Department of Health and Human Services
 

OFFICE OF 

INSPECTOR GENERAL 

LOS ANGELES COUNTY SUPPLIERS’
 

COMPLIANCE WITH MEDICARE 


STANDARDS: RESULTS FROM
 

UNANNOUNCED VISITS 


Daniel R. Levinson
 

Inspector General 


February 2008
 

OEI-09-07-00550
 
 

 

 

 

 

 

 

 

 

 

 

 

 

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 SUMMARY 

OBJECTIVE 

To conduct unannounced site visits of suppliers of Medicare durable 

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

Los Angeles County to (1) determine their compliance with selected 

Medicare supplier standards and (2) identify their atypical 

characteristics. 

BACKGROUND 

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 submit 

claims for Medicare reimbursement. DMEPOS suppliers are required 

to comply with 5 conditions and 25 supplier standards to enroll in the 

Medicare program and receive payment for a Medicare-covered item. 

The Centers for Medicare & Medicaid Services (CMS) contracts with the 

National Supplier Clearinghouse (NSC) to manage the enrollment and 

reenrollment of suppliers in the Medicare program. 

According to the Department of Health and Human Services, Los 

Angeles is a high-risk area for fraudulent activity involving DMEPOS 

suppliers. Supplier site inspections conducted by NSC underscore the 

risks in Los Angeles County. In 2006, NSC conducted 401 inspections 

in Los Angeles County and revoked the billing privileges of 95 suppliers. 

In the 12 months beginning July 1, 2006, Medicare allowed 

approximately $245 million for DMEPOS provided in Los Angeles 

County and $8.6 billion nationwide. 

We focused on four requirements with which compliance could be 

verified quickly through direct observation: suppliers must (1) maintain 

physical facilities, (2) be accessible during business hours, (3) have 

visible signs, and (4) post hours of operation. We conducted 

unannounced site visits of 905 suppliers in Los Angeles County in late 

2007. In addition, we analyzed the suppliers’ billing patterns. 

FINDINGS 

In Los Angeles County, 115 of 905 suppliers (13 percent) did not 

maintain physical facilities or were not open during unannounced site 

visits. Thirteen percent of the suppliers we visited (115 of 905) did not 

maintain physical facilities or were not open during our unannounced 

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E X E CUTIVE S U MMAR Y 

site visits. Thirty suppliers did not maintain physical facilities, and 

85 suppliers were not accessible during business hours. Medicare 

allowed $21 million in the 12 months beginning July 1, 2006, for these 

suppliers’ claims. 

Another 79 suppliers (9 percent) were open but did not meet at least 

one of the two additional requirements for the standards we reviewed. 

Seventy-eight suppliers did not post hours of operation, but were open 

during reasonable business hours (10 a.m. to 4 p.m.). Five suppliers did 

not post signs indicating a business name. Four suppliers did not meet 

either requirement. 

An additional 124 suppliers (14 percent) met the requirements for the 

standards we reviewed, but their claims had in common an atypical 

characteristic. More than half of the Medicare beneficiaries for these 

124 suppliers did not receive other Medicare services (such as an office 

visit) from the ordering physician within a 6-month period preceding the 

DMEPOS claim. Eighty-nine percent of these suppliers have the 

primary specialty “Medical Supply Company—Other.” 

RECOMMENDATION 

Our findings in this report, along with past Office of Inspector General 

(OIG) work in Florida, demonstrate that noncompliant suppliers are 

enrolled in the Medicare program. We recognize that CMS recently has 

taken action to address vulnerabilities in the DMEPOS benefit, 

particularly in Florida and California, including initiating a 2-year 

DMEPOS demonstration project in November 2007. Although this 

demonstration project has potential to prevent fraud, permanent 

corrective action is warranted to prevent fraudulent providers from 

entering and participating in Medicare. Therefore, we recommend that 

CMS: 

Strengthen the Medicare DMEPOS supplier enrollment process and 

ensure that suppliers meet Medicare supplier standards. OIG 

presented a number of options to CMS in its March 2007 report, “South 

Florida Suppliers’ Compliance With Medicare Standards: Results From 

Unannounced Visits” (OEI-03-07-00150). CMS has made progress 

toward implementing some of those options for strengthening the 

Medicare DMEPOS supplier enrollment process and compliance with 

supplier standards. We continue to recommend that CMS: 

•	 conduct more unannounced site visits to suppliers, which could 

include full site inspections and abbreviated site inspections, to 

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EXECUTIVE SUMMARY 

supplement, not replace full site inspections and to determine 

whether suppliers still exist at the addresses on record; 

•	 perform more rigorous background checks of applicants and 

currently enrolled high-risk suppliers (including business owners 

and managing employees); 

•	 assess the fraud risk of suppliers and focus monitoring and 

enforcement on high-risk suppliers; 

•	 increase prepayment review of DMEPOS claims, especially claims 

from new suppliers and suppliers deemed high risk; 

•	 require suppliers in areas particularly vulnerable to fraud and 

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

and 

•	 strengthen the Medicare supplier standards by establishing a 

minimum number of hours of operation and establishing 

minimum inventory requirements for product and service types. 

In addition, we recommend that CMS: 

•	 require all suppliers to pay a Medicare enrollment application 

fee to cover the costs of: (1) full site inspections or abbreviated 

site inspections to monitor suppliers’ compliance with Medicare 

standards and (2) criminal background checks; 

•	 require a supplier to pay an additional Medicare enrollment fee if, 

during a site visit (conducted during business hours), the 

supplier’s facility is closed or inaccessible, necessitating an 

additional site visit; and 

•	 seek legislative authority to impose temporary moratoriums, on 

an as-needed basis, on supplier enrollment in high-fraud areas. 

