Between November 2005 and January 2006, we 
conducted structured interviews with the 41 contractors that held the 
32 Part A and 29 Part B contracts regarding their experiences with the 
PECOS, the factors that commonly delayed processing of applications, 
the guidance they received, and their understanding of application-
processing procedures.  
CMS Interviews.  We conducted structured interviews in January and 
February 2006 with staff responsible for producing tie-in notices and 
staff involved in granting access to the PECOS in each CMS regional 
office and with CMS central office staff responsible for provider 
enrollment and access to the PECOS.   
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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. 
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Sixty-six percent of the Part A 
Because of misinterpretation of CMS guidance, the 
applications reported as exceeding 
majority of Part A applications contractors reported 
the 99-percent processing 
as exceeding timeframes as of July 31, 2005, had  timeframe had not actually 
not actually exceeded timeframes  exceeded it. The misclassification 
was due to the fact that 
contractors retained applications awaiting tie-in notices in pending 
inventory or failed to update the record status in the PECOS correctly. 
For applications that require tie-in notices, the PIM states that a 
contractors processing time ends when the contractor sends its 
recommendation for approval or denial to the State agency.  Therefore, 
contractors should not have categorized these applications as pending.  
Our structured interviews revealed that staff from eight contractors 
incorrectly believed that processing time included time spent waiting for 
tie-in notices.  In addition, contractors reported incorrectly categorized 
applications as a result of failing to update the PECOS.  For example, 
some contractors failed to change the status of applications to closed 
when they were complete.  Contractors failure to apply the various 
record statuses correctly caused applications to be categorized as 
exceeding processing timeframes when, in fact, they had not. 
Eighteen percent of Part A applications reported as exceeding 
timeframes were delayed due to a backlog of applications waiting to be 
processed by one contractor.  Staff from this contractor explained that 
the backlog was due to an increase in Federally Qualified Health Center 
enrollments and that they were unable to add staff quickly enough to 
accommodate the additional workload.   
The remaining Part A applications were delayed for a variety of other 
reasons, including complex provider ownership structures requiring 
extensive documentation, contractor staff errors, and difficulty 
validating Social Security numbers. Appendix B provides the number of 
sampled applications, projections, and confidence intervals for each 
cause of delay. 
  OEI-07-05-00100  PROVIDER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM:  EARLY IMPLEMENTATION CHALLENGES  9  F I N D I N G S  

One Part B contractor reported 
Part B applications contractors reported as  backlogs of applications waiting to 
exceeding timeframes as of July 31, 2005, were  be processed that accounted for an 
estimated 52 percent of Part B 
primarily the result of one contractors backlog 
applications reported as exceeding 
and providers failure to respond to  
timeframes.  This contractor did 
requests for information 
not provide a specific explanation 
for the backlog. 
Forty-one percent of applications reported as exceeding processing 
timeframes were the result of providers failure to respond to requests 
for missing or corrected application information.  The version of the PIM 
in effect during the review period provided that in . . . situations where 
[contractors] have made at least three attempts to contact the applicant 
for information, and the applicant is not responding to those requests, 
[contractors should] close the application after 120 days.  The PIM 
further provided, Anytime the information is received during the 
120-day cycle, process [the application] even if the delay in processing 
was not caused by the contractor. Therefore, if the applicant waited 
until the 99th day to send the information, the contractor is required to 
process it . . . .  Therefore, contractors should process applications 
anytime information is received, even if doing so will make the 
processing of the application take more than 120 days. 
However, contractors inconsistently interpreted the PIM guidance 
concerning when to close an application for provider nonresponse.  Some 
contractors believed that the status of applications could be changed to 
closed 7 days after the third contact attempt; others believed that 
applications were no longer counted in pending inventory after three 
contact attempts, but that the status of the applications could not be 
changed to closed until 120 days had elapsed; still others believed that 
all applications had to be held open for 120 days regardless of whether 
the provider responded to follow-up requests.  Additionally, some 
contractors indicated that they would keep an application open longer 
than 120 days if the provider showed cooperation with requests, in 
accordance with the PIM guidance; others would not, closing all 
applications at 120 days regardless of whether the provider had been 
cooperative.  Misinterpretation of when to close applications for provider 
nonresponse could cause inconsistent reporting of pending inventory. 
Therefore, some applications that should have been closed may have 
been incorrectly reported as exceeding timeframes and others that 
should have been left open may have been incorrectly closed.  
  OEI-07-05-00100  PROVIDER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM:  EARLY IMPLEMENTATION CHALLENGES  10  F I N D I N G S  
CMS staff indicated that, in March 2006, the application-processing 
guidelines changed to specify that processing time for each application 
does not begin until the contractor receives a complete and correct 
application. We interviewed contractors in November 2005 through 
January 2006. Therefore, the policy change did not affect the pending 
applications we discussed with contractors, meaning that we could not 
determine whether this change eliminated pending applications due to 
provider nonresponse.   
The remaining Part B applications did not meet established timeframes 
for a variety of other reasons, including contractor staff errors, difficulty 
validating Social Security numbers, problems with transferring records 
to the claims payment system, and problems with conducting visits to 
the providers locations. Appendix B provides the number of sampled 
applications, projections, and confidence intervals for each cause of 
delay. 
