Department of Health and Human Services


OFFICE OF 

INSPECTOR GENERAL 

SOUTH FLORIDA SUPPLIERS’


COMPLIANCE WITH MEDICARE 


STANDARDS: RESULTS FROM 


UNANNOUNCED VISITS 


Daniel R. Levinson


Inspector General 


March 2007


OEI-03-07-00150

Office of Inspector General 
 http://oig.hhs.gov 

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

as amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of beneficiaries served by those 

programs. This statutory mission is carried out through a nationwide network of audits, 

investigations, and inspections conducted by the following operating components: 

Office of Audit Services 

The Office of Audit Services (OAS) provides all auditing services for HHS, either by 

conducting audits with its own audit resources or by overseeing audit work done by others. 

Audits examine the performance of HHS programs and/or its grantees and contractors 

in carrying out their respective responsibilities and are intended to provide independent 

assessments of HHS programs and operations. These assessments help reduce waste, 

abuse, and mismanagement and promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on 

significant issues. Specifically, these evaluations focus on preventing fraud, waste, or 

abuse and promoting economy, efficiency, and effectiveness in departmental programs. 

To promote impact, the reports also present practical recommendations for improving 

program operations. 

Office of Investigations 

The Office of Investigations (OI) conducts criminal, civil, and administrative 

investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 

and of unjust enrichment by providers. The investigative efforts of OI lead to criminal 

convictions, administrative sanctions, or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support in OIG's internal operations. OCIG imposes program exclusions and civil 

monetary penalties on health care providers and litigates those actions within HHS. 

OCIG also represents OIG in the global settlement of cases arising under the Civil False 

Claims Act, develops and monitors corporate integrity agreements, develops compliance 

program guidances, renders advisory opinions on OIG sanctions to the health care 

community, and issues fraud alerts and other industry guidance. 
Δ EXECUTIVE SUMMAR Y 

OBJECTIVE 

To conduct unannounced site visits of suppliers of Medicare durable 

medical equipment, prosthetics, orthotics, and supplies (DMEPOS) in 

three South Florida counties (Miami-Dade, Broward, and Palm Beach) 

to determine their compliance with selected Medicare supplier 

standards. 

BACKGROUND 

The Centers for Medicare & Medicaid Services (CMS) reported that 

payments for DMEPOS reached $10 billion in fiscal year 2005. 

DMEPOS are covered under Medicare Part B and include items such as 

hospital beds, wheelchairs, respirators, walkers, and artificial limbs. 

DMEPOS suppliers must enroll in the Medicare program to sell or rent 

medical equipment and supplies to Medicare beneficiaries and to submit 

claims for Medicare reimbursement. At the time of our review, 

DMEPOS suppliers had to comply with 21 Medicare DMEPOS supplier 

standards to enroll in the Medicare program. 

CMS contracts with the National Supplier Clearinghouse (NSC) to 

manage the enrollment of suppliers in the Medicare program. 

According to NSC supplier enrollment data, Miami-Dade County has 

the highest concentration of suppliers per Medicare beneficiary of any 

county in the nation. Broward and Palm Beach Counties also have high 

concentrations of suppliers. As a result of allegations in Miami-Dade 

and Broward Counties, NSC reported that, during the last two quarters 

of 2005, Florida led the nation for allegations of supplier noncompliance 

with Medicare standards. We undertook a review of the suppliers in 

three South Florida counties to assess their compliance with Medicare 

supplier standards. 

We focused on three supplier standards that could be verified quickly 

through direct observation and desk review. These three standards 

include five specific requirements, which state that suppliers must: 

(1) maintain a physical facility, (2) be accessible (open and staffed) 

during business hours, (3) have a visible sign, (4) have hours of 

operation posted, and (5) maintain a primary business telephone listed 

under the name of the business. We conducted unannounced site visits 

in late 2006 to determine whether 1,581 DMEPOS suppliers in 

Miami-Dade, Broward, and Palm Beach Counties were in compliance 

with these 5 requirements. 

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EXE CUTIVE S CUTIVE S U MMAR Y

FINDINGS 

Thirty-one percent of suppliers in three South Florida counties did 

not maintain a physical facility or were not open and staffed during 

unannounced site visits. A total of 491 of 1,581 suppliers (31 percent) 

failed to maintain a physical facility or were not open and staffed during 

our unannounced site visits. Suppliers located in Miami-Dade County 

represented 64 percent of the suppliers we visited, but accounted for 

80 percent of suppliers that did not maintain physical facilities or were 

not accessible during business hours. 

Six percent of the suppliers we visited (98 of 1,581) did not maintain 

physical facilities. Instead of finding operational facilities, site reviewers 

found vacant facilities or facilities in which another type of business was 

operating. 

An additional 25 percent of suppliers (393 of 1,581) were not accessible 

during reasonable business hours. Of these suppliers, 385 were closed 

during unannounced site visits on a minimum of 2 weekdays during 

reasonable or posted business hours. Eight suppliers were open but 

not staffed during a minimum of two unannounced site visits. These 

suppliers’ doors were unlocked, but site reviewers saw no one in the 

facilities. 

Another 14 percent of suppliers were open and staffed but did not 

meet at least one of three additional requirements for the standards 

we reviewed. Fourteen percent of suppliers (216 of 1,581) were open 

and staffed but did not meet at least 1 of the 3 remaining requirements 

we reviewed (having posted hours of operation, a visible sign, and a 

listed telephone number). Two hundred and six of these suppliers did 

not comply with 1 of these requirements and 10 suppliers did not 

comply with 2 or more of these requirements. 

