DEPARTMENT OF HEALTH &. HUMAN SERVICES 	 Office of Inspector General 

Washington, D.C. 20201 

NOVO.12010 

TO: 	 Donald M. Berwick, M.D. 

Administrator 

Centers for Medicare & Medicaid Services 

FROM: Stuart Wright 

Deputy Inspector General 

for Evaluation and Inspections 

SUBJECT: 	 Memorandum Report: The Use ofPayment Suspensions To Prevent 

Inappropriate Medicare Payments, OEI-OI-09-001S0 

This memorandum report presents the findings of our recent work that (1) describes 

Medicare payment suspensions implemented by the Centers for Medicare & Medicaid 

Services (CMS) in 2007 and 2008 and (2) assesses CMS's process for approving and 

implementing Medicare payment suspensions. 

CMS may suspend payments to a Medicare provider or supplier (hereinafter referred to 

as a provider) under any of three circumstances: (1) fraud or willful misrepresentation, 

(2) when an overpayment exists but the amount has not been determined, or (3) when 

payments made or to be made may be incorrect. 1 CMS may suspend payments based on 

requests from its contractors or from law enforcement. 

We analyzed 253 suspensions that eMS imposed in 2007 and 2008. Part B providers 

composed 85 percent ofthose suspensions. Overpayments to providers in those years 

totaled at least $206 million. eMS extended more than half of payment suspensions, 

generally because its contractors needed more time to calculate overpayments or the 

Office of Inspector General (OIG) was considering an administrative action against a 

provider, such as a civil monetary penalty or permissive exclusion. 

The great majority of providers that eMS suspended in 2007 and 2008 exhibited 

characteristics that suggest fraud. eMS recommends that providers suspended due to 

fraud receive no advance notice; in all but three of the suspensions, no such advance 

notice was given. Seventy-four percent of suspended providers showed questionable 

billing patterns. Sixty-three percent of suspensions were supported by information from 

beneficiaries or from other providers; this information included evidence that the 

suspended providers had billed for services that were never received or were medically 

142 CFR § 40S.371(a)(l). 
Page 2 – Donald M. Berwick, M.D. 

OEI-01-09-00180 The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments 

 

unnecessary and had used other providers’ billing numbers to seek payment for items or 

services that had not been authorized. Twenty-four percent of suspended providers billed 

Medicare before their suspensions despite having vacant physical locations. 

We also found that CMS provides some inconsistent guidance on payment suspensions, 

particularly in specifying the types of information that its contractors should submit with 

a request for a suspension, as well as in describing to contractors and law enforcement the 

circumstances in which an extension is permitted. 

We conclude that payment suspensions were used in 2007 and 2008 almost exclusively 

as a tool to fight fraud. Since the time when we collected data for this evaluation, the 

Patient Protection and Affordable Care Act (hereinafter referred to as the Affordable Care 

Act) was signed into law. The Affordable Care Act states that a provider’s payments 

may be suspended based on a credible allegation of fraud, unless there is good cause not 

to suspend such payments. It also states that CMS must consult with OIG in determining 

whether a credible allegation of fraud exists.2

 On September 23, 2010, CMS issued 

proposed regulations for these provisions.3 The information provided in this report may 

be useful to CMS when it finalizes these regulations. In the guidance that CMS develops 

for the new provisions for payment suspensions, CMS could also address the 

inconsistencies that this report identifies. 

BACKGROUND 

Improper Medicare Payments and Payment Suspensions 

CMS may suspend payments to any Medicare provider when it possesses reliable 

information that the provider was overpaid for previously submitted claims. CMS 

imposes suspensions under any of three circumstances: (1) fraud or willful 

misrepresentation, (2) when an overpayment exists but the amount has not been 

determined, and (3) when payments made or to be made may be incorrect.4

 

Payment suspensions are a strong tool for CMS to use to protect the Medicare program 

from improper payments. In 2008, CMS highlighted payment suspensions as a means of 

fighting fraud, waste, and abuse by home health providers in Miami-Dade County, 

Florida.5

 

CMS may suspend payments based on requests from its contractors or from law 

enforcement. CMS contractors that typically request payment suspensions include 

Program Safeguard Contractors and Zone Program Integrity Contractors, both of which 

2

 P.L. 111-148, §§ 6402(h)(1) and (2). 

