Testimony of: 
Stuart Wright 
Deputy Inspector General for Evaluation and Inspections 
U.S. Department of Health and Human Services 
________________________________________________________________________ 
 
Good afternoon, Chairman Pallone, Ranking Member Deal, and distinguished members 
of the Subcommittee.  I am Stuart Wright, Deputy Inspector General for Evaluation and 
Inspections at the Department of Health and Human Services (HHS).  I appreciate the 
opportunity to appear before you today to discuss our work related to Medicare integrity 
and efficiency. 
 
My testimony today will briefly describe the Office of Inspector Generals (OIG) mission 
and role in protecting and promoting the integrity, efficiency, and effectiveness of the 
Medicare program.  In addition, I will provide a general overview of our approach and 
work related to Medicare oversight touching on our efforts to assess the appropriateness 
of payments and prices, as well as addressing access and quality-of-care issues for 
beneficiaries.  I will also discuss our recent work related to durable medical equipment as 
a specific illustration of some of the program vulnerabilities we have identified and our 
recommendations to strengthen Medicare enrollment safeguards.  As part of that 
discussion, my testimony will provide details on our recent work in three South Florida 
counties, in which we determined that 45 percent of suppliers did not meet one or more 
of five Medicare enrollment requirements we reviewed.  
 
 
Role and Responsibility of the HHS OIG 
 
Our office was created in 1976 as the first statutory OIG in the Federal Government.  
Two years later, the Inspector General Act of 1978 (IG Act), modeled after the law 
creating the HHS OIG, established OIGs at other Cabinet-level departments of the 
Federal Government, as well as at some independent Government agencies.  Congress 
created OIGs to be independent and objective units within Federal departments and 
agencies for the purposes of:  (1) conducting audits and investigations of programs and 
operations; (2) coordinating and recommending policies to promote economy, efficiency, 
and effectiveness in the administration of programs; (3) preventing and detecting fraud 
and abuse; and (4) keeping the Department Secretary or Agency Administrator and 
Congress informed about the necessity for corrective action. 
 
To achieve these important objectives, our office reviews programs to identify systemic 
vulnerabilities and makes recommendations to improve their efficiency and effectiveness; 
investigates specific instances of potential fraud or abuse and takes appropriate 
enforcement actions; audits specific payments, providers, and programs to identify and 
recommend recovery of overpayments; and promotes voluntary compliance by issuing 
guidance to the health care industry.   
 
 
House Committee on Energy and Commerce 
Subcommittee on Health  
Hearing:  April 18, 2007    Page 1  While we recognize that the majority of providers and suppliers are trustworthy and 
honest and strive to submit accurate and appropriate claims for payment, provider efforts 
alone are not sufficient to ensure the integrity of the program.  OIGs oversight plays a 
key role in protecting program resources and the health and welfare of beneficiaries.   
 
OIGs effectiveness in protecting the integrity of Medicare relies heavily on our 
partnerships with other law enforcement organizations.  We work with the Department of 
Justices Civil, Criminal, and Civil Rights Divisions, the U.S. Attorneys Offices, the 
Federal Bureau of Investigation, other Offices of Inspector General, and State and local 
law enforcement officials to investigate allegations of fraud cases and curb abusive 
behavior.  We also frequently collaborate with the Centers for Medicare & Medicaid 
Services (CMS) to address mutual issues of concern.  
 
Our staff expertise, national presence, organizational structure, ongoing identification of 
high risk areas, and collaboration with law enforcement partners enable OIG to leverage 
our resources to achieve maximum return for the dollars invested in our office.  For the  
3-year period from fiscal years (FY) 2004 through 2006, on average we reported savings 
of $13 for every dollar invested in our office.  
 
OIG Priority Setting, Reporting, and Followup 
 
Each year, OIG publishes a work plan, which outlines our activities for the upcoming 
fiscal year.  Although resource constraints preclude us from reviewing all 300-plus 
programs of the Department annually, OIG engages in a comprehensive work-planning 
process to identify the most important and timely issues and to direct our resources 
accordingly.  Additionally, as part of the Departments mandated Performance and 
Accountability Report, each year our office identifies, based upon OIGs body of work, 
the most significant management and performance challenges facing the Department.  
And, consistent with the requirements of the IG Act, OIG reports to Congress 
semiannually on OIGs audit, evaluation, and enforcement accomplishments during the 
prior 6-month reporting period.   
 