The remaining 55 percent of suppliers we visited met all of the 

5 requirements included in our review. 

RECOMMENDATION 

Based on unannounced site visits to 1,581 Medicare DMEPOS suppliers 

in 3 counties in South Florida, we identified 491 suppliers (31 percent) 

that did not maintain physical facilities or were not accessible during 

reasonable business hours. We referred these suppliers to CMS so that 

it could consider potential revocation of the suppliers’ Medicare billing 

numbers. Another 216 suppliers (14 percent) were open and staffed but 

OE I-03-07-00 150 S O U TH F L O R I DA S UPPLI E R S ’ C O M P L I ANCE WI T H ME D I C ARE S TA N DARDS ii 
EXE CUTIVE S U MMAR Y 

failed to meet at least 1 of the other 3 requirements included in our 

review. 

Because nearly half of the suppliers we visited were not in compliance 

with the Medicare supplier standards we reviewed, our findings 

warrant further attention by CMS to protect the integrity of the 

Medicare DMEPOS benefit. Therefore, we recommend that CMS: 

Strengthen the Medicare DMEPOS Supplier Enrollment Process and 

Ensure That Suppliers Meet Medicare Supplier Standards 

Options to implement this recommendation could include: 

• conducting more unannounced site visits to suppliers; 

• implementing an enhanced review of all new enrollment 

applications by DMEPOS suppliers in South Florida; 

• prioritizing processing reenrollment applications for current 

suppliers over processing new supplier applications; 

• performing more rigorous background checks of applicants; 

• assessing the fraud risk of suppliers and targeting monitoring and 

enforcement on high-risk suppliers; 

• increasing prepayment review of DMEPOS claims; 

• requiring all DMEPOS suppliers to post a surety bond; 

• implementing a competitive bidding acquisition program for 

DMEPOS within high-vulnerability areas; if a competitive bidding 

program is implemented in these areas, the number of suppliers 

should be limited to those that demonstrate compliance with 

Medicare standards and that can provide the best value to the 

Medicare program and its beneficiaries; 

• requiring suppliers in areas particularly vulnerable to fraud and 

abuse to reenroll with NSC more frequently than every 3 years; 

• strengthening the Medicare supplier standards by establishing a 

minimum number of hours of operation required for each supplier 

and establishing minimum inventory requirements for product 

and service types provided by a supplier; and 

• deactivating the Medicare billing numbers of DMEPOS suppliers 

that have been inactive for a 90-day period. 

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EXE CUTIVE S U MMAR Y

AGENCY COMMENTS 

CMS agreed with or will consider the options we recommended for 

strengthening the Medicare DMEPOS supplier enrollment process and 

ensuring that suppliers meet Medicare supplier standards. CMS noted 

that it is taking several steps to strengthen DMEPOS supplier 

standards. Some of these steps include requiring suppliers to become 

accredited, drafting a proposed regulation requiring suppliers to post 

surety bonds, revisiting NSC contract requirements to increase 

unannounced supplier site visits, and developing a proposal to revise 

deactivation requirements for inactive Medicare billing numbers. CMS 

stated that it appreciated working collaboratively with NSC and the 

Office of Inspector General (OIG) to conduct unannounced site visits in 

South Florida to determine compliance with Medicare supplier 

enrollment standards. CMS noted that the data collection protocol used 

for the South Florida supplier site visits was valuable, but provided less 

information than the NSC-established site visit protocol to support 

supplier number revocation decisions when suppliers submit appeals. 

OFFICE OF INSPECTOR GENERAL RESPONSE 

Previous work conducted by OIG has demonstrated that the Medicare 

DMEPOS benefit is highly vulnerable to fraud and abuse. These 

vulnerabilities can only be reduced by ensuring that Medicare does 

business with legitimate DMEPOS suppliers. 

The findings of this review detail the business practices of more than 

1,500 DMEPOS suppliers that were the subject of our review during 

visits to suppliers. We found that 45 percent of the suppliers we visited 

did not meet at least one of the five requirements that we reviewed, 

raising substantial concerns as to whether DMEPOS suppliers in South 

Florida are in compliance with the most basic of supplier standards. 

As CMS states in its comments, we worked closely with CMS and NSC 

staff in developing the protocol for this study. This joint effort allowed 

for unannounced site visits to a large population of DMEPOS suppliers 

during a several week period. Visiting a large number of suppliers 

without forewarning in a short period of time was crucial to ensuring 

that suppliers were not alerted to our efforts. 

Given the overwhelming evidence of noncompliance with supplier 

standards in South Florida, it is essential that our recommendations be 

promptly implemented to ensure the integrity of the Medicare program 

and to protect beneficiaries from potentially unscrupulous suppliers. 

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Δ T ABLE OF CONTENTS 

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

INTR O D U C T I ON ........................................... 1

FINDI NGS ................................................. 8 

Thirty-one percent of suppliers did not maintain physical facilities 

or were not accessible during unannounced visits.............. 8 

Another 14 percent of suppliers failed to meet at least one of

three additional requirements ............................. 9

RECOM M E NDATI O N ...................................... 10

 Agency Comments ..................................... 11

Office of Inspector General Response....................... 11

APPENDIXES ............................................. 13

A: Medicare DMEPOS Supplier Standards ................. 13

B: Primary Specialty Types for Suppliers Visited in 

South Florida ...................................... 16

C: County Locations for Suppliers Visited in South Florida .... 17

D: Agency Comments .................................. 18

ACKN O W LEDGMENTS .................................... 22
Δ INTRODU C TION 

OBJECTIVE 

To conduct unannounced site visits of suppliers of Medicare durable 

medical equipment, prosthetics, orthotics, and supplies (DMEPOS) in 

three South Florida counties (Miami-Dade, Broward, and Palm Beach) 

to determine their compliance with selected Medicare supplier 

standards. 

