Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

CARRIERS STILL NEED TO PURGE 

UNUSED PROVIDER NUMBERS 
— CARRIERS STILL NEED TO PURGE UNUSED PROVIDER NUMBERS 

In a May 1991 report the Office of Inspector General (OIG) found that most carriers did


not systematically update provider files. 1 The OIG found that carriers could reduce


Medicare’s vulnerability to abuse and save administrative costs by periodically deactivating


provider numbers with no billing history.


At that time, the OIG recommended that the Health Care Financing Administration


(HCFA) require carriers to deactivate all provider numbers without current billing history.


In October 1994 HCFA instructed the carriers to deactivate a provider number if no claims


were submitted over a 3-year period.2 Between October 1994 and February 1995 the


carriers completed deactivation of provider numbers that met this criterion.


During May and June 1995, in the course of gathering survey data for a study on


encouraging physicians to use paperless claims, we obtained from the carriers listings of


active physician provider numbers, with December 1994 claim volumes noted for each. As


was the case in 1991, we find a substantial percentage of these physician provider numbers


are unused, that is, they have no recent billing history.


From a samp[e of active paper-biller physician provider numbers at eight carriers, 

we project that 65 percent were not used for billing Medicare in December 1994. 

In the table below we show the unused provider number percentages at the carriers in our 

sample, and the projection to all carriers. Projecting the sample results to a total of 

485,787 active paper-biller physician provider numbers at all 29 carriers, we estimate that 

315,762 such numbers were unused nationwide. 

TABLE: 

CARRIER PAPER 

BILLERS 

A 690 

B 18,307 

c 6,187 

D 14,736 

E 2,233 

F 2,791 

G 6,971 

H 39,263 

All Carriers 485,787 

UNUSED PHYSICIAN 

NUMBERIN 

SAMPLE 

140 

320 

200 

300 

255 

260 

300 

300 

— 

PROVIDER 

NUMBER 

UNUSED 

44 

212 

98 

187 

97 

178 

189 

216 

— 

NUMBERS 

PERCENT 

UNUSED 

31 

66 

49 

62 

38 

68 

63 

72 

65 

MARGINOF 

ERROR 

* 7.70/0 

f 5.20/0 

k 6.90/0 

&5.5% 

+ 6.00/0 

* 5.7% 

&5.5’% 

+ 5.1%0 

* 5.7% 

Source: OIG Survey of Medicare carriers, May 1995. 

1

We have included a description of our two-stage sampling methodology in a note at the


end of this repoti. It is important to note here four points concerning the data in the table.


First, the data reflect claim activity for one arbitrarily chosen calendar month, December


1994. We held discussions with carrier staffs, reviewed monthly and yearly claim volumes


reported to HCFA, and noted another reviewer’s conclusion that seasonal changes do not


lead to significant differences in Medicare Part B claim characteristics.3 From this


analysis we believe that 1 month fairly represents the incidence of unused active physician


billing numbers. Vacations, illness, varied billing schedules, or other factors can account


for some of the unused provider numbers in any one given, but are unlikely to account for


a substantial percentage of unused numbers.


Second, we relied on the carriers’ then-current (May or June 1995) provider number


listings. It would have been an onerous task for the carriers to reconstruct provider


number listings for December. Changes in provider populations are gradual. Initiation of


new practices and termination of established practices will change the carrier listings from


month to month. As these incremental changes are unlikely to lead to substantial overall


change in the course of several months, we believe the December claim history


substantially reflects billing number use among the May or June provider population.


Third, the data are limited to physician provider numbers. Physicians account for the vast


majority of all provider numbers, and the carriers have responsibility for issuing (or


deactivating) physician provider numbers. Non-physician supplier numbers, by contrast,


are often issued by a central registry (durable medical equipment) or the certification


process (independent laboratories). In this context we note that the OIG found 30 percent


of all provider numbers were unused, at the one carrier examined in detail in 1991.


Fourth, we selected the samples for the table from physician provider numbers that are not


authorized to use paperless claims (paper billers). Nationwide the 485,787 paper-biller


numbers accounted for 59 percent of all active physician provider numbers, but they


represented just 17 percent of physician claims in December 1994.


We have some indication that the incidence of unused provider numbers among paperless


billers may be substantial. if perhaps not so high as the 65 percent found for paper billers.


Among nine carriers that sent us data for both categories, paper and paperless billers, we


found that unweighed averages of 66 percent of paper, 29 percent of paperless, and 57


percent of all provider numbers were unused.


