Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JANET REHNQUIST 

Inspector General 

NOVEMBER 2001 

OEI-03-01-00110 

Medical Equipment and Supply Claims with 

Invalid or Inactive Physician Numbers 
OFFICE OF INSPECTOR GENERAL 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, is to 

protect the integrity of the Department of Health and Human Services programs as well as the 

health and welfare of beneficiaries served by them. This statutory mission is carried out through a 

nationwide program of audits, investigations, inspections, sanctions, and fraud alerts. The 

Inspector General informs the Secretary of program and management problems and recommends 

legislative, regulatory, and operational approaches to correct them. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 

Inspector General. It conducts short-term management and program evaluations (called 

inspections) that focus on issues of concern to the Department, the Congress, and the public. The 

inspection reports provide findings and recommendations on the efficiency, vulnerability, and 

effectiveness of departmental programs. 

OEI's Philadelphia Regional Office prepared this report under the direction of Robert A. Vito, 

Regional Inspector General, and Linda M. Ragone, Deputy Regional Inspector General. Principal 

OEI staff included: 

REGION HEADQUARTERS 

David Tawes, Project Leader Bambi Straw, Program Specialist 

Cortney Hayflinger, Program Analyst 

To obtain copies of this report, please call the Philadelphia Regional Office at (800) 531-9562. 

Reports are also available on the World Wide Web at our home page address: 

http://www.oig.hhs.gov/oei/ 
EXECUTIVE SUMMARY 

PURPOSE 

This inspection examined Medicare payments for medical equipment and supply claims 

submitted with invalid or inactive unique physician identification numbers. 

BACKGROUND 

Medicare beneficiaries covered by Part B are eligible to receive medical equipment and 

supplies deemed medically necessary by a physician. Medicare regulations require 

suppliers to provide the unique physician identification number (UPIN) of the physician 

who ordered the equipment and/or supplies when submitting a claim. Because Medicare 

payment for medical equipment and supplies is only authorized when items are ordered by 

a physician, claims with incorrect UPIN information should not be paid. 

The Consolidated Omnibus Budget Reconciliation Act of 1985 required the Centers for 

Medicare & Medicaid Services (CMS) to establish UPINs for all physicians who provide 

services to Medicare beneficiaries. Each physician is assigned one and only one UPIN. 

The CMS contracts with one company to maintain a database, the UPIN Registry, that 

contains relevant data on all assigned UPINs. Information regarding the practice settings 

(i.e., physical locations where the physician practices medicine) associated with a 

particular UPIN are included in the UPIN Registry. Medicare requires physicians to notify 

their local Part B carriers of any practice setting changes. In addition, local carriers have 

been instructed by CMS to inactivate practice settings for which there has been no claim 

activity during the previous 12 months. For the purposes of this report, we will refer to 

UPINs without any active practice settings as inactive, and UPINs that have never been 

assigned by Medicare as invalid. 

We compared the UPINs listed on 1999 medical equipment and supply claims to 

information contained in the UPIN Registry. We then identified Medicare payments for 

claims where the listed UPIN was either invalid or inactive on the date of service. 

FINDINGS 

Medicare paid $32 million for medical equipment and supply claims with invalid 

UPINs in 1999 

In 1999, Medicare allowed charges for medical equipment and supply claims with invalid 

UPINs totaled $32 million. Approximately 14,000 different invalid UPINs were used on 

medical equipment and supply claims paid by Medicare. Seventy-eight percent of the 

Claims with Invalid or Inactive Physician Numbers OEI-03-01-00110 i 
invalid UPINs appearing on these claims in 1999 were associated with less than $1,000 in 

Medicare allowed charges. However, 106 of the invalid UPINs had more than $50,000 in 

allowed charges associated with them. One invalid UPIN was listed as the ordering 

physician by seven different suppliers on $1.1 million in Medicare claims. 