3

 75 Fed. Reg. 58204, 58239 (Sept. 23, 2010). 

4

 42 CFR § 405.371(a)(1); CMS, Program Integrity Manual (PIM), § 3.9.1. 

5

 CMS, CMS Strengthens Efforts to Fight Medicare Waste, Fraud and Abuse. Accessed at 

http://www.cms.gov/apps/media/press_releases.asp on May 3, 2010. 
Page 3 – Donald M. Berwick, M.D. 

OEI-01-09-00180 The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments 

conduct data analysis and identify potential Medicare fraud on CMS’s behalf.6 Law 

enforcement entities, including OIG and the Department of Justice (DOJ), request 

payment suspensions from CMS through these contractors.7

 In addition, the Office of 

General Counsel in the Department of Health & Human Services (HHS) reviews requests 

for payment suspensions prior to their approval. 

The Process for Payment Suspensions 

Two documents outline procedures for payment suspensions. For contractors, 

Section 3.9 of the PIM details those procedures. For law enforcement, the Joint 

Guidance on CMS Administrative Actions and the Impact on Health Care Fraud Cases

(hereinafter referred to as the Joint Guidance) provides information regarding payment 

suspensions and law enforcement investigations. Authored by CMS, OIG, and DOJ and 

released in July 2009, the Joint Guidance describes the types of administrative sanctions 

that CMS may impose, including payment suspensions, and their effect on ongoing 

investigations and litigation. 

Requesting a payment suspension. The process for requesting a payment suspension is 

the same whether a contractor initiates it based on the contractor’s own analysis or at 

CMS’s request, or at the behest of law enforcement.8 The contractor provides CMS with 

a draft notification letter (hereinafter referred to as a suspension notice) and a summary of 

the reliable information. The suspension notice must include the reason for the 

suspension, which “must be specific enough to justify the action being taken and allow 

the provider an opportunity to identify the problem.”9

 In addition to that requirement, the 

notice must also include 10 other elements: 

 that the suspension will be imposed, 

 the extent of the suspension (all claims, certain types of claims, 100 percent 

suspension, or partial suspension), 

 that the suspension is not appealable, 

 that CMS has approved the suspension, 

 when the suspension will begin, 

 the items and services affected, 

 how long the suspension is expected to be in effect, 

 the reason for suspending payment, 

 

6

 In 2008, CMS established Zone Program Integrity Contractors, which will consolidate benefit integrity 

work for Medicare Parts A and B. Seven of them will replace the Program Safeguard Contractors. As of 

October 2010, three are operational. 

7

 CMS, PIM, § 3.9.1.1.C. 

8

 A memorandum of understanding between OIG and CMS allows OIG to request a payment suspension 

based on a declaration signed by an OIG Special Agent. This declaration includes a description of the 

fraud and the evidence supporting the request for a payment suspension. The memorandum of 

understanding was established in January 2009 and amended in June 2010. 

9

 CMS, PIM, § 3.9.1.1.C. 
Page 4 – Donald M. Berwick, M.D. 

OEI-01-09-00180 The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments 

 that the provider has the opportunity to submit a rebuttal statement within 

15 days of the suspension notice, and 

 where to mail the rebuttal. 10

Payment suspension approval and provider notification. CMS decides whether to 

suspend a provider’s payments based on reliable information that it receives from the 

contractor. After CMS approves a suspension, it determines whether the provider should 

be notified before or after the date of the suspension. If CMS suspends a provider 

because of suspected fraud, willful misrepresentation, or harm to the Medicare Trust 

Funds, CMS directs the contractor to send the notice to the provider on or after the 

effective date of the suspension, but no later than 15 days after this date.11 For 

suspensions imposed for other reasons, CMS instructs the contractor to send the 

suspension notice at least 15 calendar days before the suspension takes effect.12 

Opportunity for rebuttal. Payment suspensions may not be appealed to an administrative 

law judge within HHS. However, a suspended provider may submit a rebuttal to explain 

why CMS should remove the suspension. A provider must submit a rebuttal letter within 

15 days of the date of the suspension notice, but the contractor can shorten or extend this 

period for cause.13 CMS directs its contractors to respond within 15 days of receiving a 

rebuttal letter with CMS’s decision for continuing or removing the suspension. The 

process for responding to rebuttal letters is similar to that for requesting suspensions; the 

contractor drafts a response to the rebuttal and forwards it—along with the provider’s 

rebuttal letter—to CMS for approval. 