Finally, OIG reports on all recommendations based on findings from OIG audits and 
evaluations that have not been fully implemented by the Department.  To present one 
comprehensive listing of these recommendations, OIG is in the process of combining two 
documents that we have historically issued  the Red Book and Orange Book  into 
one publication that will be titled Compendium of Unimplemented Office of Inspector 
General Recommendations.  This document will serve as a useful tool for Congress, the 
Administration, and the Department in their respective efforts to identify ways to 
maximize the effectiveness of programs and services and to improve the efficiency of 
departmental programs.  OIG expects to release this compendium in May 2007.   
 
 
 
 
 
 
House Committee on Energy and Commerce 
Subcommittee on Health  
Hearing:  April 18, 2007    Page 2  OIG Identification of Program Inefficiencies and Vulnerabilities 
 
The Medicare program has grown dramatically since its inception in 1965 and currently 
provides health care insurance for more than 43 million persons.  More than 1 billion fee-
for-service claims are processed annually, and Medicare is the largest purchaser of 
managed care services in the country.  Total Medicare expenditures have grown from 
$206 billion in FY 1996 to over $382 billion in FY 2006.   
 
With increasing dollars at stake and a growing beneficiary population, the importance 
and the challenges of safeguarding this program are greater than ever.  Fraud, waste and 
abuse schemes have become increasingly complex and constantly change in response to 
the latest oversight efforts by Congress, CMS, our office, and our law enforcement 
partners.  With Medicares expansive network of health care activities comes a 
tremendous responsibility to protect the programs integrity, promote efficiency in 
operation, and ensure effectiveness.   
 
OIG is committed to identifying program weaknesses and vulnerabilities to help prevent 
fraud, waste, and abuse, promote economies and efficiencies, and to improve quality of 
care.  Our work is aimed at identifying and recommending methods to minimize 
inappropriate payments, identifying ways to close loopholes that allow unscrupulous 
providers to defraud the program, and examining payment and pricing methods to ensure 
that Medicare, its beneficiaries, and taxpayers realize good value for program 
expenditures.  Further, we routinely monitor quality controls and oversight to ensure that 
beneficiaries have access to and receive quality health care.  To illustrate the variety of 
approaches we use in our oversight of the Medicare program, I have highlighted some of 
our significant work below.   
 
Ensuring Appropriate Payments 
 
In 1996, OIG estimated that over $23 billion (about 14 percent of expenditures) in 
improper payments had been made by the Medicare fee-for-service program.  CMS, 
which is now responsible for determining the error rate, estimated that incorrect Medicare 
fee-for-service payments were reduced to $10.8 billion (4.4 percent of expenditures) in 
2006.   
 
Although the overall Medicare fee-for-service payment error rate has decreased in recent 
years, the increasing size and scope of the Medicare program continue to place it at high 
risk for payment errors in terms of both frequency and magnitude.  Improper payments 
and problems in specific parts of the program continue to be identified by OIG audits and 
evaluations and by CMSs assessment of the Medicare payment error rate.  These reviews 
have revealed payments for unallowable services, improper coding, and other types of 
improper payments.  Improper payments range from reimbursement for services provided 
but inadequately documented and inadvertent mistakes to outright fraud and abuse.   
 
For example, OIG identified $1.1 billion in improper payments in 1 year for services 
billed as consultations, a total of $676 million in improper payments in a series of 
 
House Committee on Energy and Commerce 
Subcommittee on Health  
Hearing:  April 18, 2007    Page 3  reviews for mental health services provided in various settings, $402 million in 1 year for 
inappropriately paid emergency and nonemergency ambulance transports, and $136 
million in a 6-month period for inappropriately paid physical therapy services.  
Additionally, OIG determined that in 2001, Medicare and its beneficiaries paid an 
estimated $96 million for claims that did not meet Medicares coverage criteria for any 
type of wheelchair or scooter and also spent an estimated $82 million in excessive 
payments for claims that could have been billed using a code for a less expensive 
mobility device.  
 