We sought carrier explanations for the high percentage of active but unused physician


provider numbers. The carriers stressed that this situation tends to develop because


physicians neglect to notify the carriers to deactivate solo billing numbers when they close


an individual office to join a group practice or managed care organization.


2

� 

� 

� 

� 

Except in cases of sanctions, most carriers rely on physicians to report voluntarily on 

changes in their billing situation, such as a move out of State. Often, the carriers report, 

they learn of the move only by returned mail. There is no incentive for physicians to 

report changes in billing arrangements, nor is there a disincentive to neglect reporting. 

The extent to which carriers actively seek to purge unused numbers is unclear. According 

to HCFA, between October 1994 and February 1995 the carriers completed the deactivation 

of provider numbers for which no claims were submitted over a 3-year period. Our data 

reflect the carrier files afler this deactivation was completed. 

We do know that the carrier in our sample with the smallest percentage of active but 

unused numbers (the Montana carrier) has long had in place a system to identifi and purge 

unused provider numbers every 3 years. The 1991 OIG report referenced above cited the 

Montana carrier for its effective practice in sending out information verification letters to 

providers. 

The large number of active but unused numbers poses signl~cant issues regarding 

integrity and efficiency. 

MISUSING PROVIDERNUMBERS: Billing numbers can be misused by physicians, 

their office staffs, or billing agents who process and submit claims. With two of 

more billing numbers controlled by one physician it becomes easier for duplicate 

billings, unbundling, fragmentation, or global service period violations to occur, by 

accident or by design. 

SKEWINGUT1LIZATIONREVIEWS: Utilization parameters can be rendered 

inaccurate, or even be manipulated, by holders of multiple numbers. Postpayment 

screens can be more costly, or even impracticable, to apply. Quality of service 

reviews, which need to look at claims in the context of all other services by the 

billing physician, can be affected. 

EVADING SANCTIONS: A sanctioned physician can evade deactivation of the 

primary provider number. Unless all the carriers and the registries with which a 

sanctioned provider trades fully and accurately coordinate information, exclusion 

might not be effective. 

KNOWiNG ACCURATE GROUP COMPOSITION: Group membership can be concealed 

or reported improperly. Carriers are required to keep current information on the 

composition of physician group practices in order to control abusive billing, to 

monitor program payments, and to assess reasonableness and necessity of services 

claimed. 

3

— — It becomes especially important to remove these risks as Medicare moves toward a unified 

national system for processing health care claims. Within the Medicare Transaction 

System (MTS), HCFA plans to maintain a national provider file that will make available to 

claims processing sites provider data with a unique numbering system. If carrier files 

continue to contain so many unused provider numbers, the transition to MTS could become 

unnecessarily complicated and could even be jeopardized. 

Just keeping a large number of active but unused numbers in provider files can impose 

needless administrative expenses on Medicare and the carriers. Professional relations 

outreach activities are duplicated, if only through printing and mailing costs. Calculations 

of pricing screens and charge histories need to address unused numbers, ofien futilely, 

because they can be used at any time without notice. Even routine maintenance of 

provider files incurs larger than needed staffing and information resource management 

costs. 

RECOMMENDATION. The HCFA should require the carriers to deactivate annually 

all provider numbers without current billing history and to update provider records 

periodically. 

This recommendation follows from one made by OIG in 1991. With the approach of 

MTS, the recommendation appears to be even more pertinent now than at that time. 

Further, it relates very directly to HCFA’S priority interest in addressing fraud and abuse 

and to the goal set forth in its strategic plan to be a leader in health care information 

resources management. 

The carriers can proactively identify unused provider numbers whose holders intend not to 

use them again by contacting the physicians. One way to do this would be to send a 

mailer with a tear-off return postcard for the physician to indicate intent to use the provider 

number, or not. Failure to respond could trigger a warning notice, and timely deactivation. 

Social Security has found that a mailer assists in screening disabled beneficiaries who are 

due to have mandated periodic reviews.4 

In the Medicare Carrier Manual, HCFA has established 3 years as an acceptable time limit 

for inactivity. Our finding that 65 percent of physician provider numbers were unused, 

after the first round of deactivation by the carriers, suggests that a lower limit would be 

more appropriate for timely closing of unused numbers. A 1-year limit would allow 

provider numbers with just one claim a year to remain active. 