Calculating overpayments during a suspension. After suspending payments to a provider, 

the contractor calculates the overpayment, which “consists of all claims in a specific time 

period determined to have been paid incorrectly.”14 The contractor selects a statistically 

valid random sample of claims, requests medical records for these claims from the 

suspended provider, and reviews the records to determine the amount of the 

overpayment.15 If the contractor does not receive records from the provider, then the 

contractor determines that 100 percent of the claims were paid in error. 

During the suspension, the provider may continue to submit claims. Amounts from valid 

claims submitted by the provider during this period are held in suspense. Those funds 

must first be applied to reduce the amount of the overpayment and then to reduce any 

 

10 CMS, PIM, § 3.9.2.2.2. 

11 42 CFR § 405.372(a)(3); CMS, PIM, § 3.9.2.2. 

12 CMS, PIM, § 3.9.2.2.1. 

13 42 CFR § 405.374(b). 

14 CMS, PIM, § 3.9.2.3.1. 

15 CMS, PIM, § 3.6. 
Page 5 – Donald M. Berwick, M.D. 

OEI-01-09-00180 The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments 

other debt owed to CMS or HHS. Any remaining funds held in suspense are then 

released to the provider. 16

Extension of payment suspensions. Payment suspensions generally last 180 days. 

However, based on written requests from contractors or law enforcement, CMS may 

extend payment suspensions under certain circumstances (see Table 1). 

Table 1: CMS’s Provisions for Extending Payment Suspensions 

Entity Requesting an 

Extension 

Time Limit for 

the Extension 

Circumstance Under Which CMS May Grant the Entity an 

Extension Based on a Written Request

Contractor, OIG, or 

DOJ 

180 days The entity is unable to complete its examination of the information or 

investigation (including calculation of the overpayment). 

DOJ 180 days An additional 180-day extension may be granted based on an 

ongoing investigation and the anticipated filing of criminal and/or civil 

actions. 

OIG No limit The time limits for extensions do not apply if the provider has been 

referred to, and is being considered by, OIG for administrative action 

(such as permissive exclusion or civil monetary penalty). 

Source: 42 CFR § 405.372(d); CMS, PIM, § 3.9.2.4.

Removal of payment suspensions. After the contractor calculates the overpayment, it 

issues a letter to the provider that includes the overpayment amount. The contractor then 

refers the overpayment to the Medicare claims processor. The claims processor issues a 

letter (called a demand letter) to the provider demanding refund of the overpayment and 

maintains the responsibility for collecting the overpayment.17 Once the claims processor 

has issued the demand letter and the suspended payments have been applied to the 

overpayment and/or released to the provider, the suspension is removed.18

The Affordable Care Act and Payment Suspensions 

Signed into law on March 23, 2010, the Affordable Care Act established the following 

provisions for payment suspensions: 

 CMS may suspend payments to a provider pending an investigation of a credible 

allegation of fraud against the provider, unless CMS determines there is good 

cause not to suspend such payments; 

 CMS shall consult with OIG in determining whether there is a credible allegation 

of fraud against a provider of services or supplier; and 

 CMS shall promulgate regulations to implement the provisions listed above.19

(CMS issued the proposed regulations on September 23, 2010.20) 

 

16 42 CFR § 405.372(e). 

17 CMS, PIM, § 3.8. 

18 Joint Guidance, p. 5. 

19 P.L. 111-148 § 6402(h). 

20 75 Fed. Reg. 58204, 58239. 
Page 6 – Donald M. Berwick, M.D. 

OEI-01-09-00180 The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments 

METHODOLOGY 

Scope 

This evaluation examined payment suspensions for fee-for-service Medicare providers 

that CMS imposed in 2007 and 2008 in the 50 States, the District of Columbia, and 

Puerto Rico (hereinafter referred to as States). It also examined CMS’s processes for 

payment suspensions. This evaluation did not examine CMS’s decisions on individual 

payment suspensions or the appropriateness of payment suspensions. 

