DEPARTMENT OF HEALTH & HUMAN SERVICES 	 Office of Inspector General 
Washington, D.C. 20201 
MAY  122010 

TO: 	 Marilyn Tavenner 
Acting Administrator and Chief Operating Officer 
Centers for Medicare & Medicaid Services 
FROM:  Stuart Wright 
Deputy Inspector General 
for Evaluation and Inspections 
SUBJECT: 	 Memorandum Report:  Collection Rate for Overpayments Made to 
Medicare Suppliers in South Florida, OEI-03-09-00570 
This memorandum report provides additional information from our recent study 
Collection Status ofMedicare Overpayments Identified by Program Safeguard 
Contractors (OEI-03-08-00030), hereafter referred to as the Collections study.  For that 
study, we determined the collection status, as ofJune 2008, of Medicare overpayments 
that Program Safeguard Contractors (PSC) identified and referred to claims processors 
for collection in 2007. 
For this memorandum report, we conducted further analysis on data obtained during the 
Collections study.  Previous Office of Inspector General (OIG) work has identified 
durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) in 
South Florida (Miami-Dade, Broward, and Palm Beach Counties) as an area vulnerable to 
fraud and abuse. Therefore, we focused our additional analysis on PSC-identified 
DMEPOS overpayments in South Florida. 
We found that the collection rate ofPSC-identified DMEPOS overpayments in 
South Florida was only 1 percent.  This is compared to a national collection rate for all 
claim types of 7 percent and a national DMEPOS collection rate of 3 percent as identified 
in our Collections study.  In addition, we found that the median overpayment was 
$527,420 and that 25 percent ofthe overpayments were more than $1 million each. 
While only 1 percent ofthe PSC-identified DMEPOS overpayment dollars in 
South Florida was collected, another 91 percent was referred for collection to the 
Department ofthe Treasury (Treasury) which historically does not have a high rate of 
return.  In addition, by December 2008, only 1 ofthe 315 suppliers associated with 
South Florida DMEPOS overpayments was still active in the Medicare program; the 
remaining suppliers were either revoked or inactive.  The fact that these suppliers are no 
longer billing the Medicare program makes overpayment collection difficult. 
OEI-03-09-00S70  Collection Rate for Overpayments Made to Medicare Suppliers in South Florida  Page 2  Marilyn Tavenner 
 
 
BACKGROUND 
 
Previous OIG Work on Overpayment Collection and Vulnerabilities in  
South Florida  
OIG recently completed work on the identification and the collection of PSCs 
overpayment referrals.  We found that PSCs referred $835 million in overpayments to 
claims processors for collection in 2007; however, 2 of 18 PSCs were responsible for    
62 percent of this amount.1  We also found that overpayments referred for collection by 
PSCs in 2007 did not result in significant recoveries to the Medicare program.  
Specifically, only 7 percent ($55 million of $835 million) had been collected by claims 
processors as of June 2008.2         
 
Previous OIG work has identified South Florida as an area vulnerable to DMEPOS fraud, 
waste, and abuse.  For a March 2007 report, OIG conducted unannounced site visits of 
DMEPOS suppliers in three South Florida counties (Miami-Dade, Broward, and Palm 
Beach) to determine their compliance with selected Medicare supplier standards.3  In that 
report, we found that nearly half of DMEPOS suppliers in South Florida were not in 
compliance with Medicare supplier standards.  For example, these suppliers did not 
maintain physical facilities, were not accessible during reasonable business hours, or did 
not have posted hours of operation.   
 
In a followup study, OIG reviewed the appeal files for suppliers who were revoked as a 
result of the March 2007 study, then appealed their revocations, and received hearings.4  
We found that hearing officers reinstated the billing privileges for 91 percent of the 
suppliers.  However, two-thirds of suppliers whose billing privileges were reinstated 
subsequently had their privileges revoked again or inactivated, and some individuals 
connected to reinstated suppliers were indicted, convicted, and sentenced to jail time.    
 