BACKGROUND 

The Centers for Medicare & Medicaid Services (CMS) reported that 

Medicare payments for DMEPOS reached $10 billion in fiscal year 2005. 

DMEPOS are covered under Medicare Part B and include items such as 

hospital beds, wheelchairs, respirators, walkers, and artificial limbs.1 

Medicare pays for DMEPOS that are necessary and reasonable for the 

treatment of a beneficiary’s illness or injury, or to improve the 

functioning of a malformed body member. Medicare only covers medical 

equipment when it is ordered for a beneficiary by a physician or in some 

cases a nonphysician practitioner. 

Medicare Enrollment of DMEPOS Suppliers 

CMS contracts with the National Supplier Clearinghouse (NSC), 

operated by Palmetto Government Benefits Administrators, to manage 

the enrollment of suppliers. Suppliers must complete applications and 

comply with 21 Medicare DMEPOS supplier standards to enroll in the 

program.

2 CMS requires DMEPOS suppliers to comply with these 

supplier standards to ensure that only qualified suppliers are enrolled 

in the Medicare program. A supplier must report to CMS any changes 

in the information provided in the application (including change of 

address) within 30 days of the change. 

If DMEPOS suppliers operate businesses at multiple physical locations, 

they are required to apply for a different Medicare billing number for 

each location. 

1 Social Security Act, §§ 1832, 1861. 

2 42 CFR § 424.57(c). This citation refers to 25 supplier standards because 4 additional 

supplier standards were added by Federal Register notice dated August 18, 2006. The 

additional supplier standards relate to accreditation of suppliers and are provided in 

Appendix A. However, CMS has not set a deadline for DMEPOS suppliers to become 

accredited in order to retain/obtain a billing number. At the time of this review, suppliers 

needed to comply with only 21 standards to enroll in the Medicare program. 

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INTROD UCT ION 

Standards. Federal regulations state that DMEPOS suppliers must 

meet the Medicare DMEPOS supplier standards to receive payment for 

a Medicare-covered item. If a supplier fails to comply with all 

standards, CMS may revoke the supplier’s billing privileges (42 CFR 

§ 424.57(d)). Appendix A contains a complete list of the Medicare 

standards. 

Application. DMEPOS applicants must complete the Medicare 

enrollment application (Form CMS-855S) to be considered for 

enrollment. Before the application can be completed, however, new 

applicants must first obtain their National Provider Identifier (NPI), a 

unique identifier for health care providers that is assigned by the 

National Plan and Provider Enumeration System. Only after obtaining 

this NPI can applicants submit Form CMS-855S and supporting 

documents to NSC.3 

Site visit. NSC must conduct a site visit to verify that a DMEPOS 

supplier applicant complies with the 21 Medicare supplier standards 

before approving an applicant and assigning a Medicare billing 

number.4 NSC or its contractor conducts unannounced site visits while 

the application is being processed.5 During these site visits, inspectors 

complete a questionnaire based on the standards. In addition to this 

questionnaire, site inspectors review files, request copies of required 

licenses, and document the supplier’s inventory. Generally, if the 

supplier is not in compliance, NSC denies the application. However, if 

the deficiency is very minor, NSC educates the provider about the 

required change(s) rather than denying the application. After the 

initial enrollment site visit, suppliers are generally not visited by NSC 

inspectors until they are due for reenrollment every 3 years. 

3 Supporting documents include, but are not limited to, copies of Federal, State, and/or 

local professional and business licenses, certifications, and/or registrations; liability 

insurance policies; written confirmation from IRS confirming Tax Identification Number; 

completed Authorization Agreement for Electronic Funds Transfer (Form CMS-588); and 

NPI notification. 

4 Available online at: 

http://www.palmettogba.com/palmetto/providers.nsf/44197232fa85168985257196006939dd/ 

85256d580043e75485256fe20049923e?OpenDocument. Accessed on October 19, 2006. 

5 In South Florida, two inspectors from the NSC Supplier Audit and Compliance Unit 

conduct all the site visits. The processing time for initial enrollment of a DMEPOS supplier 

is approximately 60 days. 

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INTROD UCT ION

Reenrollment. DMEPOS suppliers are required to reenroll in the 

Medicare program every 3 years to continue receiving Medicare 

reimbursement (42 CFR § 424.57 (e)). Prior to their reenrollment date, 

suppliers receive a reenrollment package from NSC. Suppliers have 

35 days from the date on the reenrollment letter to submit the 

completed CMS-855S and required documentation. A one-time 

extension can be requested by suppliers; however, suppliers failing to 

reenroll within the given timeframe are subject to deactivation of their 

Medicare billing number. NSC conducts an unannounced reenrollment 

site visit to ensure that a supplier continues to meet Medicare 

standards. Generally, if the supplier is not in compliance during the 

reenrollment visit, NSC issues a revocation notice. However, if the 

deficiency is very minor, NSC educates the provider about the required 

change(s) rather than issuing a revocation notice. 