Data Sources and Analysis 

Our evaluation relied on four data sources: documents for payment suspensions that 

CMS approved in 2007 and 2008, interviews with CMS officials, site visits at three 

purposively selected contractors, and a review of CMS regulations and guidance. 

To examine the payment suspensions that CMS implemented, we reviewed contractorprovided documents pertaining to 253 payment suspensions imposed in these 2 years.21 

We identified the types and sources of reliable information that supported payment 

suspensions to determine the circumstances in which CMS approved suspensions. 

To examine CMS’s processes for approving and implementing payment suspensions, we 

used data from our review of payment suspension documents and a review of all relevant 

regulations and guidance for payment suspensions. We also relied on information from 

interviews with CMS officials and site visits at three contractors; in these interviews and 

site visits, we collected information about processes and procedures for implementing 

payment suspensions. 

Standards 

This evaluation was conducted in accordance with the Quality Standards for Inspections 

approved by the Council of the Inspectors General on Integrity and Efficiency. 

RESULTS 

Payment Suspensions in 2007 and 2008 Were Concentrated in Medicare Part B, and 

Most Were Located in Four States

Part B providers composed 85 percent of suspensions in 2007 and 2008. We divided the 

Part B providers into two categories: those that supply durable medical equipment, 

prosthetics, and other supplies (DMEPOS); and other providers, such as physicians and 

 

21 According to CMS’s Fraud Investigations Database, the agency imposed 260 suspensions in this 2-year 

period. However, contactors were unable to provide us with the files on 7 of these suspensions, leaving us 

with 253 suspensions that had information we could use. 
Page 7 – Donald M. Berwick, M.D. 

OEI-01-09-00180 The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments 

home health agencies. We examined these two groups separately because of concerns 

that OIG has raised about fraud among DMEPOS suppliers.22 (See Table 2.) 

Table 2: Number of Payment Suspensions by Year and Provider Type 

Provider Type 2007 2008* Total 

Part A 10 (6%) 28 (32%) 38 (15%) 

Part B—DMEPOS 23 (14%) 41 (47%) 64 (25%) 

Part B—non-DMEPOS 132 (80%) 19 (22%) 151 (60%) 

 Total 165 88 253 

Source: OIG analysis of payment suspension documents, 2010. 

* Percentages do not total 100 percent because of rounding. 

Seventy-nine percent of providers that CMS suspended in 2007 and 2008 were located in 

four States; more than half were located in Medicare Fraud Strike Force areas. CMS 

suspended payments to providers located in 23 States, with most of the suspended 

providers located in Florida, Puerto Rico, California, and Michigan (see Figure 1; also 

see Appendix A for the number of payment suspensions by State). 

Figure 1: Percentage of Providers Suspended in 2007 and 2008 by State

Source: OIG analysis of payment suspension documents, 2010.

Michigan

5%

All other 

States (N=19)

21%

Puerto Rico

26%

Florida

35%

California

13%

 

22 See OIG, South Florida Suppliers’ Compliance With Medicare Standards: Results From Unannounced 

Visits, OEI-03-07-00150, March 2007; and OIG, Los Angeles County Suppliers’ Compliance With 

Medicare Standards: Results From Unannounced Visits, OEI-09-07-00550, February 2008. 
Page 8 – Donald M. Berwick, M.D. 

OEI-01-09-00180 The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments 

Furthermore, 53 percent (135 of 253) of providers with payment suspensions were 

located in the seven U.S. Attorney’s Office districts in which a Medicare Fraud Strike 

Force currently operates.23 The Medicare Fraud Strike Force, a joint initiative between 

HHS and DOJ that began in March 2007, targets “chronic fraud as well as emerging or 

migrating schemes perpetrated by criminals operating as health care providers or 

suppliers.”24 

Overpayments totaled at least $206 million. As of August 2009, CMS had removed 

182 (72 percent) of the payment suspensions that it approved in 2007 and 2008. The 

median overpayment amount that contractors calculated for the removed suspensions was 

$1,288,136 (see Table 3), with overpayments ranging from $23,344 to $6,071,470. For 

23 of the 182 suspensions that CMS removed, the contractor determined that there was 

no overpayment to calculate or recoup. 