We conducted our interviews with 
Over half of all contractors reported difficulty 
contractors between 4 and 
accessing the PECOS 
6 months after the date of our 
pending application information (July 2005).  In these interviews, 
contractors discussed their current and past experiences, which 
included difficulty accessing the PECOS at the time of our interviews.  
Sixty-one percent of contractors (25 of 41) volunteered that they 
received frequent, intermittent notices from CMS, asking them to use 
the PECOS only during certain time periods.  For example, CMS 
advised contractors in the eastern time zone to work in the PECOS only 
from 6 a.m. to 12 p.m.  During these periods, the system limited access 
6 
to the PECOS to 150 simultaneous users across the Nation.
Thirty-one percent of contractors (13 of 41) reported that limited access 
to the PECOS compromised their ability to meet timeliness 
requirements.  One contractor with more than 50 PECOS users 
indicated that its need for access was 4 times greater than allowed 
during these periods.  One contractor with over 100 PECOS users tried 
6 We determined that there were more than 1,400 registered users of the PECOS as of 
May 2006. CMS noted in their comments to the draft report that peak concurrent usage 
equates to 270-300 users. We have no reason to believe that the number of users changed 
substantially between the time of our interviews (November 2005January 2006) and May 
2006. 
  OEI-07-05-00100  PROVIDER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM:  EARLY IMPLEMENTATION CHALLENGES  11  F I N D I N G
 S  
staggering work hours (beginning at 4 a.m.), but found that these efforts 
did not alleviate the problem. As one contractor staff person described 
the problem, [We] have three drawers of files that need to be keyed and 
are aging, but because of the limited access to the PECOS, the 
contractors staff were unable to complete this work. 
CMS staff confirmed that periods of limited access to the PECOS 
occurred, explaining that implementation of Medicare Part D was the 
cause.  Server capacity usually devoted to the PECOS had to be diverted 
to process Part D enrollments.  The access problems had abated as of 
January 2006, according to CMS staff, and no significant downtime 
occurred between January and March 2006.   
Given the initiatives planned for CMS computer systems in general, 
such as implementing the National Provider Identifier, and, for the 
PECOS specifically, such as enrollment of durable medical equipment 
suppliers and Medicaid providers, the system may again be overtaxed if 
CMS does not adequately plan for future needs. 
Half of contractors experienced difficulties obtaining and recertifying user 
IDs 
Fifty-one percent of contractors (21 of 41) reported that they had 
experienced difficulty obtaining or recertifying user IDs for their 
employees. According to contractor staff, new users waited up to 
12 weeks after submitting applications for their user IDs, delaying them 
from beginning work.  Contractors also reported difficulty with annual 
recertifications of user IDs.  As one contractor staff person noted, [We] 
get an e-mail saying an employee needs to revalidate about 30 days 
before revocation [of the user ID] occurs, and [we] get the forms going as 
soon as possible, but [our] employees still end up getting revoked. 
Requests for new user IDs and recertifications of existing user IDs must 
be processed through a series of approvers; requests are often left 
unprocessed, according to contractor and CMS regional office staff.  
CMS central office staff verified these concerns. Problems occur in the 
process when the e-mail address for an approver is incorrect, when an 
approver is on leave, or when an approver does not act upon the e-mail 
notification.  When approvers do not respond in time, the request for a 
new user ID is closed or, in case of a recertification, the user ID is 
revoked. Either of these two events can cause contractor employees to 
have to start the user ID process over, thereby delaying their access to 
the PECOS and losing application-processing time. 
. 
  OEI-07-05-00100  PROVIDER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM:  EARLY IMPLEMENTATION CHALLENGES  12    C O N C L U S I O N  

Our review of the reasons for delayed application processing found that 
many current Part A applications identified as late had been incorrectly 
reported as late because of contractor staff misunderstanding of 
application-processing policy.  The applications that were delayed 
because of workload backlogs were confined to two large contractors. 
The changes to the application-processing guidelines implemented in 
March 2006 specify that processing time does not begin until the 
contractor receives a complete and correct application.  This may reduce 
the potential for workload backlogs in the future.  Finally, over half of 
all contractors reported difficulty accessing the PECOS.   
Based on these findings, we offer to CMS the following suggestions for 
improvement.   
	 CMS could conduct updated training for Part A contractor staff 
to ensure consistent understanding of application-processing 
policy, specifically regarding when application-processing time 
ends in relation to receipt of tie-in notices to maintain 
compliance with the revised PIM.   
	 CMS may also want to address issues with system access and 
user IDs that could lead to future delays in application 
processing.  
	 CMS may also want to determine the need for increased system 
capacity to ensure that periods of limited access to the PECOS 
will not reoccur as planned initiatives, such as National Provider 
Identifier and enrollment of Medicaid providers, are 
implemented. 
	 Finally, CMS could revise the EUA Workflow process to prevent 
user ID requests and recertifications from being denied because 
of factors such as incorrect approver e-mail addresses, approvers 
being on leave, or approvers not acting upon e-mails. 