Appeals Process. When NSC denies or revokes a supplier’s billing 

number, the supplier has two options to contest the determination: the 

supplier may submit a corrective action plan (CAP) or request a 

hearing. CMS and NSC negotiate the terms of the CAP with the 

supplier to ensure that the supplier complies with current supplier 

standards. If CMS and NSC are satisfied that issues of noncompliance 

have been resolved, the supplier’s billing number may be reissued or 

reinstated. If CMS and NSC uphold the denial or revocation, the 

supplier may request a formal hearing before a Hearing Officer. This 

hearing can be conducted by telephone or in person. The next level of 

appeal is review of the case by an Administrative Law Judge.6 

Vulnerabilities in the Current Medicare Enrollment Process in South Florida 

According to NSC supplier enrollment data, Miami-Dade County has 

the highest concentration of suppliers per Medicare beneficiary of any 

county in the nation. Broward and Palm Beach Counties also have high 

concentrations of suppliers. As a result of allegations in Miami-Dade 

and Broward Counties, NSC reported that, during the last two quarters 

of 2005, Florida led the nation for allegations of supplier noncompliance 

with Medicare standards. 

6 42 CFR § 405.874; also available online at: 

http://www.palmettogba.com/palmetto/providers.nsf/$$ViewTemplate+for+Docs?ReadForm 

&Providers/National+Supplier+Clearinghouse/Supplier+Enrollment/Appeals+Process. 

Accessed on January 30, 2006. 

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INTROD UCT ION 

Once a DMEPOS supplier has received an enrollment or reenrollment 

site visit, the supplier generally is not visited again outside the 3-year 

cycle. Though an unannounced, out-of-cycle site visit may occur if NSC 

becomes aware that a supplier may be in violation of one or more 

Medicare standards, typically DMEPOS suppliers are only visited at the 

end of their 3-year reenrollment period. 

Out-of-cycle site visits have proven to be effective in detecting 

noncompliant suppliers. According to NSC, in the first quarter of 2006 

it initiated a project to conduct out-of-cycle visits to approximately 500 

DMEPOS suppliers in Miami-Dade, Broward, and Palm Beach 

Counties. As a result of this project, NSC revoked the Medicare billing 

numbers for 286 of these suppliers. Many of these suppliers’ facilities 

were found to be vacant or occupied by some other business. This 

suggests that DMEPOS suppliers may take advantage of the standard 

site visit cycle by establishing businesses that are not maintained or 

staffed after NSC conducts the initial or reenrollment site visit. 

Related Studies 

A September 2005 Government Accountability Office (GAO) report 

(GAO-05-656) examined the procedures NSC uses to ensure that 

DMEPOS suppliers are legitimate businesses and are qualified to bill 

Medicare. GAO found that the screening procedures used by NSC, 

including on-site visits and checking State licensure, were insufficient to 

prevent illegitimate businesses from enrolling in the Medicare program. 

GAO estimated that NSC did not conduct 605 required on-site visits to 

suppliers in Florida, Illinois, Louisiana, and Texas. GAO made several 

recommendations, including establishing a minimum number of 

out-of-cycle, on-site inspections that NSC must perform each year as 

part of its contract. CMS generally concurred with the report’s findings 

and stated that, beginning in fiscal year 2006, the requirement to 

perform out-of-cycle, on-site visits would be added to NSC’s contractual 

duties. 

In 1997, OIG issued the report “Medical Equipment Suppliers: 

Assuring Legitimacy” (OEI-04-96-00240). In this study, OIG examined 

Medicare supplier enrollment practices in 12 large metropolitan areas 

in 5 States, including Florida. Based on unannounced site visits, the 

study concluded that the enrollment process was unreliable for 

detecting unethical and improper practices of suppliers, particularly 

because supplier enrollment at that time did not involve on-site 

verification of supplier application data. One of the options OIG 

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INTROD UCT ION

recommended for ensuring the integrity of Medicare suppliers was for 

CMS to conduct on-site visits at applicants’ physical locations. CMS 

concurred, but stated that limited resources allowed on-site visits to be 

conducted only in high-risk areas. 

In 2001, OIG issued a follow-up report (OEI-04-99-00670) that assessed 

how well DMEPOS suppliers were meeting the Medicare standards. 

OIG found that the expansion of the CMS site inspection program 

improved supplier compliance with the Medicare standards. OIG made 

several recommendations to increase the compliance rates further, such 

as instituting random, unannounced site visits. CMS concurred with 

the recommendations. 

METHODOLOGY 

Scope of Review 

We focused on three supplier standards that could be verified quickly 

through direct observation and desk review. These three standards 

(7, 8, and 9 in Appendix A) include five specific requirements: 

• The supplier must maintain a physical facility (Standard 7). 

• The facility must be accessible during business hours (Standard 8). 

• The facility must have a visible sign (Standard 8). 

• The supplier’s hours of operation must be posted (Standard 8). 

• The supplier must maintain a primary business telephone listed 

under the name of the business (Standard 9). 

Our review focused on 1,581 suppliers in the South Florida area, 

specifically in Miami-Dade, Broward, and Palm Beach Counties. We 

identified all active DMEPOS suppliers in these counties using NSC 

enrollment data as of October 16, 2006. NSC enrollment data are 

updated each day as additions and changes are received from suppliers. 

From this list, we selected 10 primary specialty supplier types for 

inclusion in our review. Appendix B lists the primary specialty types. 

We excluded large chain suppliers (25 stores or more) from our review. 

We also excluded suppliers under investigation by OIG and suppliers 

that had, or were in the process of having, their Medicare billing 

numbers revoked by NSC. This resulted in a total of 1,581 suppliers for 

our review. The number of suppliers located in each county is presented 

in Appendix C. 

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INTROD UCT ION

Data Collection and Analysis 

We conducted unannounced site visits to all 1,581 suppliers to 

determine whether suppliers were in compliance with the 

4 requirements related to Standards 7 and 8. We recorded all 

observations using a standardized protocol. OIG staff, along with 

CMS and its contractor staff, conducted all site visits in late 2006. 