After the contractor calculates the overpayment, Medicare claims processors are 

responsible for collecting it. However, recent OIG work found that claims processors 

collected only 7 percent of overpayments that contractors referred to them for collection 

in 2007.25 

Table 3: Overpayments Calculated During Payment Suspensions 

by Provider Type* 

Provider Type N Median Minimum Maximum Total 

Part A 21 $1,645,026 $166,200 $4,596,538 $43,223,576 

Part B – DMEPOS 57 $1,237,153 $23,344 $5,881,115 $72,779,627 

Part B – non-DMEPOS 65 $1,072,338 $35,204 $6,071,470 $89,918,810 

 Overall 143 $1,228,136 $23,344 $6,071,470 $205,922,014 

Source: OIG analysis of payment suspension documents, 2010. 

* We base this analysis on the documents we received for 143 of the 182 removed suspensions. As of 

August 2009, 71 suspensions had not been removed, so the amount of any overpayment had not yet been 

determined. For 23 suspensions, contractors calculated that no overpayment had been made; for 

16 suspensions, contractors did not provide information on the amount of overpayment.

 

23 As of July 2010, the Medicare Strike Force is in operation in the following U.S. Attorney’s Office 

districts: Southern District of Florida (Miami), Central District of California (Los Angeles), Eastern 

District of Michigan (Detroit), Southern District of Texas (Houston), Middle District of Louisiana (Baton 

Rouge), Eastern District of New York (Brooklyn), and Middle District of Florida (Tampa). “Medicare 

Fraud Strike Force Expands Operations into Brooklyn, N.Y.; Tampa, Fla.; and Baton Rouge, La.” 

Accessed from http://www.stopmedicarefraud.gov/heatsuccess/taskforces.html on July 29, 2010. 

24 DOJ, “Fact Sheet: Medicare Fraud Strike Forces.” Accessed from 

http://www.stopmedicarefraud.gov/heatsuccess/general_fact_sheet.pdf on July 29, 2010. 

25 See OIG, Collection Status of Medicare Overpayments Identified by Program Safeguard Contractors, 

OEI-03-08-00030, May 2010; and OIG, Medicare Overpayments Identified by Program Safeguard 

Contractors, OEI-03-08-00031, May 2010. 
OEI-01-09-00180 The Use of Paym ent Suspensions To Prevent Inappropriate Medicare Payments 

Figure 2: Number of Calendar Days Between the Date of Contractors’ 

Requests for Payment Suspensions and Date of CMS’s Approval* 

2 

8% 

0 

24% 1 

12% 

8 to 14 

10% 

3 to 7 

27% 

15 to 30 

9% 

31 to 60 

9% 

61 to 92 

1% 

Source: OIG analysis of payment suspension documents, 2010. 

* This analysis is based on 191 payment suspensions that were initiated by contractors/law enforcement. We 

excluded the remaining 62 payment suspensions because these were initiated by CMS. 

 

Page 9 – Donald M. Berwick, M.D. 

Implementation of Suspensions Followed the Process Described in the Program 

Integrity Manual 

Suspension notices generally contained the required elements. Ninety-six percent (240) 

of the 250 suspension notices that we received included all required elements that the 

PIM specifies.26 The suspension notice—which informs a provider that its payments 

have been suspended and provides information about the suspension process—must 

include (among other things) the suspension’s start date, its expected duration, and 

information on the rebuttal process. Of the 10 notices that lacked required elements, 

6 omitted information explaining that the provider has the opportunity to submit a 

rebuttal statement within 15 days of notification, and 4 omitted the date that the 

suspension began. 

Although the PIM contains no requirements for timeframes, CMS approved payment 

suspensions in a median of 4 calendar days. CMS approved about one-quarter of 

suspensions (46 out of 191) on the same day that contractors requested them (see 

Figure 2 for approval timeframes). According to CMS officials with whom we spoke, 

they review each request for a payment suspension to assess the extent to which Medicare 

funds are at risk, as well as whether a payment suspension is the appropriate 

administrative tool to use. 

26 Contractors did not provide suspension notices for 3 of the 253 suspended providers. 
Page 10 – Donald M. Berwick, M.D. 