In addition, we sent to CMS information about the suppliers we visited 

that did not meet one or more of the four requirements. Based on our 

findings and its own followup, CMS should take appropriate action. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS stated that it believes that it has already addressed the majority of 

the options we recommend in this report that also appear in “South 

Florida Suppliers’ Compliance With Medicare Standards: Results From 

Unannounced Visits” (OEI-03-07-00150). Specifically, CMS modified its 

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EXECUTIVE SUMMARY 

scope of work with NSC to increase the frequency of unannounced site 

visits and to assess the fraud risk of suppliers in certain high fraud 

areas. CMS will consider increasing prepayment review of suppliers’ 

claims and is in the process of conducting “targeted background checks 

on suppliers.” CMS may consider establishing more frequent 

reenrollment requirements for suppliers. CMS is seeking public 

comment on a proposed rule that would establish a minimum number of 

hours of operation required for suppliers. 

Regarding the new recommendations in this report, CMS stated that 

suppliers must pay a fee to the accrediting organization for an initial 

site visit and that “criminal background checks are conducted as 

required by State standards.” We note that our new recommendations 

regarding site inspections and application fees pertain to NSC’s actions 

to enforce compliance with Medicare supplier standards: the fees we 

suggest would be paid to the Federal Government. The accrediting 

organization and NSC are independent of one another and address 

different standards. We have modified our recommendation to clarify 

this point. Finally, CMS will consider seeking legislative authority to 

impose temporary moratoriums on supplier enrollment. 

CMS did not indicate whether it concurred with our recommendation to 

establish minimum inventory requirements. We ask that, in its final 

management decision, CMS more clearly indicate whether it concurs 

with this recommendation and what steps, if any, it will take to 

implement it. 

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Δ TABLE OF CONTENTS 

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

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

FINDINGS ................................................. 8 

In Los Angeles County, 115 of 905 suppliers (13 percent) 

 did not maintain physical facilities or were not open 

 during unannounced site visits............................. 8 

Another 79 suppliers (9 percent) were open but 

 did not meet at least one of the two additional requirements 

 for the standards we reviewed ............................ 11 
 

An additional 124 suppliers (14 percent) met the requirements 

 for the standards we reviewed, but their claims had in common 

 an atypical characteristic.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 
 

RECOMMENDATION ...................................... 14 
 

Agency Comments and 

 Office of Inspector General Response ....................... 16 
 

APPENDIXES ............................................. 18 
 

A: Conditions for Medicare Payments for Durable Medical 

 Equipment, Prosthetics, Orthotics, and Supplies 

 (DMEPOS)......................................... 18 
 

B: Medicare DMEPOS Supplier Standards ................. 19 
 

C: Supplier Site Visit Process ............................ 24 
 

D: Primary Specialty Supplier Types Visited in 

 Los Angeles County ................................. 26 
 

E: Agency Comments ................................... 27 
 

ACKNOWLEDGMENTS .................................... 30 
 
INTRODUCTION Δ INTRODUCTION 

OBJECTIVE 

To conduct unannounced site visits of suppliers of Medicare durable 

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

Los Angeles County to (1) determine their compliance with selected 

Medicare supplier standards and (2) identify their atypical 

characteristics. 

BACKGROUND 

Medicare Coverage of Durable Medical Equipment, Prosthetics, Orthotics, 

and Supplies 

Pursuant to Title XVIII of the Social Security Act, DMEPOS are covered 

under Medicare Part B and include such items as hospital beds, 

wheelchairs, respirators, walkers, artificial limbs, and wound care 

supplies.1 Medicare pays for DMEPOS that are necessary and 

reasonable for the treatment of a beneficiary’s illness or injury or to 

improve the function of a malformed body member. Medicare covers 

medical equipment only when it is ordered for a beneficiary by a 

physician or, in some cases, a nonphysician practitioner. 

Medicare Enrollment of Durable Medical Equipment, Prosthetics, Orthotics, 

and Supplies Suppliers 

The Centers for Medicare & Medicaid Services (CMS) contracts with the 

National Supplier Clearinghouse (NSC), operated by Palmetto 

Government Benefits Administrator (Palmetto GBA), to manage the 

enrollment of suppliers. Suppliers must enroll in Medicare to submit 

claims for reimbursement.2 The enrollment process involves obtaining a 

National Provider Identifier (NPI), completing a Medicare enrollment 

application, and satisfying the Medicare DMEPOS conditions and 

supplier standards. 

Supplier conditions and standards. Pursuant to 42 CFR § 424.57(b), 

DMEPOS suppliers must meet five conditions to be eligible to receive 

payment for a Medicare-covered item. (See Appendix A for a list of 

these conditions.) In addition to meeting these conditions, suppliers 

must meet and certify that they meet and will continue to meet the 

1 Social Security Act §§ 1832, 1834, and 1861. 

2 42 CFR § 424.505. 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 1 
 

 

 

INTROD U C T I O N 

25 standards imposed pursuant to 42 CFR § 424.57(c).3 (See 

Appendix B for a list of the standards.) CMS can revoke suppliers’ 

billing privileges if they fail to meet the conditions and standards.4 

Application. New applicants must obtain their NPIs before they can 

complete an application.5 The NPI is a unique identifier for health care 

providers that is assigned by the National Plan and Provider 

Enumeration System. Suppliers also must submit supporting 

documentation with every application.6 A supplier must complete and 

submit the Medicare Enrollment Application when: 

• enrolling in Medicare for the first time, 

• reporting certain changes from the initial application, 

• adding another business location, 

• verifying the accuracy of information on an original application, or 

• reenrolling or deactivating a billing number.7 

Site visits. NSC can inspect a supplier’s site to ascertain compliance 

with the conditions and standards8 and to verify enrollment 

information.9 After a supplier submits an enrollment application, NSC 

conducts an unannounced site visit to ensure that the supplier complies 

with the conditions and standards. Following the inspection, NSC 

notifies the supplier in writing, generally within 60 days, whether it has 

3 Initially there were 21 supplier standards. Four additional supplier standards were 

added by a Federal Register notice dated April 10, 2007. The additional supplier 

standards relate to competitive bidding and supplier accreditation. However, applicable 

suppliers had until September and October 2007, respectively, to meet the competitive 

bidding and accreditation requirements. 