To promote access to hospital care for patients with substantial medical needs, CMS 
makes additional payments called outlier payments.  In a recent audit, OIG found that 
a major hospital chain took advantage of the Medicare outlier payment system by billing 
for and receiving hundreds of millions of dollars in outlier payments by merely 
increasing its charges for services.  The hospital chain recently reached a $920 million 
settlement with the Government to settle allegations concerning the improper outlier 
payments, and, in addition, to settle allegations that it paid illegal kickbacks to doctors to 
refer Medicare patients to its hospitals and used improper billing codes to receive 
payments to which it was not entitled.   
 
Ensuring Appropriate Prices 
 
To further identify potential savings to the Medicare program, OIG has conducted 
extensive reviews of payment and pricing methodologies, which have determined that 
Medicare pays too much for certain items and services.  For example, in a series of 
reports, OIG consistently found that Medicares Part B drug reimbursement methodology 
led to overpayments and was vulnerable to abuse.  In a 2001 review, OIG concluded that 
Medicare and its beneficiaries could save $761 million a year by paying for 24 drugs at 
the prices available to physicians and suppliers.  Consistent with the recommendations in 
our body of work, the Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (MMA) included provisions that instituted a new drug reimbursement 
methodology for Part B.  Recognizing the extensive work by OIG on Part B drug 
reimbursement, Congress also included provisions in the MMA mandating that OIG 
monitor Part B drug reimbursement and certain market prices for Part B-covered drugs 
on an ongoing basis.   
 
In another example, OIG issued a report in September 2006 on the cost and servicing of 
home oxygen equipment.  This study built upon earlier work mandated by the MMA that 
compared Medicare reimbursement for home oxygen equipment to the prices paid by 
Federal Employees Health Benefits plans.  In this review, we found that the program 
spent $2.3 billion in 2004 to rent oxygen concentrators, which are stationary equipment, 
for approximately 1.3 million beneficiaries.  The Deficit Reduction Act of 2005 ended 
indefinite rental for oxygen equipment and established a rental cap of 36 months.  Under 
the new rental cap, which beneficiaries will start to reach in January 2009, our report 
found that Medicare will allow $7,215 for a concentrator that costs about $600 to 
purchase new.  Additionally, beneficiaries will incur $1,443 in coinsurance over the 36 
 
House Committee on Energy and Commerce 
Subcommittee on Health  
Hearing:  April 18, 2007    Page 4  months.  We noted that if such payments were limited to 13 months, Medicare and its 
beneficiaries would save $3.2 billion over 5 years.   
 
Ensuring Access and Quality of Care
 
OIG also conducts reviews to identify whether beneficiaries are able to promptly obtain 
needed health care services, and monitors oversight activities designed to ensure that 
beneficiaries receive quality services.  In particular, OIG has long been concerned with 
the quality of care rendered in nursing facilities.  Prior OIG work found an increase in the 
number of deficiencies, and a large number of nursing homes had been cited for 
substandard care.  Recent work has focused on enforcement mechanisms against nursing 
homes that are out of compliance for designated time periods or have deficiencies that put 
residents in immediate jeopardy.  For example, a recent OIG report found that for the 
majority of cases requiring mandatory termination of nursing facilities, CMS did not 
apply the remedy due to both late case referrals by States and CMS staffs reluctance to 
impose this severe remedy.  In another recent review, OIG found that CMS did not 
investigate some of the most serious nursing home complaints within the required 
timeframe and that CMSs oversight of nursing home complaint investigations is limited.  
 
We also recently conducted a review of quality-of-care data for End Stage Renal Disease 
facilities and found that limitations in data may limit quality oversight in these facilities.  
Another recent report examining the use of restraints and seclusion in hospitals found that 
CMS and survey agencies did not respond consistently to reported deaths in a timely 
manner and that CMS does not maintain comprehensive and reliable information about 
hospital deaths related to restraint and seclusion.  We also recently examined beneficiary 
access to home health and skilled nursing facility care since the implementation of the 
prospective payment system and found that, while most Medicare beneficiaries have 
access to care, some with certain medical conditions, such as those needing IV antibiotics 
and/or expensive drugs and those with complex wound care needs, may experience 
delays in obtaining necessary care.  Additional past work has included assessing the 
frequency of surveys of nonaccredited hospitals and CMS oversight of the Joint 
Commission on Accreditation of Healthcare Organizations performance.   
 