AGENCY COMMENTS 
CMS indicated in its comments that the information in the report will 
assist in its ongoing management of the PECOS, but believes that the 
startup issues noted have been resolved.  With regard to training, CMS 
stated that it has worked with Part A contractors and its own staff to 
  OEI-07-05-00100  PROVIDER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM:  EARLY IMPLEMENTATION CHALLENGES  13  C O N C L U S I O N  
increase understanding of application processing timeframes, 
specifically with regard to delayed receipt of tie-in notices.  With regard 
to system access and capacity, CMS stated that it has addressed this 
issue by starting to transition PECOS from a DB2 to an Oracle 
environment to limit the interference that other CMS applications have 
on PECOS. Finally, CMS stated it will consider more effective ways to 
improve the EUA Workflow process. We made technical corrections 
based on CMSs comments, as appropriate.  For the full text of CMSs 
comments, see Appendix C. 
  OEI-07-05-00100  PROVIDER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM:  EARLY IMPLEMENTATION CHALLENGES  14    A P P E N D I X   A  
Flowchart of the EUA Workflow Process for Approving a CMS Computer
Systems User ID 
Form CMS 20037 
submitted to regional 
office 
Request for approval is  Form CMS 20037  Request for approval is 
routed to CMS  entered in EUA  routed to contractor 
approver by e-mail  Workflow system  approver by e-mail 
Request is sent to 
Request is closed and  Denied within 4 days  Request  Approved within 4 days 
final approver at CMS 
requester is notified  is: 
central office 
Request is not processed 
within 4 days 
Requester is notified 
of assigned user ID 
Second e-mail 
notification is sent 
Request is sent to 
Request is closed and  Denied within 4 days  Request  Approved within 4 days 
final approver at CMS 
requester is notified  is: 
central office 
Request is not processed 
within 4 days 
Requester is notified 
of assigned user ID 
Third e-mail 
notification is sent 
Request is sent to 
Denied within 4 days  Request  Approved within 4 days 
final approver at CMS 
is: 
Request is closed and  central office 
requester is notified 
Request is not processed 
within 4 days 
Requester is notified 
of assigned user ID 
  OEI-07-05-00100  PROVIDER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM:  EARLY IMPLEMENTATION CHALLENGES  15    A P P E N D I X   B  
Sample Sizes, Projections, and Confidence Intervals for Reasons of Delay in 
Application Processing 
Reasons Why Part A Applications Were Reported as Exceeding Processing Timeframes 
Number of Applications in  Point  95-Percent Confidence 
Reason* 
Sample  Estimate  Interval 
Contractor misunderstanding of 
139  66%  63.5% - 68.3% 
application processing policy 
Backlogs in contractor inventory  48  18%  15.8% - 20.3% 
Other (e.g., complex ownership 
structures, contractor staff errors, 
48  Not projected 
difficulty validating Social Security 
numbers) 
Total  235 
*Some applications were delayed for multiple reasons.  Applications that were delayed because of (1) contractor 
misunderstanding and any other reason, or (2) contractor backlog and any other reason were counted in either the 
misunderstanding or backlog category, but not in both categories. 
Source:  OIG analysis of contractor reasons for delay, 2005. 
Reasons Why Part B Applications Were Reported as Exceeding Processing Timeframes 
Number of Applications in  Point  95-Percent Confidence 
Reason* 
Sample  Estimate  Interval 
Provider failure to respond to requests for 
99  41%  36.6% - 44.5% 
information timely 
Backlogs in contractor inventory  65  52%  47.6% - 55.8% 
Other (e.g., difficulty conducting site visit, 
difficulty transferring information to claims  21  Not projected 
payment system) 
Total  185 
*Some applications were delayed for multiple reasons.  Applications that were delayed due to (1) provider 
nonresponse and any other reason, or (2) contractor backlog and any other reason were counted in either the provider 
nonresponse or backlog category, but not both categories. 
Source:  OIG analysis of contractor reasons for delay, 2005. 
  OEI-07-05-00100  PROVIDER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM:  EARLY IMPLEMENTATION CHALLENGES  16    A P P E N D I X   C  
Agency Comments 
  OEI-07-05-00100  PROVIDER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM:  EARLY IMPLEMENTATION CHALLENGES  17  A P P E N D I X   C  

  OEI-07-05-00100  PROVIDER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM:  EARLY IMPLEMENTATION CHALLENGES  18  .. A CK NOW LED G MEN T 5
Brian T. Pattison,
This report was prepared under the direction of 
Regional Inspector General for Evaluation and Inspections in the
Kansas City regional offce, and Gina C. Maree, Deputy Regional
Inspector General.
Tricia Fields ;served as the team leader for this study. Other principal
Offce of  Evaluation and Inspections staff  from the Kansas City regional
offce who contributed to the report include Michael Barrett and
who contributed include C. Scott
Michala Walker; central offce staff 
Manley and Barbara Tedesco.
OEI.07.05.00100 PROVIOER ENROLLMENT, CHAIN AND OWNERSHIP SYSTEM: EARLY IMPLEMENTATION CHALLENGES 19