4 42 CFR § 424.57(d). 

5 Centers for Medicare & Medicaid Services (CMS), “Medicare Enrollment for Durable 

Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Suppliers,” May 2007. 

Available online at 

http://www.cms.hhs.gov/MedicareProviderSupEnroll/Downloads/DurableMedicalEquip.pdf. 

Accessed November 5, 2007. 

6 42 CFR § 424.510. 

7 Palmetto Government Benefits Administrator (Palmetto GBA), “Helpful Hints on 

Completing the 855S for an Additional Location,” revised February 5, 2007. Available 

online at 

http://www.palmettogba.com/palmetto/providers.nsf/Attachments/2343214C3D5F4CE685 

25734E0048000C/$FILE/Helpful+Hints+on+completing+the+855S+-

+Additional+Locations.pdf. Accessed November 5, 2007. 

8 42 CFR § 424.57(c)(8). 

9 42 CFR § 424.510(d)(8). 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 2 
 

INTRODUCTION 

approved the application. To continue billing Medicare, the supplier 

must renew its application every 3 years.10 NSC then may conduct an 

additional site visit to confirm whether the supplier complies with the 

conditions and standards. (See Appendix C for more details on the site 

visit process.) 

Vulnerabilities in the Site Inspection Process 

Generally, once a DMEPOS supplier has had an enrollment or 

reenrollment site visit, NSC does not revisit the supplier for 3 years. 

NSC may conduct additional site visits if it suspects that a supplier is in 

violation of one or more Medicare standards. Recent Office of Inspector 

General (OIG) findings11 suggest that suppliers can defraud Medicare 

by establishing businesses that are not maintained or staffed after NSC 

conducts the initial or reenrollment site visit. 

Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 

Vulnerabilities in South Florida and Los Angeles County 

This report is one of a series of recent OIG reports on vulnerabilities in 

the Medicare DMEPOS benefit, including the March 2007 report, 

“South Florida Suppliers’ Compliance With Medicare Standards: 

Results From Unannounced Visits” (OEI-03-07-00150). OIG reviewed 

suppliers in three South Florida counties (Miami-Dade, Broward, and 

Palm Beach) to assess their compliance with selected Medicare supplier 

standards. The review focused on three supplier standards with which 

compliance could be verified quickly through direct observation and 

desk review. OIG conducted 1,581 unannounced site visits and 

identified 491 suppliers (31 percent) that did not maintain physical 

facilities or were not accessible during reasonable business hours. OIG 

referred these suppliers to CMS to consider revoking their Medicare 

billing numbers. 

Recent work by NSC indicates that DMEPOS suppliers in Los Angeles 

County may have characteristics similar to those of suppliers in South 

Florida. In 2006, NSC conducted 401 inspections in Los Angeles County 

and revoked the billing privileges of 95 suppliers.12 From 2002 

OEI-09-07-00550

10 42 CFR § 424.57 (e). 

11 Office of Inspector General (OIG), “Medical Equipment Suppliers: Compliance With 

Medicare Enrollment Requirements” (OEI-04-05-00380), March 2007. 

12 CMS, “Medicare Provider Enrollment Demonstration Involving Suppliers of Durable 

Medical Equipment, Prosthetics, Orthotics, and Supplies in High-Risk Areas, 

July 2, 2007.” Available online at 

http://www.hhs.gov/news/facts/medicarefraud/index.html. Accessed July 19, 2007. 

L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 3 
 

INTRODUCTION 

through 2006, the number of DMEPOS suppliers, the amount of 

DMEPOS billing, and the number of revocations all increased in 

Los Angeles County.13 In the 12 months beginning July 1, 2006, 

Medicare allowed approximately $245 million for DMEPOS provided in 

Los Angeles County and $8.6 billion nationwide.14 

Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 

Demonstration Project 

On November 1, 2007, CMS began a 2-year demonstration project15 

involving all DMEPOS suppliers located in Miami-Dade, Broward, and 

Palm Beach Counties in Florida and Los Angeles, Orange, Riverside, 

and San Bernardino Counties in California. CMS designed the project 

to improve its ability to detect and prevent fraud. In the first 3 months 

of the demonstration, NSC required all suppliers in these seven counties 

to submit new Medicare Enrollment Applications. If a supplier does not 

submit an application within 30 days, NSC will immediately revoke its 

billing privileges. For suppliers that submit new applications, NSC will 

conduct new site inspections. In addition, NSC will revoke suppliers’ 

billing privileges if suppliers: 

•	 fail to report changes in ownership or addresses within 30 days of 

the effective date of the change, 

•	 are required by NSC to obtain accreditation and fail to do so 

within 90 days, 

•	 have owners or managing employees who were convicted of 

felonies in the last 10 years, or 

•	 no longer meet each requirement for enrollment. 

Suppliers covered under the demonstration project will be subject to 

additional, enhanced review designed to detect fraud. 

Related Office of Inspector General Studies 

In 1997, OIG issued “Medical Equipment Suppliers: Assuring 

Legitimacy” (OEI-04-96-00240). OIG examined Medicare supplier 

enrollment practices in 12 large metropolitan areas in five States. 

OEI-09-07-00550

13 Ibid. 

14 OIG analyses of Medicare National Claims History, 2007. 

15 Palmetto GBA, “Medicare Provider Enrollment Demonstration Project,” 

October 2007. Available online at 

http://www.palmettogba.com/palmetto/providers.nsf/Attachments/85256D580043E754852 

57360004A7023/$FILE/NSC+News+-+October+2007.pdf. Accessed November 5, 2007. 