OEI-01-09-00180 The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments 

Few providers submitted rebuttals. Of the 253 suspended providers, 41 (16 percent) 

submitted rebuttals to CMS. Because payment suspensions cannot be appealed, the 

rebuttal serves as a provider’s only opportunity to submit information on why CMS 

should remove the suspension. Of the 41 providers that submitted rebuttals, CMS 

removed suspensions for 3. 

CMS extended more than half of payment suspensions. The suspensions that CMS had 

removed lasted a median of 267 days. For Part A providers, the median length was 

179 days; for Part B providers, it was 341 days. CMS extends suspensions based on 

requests from contractors and law enforcement. CMS approved extensions for 145 of the 

253 payment suspensions (57 percent). Two-thirds of the extensions (96 out of 145) 

were one-time extensions of 180 days. CMS also approved a second 180-day extension 

for three suspensions. 

In most cases, contractors requested that CMS extend suspensions so that they could 

complete their calculations of the overpayments made to the providers. Contractor staff 

told us that because of several factors, they might need additional time to calculate 

overpayments. These factors include the amount of time that the provider takes to submit 

medical records and the complexity of the medical record reviews that contractors 

conduct. 

CMS extended 46 of 145 (32 percent) suspensions for indefinite time periods. CMS may 

extend a suspension indefinitely based on a request from OIG when OIG is considering 

an administrative action against a provider, such as a civil monetary penalty or 

permissive exclusion.27 

The Great Majority of Providers That CMS Suspended in 2007 and 2008 Exhibited 

Characteristics That Suggest Fraud 

Although the circumstances for each suspension are unique, the timing of suspension 

notices and the reliable information that supported the suspensions demonstrate that CMS 

suspended most providers because of suspected fraud. 

All but three suspended providers received no advance notice, indicating suspected fraud 

or willful misrepresentation. If CMS suspends a provider because of suspected fraud, 

willful misrepresentation, or harm to the Medicare Trust Funds, CMS instructs its 

contractors to send the notice on or after the effective date of the suspension, but no later 

than 15 days after this date. For suspensions imposed for other reasons, CMS instructs its 

contractors to give providers at least 15 calendar days of prior notice.28 

 

27 42 CFR 405.372(d)(3); CMS, PIM, § 3.9.2.4. 

28 CMS, PIM, § 3.9.2.2.1. 
Page 11 – Donald M. Berwick, M.D. 

OEI-01-09-00180 The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments 

Contractors sent 99 percent of notices (243 of 246) to providers on or after the day the 

suspension took effect.29 Contractors sent notices to the remaining three suspended 

providers just 1 day prior to the date the suspension took effect. 

Seventy-four percent of suspended providers had questionable billing patterns. For 

187 out of 253 suspended providers, contractors included analysis of claims data that 

showed unusual billing patterns. 

The contractors’ analyses showed billing patterns common in instances of suspected 

fraud, including aberrantly high amounts of services provided within a short timeframe 

and spikes in billing as a result of multiple claims submitted for the same beneficiary. 

The contractors’ analyses also showed that some of the suspended providers billed 

Medicare using stolen identities. In these instances, suspended providers billed for 

services using beneficiary identification numbers that were known to have been 

compromised. Other suspended providers aberrantly billed for medical equipment, 

submitting claims that listed neurosurgeons, pediatricians, and pathologists as the 

ordering physicians. Those specialties do not typically order such equipment. 

Sixty-three percent of suspensions were supported by information from beneficiaries or 

from other providers that raised questions. For 159 out of 253 suspensions, complaints or 

attestations from beneficiaries and/or from other providers contributed reliable 

information needed to implement a suspension. They filed their complaints either with 

contractors or with law enforcement. The attestations from beneficiaries and providers 

resulted from interviews conducted by law enforcement or contractors, as well as from 

signed statements collected by these entities. In some instances, the information provided 

through complaints and attestations led a contractor to initiate payment suspensions. 

Beneficiary complaints and attestations indicated that the suspended providers billed 

them for services that they never received or that were medically unnecessary. For 

example, some complaints concerned out-of-State providers that had billed the 

beneficiaries for services that they never received. The beneficiaries had neither heard of 

the providers nor been to the States in which the providers were located. Beneficiaries 

also attested that medical equipment suppliers billed them for equipment that they never 

received. These beneficiaries indicated that they did not know the supplier or referring 

physician listed on the claim. In addition, beneficiaries told contractors or law 

enforcement that they received home health services even though they were not 

homebound, as Medicare requires. 