Medicare paid $59 million for medical equipment and supply claims with inactive 

UPINs in 1999 

In 1999, Medicare allowed $59 million for medical equipment and supply claims with 

UPINs that were inactive on the date of service. More than 28,000 inactive UPINs were 

listed on claims paid by Medicare in 1999. Thirty percent of these UPINs had been 

inactive for at least 3 years, and accounted for $10 million in payments. Some UPINs 

listed on medical equipment and supply claims had been inactive for more than 9 years as 

of the claim’s date of service. 

A small number of suppliers accounted for a significant share of allowed charges 

for claims with invalid or inactive UPINs 

Almost 25,000 (28 percent) of the approximately 90,000 suppliers that submitted claims 

to Medicare in 1999 used an invalid or inactive UPIN on at least one claim. One hundred 

suppliers alone accounted for $17 million of the $91 million in allowed charges for claims 

with invalid or inactive UPINs. Allowed charges for claims with invalid or inactive UPINs 

made up a very small share (less than 2 percent) of the average supplier’s 1999 

reimbursement. However, we identified 1,053 suppliers that had more than 30 percent of 

their 1999 allowed charges associated with invalid or inactive UPINs. 

RECOMMENDATIONS 

We believe that our findings illustrate a significant vulnerability in Medicare’s claims 

processing system for medical equipment and supplies. Carriers should only pay for 

medical equipment and supply claims that include accurate UPINs. While it is possible 

that some of the equipment and supplies that we identified were medically necessary, the 

inability of Medicare systems to determine whether claims are submitted with invalid or 

inactive UPINs creates the potential for widespread abuse. 

In order to address the issues identified by this report, we recommend that CMS: 

Revise claims processing edits to ensure that UPINs listed on medical equipment and 

supply claims are valid and active. 

Emphasize to suppliers the importance of using accurate UPINs when submitting 

claims to Medicare. 

Claims with Invalid or Inactive Physician Numbers OEI-03-01-00110 ii 
We have provided CMS with 1999 data on medical equipment and supply claims with 

invalid or inactive UPINs for further analysis and review. The CMS, if necessary, will 

forward any suspected problematic claims to our Office of Investigations. 

Agency Comments 

The CMS concurred with our recommendation concerning the revision of claims 

processing edits. The agency indicated that it has developed instructions, system changes, 

and edits which will reject claims listing a deceased physician’s UPIN. Once this initiative 

is implemented in April 2002, CMS plans to expand it to include all invalid and inactive 

UPINs. The CMS also agreed with our recommendation concerning supplier education. 

The full text of CMS’ comments is presented in Appendix A. 

We agree that CMS’ recent actions indicate that positive first steps are being taken, and 

look forward to its future initiatives involving UPINs. However, until these initiatives are 

in place, we believe that CMS should perform post-payment reviews in order to detect the 

use of invalid and inactive UPINs on medical equipment and supply claims. 

Claims with Invalid or Inactive Physician Numbers OEI-03-01-00110 iii 
TABLE OF CONTENTS 

PAGE

EXECUTIVE SUMMARY .................................................... i

INTRODUCTION .......................................................... 1

FINDINGS

Invalid UPINs ........................................................ 4

Inactive UPINs ....................................................... 4

Suppliers Using Invalid or Inactive UPINs ................................... 5

RECOMMENDATIONS ..................................................... 6

APPENDIX

A. Centers for Medicare & Medicaid Services Comments ....................... 7

Claims with Invalid or Inactive Physician Numbers OEI-03-01-00110 iv
INTRODUCTION 

PURPOSE 

This inspection examined Medicare payments for medical equipment and supply claims 

submitted with invalid or inactive unique physician identification numbers. 