L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 4 
INTRODUCTION 

Based on unannounced site visits, OIG found that the enrollment 

process—desk review and verification of applicants—was unreliable for 

detecting unethical and improper practices of suppliers, particularly 

because supplier enrollment at the time did not involve onsite 

verification of supplier application data. One of the options OIG 

recommended for ensuring the integrity of Medicare suppliers was for 

CMS to conduct onsite visits at applicants’ physical locations. CMS 

concurred but stated that limited resources allowed onsite visits to be 

conducted only in 

high-risk areas. 

In August 2001, OIG issued a follow-up report entitled “Medical 

Equipment Suppliers: Compliance With Medicare Standards” 

(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. 

In March 2007, OIG issued “Medical Equipment Suppliers: Compliance 

With Medicare Enrollment Requirements” (OEI-04-05-00380). OIG 

conducted unannounced site visits in 2005 and found that 10 of the 

169 DMEPOS suppliers that were reviewed did not exist at their 

business addresses. However, these 10 suppliers billed Medicare almost 

$393,000 in the 2 months after OIG had determined that they were 

nonexistent and received almost $197,000 in reimbursements. The 

report concluded that out-of-cycle site visits may help to prevent fraud, 

waste, and abuse in the Medicare program. 

METHODOLOGY 

Scope of Review 

We focused on two supplier standards with which compliance could be 

verified quickly through direct observation. These standards include 

four specific requirements: 

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

•	 The facility must be accessible during reasonable business hours 

 (Standard 8). 

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

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INTROD 
 UCTION 

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

Sample 

Our review focused on 905 suppliers in Los Angeles County. Using NSC 

enrollment data as of August 22, 2007, we identified all active DMEPOS 

suppliers in Los Angeles County. NSC enrollment data are updated 

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

this list, we selected seven primary specialty supplier types for inclusion 

in our review. Appendix D lists the primary specialty supplier types. 

To be consistent with our 2006 review of South Florida DMEPOS 

suppliers, we excluded large chain suppliers (25 stores or more) from 

our review. We also excluded suppliers under investigation by OIG and 

suppliers whose Medicare billing numbers had been revoked by NSC. 

Data Collection and Analysis 

We conducted unannounced site visits to all 905 suppliers to determine 

whether suppliers complied with the four requirements related to 

Standards 7 and 8. We recorded all observations using a standardized 

protocol. OIG staff conducted all site visits in September and 

October 2007. We developed the following 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 it did not exist at the business address on file with NSC. 

•	 We determined that a supplier was not accessible during business 

hours if it was closed during site visits that occurred on two 

different weekdays (Monday through Friday). We considered the 

facility closed if (1) the door was locked (and there was no 

doorbell) or (2) the door was locked and no one responded to the 

doorbell (if there was a doorbell). We conducted all visits during 

the suppliers’ posted business hours. If a supplier did not post 

business hours, we conducted the visits during reasonable 

business hours (10 a.m. to 4 p.m., Monday through Friday). 

•	 We also determined that a supplier was not accessible during 

business hours on multiple visits if it (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 or had posted the 

same sign during a third site visit. 

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INTROD U C T I O N 

In total, we conducted more than 1,200 unannounced visits. We 

aggregated the site visit results to determine the number of suppliers 

that were not in compliance with the four requirements. We reviewed 

and categorized our direct observations of the physical facilities to 

provide more detailed information about the site visits and to compare 

and contrast the suppliers’ observable features. During our site visits, 

we took photographs of selected suppliers. 

In addition, we analyzed the Medicare claims patterns of the suppliers 

we visited and the national population of active and revoked suppliers. 

(See Table 1 on page 12.)16 Data for the suppliers’ claims came from 

Medicare’s National Claims History. Supplier enrollment information 

came from NSC’s supplier enrollment files. We used SAS analytical 

software to analyze all data. 

Limitations 

We designed this review to collect data about DMEPOS suppliers while 

remaining undetected during unannounced site visits. Our review was 

limited to providing compliance data on two Medicare supplier 

standards that include four requirements. We did not conduct full 

compliance reviews that would address all 25 standards. 

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. 

16 For this analysis, we limited the population to suppliers that billed more than $10,000 

for DMEPOS in the 12 months beginning July 1, 2006. 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 7 
Δ FINDINGS 

In Los Angeles County, 115 of 905 suppliers 

(13 percent) did not maintain physical facilities or 

were not open during unannounced site visits 

Thirteen percent of the suppliers we 

visited (115 of 905) did not maintain 

physical facilities or were not open 

during our unannounced site visits to 

their locations in Los Angeles County. 

These suppliers did not maintain appropriate physical facilities, or their 

facilities were not open during posted or reasonable business hours on 

at least two visits. In the 12 months beginning July 1, 2006, Medicare 

allowed $21 million for these suppliers’ claims.17 

“Medical Supply Company—Other” was the primary specialty supplier 

type listed in NSC enrollment data for the majority of suppliers that did 

not maintain physical facilities or were not accessible during posted or 

reasonable business hours (99 of 115). Suppliers with this primary 

specialty accounted for 45 percent of all Los Angeles County suppliers in 

our review but accounted for 86 percent of suppliers in this category. 

(See Appendix D for a breakout of all 115 suppliers by primary specialty 

supplier type.) 

Three percent of suppliers (30 of 905) did not maintain physical facilities 

Medicare requires all DMEPOS suppliers to maintain “a physical 

facility on an appropriate site.”18 However, 30 of the suppliers we 

visited did not maintain physical facilities. Instead of finding 

operational facilities, we found vacant facilities or facilities in which 

other types of businesses were operating. 