 
Enrollment Vulnerabilities:  Durable Medical Equipment Suppliers 
 
Medicare Part B pays for durable medical equipment, prosthetics, orthotics, and supplies 
(DMEPOS) that are necessary and reasonable for the treatment of a beneficiarys illness 
or injury.  These are items that can withstand repeated use and include oxygen 
equipment, hospital beds, wheelchairs, nebulizers, and other equipment that physicians 
prescribe for home use.  Medical supplies include catheter, ostomy, incontinence, and 
wound care supplies.  Medicare also covers braces and artificial limbs.  In FY 2005, 
Medicare paid over $10 billion in claims for medical equipment and supplies.  
 
OIG has consistently found that the Medicare DMEPOS benefit is vulnerable to fraud 
and abuse.  Specifically, we have identified problems related to a wide range of items and 
 
House Committee on Energy and Commerce 
Subcommittee on Health  
Hearing:  April 18, 2007    Page 5  equipment, including orthotic body jackets, wound care supplies, incontinence supplies, 
lymphadema pumps, therapeutic shoes, enteral nutrition supplies, and, as provided in 
earlier examples, oxygen and power wheelchairs.   
 
To ensure that payments are made correctly and services provided properly, it is essential 
that only qualified and trustworthy providers and suppliers are enrolled in the Medicare 
program.  Our best strategy is twofold:  to work to prevent these abuses from happening 
in the first place by ensuring that Medicare only does business with legitimate DMEPOS 
suppliers, and to pursue those unscrupulous providers who have exploited the current 
system.   
 
Activities of such providers not only cost taxpayers billions of dollars, but also deprive 
vulnerable beneficiaries of the care and support they need as well as put them at financial 
risk.  When fraud is perpetrated, such as an item being inappropriately billed on behalf of 
a Medicare beneficiary, the beneficiary is not only responsible for the copayments for 
unneeded or undelivered medical equipment, but may also face difficulties in obtaining 
medical equipment in the future if it appears that Medicare has already provided such 
equipment to that individual.  
Fraudulent Activities 
OIG has found that fraudulent suppliers continue to enroll and participate in the Medicare 
program.  From 2002 through 2006, OIG excluded from the Medicare and Medicaid 
programs 121 DMEPOS companies and 457 individuals associated with DMEPOS.  OIG 
has also aggressively investigated individuals and entities that have defrauded Medicare 
and Medicaid.  Between 2002 and 2006, our investigations resulted in 289 successful 
criminal prosecutions of DMEPOS suppliers.  During this same period, there were 76 
civil settlements or judgments imposed.  Together, these criminal convictions and civil 
adjudications resulted in more than $796 million in restitution, fines and penalties.   
To help combat DMEPOS fraud, OIG, in conjunction with the U.S. Attorneys Office for 
the Southern District of Florida, the Federal Bureau of Investigation, and the Department 
of Justice launched a health care initiative designed to identify suspicious suppliers and 
review questionable financial activities.  Since its inception, the initiative has recovered 
more than $10 million from nominee account holders who agreed to turn over the funds 
in the bank accounts when confronted by law enforcement officials.  In most cases, the 
nominee account holders stated that they had no operational control of the businesses and 
had only lent their names in return for remuneration.   
 
The DMEPOS fraud schemes we have uncovered generally fall into the following 
categories:  (1) filing claims for equipment that was never delivered; (2) billing for high 
cost equipment when lower cost equipment was actually provided (upcoding); (3) billing 
for the component parts of a piece of equipment instead of the entire unit (unbundling); 
(4) delivering medical equipment to beneficiaries who do not need it; and (5) paying 
kickbacks to physicians and other sources in return for referring beneficiaries, access to 
beneficiaries Medicare numbers and/or signing certificates of medical necessity.  
 
