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 
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OEI-03-09-00570 Collection Rate for Overpayments Made to Medicare Suppliers in South Florida 

 

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 PSC’s jurisdiction are known as the 

PSC’s affiliated contractor. 
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OEI-03-09-00570 Collection Rate for Overpayments Made to Medicare Suppliers in South Florida 

 

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 provider’s future 

Medicare payments, through a provider’s 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 Treasury’s 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. 
Page 4 – Marilyn Tavenner 

OEI-03-09-00570 Collection Rate for Overpayments Made to Medicare Suppliers in South Florida 

s 

re 

ked. 

 

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 supplier’s 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 contain

suppliers’ address information and indicates whether suppliers’ billing privileges a

active, inactive, or revo

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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OEI-03-09-00570 Collection Rate for Overpayments Made to Medicare Suppliers in South Florida 

 

$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 surety’s 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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OEI-03-09-00570 Collection Rate for Overpayments Made to Medicare Suppliers in South Florida 

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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OEI-03-09-00570 Collection Rate for Overpayments Made to Medicare Suppliers in South Florida 

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 

Overpayments Referred 

by PSC 

Number of 

Overpayments

Percentage of 

Overpayments1

Dollar Amount 

Referred 

Dollar Amount 

Collected

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. 1

Percentages 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 Treasury’s 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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OEI-03-09-00570 Collection Rate for Overpayments Made to Medicare Suppliers in South Florida 

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.