Twenty facilities were vacant. These facilities were vacant and closed for 

business. Although these suppliers have active enrollment files and 

most have recent paid Medicare claims, we found no operational 

businesses at the suppliers’ locations. For all but 5 of these 

20 suppliers, Medicare allowed claims in the 12 months beginning 

July 1, 2006. In total, Medicare allowed approximately $3 million for 

these suppliers in the 12 months beginning July 1, 2006. For example, 

one supplier associated with a vacant facility was allowed $301,687 in 

the 12 months beginning July 1, 2006. We observed the same two signs 

stating “out for delivery” and “return at 2:15 p.m.” in the facility’s 

window on two visits on different weekdays. The signs appeared to be 

permanent fixtures, and the facility was devoid of medical supplies or 

17 At the time that we issued this report, the most recent Medicare claims data 

available to us covered the 12 months beginning July 1, 2006. 

18 42 CFR § 424.57(c). 

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FINDINGS 

any evidence suggesting that it was an operational business. (See Photo 

1 below.) 

PHOTO 1 

The supplier was 

actively enrolled in 

Medicare, but the 

facility was vacant. 

 Source: OIG unannounced site visits to DMEPOS facilities in Los Angeles County, September 2007. 

Eight facilities did not appear to be DMEPOS facilities. Instead of finding 

medical equipment suppliers, we found other businesses operating at 

the addresses on record with NSC. In six instances, the businesses 

were an art gallery, a tutoring business, a trucking company, an 

insurance sales office, a vitamin supplement company, and physicians’ 

offices. Two additional locations were private residences, with no 

business signs or posted business hours. 

For the supplier whose facility is now an art gallery, Medicare allowed 

approximately $5 million in the 12 months beginning July 1, 2006. 

Suppliers have 30 days from the date of an address change to inform 

NSC.19 However, at the time of our visits, the art gallery had been 

open at the supplier’s address for about 5 months. Medicare allowed 

more than $1 million during the first 3 months of this 5-month period.20 

The only other address listed in NSC files for this supplier is a post 

19 42 CFR § 424.57(c)(2). 

20 At the time we issued this report, we did not have access to the last 2 months of 

DMEPOS claims for the 5-month period. 

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FINDINGS 

office box, which is shared by two other suppliers. These other two 

suppliers failed NSC site inspections and currently are not enrolled 

with NSC as active suppliers. For all three suppliers, the post office box 

is listed as the “pay to” address—the address to which Medicare sends 

reimbursement checks. 

The addresses listed with NSC were not valid for two suppliers, and we 

could not confirm the suppliers’ existence. In both cases, the street 

addresses existed; however, the suite numbers associated with the 

suppliers did not. There was no sign indicating that the supplier had 

moved, or that the supplier occupied another suite in the building. 

Nine percent of suppliers (85 of 905) were not open during business hours 

Nine percent of the 905 DMEPOS suppliers were not open during 

posted or reasonable business hours. The average weekly hours of 

operation posted for these suppliers was 30 hours compared to 44 hours 

among the suppliers that were open during business hours.21 When 

business hours were not posted, we considered 10 a.m. to 4 p.m. on 

weekdays to be reasonable business hours and conducted our visits 

accordingly. 

In the 12 months beginning July 1, 2006, Medicare allowed 

approximately $11 million for these 85 suppliers’ claims. The median 

allowed per supplier was $82,314. For example, Medicare allowed 

$219,226 for one supplier we found inaccessible during its posted 

business hours. This supplier appeared to share space with a tax return 

preparation service and a notary public. We photographed the facility 

during its posted business hours. (See Photo 2 on the next page.) We 

visited another supplier three times during reasonable business hours, 

but the supplier changed its posted business hours prior to each of our 

visits and was closed during each visit. During each visit, we observed 

no DMEPOS visible through the facility’s windows. Medicare allowed 

$152,485 for that supplier’s claims in the 12 months beginning 

July 1, 2006. 

21 To calculate the average hours of operation, we included only the suppliers that 

posted hours of operation. Five of the eighty-five suppliers that were closed did not post 

hours of operation. Of the 790 suppliers that were open during business hours, 78 did not 

post hours of operation. 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 10 
 

 

FINDINGS 

PHOTO 2 

The supplier 

was actively 

enrolled in 

Medicare but 

not accessible 

during its 

posted 

business hours 

on two 

unannounced 

visits. 

Source: OIG unannounced site visits to DMEPOS facilities in Los Angeles County, 

September 2007. Supplier-identifying information was redacted. 

Another 79 suppliers (9 percent) were open but 

did not meet at least one of the two additional 

requirements for the standards we reviewed 

Nine percent of suppliers (79 of 

905) were open but did not post 

hours of operation and/or did not 

post signs with their business 

names. 

Seventy-eight suppliers did not post hours of operation but were open 

during reasonable business hours. Five suppliers did not post signs 

indicating a business name. Four suppliers did not meet either 

requirement. 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 11 
 

 

 

 

 

 

 

F I NDING S 

The remaining 79 percent of suppliers we visited (711 of 905) met all 

four of the requirements included in our review.22 

An additional 124 suppliers (14 percent) met the 

requirements for the standards 

we reviewed, but their claims had in common 

an atypical characteristic 

Fourteen percent of the suppliers we 

visited met the four requirements, but 

more than half of the Medicare 

beneficiaries for these 124 suppliers 

did not receive other Medicare 

services (such as an office visit) from 

the physicians who ordered the DMEPOS within the 6-month period 

preceding the DMEPOS claims23 (see Table 1). Generally, physicians 

provide services prior to ordering medical equipment for their patients. 

However, Medicare does not require physicians to conduct face-to-face 

examinations of patients to write a prescription for any DMEPOS 

except power mobility devices.24 

TABLE 1 

More than half of the 

beneficiaries for 

whom the suppliers 

billed did not receive 

other Medicare 

services (such as an 

office visit) from the 

physicians who 

ordered the DMEPOS. 