House Committee on Energy and Commerce 
Subcommittee on Health  
Hearing:  April 18, 2007    Page 6  For example, an OIG investigation found that as part of a fraud scheme, a psychiatrist 
and his associates received kickbacks from DMEPOS suppliers for improperly certifying 
that many of their patients qualified for wheelchairs.  The DMEPOS suppliers, in turn, 
supplied scooters to the beneficiaries but billed for the higher priced motorized 
wheelchairs or billed for wheelchairs that were never delivered.  These fraudulent claims 
to Medicare were in excess of $50 million.  Another investigation resulted in a DMEPOS 
company paying $8.4 million pursuant to its guilty plea to false statements relating to 
health care matters.  Over a period of several years, the DMEPOS supplier billed 
Medicare and Medicaid for equipment provided to beneficiaries residing in assisted 
living facilites who did not meet coverage criteria, created false documents to support the 
false claims, and routinely misled assisted living facility personnel and physicians when 
marketing and servicing the equipment.  
 
Supplier Enrollment Process 
 
CMS contracts with the National Supplier Clearinghouse (NSC), operated by Palmetto 
Government Benefits Administrators, to manage the enrollment of suppliers.  To enroll in 
the program and apply for a Medicare billing number, suppliers must comply with 21 
Medicare DMEPOS supplier standards.  Suppliers must also report to CMS any changes 
in the information provided in the application, including change of address, within 30 
days of the change.  DMEPOS suppliers are required to reenroll with NSC every 3 years 
to maintain their Medicare billing privileges.  If a supplier fails to comply with all 
standards at any time, CMS may revoke these privileges.  
 
Over the past decade, OIG has identified and reported on weaknesses in Medicares 
enrollment process for and oversight of DMEPOS suppliers.  A 1997 report examined 
Medicare supplier enrollment practices in 12 large metropolitan areas in 5 States, 
including Florida.  Based on unannounced site visits, we concluded that the enrollment 
process was unreliable for detecting unethical and improper practices of suppliers and 
recommended that CMS conduct site visits at the physical locations of DMEPOS supplier 
applicants.  In a 2001 report assessing whether DMEPOS suppliers met the Medicare 
standards, OIG found that the expansion of the CMS site inspection program improved 
supplier compliance with Medicare standards.  OIG made several recommendations to 
further improve the compliance rates, such as instituting random, unannounced site visits 
of DMEPOS businesses at times other than initial enrollment and reenrollment.   
 
Consistent with prior OIG recommendations, the NSC now conducts site visits to verify 
that DMEPOS supplier applicants or reenrollees comply with the 21 Medicare supplier 
standards before assigning a Medicare billing number.  After the initial site visit, 
suppliers are generally not visited by NSC inspectors until they are due for reenrollment 
after 3 years.  An unannounced, out-of-cycle visit may occur if NSC becomes aware that 
a supplier may be in violation of one or more Medicare standards.  
 
 
 
 
 
House Committee on Energy and Commerce 
Subcommittee on Health  
Hearing:  April 18, 2007    Page 7  South Florida Suppliers Compliance with Medicare Enrollment Standards 
 
According to NSC supplier enrollment data, Miami-Dade County has the highest 
concentration of suppliers per Medicare beneficiary of any county in the Nation.  
Broward and Palm Beach Counties also have high concentrations of suppliers.  NSC 
reported that during the last two quarters of 2005, Florida led the Nation in allegations of 
supplier noncompliance with Medicare standards.  In the first quarter of 2006, the NSC 
initiated a project to conduct out-of-cycle visits to approximately 500 DMEPOS suppliers 
in Miami-Dade, Broward, and Palm Beach Counties.  As a result of that project, NSC 
revoked the Medicare billing numbers for 286 of these suppliers.  These revocations 
suggested that DMEPOS suppliers intent on defrauding the Medicare program could take 
advantage of the predictable site visit cycle by establishing businesses that do not 
maintain compliance with Medicare standards after NSC conducts the initial or 
reenrollment site visit.   
 