Working with CMS, we developed parameters to define supplier 

compliance with the requirements to maintain a physical facility and be 

accessible to beneficiaries during business hours: 

• We determined that a supplier did not maintain a physical facility 

if the supplier did not exist at the business address on file with 

NSC. 

• We determined that a supplier was not accessible during 

business hours if the supplier was closed (i.e., the door was 

locked) or not staffed during site visits that occurred on two 

different weekdays (Monday through Friday). The first visit 

was conducted during reasonable business hours (9 a.m. to 

5 p.m.) and the second visit was conducted during the supplier’s 

posted business hours or during reasonable business hours 

(9 a.m. to 5 p.m.) if no business hours were posted. 

• We also determined that a supplier was not accessible during 

business hours if the supplier (1) was closed (i.e., the door was 

locked) during the first site visit; (2) had posted a sign indicating 

that the supplier was “out on delivery” or “out to lunch” during 

the second site visit; and (3) was closed, not staffed, or had 

posted the same sign during a third site visit. The second and 

third visits were conducted during the supplier’s posted business 

hours or during reasonable business hours (9 a.m. to 5 p.m.) if 

no business hours were posted. 

We aggregated site visit results to determine the number of suppliers 

that had visible signs and hours of operation posted. We also 

reviewed and categorized site reviewers’ observations about the 

physical facilities. 

In addition to site visits, we conducted Internet searches to determine 

whether each supplier had a listed telephone number as specified in 

Standard 9. The searches included WhitePages.com, 

YellowPages.com, and SuperPages.com. We used the supplier’s 

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INTROD UCT ION 

business name or alias (i.e., an alternate name the supplier uses to 

conduct business) to conduct the Internet searches. 

Standards 

This study was conducted in accordance with the “Quality Standards for 

Inspections” issued by the President’s Council on Integrity and 

Efficiency and the Executive Council on Integrity and Efficiency. 

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Δ FINDINGS 

Thirty-one percent of suppliers in three South 

Florida counties did not maintain a physical 

facility or were not open and staffed during 

unannounced site visits 

A total of 491 of 1,581 DMEPOS 

suppliers (31 percent) failed to 

maintain a physical facility or were 

not open and staffed during our 

unannounced site visits to 

suppliers’ locations in 3 South Florida counties. These suppliers did not 

maintain appropriate physical facilities or their facilities were not 

accessible to beneficiaries during reasonable or posted business hours 

on at least two visits. As of November 30, 2006, the 491 suppliers billed 

Medicare for almost $237 million and Medicare allowed over $97 million 

for services provided between January 1 and November 30, 2006. 

Of the 491 suppliers, 394 were located in Miami-Dade County, 59 were 

located in Broward County, and 38 were located in Palm Beach County. 

Suppliers located in Miami-Dade County represented 64 percent of the 

suppliers we visited, but accounted for 80 percent of suppliers that did 

not maintain physical facilities or were not accessible during business 

hours. Appendix C provides the number of suppliers visited in each 

county. 

“Medical supply company—other” was the primary business specialty 

listed in NSC enrollment data for the majority of suppliers that did not 

maintain physical facilities or were not accessible during reasonable 

business hours (413 of 491). Suppliers with this primary specialty 

accounted for 53 percent of all South Florida suppliers in our review, 

but accounted for 84 percent of suppliers that did not maintain physical 

facilities or were not open and staffed during business hours. The 

remaining specialty types for suppliers are provided in Appendix B. 

Six percent of suppliers (98 of 1,581) did not maintain physical facilities 

Medicare requires all medical equipment suppliers to maintain “a 

physical facility on an appropriate site.” However, 98 of the suppliers 

we visited did not maintain physical facilities. Instead of finding 

operational facilities, site reviewers found vacant facilities or facilities 

in which another type of business was operating. 

Twenty-five percent of suppliers (393 of 1,581) were not accessible during 

reasonable business hours 

One-quarter of the 1,581 medical equipment suppliers we visited were 

not accessible during reasonable or posted business hours. When 

business hours were not posted, we considered reasonable business 

hours to be between 9 a.m. and 5 p.m. on weekdays. 

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F I NDING S 

Of the 393 suppliers, 385 were closed during site visits on a minimum of 

two weekdays during reasonable or posted business hours. Eight 

suppliers were open but not staffed during a minimum of two site visits. 

These suppliers’ doors were unlocked, but site reviewers saw no one in 

the facilities. 

Site reviewers visited some locations housing multiple suppliers that 

were not open and staffed during posted or reasonable business hours. 

At one building, 15 suppliers were not open and staffed. On the same 

street, another building housed nine suppliers that were not open and 

staffed. Other locations often had two to six suppliers that were not 

open and staffed. 

Some of these 393 suppliers also failed to meet 1 or more of 3 additional 

requirements. Site visits revealed that 41 of the 393 suppliers did not 

meet the requirement that suppliers’ hours of operation be posted. 

Based on signs at their facilities, all suppliers with posted business 

hours were open an average of 35 hours per week. However, those 

found to be closed or open and not staffed posted business hours that 

averaged only 26 hours per week. Ten of these 393 suppliers also failed 

to meet the requirement that visible signs be posted at their facilities. 

Finally, Internet searches revealed that 14 of the 393 suppliers did not 

have listed telephone numbers. 

Another 14 percent of suppliers were open and staffed 

but did not meet at least one of three additional 

requirements for the standards we reviewed 

Fourteen percent of suppliers (216 

of 1,581) were open and staffed 

but did not meet at least 1 of the 

3 remaining requirements we 

reviewed (having posted hours of 

operation, a visible sign, and a listed telephone number). Two hundred 

and six of these suppliers did not comply with 1 of these requirements 

and 10 did not comply with 2 or more of these requirements. 