Suppliers Whose Claims Had 

An Atypical Characteristic 

DMEPOS Suppliers 

(Allowed more than $10,000 in Medicare claims 

for DMEPOS) Population Number Percentage 

Los Angeles Review Population

 -Met the four requirements we reviewed 427 124 29% 

-Did not meet one or more of the 

requirements we reviewed 119 63 53% 

National Population 

-Actively billing suppliers 54,913 4,415 8% 

-Revoked suppliers 

(July 1, 2006, to present) 919 619 67% 

Source: OIG analysis of Medicare National Claims History, 2007. 

22 The percentage of suppliers that met the requirement plus the percentage of 

suppliers that did not meet the requirements does not total 100 percent because of 

rounding. 

23 We reviewed Medicare claims data to determine that the beneficiaries did not see 

the ordering physician within a 6-month period preceding the DMEPOS claim. The total 

Los Angeles review population is 905 suppliers. One hundred and seven suppliers had no 

allowed DMEPOS claims in 12 months beginning July 1, 2006, and were excluded from 

this table. Two hundred and fifty-two suppliers were allowed less than $10,000 in the 

same period and also were excluded from the table. Therefore, we analyzed 546 of the 905 

suppliers in the Los Angeles review population. 

24 “Power mobility device means a covered item of durable medical equipment that is 

in a class of wheelchairs that includes a power wheelchair (a four-wheeled motorized 

vehicle whose steering is operated by an electronic device or a joystick to control direction 

and turning) or a power-operated vehicle (a three or four-wheeled motorized scooter that 

is operated by a tiller) that a beneficiary uses in the home.” 42 CFR § 410.38(c)(2)(i). 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 12 
 

FINDINGS 

This characteristic is prevalent among noncompliant suppliers. 

Sixty-seven percent of suppliers nationally whose billing privileges were 

revoked by NSC had a majority of claims for beneficiaries who did not 

receive other Medicare services from the ordering physicians during the 

6 months prior to the DMEPOS claim. Similarly, in this review, 

53 percent of the suppliers that we found to be noncompliant with 

Medicare standards exhibited this characteristic. In contrast, only 

8 percent of actively billing suppliers nationally exhibited this pattern. 

One primary specialty supplier type stands out among suppliers that 

exhibited this characteristic. Eighty-nine percent of these suppliers 

(110 of 124) have the primary specialty “Medical Supply Company— 

Other.” Similarly, 86 percent of the suppliers that did not maintain 

physical facilities or were not open during unannounced site visits have 

the primary specialty “Medical Supply Company—Other.” However, 

this specialty accounts for only 45 percent of the Los Angeles County 

suppliers in our review. 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 13 
 

Δ RECOMMENDATION 

In total, 194 of the 905 suppliers (22 percent) that we visited did not 

meet one or more of the requirements for the Medicare DMEPOS 

standards we reviewed. These suppliers did not maintain physical 

facilities, were not accessible to beneficiaries during posted or 

reasonable business hours, and/or failed to post signs indicating a 

business name and/or hours of operation. An additional 124 suppliers 

(14 percent) met the requirements for the standards we reviewed but 

more than half of their Medicare beneficiaries did not receive other 

Medicare services (such as an office visit) from the physicians who 

ordered the DMEPOS within the 6-month period preceding their 

DMEPOS claims. 

These findings show continued vulnerabilities in the Medicare 

DMEPOS benefit. In March 2007, OIG reported the results of our 

unannounced visits to 1,581 suppliers in South Florida. We identified 

491 suppliers that did not maintain physical facilities or were not 

accessible during business hours. Our work in Florida and California 

demonstrates that noncompliant suppliers are enrolled in the Medicare 

program. Our work also demonstrates that abbreviated site visits may 

be an efficient use of limited resources to identify suppliers that do not 

meet the most basic of supplier standards—existing at the locations 

they report to CMS. 

We recognize that CMS recently has taken action to address 

vulnerabilities in the DMEPOS benefit, particularly in Florida and 

California, including initiating a 2-year DMEPOS demonstration project 

in November 2007. Although this demonstration project has potential 

to prevent fraud, permanent corrective action is warranted to prevent 

fraudulent providers from entering and participating in Medicare. 

Therefore, we recommend that CMS: 

Strengthen the Medicare DMEPOS Supplier Enrollment Process and Ensure 

That Suppliers Meet Medicare Supplier Standards 

OIG presented a number of options to CMS in its March 2007 report, 

“South Florida Suppliers’ Compliance With Medicare Standards: 

Results From Unannounced Visits” (OEI-03-07-00150). CMS has made 

progress toward implementing some of those options for strengthening 

the Medicare DMEPOS supplier enrollment process and compliance 

with supplier standards. We continue to recommend the following: 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 14 
 

 R ECOMMENDATION 

•	 conduct more unannounced site visits to suppliers, which could 

include full site inspections and abbreviated site inspections, to 

supplement, not replace full site inspections and to determine 

whether suppliers still exist at the addresses on record; 

•	 perform more rigorous background checks of applicants and 

currently enrolled high-risk suppliers (including business owners 

and managing employees); 

•	 assess the fraud risk of suppliers and focus monitoring and 

enforcement on high-risk suppliers; 

•	 increase prepayment review of DMEPOS claims, especially claims 

from new suppliers and suppliers deemed high risk; 

•	 require suppliers in areas particularly vulnerable to fraud and 

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

and 

•	 strengthen 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. 

In addition, we recommend that CMS: 

•	 require all suppliers to pay a Medicare enrollment application fee 

to cover the costs of: (1) full site inspections or abbreviated site 

inspections to monitor suppliers’ compliance with Medicare 

standards and (2) criminal background checks; 

•	 require a supplier to pay an additional Medicare enrollment fee if, 

during a site visit (conducted during business hours), the 

supplier’s facility is closed or inaccessible, necessitating an 

additional site visit; and 

•	 seek legislative authority to impose temporary moratoriums, on 

an as-needed basis, on supplier enrollment in high-fraud areas. 