HCFA Comments 

The HCFA agrees with our recommendation in the draft report that carriers deactivate 

unused provider numbers. but believes that 3 years of inactivity offers an appropriate 

threshold before carriers deactivate an unused number. The HCFA also agrees with our 

4

suggestion that many inactive addresses occur when physicians neglect to notify carriers to 

deactivate solo billing numbers. The full text of HCFA’S comments is in the Appendix. 

OIG Response 

While we appreciate HCFA’S agreement regarding the importance of deactivating unused


numbers, we must emphasize the need for carriers to act more quickly and more assertively


in this area. Thus we have revised our recommendation to explicitly reflect our belief that


a 1-year time period for deactivation should be established.


In 1991 HCFA accepted our previous recommendation to deactivate unused provider


numbers. Instructions were issued in October 1994 and deactivation completed by the


carriers in February 1995. Our data from May and June 1995 show that this deactivation,


with a 3-year threshold, lefl many unused provider numbers active in carrier files.


Therefore, we believe additional corrective action is necessary.


The HCFA believes that deactivating provider numbers more frequently than every 3 years


would be labor intensive and not cost effective. We are not aware of analyses


documenting just how labor intensive and cost effective a 1-year deactivation threshold


would be. It would appear efficient to mail a postcard to holders of the inactive numbers,


and deactivate the nonrespondents. Carriers could be allowed discretion to retain


nonrespondents for whom they had independent information to show continuing activity.


METHODOLOGICALNOTE: We defined a physician provider number as a billing number assigned to a 

physician (defined in Section 1861(r) of the Social Security Act) or to a group of physicians. Many 

physicians in a billing group can share one provider number, but a group (or a solo physician) can have more 

than one provider number if the carrier assigns them, for example, to identifi multiple practice locations. 

We defined an active physician provider number as one that had not been deactivated by the carrier by reason 

of death, moving out of State. sanction, or similar occurrence. An active number entered in item 33 of the 

Health Insurance Claim Form. HCFA- 1500, can induce a carrier to process the claim and issue payment, if 

all the other data entered on the claim form is consistent. 

We defined an unused active physician provider number as one that was not used for a claim processed by 

the carrier during December 1994. This was the most recent complete month at the time we began the study. 

We asked the carriers to count processed claims rather than submitted claims so that we could also count 

amounts allowed on a comparable basis, and we could use the carrier performance report (HCFA- 1565) 

numbers as a reality check. 

We selected 8 (out of 29) carriers at random in the first stage of a two-stage random sample of physician 

providers. We then selected 100 active physician provider numbers at each carrier. When we found the first 

100 selected included a substantial percentage of unused numbers (no claims during December 1994), we 

inflated the selection to give approximately 100 used numbers. Thus the sample sizes in the Table. 

For the margin of error in the table we used standard statistical formulas to compute confidence intervals that 

apply to the sample design used to select this sample. 

5

NOTES: 

1.	 US Department of Health and Human Services, Office of Inspector General, Carrier A4ainfenance J# 

Medicare Provider Numbers, 0EI-06-89-O0870, May 1991. 

2.	 US Department of Health and Human Services, Health Care Financing Administration, Medicare 

Carriers Manual, Part 4 Professional Relations, Section 1001.2. 

3.	 United States General Accounting Office, Medicare Claims: Commercial Technology Could Save 

Billions Lost to Billing Abuse, Report AIMD-95-135, Washington DC, May 1995, Note 6. 

4.	 Social Security Administration, 1994 Annual Report to the Congress, SSA Publication 03-005, July 

1994, page 11. 

6

— APPENDIX 

COMMENTS ON THE DRAFT REPORT 

Appendix-1 
:< 

,,.$4,,, ,. ..-

DEP.IRT<MENT OF HE.\LTH 

--, 

4+ ,,,,,0 > 

DATE o~1619$xj 

TO:	 June Gibbs Brown 

Inspector Generai 

FROM: Bruce C. Wade 

Administrator % 

SUBXECT	 Office of inspector 

Provider PJumbers,” 

We reviewed the above-referenced 

& HU,}IAN SERVICES ‘eafth Care Ftnanclng Admlnfstratro~ 

T!le Admlnlstrator 

Washington. D.C. 20201 

A 

General Draft Report, “Camers Still Need to Purge Unused 

(OEI-O 1-94-0023 1) 

reporton the continuing need for Medicare carriers to purge 

unused provider numbers horn their files. .Attached are our comments on the report 

recommendation. 