Of the 216 suppliers that were open and staffed but failed to meet 1 or 

more of three additional requirements in our review, 204 suppliers did 

not have posted hours of operation. Thirteen suppliers did not meet the 

requirement of having a visible sign, and 10 suppliers did not have 

listed telephone numbers. 

The remaining 55 percent of suppliers we visited (874 of 1,581) met all 

of the 5 requirements included in our review. 

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Δ RECOMME NDA TION 

Based on unannounced site visits to 1,581 Medicare DMEPOS suppliers 

in 3 counties in South Florida, we identified 491 suppliers (31 percent) 

that did not maintain physical facilities or were not accessible during 

reasonable business hours. We referred these suppliers to CMS so that 

it could consider potential revocation of the suppliers’ Medicare billing 

numbers. 

An additional 14 percent of suppliers, while maintaining facilities that 

were open and staffed, did not meet at least 1 additional requirement 

from the Medicare standards that we reviewed. 

Because nearly half of the suppliers we visited were not in compliance 

with the Medicare supplier standards we reviewed, our findings 

warrant further attention by CMS to protect the integrity of the 

Medicare DMEPOS benefit. Therefore, we recommend that CMS: 

Strengthen the Medicare DMEPOS Supplier Enrollment Process and 

Ensure That Suppliers Meet Medicare Supplier Standards 

Options to implement this recommendation could include: 

• conducting more unannounced site visits to suppliers; 

• implementing an enhanced review of all new enrollment

applications by DMEPOS suppliers in South Florida; 

• prioritizing processing reenrollment applications for current

suppliers over processing new supplier applications; 

• performing more rigorous background checks of applicants; 

• assessing the fraud risk of suppliers and targeting monitoring and 

enforcement on high-risk suppliers; 

• increasing prepayment review of DMEPOS claims; 

• requiring all DMEPOS suppliers to post a surety bond; 

• implementing a competitive bidding acquisition program for 

DMEPOS within high-vulnerability areas; if a competitive bidding 

program is implemented in these areas, the number of suppliers 

should be limited to those that demonstrate compliance with 

Medicare standards and that can provide the best value to the 

Medicare program and its beneficiaries; 

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R E C O MMENDA T I ON 

• requiring suppliers in areas particularly vulnerable to fraud and 

abuse to reenroll with NSC more frequently than every 3 years; 

• strengthening the Medicare supplier standards by establishing a 

minimum number of hours of operation required for each supplier 

and establishing minimum inventory requirements for product 

and service types provided by a supplier; and 

• deactivating the Medicare billing numbers of DMEPOS suppliers 

that have been inactive for a 90-day period. 

AGENCY COMMENTS 

CMS agreed with or will consider the options we recommended for 

strengthening the Medicare DMEPOS supplier enrollment process and 

ensuring that suppliers meet Medicare supplier standards. Specifically, 

CMS is revisiting the NSC’s contract requirements to increase the 

number of unannounced supplier site visits; considering targeted 

background checks of supplier applicants; incorporating targeted 

monitoring and enforcement for high-risk suppliers into future contract 

solicitations; drafting a proposed regulation requiring suppliers to post 

surety bonds; requiring suppliers to become accredited as meeting 

DMEPOS quality standards; considering proposing more general 

minimum inventory and business hours requirements in a future 

rulemaking document; and developing a proposal to revise deactivation 

requirements for inactive Medicare billing numbers. CMS has already 

begun conducting enhanced reviews of new supplier applicants and 

prioritizing the processing of reenrollment applications over new 

supplier applications in South Florida and other high vulnerability 

areas. 

CMS stated that it appreciated working collaboratively with NSC and 

the Office of Inspector General (OIG) to conduct unannounced site visits 

in South Florida to determine compliance with Medicare supplier 

enrollment standards. CMS believes that projects such as the one 

conducted in South Florida are both worthwhile and cost-effective, and 

states that the results of the project show there can be added value from 

quickly applying an abbreviated protocol to a large number of suppliers 

in a short period of time. CMS further noted that it believes the data 

collection protocol used for the South Florida supplier site visits was 

valuable, but provided less information than the NSC-established site 

visit protocol to support supplier number revocation decisions when 

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R E C O MMENDA T I ON 

suppliers submit appeals. The full text of CMS’s comments is provided 

in Appendix D. 

OFFICE OF INSPECTOR GENERAL RESPONSE 

Previous work conducted by OIG has demonstrated that the Medicare 

DMEPOS benefit is highly vulnerable to fraud and abuse. These 

vulnerabilities can only be reduced by ensuring that Medicare does 

business with legitimate DMEPOS suppliers. 

The findings of this review detail the business practices of more than 

1,500 DMEPOS suppliers that were the subject of our review during 

visits to suppliers. We found that 45 percent of the suppliers we visited 

did not meet at least one of the five requirements that we reviewed, 

raising substantial concerns as to whether DMEPOS suppliers in South 

Florida are in compliance with the most basic of supplier standards. 

As CMS states in its comments, we worked closely with CMS and NSC 

staff in developing the protocol for this study. This joint effort allowed 

for unannounced site visits to a large population of DMEPOS suppliers 

during a several week period. Visiting a large number of suppliers 

without forewarning in a short period of time was crucial to ensuring 

that suppliers were not alerted to our efforts. 