In addition, we sent to CMS information about the suppliers we visited 

that did not meet one or more of the four requirements. Based on our 

findings and its own followup, CMS should take appropriate action. 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 15 
 

 

R E C O MMENDA T I O N 
 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS stated that it believes that it has already addressed the majority of 

the options we recommend in this report that also appear in “South 

Florida Suppliers’ Compliance With Medicare Standards: Results From 

Unannounced Visits” (OEI-03-07-00150). Specifically, CMS modified its 

scope of work with NSC to increase the frequency of unannounced site 

visits and to assess the fraud risk of suppliers in certain high fraud 

areas. Once NSC applies fraud risk indicators to suppliers, CMS will 

consider increasing prepayment review of suppliers’ claims. CMS stated 

that it is in the process of conducting “targeted background checks on 

suppliers.” Depending on the outcome of the DMEPOS demonstration 

project, CMS may consider more frequent reenrollment requirements 

for suppliers. In addition, CMS is seeking public comment on a 

proposed rule that would establish a minimum number of hours of 

operation required for suppliers. 

For the first two new recommendations—(1) to establish an application 

fee to cover the costs of site visits and rigorous background checks and 

(2) to require a supplier to pay an additional fee if, during a site visit 

(conducted during business hours), the supplier’s facility is closed or 

inaccessible, necessitating an additional site visit—CMS referred to the 

new accreditation process for DMEPOS suppliers. CMS stated that 

suppliers must pay a fee to the accrediting organization for an initial 

site visit and that “criminal background checks are conducted as 

required by State standards.” We note that our new recommendations 

regarding site inspections and application fees pertain to NSC’s actions 

to enforce compliance with Medicare supplier standards: the fees we 

suggest would be paid to the Federal Government. The accrediting 

organization and NSC are independent of one another and address 

different standards. We have modified our recommendation to clarify 

this point. 

For the third new recommendation, CMS stated that it will consider 

seeking legislative authority to impose enrollment moratoriums, 

depending on the outcome of its enrollment demonstrations. 

CMS did not indicate whether it concurred with our recommendation to 

establish minimum inventory requirements. We ask that, in its final 

management decision, CMS more clearly indicate whether it concurs 

with this recommendation and what steps, if any, it will take to 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 16 
RECOMMENDATION 

implement it. The full text of CMS’s comments is provided in 

Appendix E. 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 17 
 

Δ APPENDIX~A 

Conditions for Medicare Payments for Durable Medical Equipment, 

Prosthetics, Orthotics, and Supplies (DMEPOS) 

The following conditions appear in 42 CFR § 424.57(b): 

1.	 The supplier has submitted a completed application to CMS to 

furnish Medicare-covered items including required enrollment 

forms. (The supplier must enroll separate physical locations it 

uses to furnish Medicare-covered DMEPOS, with the exception 

of locations that it uses solely as warehouses or repair 

facilities.) 

2.	 The item was furnished on or after the date CMS issued to the 

supplier a DMEPOS supplier number conveying billing 

privileges. (CMS issues only one supplier number for each 

location.) This requirement does not apply to items furnished 

incident to a physician’s service. 

3.	 CMS has not revoked or excluded the DMEPOS supplier’s 

privileges during the period which the item was furnished has 

not been revoked or excluded. 

4.	 A supplier that furnishes a drug used as a Medicare-covered 

supply with durable medical equipment or prosthetic devices 

must be licensed by the State to dispense drugs. (A supplier of 

drugs must bill and receive payment for the drug in its own 

name. A physician, who is enrolled as a DMEPOS supplier, 

may dispense, and bill for, drugs under this standard if 

authorized by the State as part of the physician’s license.) 

5.	 The supplier has furnished to CMS all information or 

documentation required to process the claim. 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 18 
Δ APPENDIX~B 

Medicare DMEPOS Supplier Standards 

The following standards appear in 42 CFR § 424.57(c): 

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 § 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 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 19 
 

 

APPENDIX ~ B 

capped rental items, as described in § 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 multi-site 

supplier, records may be maintained at a centralized location; 

8.	 Permits CMS, or its agents to conduct onsite 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; 

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: 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 20 
 

APPENDIX ~ B 

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 § 420.206 of this 

subchapter; 

18. Must not convey or reassign a supplier number; 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 21 
APPENDIX ~ B 

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. 

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 three 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 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 22 
A P P E N D I X ~ B 

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. 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 23 
 

 

 

Δ APPENDIX~C

Supplier Site Visit Process 

According to Palmetto Government Benefits Administrator (Palmetto 

GBA), supplier site inspections are unannounced and inspectors 

generally will attempt to conduct a second site visit if the supplier is 

inaccessible during the initial visit. 

Unannounced Site Visits. The following appears on the Palmetto GBA Web 

site, in the supplier-guidance document, “Can I make an appointment for 

my site visit?” 

Site visits are unannounced and will take place during your posted 

hours of operation. Supplier Standard #8 requires the location 

must be accessible during reasonable business hours. If a site 

inspector comes to your location outside of the posted hours of 

operation, the inspector will attempt a subsequent site visit during 

the posted hours. 

If, during the second attempt, a site inspector reports the facility is 

not open for business or could not complete the visit during the 

posted hours of operation, a denial shall not be issued. In these 

cases, the applicant will receive a letter stating a site visit was 

unable to be conducted and informing the applicant to submit a 

new application at such a time when a site inspection can be 

completed. If the site visit could not be completed for an existing 

25 supplier, the supplier number may be revoked as appropriate.

Attempts To Complete a Site Visit. The following appears on the Palmetto 

GBA Web site, in the supplier-guidance document, “How many attempts 

are made to complete a visit?” 