Likewise, complaints or attestations from providers indicated that their billing numbers 

had been used by suspended providers to bill for items or services that they had not 

authorized. For example, providers attested that they had never ordered medical 

 

29 Contractors provided us with 250 suspension notices, of which 4 notices lacked an effective date, leaving 

a denominator of 246 notices. 
Page 12 – Donald M. Berwick, M.D. 

OEI-01-09-00180 The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments 

equipment from the providers that aberrantly billed, nor had they ever treated the patients 

for whom the equipment was ordered. These physicians include anesthesiologists and 

neurologists who also indicated that they do not order medical equipment for their 

patients. Other physicians made complaints upon discovering that the suspended 

providers used their identities to establish new billing numbers in their names. 

Fifty-five percent of suspended providers failed to submit medical records. Of the 

182 providers in 2007 and 2008 for which suspensions had been removed, 100 providers 

failed to submit medical records to the contractor for calculating the overpayment. 

According to contractor staff with whom we spoke, failing to submit medical records 

during the course of a suspension demonstrates that the provider may have never existed 

or may have moved without notifying CMS. Such notification is a requirement to 

continue participating in the Medicare program. 

Twenty-four percent of suspended providers billed Medicare before their suspensions 

despite vacant physical locations. For 61 of the 253 suspensions we analyzed, 

contractors, law enforcement, and/or CMS staff found that the provider’s office did not 

appear to be in business prior to the suspension. They uncovered vacant offices and 

locked doors during posted business hours, as well as eviction notices posted on a 

provider’s office door. In one instance, they went to the provider’s address and found a 

storage facility, rather than a medical office. In addition, the site visits included 

interviews with landlords and tenants in neighboring businesses who attested that they 

had not observed any business activity at the provider’s location. 

CMS Provides Some Inconsistent Guidance on Payment Suspensions 

Two CMS-approved documents that provide guidance on the process remain incomplete 

or inconsistent with requirements for payment suspensions. These documents include the 

PIM, which provides guidance to contractors; and the Joint Guidance, which provides 

information to law enforcement about CMS’s administrative actions and their effect on 

health care fraud cases. 

The Program Integrity Manual fails to reflect CMS’s current guidance to contractors for 

payment suspensions. In 2009, CMS revised the PIM’s section on payment suspensions, 

calling for contractors requesting suspension to submit “other supportive information” 

along with the suspension notice at the time of the suspension request.30 However, the 

revised PIM does not specify the type of supportive information needed. CMS officials 

told us that when they suspend a provider, the information that they review includes 

whether the provider’s billing number was revoked, the amount of pending Medicare 

payments, and whether the provider’s claims are being reviewed prior to payment.31 If 

the contractor omits this information from the suspension request, it can result in a delay 

in CMS’s approval of the suspension. 

 

30 Ibid., § 3.9.2.2.2. 

31 This is known as a prepayment review. See CMS, PIM, § 3.4. 
Page 13 – Donald M. Berwick, M.D. 

OEI-01-09-00180 The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments 

Furthermore, the model suspension notice contained in the PIM has not been updated 

since November 2000.32 Most notably, the model notice describes an outdated 

suspension approval process. Since October 2006, the authority to approve payment 

suspensions has rested with the CMS central office, but the model notice describes the 

previous process, under which CMS regional offices approved suspensions.33 Although 

the text in the 2009 update to the PIM refers to the current arrangement, the notice 

itself—to which contractors presumably refer when preparing their requests—continues 

to reflect the former regional arrangement.34

The model notice also lacks the current legal language that CMS requires all suspension 

notices to contain. That language includes the disposition of a provider’s payments after 

the removal of the suspension.35 Because the model notice omits this required 

information, contractor staff with whom we spoke told us that they rely on their own 

templates or refer to the most recent CMS-approved suspension notice to ensure that new 

suspension notices include the appropriate information. CMS’s lack of a standardized 

model suspension notice that includes all required information could potentially cause 

delays in the suspension process. 

CMS officials acknowledged that the PIM includes out-of-date guidance and told us that 

they were working with a contractor to thoroughly revise it. CMS officials told us that 

they had conducted in-person training at each contractor’s location in the past year to 

review the suspension process with contractor staff. 