Referral of Overpayments by PSCs 
PSCs have been tasked by the Centers for Medicare & Medicaid Services (CMS) to 
detect and deter fraud and abuse in the Medicare program.  PSCs conduct investigations; 
refer cases to law enforcement; and take administrative actions, such as referring 
overpayments to claims processors for collection5 and initiating actions to deny or 
suspend payments where there is reliable evidence of fraud.  In the course of their 
                                                 
1 OIG, Medicare Overpayments Identified by Program Safeguard Contractors, OEI-03-08-00031.   
2 OIG, Collection Status of Medicare Overpayments Identified by Program Safeguard Contractors,       
OEI-03-08-00030.   
3 OIG, South Florida Suppliers Compliance With Medicare Standards:  Results From Unannounced Visits, 
OEI-03-07-00150, March 2007.  
4 OIG, South Florida Durable Medical Equipment Suppliers:  Results of Appeals, OEI-03-07-00540, 
October 2008.   
5 In 2007, claims processors that received overpayment referrals from PSCs were fiscal intermediaries, 
carriers, or Medicare administrative contractors.  These claims processors had responsibility for specific 
geographic jurisdictions and claim types.  Claims processors in a PSCs jurisdiction are known as the 
PSCs affiliated contractor. 
 
OEI-03-09-00570      Collection Rate for Overpayments Made to Medicare Suppliers in South Florida  Page 3  Marilyn Tavenner 
 
 
investigative work, PSCs review Medicare payments and may identify overpayments.6  
When PSCs identify overpayments, they are required to refer the overpayments to their 
affiliated Medicare claims processor for collection.7 
 
In 2007, TrustSolutions, LLC, was the PSC tasked with overseeing Jurisdiction C 
DMEPOS claims.  Jurisdiction C encompasses Florida, as well as Alabama, Arkansas, 
Colorado, Georgia, Louisiana, Mississippi, New Mexico, North Carolina, Oklahoma, 
Puerto Rico, South Carolina, Tennessee, Texas, U.S. Virgin Islands, Virginia, and West 
Virginia.   
 
Collection of Overpayments by Claims Processors 
In addition to paying claims, Medicare claims processors collect overpayments that are 
identified by PSCs and other sources.  Claims processors review the overpayment referral 
information provided by PSCs and make a final determination as to the dollar amount to 
be collected.8  This amount may differ from the overpayment amount referred by the 
PSC.  Outcomes of law enforcement investigations or provider appeals may also change 
the amount that a provider must repay on an overpayment.   
 
Claims processors may collect overpayments by withholding a providers future 
Medicare payments, through a providers direct repayment of the full overpayment, or 
through a provider repaying the overpayment under an extended repayment plan.  With a 
few exceptions, claims processors must refer debt that is 180 days (6 months) delinquent 
to Treasurys cross-servicing program for collection.9  The cross-servicing program 
receives referrals of nontax debt from all Federal agencies.  However, overpayments 
referred to Treasury are not likely to be fully collected because the cross-servicing 
program does not have a high rate of return.  For each fiscal year between 2003 and 2007, 
the program never collected more than 2 percent of the debt.10 
 
During 2007 and 2008, CIGNA Government Services was the claims processor that 
serviced Jurisdiction C DMEPOS claims and was tasked with collecting overpayments 
identified by TrustSolutions, LLC.  
 
Supplier Status 
CMS contracts with the National Supplier Clearinghouse (NSC) to manage the 
enrollment of DMEPOS suppliers in the Medicare program.  Before granting billing 
                                                 
6 CMS entered into contracts with PSCs to perform such work pursuant to the authority granted under the 
Medicare Integrity Program, Social Security Act,  1893, 42 U.S.C.  1395ddd.  CMS is in the process of 
replacing PSCs with Zone Program Integrity Contractors (ZPIC).  The first ZPIC contracts were awarded in 
September 2008, after our data collection timeframe.   
7 CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch. 3,  3.8.     
8 CMS, Medicare Financial Management Manual, Pub. No. 100-06, ch. 4,  10 and 80.2.   
9 Ibid.,  70.5.   
10 Treasury, Fiscal Year 2007 Report to the Congress:  U.S. Government Receivables and Debt Collection 
Activities of Federal Agencies, May 2008, p. 13.  Accessed at http://fms.treas.gov/news/reports/debt07.pdf 
on December 31, 2009. 
 