BACKGROUND 

Title XVIII of the Social Security Act establishes coverage and benefits under Part B of 

the Medicare program. Medicare beneficiaries covered by Part B are entitled to receive 

medical equipment and supplies that are deemed medically necessary by a physician. This 

benefit includes durable medical equipment (e.g., wheelchairs, hospital beds, home oxygen 

equipment) and supplies, as well as prosthetics and orthotics. The Centers for Medicare & 

Medicaid Services (CMS) contracts with four durable medical equipment regional carriers 

to process and pay medical equipment and supply claims. In 1999, Medicare reimbursed 

$6.2 billion for medical equipment and supplies. 

To obtain reimbursement for equipment and supplies provided to Medicare beneficiaries, 

suppliers submit a HCFA 1500 claim form to the durable medical equipment regional 

carrier serving their area. Medicare regulations require suppliers to provide the unique 

physician identification number (UPIN) of the physician who ordered the equipment on 

the HCFA 1500 claim form. Because Medicare payment for medical equipment and 

supplies is only authorized when it is ordered by a physician, claims with incorrect UPIN 

information should not be paid. However, according to CMS, Medicare claims processing 

systems only verify that the UPIN listed on a claim meets certain format requirements. 

Computer system edits are not performed to ensure that the UPIN has been assigned or is 

currently active. 

Assignment and Use of UPINs 

The Consolidated Omnibus Budget Reconciliation Act of 1985 required CMS to establish 

UPINs for all physicians who provide services to Medicare beneficiaries. In 1994, CMS 

expanded the use of UPINs to other medical providers, such as nurse practitioners, and to 

group physician practices. In this report, we use the term “physician” to describe both 

physicians and other medical providers who are assigned UPINs. The CMS contracts with 

one company to maintain a database containing relevant information on all assigned 

UPINs. This database is known as the UPIN Registry. 

To be assigned a UPIN a physician completes Form HCFA 855 and submits it to the 

Part B carrier serving his or her geographic area. This form requires physicians to 

Claims with Invalid or Inactive Physician Numbers OEI-03-01-00110 1 
provide information such as their Social Security numbers, State licensing information, and 

medical specialties. Physicians also must provide a listing of all of their associated practice 

settings (i.e., physical locations where they practice medicine). As part of enrollment, 

carriers validate that the provider requesting the UPIN has the appropriate license(s) 

required by State law. Carriers then contact the contractor that maintains the UPIN 

Registry to request that a UPIN be issued to the physician. Each physician is assigned one 

and only one UPIN, though local carriers assign separate identifiers for each practice 

setting. Information regarding the practice settings associated with a particular UPIN are 

included in the UPIN Registry. 

Medicare requires physicians to notify their local Part B carriers of any address changes or 

practice setting closings. In addition, local carriers have been instructed by CMS to 

inactivate practice settings for which there has been no claim activity during the previous 

12 months. The local carrier is then responsible for notifying the contractor that maintains 

the UPIN Registry of these changes. 

Related Work by the Office of Inspector General 

In 1999, the Office of Inspector General released a report entitled, “Accuracy of Unique 

Physician Identification Number Data,” (OEI-07-98-00410). This report found that 

although CMS has taken meaningful actions to enhance the accuracy of UPIN data, some 

problems continue to exist. For example, almost 23 percent of UPINs listed as active in 

the UPIN Registry had no claims activity within the previous year. The report 

recommended that CMS take steps to ensure that its carriers follow the issued guidelines 

concerning the inactivation of UPINs. 

METHODOLOGY 

Data Collection and Analysis 

We created a file containing 100 percent of 1999 medical equipment and supply claims 

from CMS’ National Claims History File. We obtained UPIN information by accessing a 

CMS database extracted from the UPIN Registry. The CMS’ UPIN database is composed 

of two separate files: one containing information on the active practice settings associated 

with a UPIN, and the other on the inactive practice settings. 

We first compared all of the UPINs listed on the 1999 claims to UPINs listed on the active 

practice settings file. As long as a UPIN on the claim had at least one active practice 

setting, or was a surrogate UPIN, we considered it to be active. Surrogate UPINs are five 

generic identifiers established by CMS to represent physicians who do not have a UPIN, 

e.g., resident physicians, retired physicians. 