Given the overwhelming evidence of noncompliance with supplier 

standards in South Florida, it is essential that our recommendations be 

promptly implemented to ensure the integrity of the Medicare program 

and to protect beneficiaries from potentially unscrupulous suppliers. 

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Δ APPENDIX A 

Medicare DMEPOS Supplier Standards 

(1) Operates its business and furnishes Medicare-covered items in compliance with all 

applicable Federal and State licensure and regulatory requirements; 

(2) Has not made, or caused to be made, any false statement or misrepresentation of a 

material fact on its application for billing privileges. (The supplier must provide complete and 

accurate information in response to questions on its application for billing privileges. The 

supplier must report to CMS any changes in information supplied on the application within 

30 days of the change.); 

(3) Must have the application for billing privileges signed by an individual whose signature 

binds a supplier; 

(4) Fills orders, fabricates, or fits items from its own inventory or by contracting with other 

companies for the purchase of items necessary to fill the order. If it does, it must provide, 

upon request, copies of contracts or other documentation showing compliance with this 

standard. A supplier may not contract with any entity that is currently excluded from the 

Medicare program, any State health care programs, or from any other Federal Government

Executive Branch procurement or nonprocurement program or activity; 

(5) Advises beneficiaries that they may either rent or purchase inexpensive or routinely 

purchased durable medical equipment, and of the purchase option for capped rental durable 

medical equipment, as defined in Sec. 414.220(a) of this subchapter. (The supplier must

provide, upon request, documentation that it has provided beneficiaries with this information, 

in the form of copies of letters, logs, or signed notices.); 

(6) Honors all warranties expressed and implied under applicable State law. A supplier must 

not charge the beneficiary or the Medicare program for the repair or replacement of 

Medicare-covered items or for services covered under warranty. This standard applies to all 

purchased and rented items, including capped rental items, as described in Sec. 414.229 of 

this subchapter. The supplier must provide, upon request, documentation that it has 

provided beneficiaries with information about Medicare-covered items covered under 

warranty, in the form of copies of letters, logs, or signed notices; 

(7) Maintains a physical facility on an appropriate site. The physical facility must contain 

space for storing business records including the supplier's delivery, maintenance, and 

beneficiary communication records. For purposes of this standard, a post office box or

commercial mailbox is not considered a physical facility. In the case of a multisite supplier, 

records may be maintained at a centralized location; 

(8) Permits CMS, or its agents to conduct on-site inspections to ascertain supplier compliance 

with the requirements of this section. The supplier location must be accessible during 

reasonable business hours to beneficiaries and to CMS, and must maintain a visible sign and 

posted hours of operation; 

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APP E N D I X ~A 

(9) Maintains a primary business telephone listed under the name of the business locally or 

toll-free for beneficiaries. The supplier must furnish information to beneficiaries at the time 

of delivery of items on how the beneficiary can contact the supplier by telephone. The 

exclusive use of a beeper number, answering service, pager, facsimile machine, car phone, or

an answering machine may not be used as the primary business telephone for purposes of this 

regulation; 

(10) Has a comprehensive liability insurance policy in the amount of at least $300,000 that 

covers both the supplier's place of business and all customers and employees of the supplier. 

In the case of a supplier that manufactures its own items, this insurance must also cover 

product liability and completed operations. Failure to maintain required insurance at all 

times will result in revocation of the supplier’s billing privileges retroactive to the date the 

insurance lapsed; 

(11) Must agree not to contact a beneficiary by telephone when supplying a Medicare-covered 

item unless one of the following applies: 

(i) The individual has given written permission to the supplier to contact them by telephone 

concerning the furnishing of a Medicare-covered item that is to be rented or purchased.

(ii) The supplier has furnished a Medicare-covered item to the individual and the supplier is 

contacting the individual to coordinate the delivery of the item. 

(iii) If the contact concerns the furnishing of a Medicare-covered item other than a covered 

item already furnished to the individual, the supplier has furnished at least one covered item 

to the individual during the 15-month period preceding the date on which the supplier makes 

such contact. 

(12) Must be responsible for the delivery of Medicare covered items to beneficiaries and 

maintain proof of delivery. (The supplier must document that it or another qualified party 

has at an appropriate time, provided beneficiaries with necessary information and 

instructions on how to use Medicare-covered items safely and effectively); 

(13) Must answer questions and respond to complaints a beneficiary has about the 

Medicare-covered item that was sold or rented. A supplier must refer beneficiaries with 

Medicare questions to the appropriate carrier. A supplier must maintain documentation of

contacts with beneficiaries regarding complaints or questions; 

(14) Must maintain and replace at no charge or repair directly, or through a service contract 

with another company, Medicare-covered items it has rented to beneficiaries. The item must 

function as required and intended after being repaired or replaced; 

(15) Must accept returns from beneficiaries of substandard (less than full quality for the 

particular item or unsuitable items, inappropriate for the beneficiary at the time it was fitted 

and rented or sold); 

(16) Must disclose these supplier standards to each beneficiary to whom it supplies a 

Medicare-covered item; 

(17) Must comply with the disclosure provisions in Sec. 420.206 of this subchapter; 

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APP E N D I X ~A 

(18) Must not convey or reassign a supplier number; 

(19) Must have a complaint resolution protocol to address beneficiary complaints that relate to

supplier standards in paragraph (c) of this section and keep written complaints, related 

correspondence and any notes of actions taken in response to written and oral complaints. 

Failure to maintain such information may be considered evidence that supplier standards 

have not been met. (This information must be kept at its physical facility and made available 

to CMS, upon request.); 

(20) Must maintain the following information on all written and oral beneficiary complaints, 

including telephone complaints, it receives: 

(i) The name, address, telephone number, and health insurance claim number of the 

beneficiary.