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privileges, NSC conducts an unannounced site visit to determine whether suppliers meet 
all Medicare supplier standards.  NSC may also conduct unannounced site visits at any 
time.11  If after a site visit, NSC finds that a supplier no longer meets the supplier 
standards, NSC will revoke the suppliers billing privileges.12, 13  Suppliers may also 
have their billing privileges become inactive.  Suppliers may become inactive for a 
number of reasons, such as voluntary inactivation or failure to submit claims for four 
consecutive quarters.  NSC maintains a database of DMEPOS suppliers which contains 
suppliers address information and indicates whether suppliers billing privileges are 
active, inactive, or revoked.   
 
Supplier Accreditation 
As an additional safeguard to the supplier enrollment process, one of the Medicare 
supplier standards that suppliers must now meet is accreditation.  Section 1834(a)(20) of 
the Social Security Act, as amended by section 154(b)(1)(A) of the Medicare 
Improvements for Patients and Providers Act of 2008, P.L. 110-275, required DMEPOS 
suppliers to meet quality standards for accreditation by September 30, 2009.  However, 
on March 23, 2010, the President signed P.L. 111-148, which postpones until  
January 1, 2011, the effective date of the accreditation requirement for pharmacies that 
act as suppliers of Medicare items and services.  At that time, only pharmacies that meet 
each of the requirements stipulated in section 1834(a)(20)(G)(ii) of the Social Security 
Act will continue to be exempted from accreditation.   
 
CMS has approved 10 national accreditation organizations to accredit DMEPOS 
suppliers as meeting the new quality standards.  There are quality standards that need to 
be met by all suppliers, e.g., financial management and product safety, and standards that 
apply to only certain types of suppliers, such as oxygen equipment suppliers.   
 
Surety Bonds for DMEPOS Suppliers  
The Balanced Budget Act of 1997, P.L. 105-33, mandated that certain DMEPOS 
suppliers be subject to a surety bond requirement, and CMS published a final rule on this 
requirement on January 2, 2009.  A DMEPOS surety bond is a bond issued by an entity 
guaranteeing that a DMEPOS supplier will fulfill its obligation to the Medicare program.  
If the obligation is not met, Medicare will recover its losses via the surety bond, up to the 
bond amount.   
 
As of October 2009,14 DMEPOS suppliers, other than those exempted from the 
requirement, were required to obtain and submit a surety bond in the amount of at least  
                                                 
11 CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch. 10,  22.  
12 42 CFR  424.517. 
13 Twenty-six supplier standards are outlined in 42 CFR  424.57(c) and include, for example, maintaining 
a physical facility and being accessible during reasonable business hours.  
14 DMEPOS suppliers seeking enrollment or with a change of ownership were subject to the surety bond 
requirement beginning May 4, 2009.  Existing DMEPOS suppliers were subject to the surety bond 
requirement beginning October 2, 2009.  42 CFR  424.57(d)(1).   
 
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$50,000 for each practice location.15, 16  The bond must guarantee that the surety will pay 
CMS the amount of any unpaid claim, plus accrued interest, for which the DMEPOS 
supplier is responsible, up to the suretys maximum obligation.  An unpaid claim is 
defined as an overpayment made by the Medicare program to the DMEPOS supplier for 
which the DMEPOS supplier is responsible, plus accrued interest that is effective 90 days 
after the date of the notice sent to the DMEPOS supplier of the overpayment.17  
Therefore, the overpayments identified in this memorandum report would fit the 
definition of an unpaid claim.  
 