Working in collaboration with CMS and NSC, OIG conducted unannounced site visits to 
1,581 suppliers1 in Miami-Dade, Broward, and Palm Beach Counties in the fall of 2006 
to assess their compliance with selected Medicare supplier standards.2  According to data 
from a CMS contractor, these three counties account for approximately 5 percent of total 
Medicare DMEPOS payments nationally.  We focused on three supplier standards that 
could be verified quickly through direct observation and desk review and that are directly 
related to the ease of beneficiary access to DMEPOS services.  These three standards 
include five specific requirements, which state that suppliers must:  (1) maintain a 
physical facility, (2) be accessible during business hours, (3) have a visible sign, (4) post 
hours of operation, and (5) maintain listed telephone numbers.    
During the site visits, OIG found that 31 percent of suppliers (491 of 1,581) did not 
comply with the first two requirements of maintaining a facility at the business addresses 
that they provided to Medicare and being open and staffed during business hours.   
  Six percent of the suppliers (98 of 1,581) did not maintain physical facilities.  In 
some cases, instead of finding operational facilities, site reviewers found vacant 
facilities or facilities in which another type of business was operating, including a 
wedding florist, a rental car company, a real estate office, and an accountants 
office.   
We also visited one supplier location where there was no sign or any other 
information on the building, mail was stacked up outside, the door was open and 
there was no one there.  At another supplier location, we found a nearly empty 
office space with a barely legible name printed on the door.  There was a 
Pharmacy is Closed sign posted on the door along with several eviction notices, 
                                                 
1 We did not visit suppliers associated with large chains, suppliers that were under investigation by OIG, or 
suppliers that had or were in the process of having their Medicare number revoked by NSC.  
2 South Florida Suppliers Compliance with Medicare Standards: Results From Unannounced Visits   
(OEI-03-07-00150), March 2007. 
 
House Committee on Energy and Commerce 
Subcommittee on Health  
Hearing:  April 18, 2007    Page 8  including a final eviction notice.  In addition, we saw several storefront locations 
that were empty inside and For Rent signs were posted.  
  Twenty-five percent of suppliers (393 of 1,581) were not accessible during 
reasonable business hours.  Of these suppliers, 385 were closed during 
unannounced site visits on a minimum of 2 weekdays during reasonable or posted 
business hours.  For the remaining 8 suppliers, site reviewers found the door 
unlocked, but no one in the facility.  Site reviewers observed some locations 
housing multiple suppliers that were either not open or not staffed during posted 
or reasonable business hours.  For example, at one building, 15 suppliers were 
either not open or staffed.  On the same street, another building housed nine 
suppliers that were not open or not staffed.  Other locations had two to six 
suppliers that were not open or staffed.   
We identified an additional 14 percent of South Florida suppliers that were open and 
staffed but failed to meet at least one of the three remaining requirements that OIG 
reviewed (having posted hours of operation, a visible sign, and a listed telephone 
number).  Two hundred and six of these suppliers did not comply with one of these 
requirements and 10 suppliers did not comply with 2 or more of these requirements.  The 
remaining 55 percent of suppliers we visited met all of the 5 requirements included in our 
review.  
For the period January through November 2006, Medicare allowed over $97 million for 
DMEPOS to the 491 suppliers we identified as not maintaining a physical facility or were 
not open and staffed.  We referred these suppliers to CMS for potential revocation of 
their Medicare billing numbers.  
In a separate report, OIG documented the results of our out-of-cycle site visits to 169 
DMEPOS suppliers in 10 States other than Florida.  The report, titled Medical 
Equipment Suppliers:  Compliance with Medicare Enrollment Requirements, 3 notes 
that 10 of the 169 suppliers did not have a physical location and that an additional 6 of 
the suppliers existed at their stated business address but were closed during posted hours 
of operation.  While this study did not uncover supplier noncompliance in all areas 
visited, our findings suggest that out-of-cycle visits of targeted DMEPOS suppliers may 
be warranted in other areas of the country.   
Addressing Weaknesses in the Enrollment Process 
 
Given our findings related to noncompliance with supplier standards, it is essential that 
additional system improvements and preventative practices be adopted to ensure the 
integrity of the Medicare program and to protect beneficiaries from potentially 
unscrupulous suppliers.  Such changes must be made on a national level so that 
fraudulent activities are not simply shifted to another geographic area over time.   
                                                 