(ii) A summary of the complaint; the date it was received; the name of the person receiving the

complaint, and a summary of actions taken to resolve the complaint. 

(iii) If an investigation was not conducted, the name of the person making the decision and the 

reason for the decision. 

(21) Provides to CMS, upon request, any information required by the Medicare statute and 

implementing regulations. 

The following items have recently been added as Medicare suppliers standards in the Federal 

Register notice dated August 18, 2006. However, CMS has not set a deadline for DMEPOS 

suppliers to become accredited in order to retain/obtain a billing number. Therefore, at the 

time of our review, suppliers needed to comply with only 21 standards to enroll in the 

Medicare program. 

(22) All suppliers of DMEPOS and other items and services must be accredited by a 

CMS-approved accreditation organization in order to receive and retain a supplier billing 

number. The accreditation must indicate the specific products and services for which the 

supplier is accredited in order for the supplier to receive payment for those specific products 

and services. 

(23) All DMEPOS suppliers must notify their accreditation organization when a new 

DMEPOS location is opened. The accreditation organization may accredit the new supplier 

location for 3 months after it is operational without requiring a new site visit. 

(24) All DMEPOS supplier locations, whether owned or subcontracted, must meet the 

DMEPOS quality standards and be separately accredited in order to bill Medicare. An 

accredited supplier may be denied enrollment or their enrollment may be revoked, if CMS 

determines that they are not in compliance with the DMEPOS quality standards. 

(25) All DMEPOS suppliers must disclose upon enrollment all products and services, 

including the addition of new product lines for which they are seeking accreditation. If a new 

product line is added after enrollment, the DMEPOS supplier will be responsible for notifying 

the accrediting body of the new product so that the DMEPOS supplier can be re-surveyed and

accredited for these new products. 

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Δ APPENDIX B 

Primary Specialty Types for Suppliers Visited in South Florida 

Primary specialty Number of 

suppliers 

Percentage of 

suppliers1 

Number of 

suppliers that did 

not maintain 

physical facilities 

or were not 

accessible 

Percentage of 

suppliers that 

did not maintain 

physical facilities 

or were not 

accessible1 

Medical Supply Company—Other 836 52.88 413 84.11 

Pharmacy 410 25.93 41 8.35 

Podiatry 234 14.80 21 4.28 

Medical Supply Company With 

Respiratory Therapist 34 2.15 8 1.63 

Medical Supply Company—Certified 

Orthotist 18 1.14 4 0.81 

Independently Practicing Occupational 

Therapist 17 1.08 1 0.20 

Independently Practicing Physical 

Therapist 14 0.89 2 0.41 

Medical Supply Company—Certified 

Prosthetist 9 0.57 0 0.00 

Medical Supply Company—Certified 

Orthotist/ Prosthetist 6 0.38 0 0.00 

Unknown Physician Specialty 3 0.19 1 0.20 

Total 1,581 100 491 100 

Source: Office of Inspector General analysis of suppliers’ primary specialty types listed in October 16, 2006, National Supplier Clearinghouse enrollment 

data. 

1

Percentages are rounded. 

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Δ APPENDIX C 

County Locations for Suppliers Visited in South Florida 

County Number of 

suppliers 

Percentage of 

suppliers1 

Number of 

suppliers that did 

not maintain 

physical facilities 

or were not 

accessible 

Percentage of 

suppliers that 

did not maintain 

physical facilities 

or were not 

accessible1 

Miami-Dade 1,013 64.07 394 80.24 

Broward 311 19.67 59 12.02 

Palm Beach 257 16.26 38 7.74 

Total 1,581 100 491 100 

Source: Office of Inspector General analysis of suppliers’ addresses listed in October 16, 2006, National Supplier Clearinghouse enrollment data. 

1

Percentages are rounded. 

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 O E I - 0 3 - 0 7 - 0 0 1 5 0 S OUTH F LORIDA S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 18 

Agency Comments 

Δ APPENDIX D 
 

 O E I - 0 3 - 0 7 - 0 0 1 5 0 S OUTH F LORIDA S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 19 

APPENDIX~D 
 

 O E I - 0 3 - 0 7 - 0 0 1 5 0 S OUTH F LORIDA S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 20 

APPENDIX~D 
 

 O E I - 0 3 - 0 7 - 0 0 1 5 0 S OUTH F LORIDA S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 21 

APPENDIX~D 
ΔA CKNO W L EDG M ENT S

 ACKNOWLEDGMENTS 

This report was prepared under the direction of Robert A. Vito, Regional 

Inspector General for Evaluation and Inspections in the Philadelphia 

regional office, and Linda M. Ragone, Deputy Regional Inspector 

General. 

Tanaz Dutia and Amy Sernyak served as the team leaders for this 

study. Other principal Office of Evaluation and Inspections staff from 

the Philadelphia regional office who contributed to this report include 

Jessica Demko, Diane Epstein, Cynthia Hansford, Maria Johnson, 

Conswelia McCourt, Emily Multari, Roman Strakovsky, and Stephanie 

Yeager; other regional and central office staff who contributed include 

Suzanne Bailey, Mark Biagioni, Diane Caves, Peggy Daniel, Jaime 

Durley, Deborah Harvey, Michael Henry, Scott Hutchison, Scott 

Manley, Gerius Patterson, Steven Zerebecki, and Mina Zadeh. 

We also would like to acknowledge the contributions of staff from the 

Office of Inspector General’s Office of Audit Services and Office of 

Investigations, the Centers for Medicare & Medicaid Services, and the 

National Supplier Clearinghouse. 

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