METHODOLOGY 
 
We reviewed the Medicare overpayments data that we collected from PSCs and claims 
processors for our Collections study.18  These data contained identifying information 
about each overpayment that PSCs referred to claims processors in 2007.  In addition, the 
data contained information on the claims processors collection of those overpayments 
through June 2008.  Because we collected information through June 2008, claims 
processors had 6 to 18 months to collect the overpayments depending on when they were 
referred in 2007.   
 
From the Medicare overpayments data, we identified DMEPOS overpayments that were 
referred from TrustSolutions, LLC, the PSC tasked with overseeing Jurisdiction C 
DMEPOS claims.  Then, to determine DMEPOS overpayments associated specifically 
with South Florida, we matched suppliers identification numbers from the overpayment 
data with supplier identification numbers from the NSC database.  This match provided 
an address for the suppliers associated with each Jurisdiction C overpayment, as well as 
their status in the Medicare program as of December 2008.  We used a national ZIP Code 
database to determine which suppliers were located in the three South Florida counties of 
Miami-Dade, Broward, and Palm Beach.  From these matches, we identified                
315 DMEPOS overpayments for suppliers located in these 3 South Florida counties.  
DMEPOS overpayments associated with suppliers located in these counties are hereafter 
referred to as South Florida DMEPOS overpayments.    
 
To determine the collection rate of PSC-identified South Florida DMEPOS 
overpayments, we divided the total amount collected by the claims processor for  
South Florida overpayments, by the total amount referred by the PSC for South Florida 
overpayments.  To determine the collection status of the overpayments, we summarized 
                                                 
15 As described in 42 CFR  424.57(d)(15), under certain specified conditions, the following DMEPOS 
suppliers are exempt from the surety bond requirement:  Government-operated DMEPOS suppliers,  
State-licensed orthotic and prosthetic personnel in private practice, physicians and nonphysician 
practitioners, and physical and occupational therapists in private practice.   
16 The bond amount will be raised by an additional $50,000 for each final adverse action that has been 
imposed against the supplier within the previous 10 years.  42 CFR  424.57(d)(3)(ii).   
17 42 CFR  424.57(a).  
18 OIG, Collection Status of Medicare Overpayments Identified by Program Safeguard Contractors,             
OEI-03-08-00030.   
 
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the collection information that the claims processor provided.  There were four 
overpayments for which the PSC provided referral information, but the claims processor 
could not provide collection data or did not provide information necessary for OIG to 
determine the collection status.   
 
To determine the number of South Florida suppliers that were active, inactive, or revoked 
from the Medicare program, we examined the supplier status from the December 2008 
NSC database. 
 
We also determined the additional amount that could have been collected had a  
$50,000 surety bond requirement been in place.  For overpayment amounts of less than 
$50,000, we used the amount identified for recovery but not collected as the additional 
amount that could have been collected had the surety bond requirement been in place.  
For overpayment amounts of $50,000 or more, we used $50,000 as the additional amount 
that could have been collected had the surety bond requirement been in place.  We then 
aggregated the amounts for all overpayments.   
 
This study was conducted in accordance with the Quality Standards for Inspections 
approved by the Council of the Inspectors General on Integrity and Efficiency. 
 
RESULTS 
  
The Collection Rate for DMEPOS Overpayments in South Florida Was Only 
1 Percent   
We found that the collection rate for South Florida DMEPOS overpayments was only  
1 percent.  The total amount referred for collection by the PSC in 2007 for South Florida 
DMEPOS overpayments was $246,009,437.  The total amount collected, as of June 2008, 
was $2,178,223.  This is compared to a national collection rate for all claim types of  
7 percent and a national DMEPOS collection rate of 3 percent, as identified in our 
Collections study.   
 
The dollar amount of the South Florida overpayments referred by the PSC ranged from 
$66 to $6.6 million.  The median overpayment totaled $527,420.  As shown in Table 1, 
80 of the 315 overpayments (25 percent) were more than $1 million each; just  
14 overpayments totaled less than $50,000 each.  Table 1 shows the number and dollar 
range of South Florida overpayments referred by the PSC in 2007, along with the amount 
collected by the claims processor through June 2008.   
 