The UPINs appearing on 1999 claims that did not appear in the active practice settings file 

and were not surrogate identifiers were then compared to the UPINs listed in the 

Claims with Invalid or Inactive Physician Numbers OEI-03-01-00110 2 
inactive practice settings file. Based on this comparison, we placed a UPIN into one of 

two categories: 

(1) Invalid: The UPIN listed on the claim does not appear in either the active or 

inactive practice settings file. The UPIN has not been assigned by Medicare. 

(2) Inactive: The UPIN listed on the claim appears in the inactive practice settings file 

but not the active file. The UPIN has been assigned, but it has either been inactivated 

by the physician, or all of its associated practice settings have been inactivated by 

carriers. 

We determined the number of invalid or inactive UPINs listed on 1999 medical equipment 

and supply claims. We then calculated the amount Medicare paid in 1999 for claims with 

UPINs that were invalid. We also calculated the amount Medicare paid in 1999 for claims 

with inactive UPINs, arraying the data by the length of time the UPINs had been inactive. 

We determined how long a UPIN had been inactive by comparing the date of service listed 

on its earliest 1999 claim to the most recent inactivation date of an associated practice 

setting. 

We summarized the UPIN data by procedure code. We also determined the allowed 

charges each supplier had with invalid or inactive UPINs, and whether or not any suppliers 

received a significant share of their Medicare reimbursement through the use of invalid or 

inactive UPINs. We used 10-digit supplier numbers when analyzing supplier data. Tendigit numbers identify each physical location where a supplier conducts business. 

However, each location may be part of a larger medical equipment supply company. 

Claims with Invalid or Inactive Physician Numbers OEI-03-01-00110 3 
FINDINGS 

Medicare paid $32 million for medical equipment and supply 

claims with invalid UPINs in 1999 

In 1999, Medicare’s allowed charges for medical equipment and supply claims with invalid 

UPINs totaled $32 million. Approximately 14,000 different invalid UPINs were used on 

medical equipment and supply claims paid by Medicare. Three-quarters of the invalid 

UPINs had the correct format and started with an appropriate letter. The remaining 

invalid UPINs began with a letter for which no UPINs had ever been issued. This means 

that the UPIN could easily be identified as one which was never assigned. 

Seventy-eight percent of the invalid UPINs appearing on medical and supply claims in 

1999 were associated with less than $1000 in Medicare allowed charges. However, 106 

of the invalid UPINs were associated with more than $50,000 in allowed charges. One 

invalid UPIN was listed as the ordering physician by seven different suppliers on $1.1 

million in Medicare claims. Out of the nearly 500,000 UPINs that were used on Medicare 

medical equipment and supply claims in 1999, this invalid UPIN ranked fifty-second 

in overall allowed charges. 

Medicare paid $59 million for medical equipment and supply 

claims with inactive UPINs in 1999 

In 1999, Medicare paid $59 million in allowed charges for medical equipment and supply 

claims with UPINs that were inactive on the date of service. Almost $8 million of this 

amount involved UPINs for physicians who had died prior to the dates of service listed on 

the claims. More than 28,000 inactive UPINs were listed on medical equipment and 

supply claims paid by Medicare in 1999. Thirty percent of these UPINs had been inactive 

for at least 3 years, and accounted for $10 million in Medicare payments. Some UPINs 

listed on medical equipment and supply claims had been inactive for more than 9 years 

at the time of the claims’ dates of service. 