Generally, two attempts are made to complete a visit. However, if 

on the first attempt the inspector finds the facility is still under 

construction or other obvious indications the facility is not a true 

operating location, or there is no visible sign or office hours posted, 

the site inspector will not make a second attempt and the NSC will 

be notified the visit could not be completed. 

25 Available online at 

http://www.palmettogba.com/palmetto/providers.nsf/44197232fa85168985257196006939d 

d/85256d580043e75485256d5f00624eb1?OpenDocument. Accessed November 6, 2007. 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 24 
A P P E N D I X ~ C 

If an attempt is made outside of the posted hours of operation, the 

inspector may leave a notice and will make a second attempt 

during the posted hours of operation. However, if the business is 

still inaccessible during the second attempt, the site inspector will 

not make any further attempts. 

The hours of operation indicate when a supplier is open and 

available. During these hours, a beneficiary, CMS or its agents 

should be able to visit the facility. If a supplier goes to lunch from 

1:00 pm to 2:00 pm, then this needs to be posted along with the 

hours of operation. If your posted hours state you are open from 

9:00 am to 5:00 pm, then the supplier should be available from 

9:00 am to 5:00 pm. 

An initial application will not be denied because of the NSC or its 

subcontractor’s inability to conduct a site visit. In these cases, the 

applicant will receive a letter stating a site visit was unable to be 

conducted and to submit a new application at such time when a 

site visit can be completed.26 

26 Available online at 

http://www.palmettogba.com/palmetto/providers.nsf/44197232fa85168985257196006939d 

d/85256d580043e7548525734800479abb?OpenDocument. Accessed November 6, 2007. 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 25 
 

Δ APPENDIX~D 

 Primary Specialty Supplier Types Visited in Los Angeles County 

Primary specialty 

Pharmacy

Medical Supply Company—Other 

Medical Supply Company With 

Respiratory Therapist 

Medical Supply Company—Certified 

Orthotist/Prosthetist 

Medical Supply Company—Certified 

Prosthetist 

Medical Supply Company—Certified 

Orthotist 

Medical Supply Company— 

Registered Pharmacist 

 Total 

Number Of 

Suppliers 

452 

405 

23 

11 

8 

5 

1 

905 

Percentage Of 

Suppliers* 

49.9% 

44.8% 

2.5% 

1.2% 

0.9% 

0.6% 

0.1% 

100.0% 

Number of 

Suppliers That 

Did Not Maintain 

Physical Facilities 

or Were Not 

Accessible 

13 

99 

1 

0 

1 

1 

0 

115 

Percentage of 

Suppliers That 

Did Not Maintain 

Physical Facilities 

or Were Not 

Accessible* 

11.3% 

86.1% 

0.9% 

0.0% 

0.9% 

0.9% 

0.0% 

100.1%** 

Source: Office of Inspector General analysis of primary specialty types listed in August 22, 2007, National Supplier Clearinghouse enrollment 

data. 

* Percentages are rounded. 

** Column does not total 100 percent because of rounding. 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 26 
OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 27 

Agency Comments

Δ APPENDIX~E 
OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 28 

APPENDIX ~ E 
OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 29 

APPENDIX ~ E 
 

Δ ACKNOWLEDGMENTS 

This report was prepared under the direction of Timothy S. Brady, 

Regional Inspector General for Evaluation and Inspections in the San 

Francisco regional office, and Deborah W. Harvey, Deputy Regional 

Inspector General. 

Michael Henry and Steven Zerebecki served as the team leaders for this 

study, and China Tantameng served as the lead analyst. Other 

principal Office of Evaluation and Inspections staff from the San 

Francisco regional office who contributed to the report include Scott 

Hutchison, Cynthia Lemesh, Veronica Vallejo, and Marcia Wong. 

We would like to acknowledge the special contributions of the Office of 

Evaluation and Inspections in the Philadelphia regional office, under 

the direction of Robert A. Vito, Regional Inspector General for 

Evaluation and Inspections, and Linda M. Ragone, Deputy Regional 

Inspector General. Contributing staff from the Philadelphia office 

include Eric Biersmith, Tanaz Dutia, Diane Epstein, Maria Johnson, 

Conswelia McCourt, Lauren McNulty, Emily Multari, Roman 

Strakovsky, and Stephanie Yeager. 

We would also like to acknowledge the contributions of each Office of 

Inspector General component, including: the Immediate Office of the 

Inspector General, the Office of Audit Services, the Office of Counsel to 

the Inspector General, the Office of Evaluation and Inspections, the 

Office of Investigations, and the Office of Management and Policy. 

Contributing staff from these offices include Sarah Ambrose, Eddie 

Baker, Jr., Michael Barcelona, Anne Bracken, Marcus Britton, Megan 

Buck, Elaine Chin, Amelia Cojuangco, Sharon Colby, Peggy Daniel, 

Robert DeConti, David Denniston, Shon Dormoy, Jaime Durley, Taryn 

Eckstein, Debra Edgerson, Mandy Fong, Lucia Forte, Rob Gibbons, 

Gopa Guha, Camille Harper, Russ Hereford, Ana Hernandez, Doris 

Jackson, Il Yong Jeon, Jennifer Jones, Judy Kellis, Tom Komaniecki, 

Haidee Lee, Erin Lemire, Christina Lester, Christi Macrina, Kevin 

Manley, Scott Manley, Beth McDowell, Amber Meurs, Christine 

Moundas, Gerius Patterson, Brian Pattison, Gerry Roy, Marcia Sayer, 

Louise Schoggen, Alicia Simon, James Sinkamnoonsak, Amanda 

Thandi, Cynthia Thomas, Ivan Troy, Sue Waddell, Gregory Wellins, 

Brian Whitley, Marcia Wong, and Mina Zadeh. 

OEI-09-07-00550 L OS ANGELES C OUNTY S UPPLIERS ’ C OMPLIANCE WITH MEDICARE S TANDARDS 30