 
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Table 1:  Range of South Florida Overpayments Referred by the PSC in 2007 and 
Collected by the Claims Processor through June 2008    
Dollar Range of 
Number of  Percentage of  Dollar Amount  Dollar Amount 
Overpayments Referred 
Overpayments Overpayments1 Referred  Collected
by PSC 
Less than $50,000  14 4% $355,547  $93,726
$50,000$99,999  10 3% $829,917  $23,664
$100,000$499,999  123 39% $37,713,461  $222,932
$500,000$999,999  88 28% $61,983,447  $1,299,936
$1 million or more  80 25% $145,127,065  $537,965
     Total  315 100% $246,009,437  $2,178,223
Source:  OIG analysis of PSC-identified DMEPOS overpayments in South Florida.   
1Percentages in this column add up to 99 percent rather than 100 percent because of rounding. 
 
Had a $50,000 surety bond requirement been in effect at the time of our study, Medicare 
could have collected an additional $15 million (6 percent) on the South Florida DMEPOS 
overpayments.  Just 14 of the overpayments would have been totally covered by the 
surety bond.  The additional $15 million would bring the total amount collected, as of 
June 2008, to just $17 million out of the $246 million referred for collection.      
 
Most South Florida DMEPOS Overpayment Dollars Were Eventually Forwarded to 
Treasury  
Ninety-one percent of the PSC-identified overpayment dollars ($224 million) was 
eventually forwarded to Treasurys cross-servicing program for collection.  Because this 
program has a low rate of return, these overpayments will not likely be recovered by the 
Medicare program.   
 
As of June 2008, the remaining 8 percent of PSC-identified overpayments dollars         
($20 million) were (1) no longer owed by providers because the overpayment amounts 
were reduced by the claims processor, (2) not likely to be collected because of provider 
bankruptcy, (3) still being collected (e.g., provider was on an extended repayment plan), 
(4) in appeal, or (5) overpayments for which the claims processor could not provide data 
or did not provide information necessary for OIG to determine the collection status.   
 
Only One of the Suppliers Associated With South Florida DMEPOS Overpayment 
Referrals Was Still Active in the Medicare Program as of December 2008  
Only 1 of the 315 South Florida suppliers associated with DMEPOS overpayments was 
still active in the Medicare program as of December 2008.  This one supplier owed 
$296,367 and was on an extended repayment plan.  Of the remaining 314 suppliers,     
282 suppliers were revoked and 32 suppliers were inactive.  The fact that these suppliers 
are no longer billing the Medicare program makes overpayment collection difficult. 
 
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CONCLUSION 
 
This memorandum report provides information on the collection rate and status of  
PSC-identified DMEPOS overpayments associated with South Florida.  We found that 
the collection rate of DMEPOS overpayments in South Florida was 1 percent or  
$2 million of the $246 million in overpayments referred for collection.  Moreover, we 
found that even if the surety bond had been in place at the time of our study, Medicare 
would have collected just an additional $15 million or 6 percent of South Florida 
DMEPOS overpayment dollars.  We also found that the vast majority of DMEPOS 
overpayment dollars were eventually referred to Treasury, which historically does not 
have a high rate of return.  In addition, as of December 2008, only one supplier was still 
active, making future overpayment collection difficult since the suppliers are no longer 
billing Medicare.    
 
Given that South Florida DMEPOS overpayments identified by the PSC resulted in low 
returns to the Medicare program, overpayment identification and collection may not be 
the most effective program integrity tool for DMEPOS claims especially in South Florida 
and other high-fraud areas.  Ensuring that claims are legitimate and appropriate prior to 
payment would eliminate the need to expend resources for postpayment collection efforts 
that are not likely to yield high returns.  
 
This report is being issued directly in final form because it contains no recommendations.  
If you have comments or questions about this report, please provide them within 60 days.  
Please refer to report number OEI-03-09-00570 in all correspondence. 
 
OEI-03-09-00570      Collection Rate for Overpayments Made to Medicare Suppliers in South Florida