There may be explanations why inactive UPINs are associated with certain types of 

services. For instance, once beneficiaries qualify for oxygen therapy, they may use it for 

the rest of their lives. Therefore, procedure codes for oxygen equipment and supplies 

could be billed for a period of time after the UPIN of the physician who initially ordered 

the equipment and supplies had been inactivated. Furthermore, certain other pieces of 

medical equipment, such as wheelchairs and hospital beds, are usually rented for an 

extended period of time. Suppliers bill Medicare a rental fee for this equipment, known as 

capped-rental items, for up to 15 consecutive months. In these cases, a claim submitted 

with a UPIN that had been inactive for less than a year would not necessarily 

Claims with Invalid or Inactive Physician Numbers OEI-03-01-00110 4 
be problematic. The physician who originally ordered the equipment may have retired or 

died within the rental period. However, if the UPIN had been inactive for over 2 years on 

the claim’s date of service, this would indicate that the UPIN was inactive at the time the 

item was ordered. Of the $59 million paid in 1999 for claims with inactive UPINs, $14 

million was for oxygen-related services and almost $7.3 million was for cappedrental items. However, 42 percent ($3 million) of the allowed charges for capped-rental 

items were associated with UPINs that had been inactive for more than 2 years. 

A small number of suppliers accounted for a significant 

share of allowed charges for claims with invalid or inactive 

UPINs 

Almost 25,000 (28 percent) of the approximately 90,000 suppliers that submitted claims 

to Medicare in 1999 used an invalid or inactive UPIN on at least one claim. One hundred 

suppliers alone accounted for $17 million of the $91 million in allowed charges for claims 

with invalid or inactive UPINs. One supplier was responsible for $1.2 million in Medicare 

allowed charges for claims with invalid or inactive UPINs, using over 1,700 of these 

UPINs on medical equipment and supply claims in 1999. 

Allowed charges for claims with invalid or inactive UPINs made up a very small share 

(less than 2 percent) of the average supplier’s 1999 reimbursement. However, we 

identified 1,053 suppliers that had more than 30 percent of their 1999 allowed charges 

associated with invalid or inactive UPINs. One supplier had 62 percent of its allowed 

charges ($365,849 of $588,563) associated with one invalid UPIN. 

Claims with Invalid or Inactive Physician Numbers OEI-03-01-00110 5 
RECOMMENDATIONS 

We believe that our findings illustrate a significant vulnerability in Medicare’s claims 

processing system for medical equipment and supplies. Carriers should only pay for 

medical equipment and supply claims that include accurate UPINs. While it is possible 

that some of the equipment and supplies that we identified were medically necessary, the 

inability of Medicare systems to determine whether claims are submitted with invalid or 

inactive UPINs creates the potential for widespread abuse. 

In order to address the issues identified by this report, we recommend that CMS: 

Revise claims processing edits to ensure that UPINs listed on medical equipment and 

supply claims are valid and active. 

Emphasize to suppliers the importance of using accurate UPINs when submitting 

claims to Medicare. 

We have provided CMS with 1999 data on medical equipment and supply claims with 

invalid or inactive UPINs for further analysis and review. The CMS, if necessary, will 

forward any suspected problematic claims to our Office of Investigations. 

Agency Comments 

The CMS concurred with our recommendation concerning the revision of claims 

processing edits. The agency indicated that it has developed instructions, system changes, 

and edits which will reject claims listing a deceased physician’s UPIN. Once this initiative 

is implemented in April 2002, CMS plans to expand it to include all invalid and inactive 

UPINs. The CMS also agreed with our recommendation concerning provider education. 

The full text of CMS’ comments is presented in Appendix A. 

We agree that CMS’ recent actions indicate that positive first steps are being taken, and 

look forward to its future initiatives involving UPINs. However, until these initiatives are 

in place, we believe that CMS should perform post-payment reviews in order to detect the 

use of invalid and inactive UPINs on medical equipment and supply claims. 

Claims with Invalid or Inactive Physician Numbers OEI-03-01-00110

6 
APPENDIX A 

Centers for Medicare & Medicaid Services Comments

Claims with Invalid or Inactive Physician Numbers OEI-03-01-00110 7