3 Medical Equipment Suppliers: Compliance with Medicare Enrollment Requirements OEI-04-05-00380, 
March 2007.   
 
House Committee on Energy and Commerce 
Subcommittee on Health  
Hearing:  April 18, 2007    Page 9   
Based on the findings of these two recent reports, OIG recommended that CMS 
strengthen the supplier enrollment process and ensure that suppliers meet Medicare 
standards through a number of actions, which include:   
 
  conducting more unannounced site visits and out-of-cycle inspections,  
  requiring all DMEPOS suppliers to post a surety bond, 
  performing more rigorous background checks of applicants, 
  increasing the prepayment review of DMEPOS claims, 
  deactivating the Medicare billing numbers of DMEPOS suppliers that have been 
inactive for a 90-day period, 
  implementing an enhanced review of all new enrollment applications by 
DMEPOS suppliers in South Florida, 
  prioritizing processing reenrollment applications for current suppliers over 
processing new supplier applications, 
  assessing the fraud risk of suppliers and target monitoring and enforcement on 
high-risk suppliers,  
  implementing a competitive bidding acquisition program for DMEPOS within 
high-vulnerability areas,  
  requiring suppliers in areas particularly vulnerable to fraud and abuse to reenroll 
with NSC more frequently than every 3 years, and 
  strengthening the Medicare supplier standards by establishing a minimum number 
of hours of operation required for each supplier and establishing minimum 
inventory requirements for product and service types provided by a supplier.   
In response, CMS described several actions it is taking to implement these 
recommendations, including:  revisiting contract requirements to increase the number of 
unannounced supplier site visits; drafting a proposed regulation requiring suppliers to 
post surety bonds; considering targeted background checks of supplier applicants; 
considering requiring greater claims scrutiny for high fraud risk suppliers; requiring 
suppliers to become accredited as meeting DMEPOS quality standards; and developing a 
proposal to revise deactivation requirements for inactive Medicare billing numbers.  CMS 
is also implementing new DMEPOS Accreditation Standards to help ensure that 
DMEPOS suppliers meet Medicare supplier standards.  Once the accreditation process is 
fully phased in, the NSC will not issue a Medicare billing number to a nonaccredited 
supplier.   
Additionally, CMS has recently issued a final rule to implement the DMEPOS 
competitive bidding program required by the MMA.  It will replace the current fee 
schedule payment amounts for specified DMEPOS items with payment rates established 
by the bidding process.  In 2008, the competitive bidding program will operate within 10 
of the largest Metropolitan Statistical Areas (MSA), including the Miami-Fort 
Lauderdale-Miami Beach area.  Items in the initial phase of this program will include 
various types of oxygen equipment and wheelchairs, mail-order diabetic supplies, enteral 
nutrients, hospital beds, negative pressure wound therapy pumps, and walkers.  In 2009, 
the program will be expanded to 70 additional MSAs and after 2009, CMS will expand 
 
House Committee on Energy and Commerce 
Subcommittee on Health  
Hearing:  April 18, 2007    Page 10  the program to additional areas and items.  Suppliers must be accredited or have 
accreditation pending before they can submit bids.   
 
 
Conclusion 
 
Within the DMEPOS benefit alone, we have identified numerous integrity problems and 
program inefficiencies.  And, in our most recent work, we have also found that the 
current Medicare supplier enrollment process is inadequate in identifying and preventing 
unscrupulous suppliers from participating in and billing the Medicare program.  We are 
continuing our examination of enrollment, compliance, and oversight of DMEPOS 
suppliers, including collaborating with CMS and the Department of Justice on specific 
efforts in high risk geographic areas.  We also have ongoing work to determine the 
appropriateness of Medicare payments for certain medical equipment and supplies, such 
as wound care equipment and pricing for wheelchairs.  
 
In addition, OIG will continue our efforts to identify areas in rest of the Medicare 
program where program dollars are not being utilized efficiently or are vulnerable to 
fraud and abuse.  We also maintain a commitment to ensuring that beneficiaries have 
access to, and are receiving, high quality care from honest and dedicated providers.  We 
will continue to apply our comprehensive and multifaceted approach to carrying out our 
mission to protect the integrity of the Medicare program and its beneficiaries.   
 
---------- 
 
I greatly appreciate the opportunity to discuss our work to enhance the efficiency and 
integrity of the Medicare program.   I would be happy to answer any questions. 
 
 
 
House Committee on Energy and Commerce 
Subcommittee on Health  
Hearing:  April 18, 2007    Page 11