Thank you for the opportunity to review and comment on this drafl report. 

Attachment 
— 

Comments of the Health Care Financirw Administration (HCFA) 

on Office of Inmector General (OIG) 

Draft Re~ort: “Carriers Still Need to Purge Unused Provider Numbers,” 

(OEI-01-94-00231] 

OIG Recommendation 

The HCFA should require the carriers to deactivate all provider numbers without current 

billing history and to update provider records periodically. 

HCFA Res~onse 

We agree that camiers should deactivate provider numbers without current billing history 

and update provider records. However, OIG suggested that HCFA’S 3-year threshold be 

reduced to 1 year, and at this time we believe that 3 years k an appropriate tirnefkne as 

most carriers must maintain 3 years of provider tie history to fulfill utilization review 

requirements. Deactivating and reenrolling in a 1-year time period would be labor 

intensive an~ based on current informatio~ not cost effective. In October 1994, HCFA 

instructed the carriers to deactivate a provider number if no claims were submitted over a 

3-year period. Be~een October 1994 and February 1995, the carriers completed 

deactivation of provider numbers that met this criterion. 

Since that time, HCFA has had ongoing initiatives to maintain an updated and cu.ment 

Provider Enrollment File. These initiatives should control entry into the system. As we 

review the impact of these changes we will also review the need to change the procedures -

for deactivating provider/supplier numbers. 

o HCFA is cuxrently reviewing carrier provider enrollment activity for the 

past 3 years to identi~ growth patterns and irends as well as the physician 

enrollment totals for 1994- 1995 to identi& and target potential areas for 

fraud and abuse. 

o	 HCFA is implementing specific criteria for “Conditions of Enrollment” 

which all new and cu.mentproviders/supphers must meet in order to obtain 

validation or reenrollrnent into the Medicare program. 

o	 HCFA requests ownership information for durable medical equipment 

suppliers and clinical laboratories to determine if providers are subsidiaries 

or successors of persons or entities previously sanctioned from the 

Medicare or Medicaid program. 
— 

Page 2 

0	 HCFA also assigns unique identifiers (e.g., Unique Physician Identification 

Numbers, National Supplier Clearinghouse numbers) to physicians, 

nonphysician practitioners, medical group practices, and suppliers who 

provide services for which Medicare payment is made. The unique 

identifiers are assigned to each provider whether practicing solo, in a 

partnership, or in a group, and remain constant throughout their Medicare 

afll.iiation. 

o	 Like ownership informatio~ these unique idenfiers and information are 

helpful in identifying sanctioned providers that either move to another state, 

join a medical group practice, or are subsidities or successors of or 

controlled by persons or entities previously debarred flom the Medicare or 

Medicaid program. A listing of exciuded providers is provided to 

contractors on an ongoing basis to ensure that sanctioned providers are not 

enroiled in the Medicare program and that the provider file information is 

current. 

o	 In August 1994, due to fraudulent supplier activity, HCFA devised more 

stringent provider enrollment verification procedures which led to the 

revocation of approximately 1,000 supplier numbers, the validation of over 

114,000 current supplier numbers, and over 2,500 pending supplier 

applications. 

We also agree with OIG that many inactive addresses occur when physicians neglect to ­


noti~ carriers to deactivate solo biliing numbers. However, as HCFA prepares for the


implementation of the Medicare Transaction System (MTS), ail existing data in the


Provider Enrollment File will be validated. Inactive and inappropriate provider


information wiii be eliminated from the Provider Enroihnent File. HCFA w-iiialso


standardize provider enroiixnent forms, policies, and procedures in preparation for MTS


with the forms scheduled to be implemented prior to “Day One” of MTS operation.


These provider em-oilrnent data wiii furnish much of the information needed for


processing claims after MTS is operational.


Additionaiiy, the National Provider System (NPS), now being developed by HCFA, wili


address the problems associated with multiple numbers such as dupiicate payments and


manipulation of utilization parameters by ensuring that only one number is assigned to a


provider. When a provider requests a new number through the NPS, a nationai data base

— 

Page 3 

will be searched to ensure that a number has not already been assigned to that provider. 

The NPS will not issue a new number when a physician changes or adds practice 

locations. Further, the NPS will track physicians’ participation in group practices. We 

expect the NPS to begin assigu.ing numbers to existing Medicare providers in April 1996.