CMS’s guidance on extending payment suspensions is contradictory. In certain 

situations, CMS may extend payment suspensions indefinitely. According to Medicare 

regulations, the suspension time limits do not apply when OIG is considering 

administrative action, such as a civil monetary penalty or permissive exclusion.36 Of the 

253 suspensions we examined, CMS approved indefinite extensions for 46 (18 percent). 

However, the PIM and the Joint Guidance—CMS’s guidance documents for its 

contractors and for law enforcement, respectively—differ from one another in describing 

when a payment suspension may be extended. The PIM states that CMS may grant an 

additional 180-day extension at the written request of DOJ, but the Joint Guidance states 

that CMS cannot grant DOJ an additional extension. In addition, the PIM states that the 

 

32 CMS, PIM, Exhibit 16—Model Suspension of Payment Letters, Rev. 3, November 22, 2000. 

33 CMS memorandum, “Re-Designation of the Payment Suspension Authority and Process,” September 6, 

2006. 

34 CMS, PIM, ch. 3, Transmittal 282, January 8, 2009. 

35 “In discussing the effect of payment suspension, we require the following language regarding the 

payment suspension in all notices: ‘When the payment suspension has been removed, any money withheld 

as a result of this action shall first be applied to reduce or eliminate the determined overpayment and then 

to reduce any obligation to CMS or HHS. (See 42 CFR 405.372(e).).’” CMS presentation for Strike Force 

law enforcement, “Medicare Payment Suspensions: Myths and Facts,” October 28, 2009. 

36 42 CFR § 405.372 (d)(3).
Page 14 – Donald M. Berwick, M.D. 

OEI-01-09-00180 The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments 

 

time limits for payment suspension do not apply if OIG is considering administrative 

sanctions. In contrast, the Joint Guidance indicates that “the payment suspension 

regulation does not explicitly establish a limit on the number of extensions, but it does 

not permit indefinite suspensions.”37

CONCLUSION 

In 2007 and 2008, CMS used payment suspensions almost exclusively as a tool to fight 

fraud. Since the time when we collected data for this evaluation, the Affordable Care Act 

was signed into law. This Act states that payments may be suspended to a provider 

pending an investigation of a credible allegation of fraud, unless there is good cause not 

to suspend such payments. It also states that CMS must consult with OIG in determining 

whether a credible allegation of fraud exists.38 On September 23, 2010, CMS issued 

proposed regulations for these provisions.39 The information provided in this report may 

be useful to CMS when it finalizes these regulations. In the guidance that CMS develops 

for the new provisions for payment suspensions, CMS could also address the 

inconsistencies that this report identifies. 

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-01-09-00180 in all correspondence. 

37 CMS, PIM, § 3.9.2.4; Joint Guidance, p. 4. 

38 P.L. 111-148 §§ 6402(h)(1) and (2). 

39 75 Fed. Reg. 58204, 58239 (September 23, 2010). 
Page 15 – Donald M. Berwick, M.D. 

OEI-01-09-00180 The Use of Payment Suspensions To Prevent Inappropriate Medicare Payments 

APPENDIX A 

Number of Payment Suspensions by State in 2007 and 2008 

State 

Number of Providers 

Suspended in 2007 

and 2008 

Percentage of 

Providers Suspended 

in 2007 and 2008* 

Arizona 8 3.2% 

Arkansas 1 0.4% 

California 33 13.0% 

Florida 88 34.8% 

Idaho 2 0.8% 

Illinois 3 1.2% 

Louisiana 5 2.0% 

Massachusetts 3 1.2% 

Michigan 12 4.7% 

Mississippi 1 0.4% 

Missouri 2 0.8% 

Nebraska 1 0.4% 

Nevada 1 0.4% 

New Hampshire 1 0.4% 

New York 1 0.4% 

Ohio 4 1.6% 

Oklahoma 1 0.4% 

Oregon 3 1.2% 

Puerto Rico 66 26.1% 

Tennessee 5 2.0% 

Texas 5 2.0% 

Washington 5 2.0% 

Wisconsin 2 0.8% 

 Total 253 100%

Source: Office of Inspector General analysis of payment suspension documents, 2010. 

*

 Percentages do not total 100 percent because of rounding.