(g-'''VICES"." DEPARTMENT OF 

HEALTH & HUMAN SERVICES

o....yJ"''''0 NOV 2 6 2008

.Office of Inspector General

Washington, D.C. 20201

TO: Kerr Weems

Acting Administrator

Centers for Medicare & Medicaid Services

FROM: Daniel R. Levinson

Inspector General

SUBJECT: Early Alert Memorandum: Payments to Medicare Suppliers and Home Health

Agencies Associated With "Curently Not Collectible" Overpayments,

OEI -06-07 -00080

SUMMARY

This early alert memorandum describes the associations between selected suppliers of durable

medical equipment, prosthetics, orthotics, and supplies (DMEPOS) with debt owed to the

Medicare program and other businesses that received Medicare payments.1 In 2005, DMEPOS

suppliers collectively had $352 milion in debt deemed "curently not collectible" (CNC) by the

Centers for Medicare & Medicaid Services (CMS). In 2006, the amount ofDMEPOS supplier

debt deemed CNC rose to $402 milion. In addition, anecdotal information from the Offce of

Inspector General (DIG) investigators and assistat United States attorneys indicates that

DMEPOS suppliers with outstading Medicare debt may inappropriately receive Medicare

payment by, among other means, operating businesses that are publicly fronted by business

associates, family members, or other individuals posing as owners. Information about the

associations between DMEPOS suppliers with Medicare debt and other businesses that receive

Medicare payment may be useful to CMS in its oversight of the program, to the extent that those

associations are a means of avoiding debt repayment or engaging in fraudulent biling.

We selected a random sample of 10 DMEPOS suppliers in Texas that each had Medicare debt of

at least $50,000 deemed CNC by CMS durng 2005-2006. CMS deems a Medicare

overpayment to be CNC if an overpayment to a DMEPOS supplier remains uncollected 210 days

after the date of the first demand letter despite recovery attempts by CMS contractors. We

attempted to identify all owners and managers of these 10 DMEPOS suppliers with CNC debt.

We then used information from public records, DMEPOS supplier and home health agency

(HHA) enrollment applications, and Medicare claims to determine whether any of the sample

DMEPOS suppliers were associated with other businesses that received Medicare payment

during 2002-2007 through shared ownership or management, family relationship, address, or

i DMEPOS suppliers are hereinafter referred to as "DMEPOS suppliers" or "suppliers."

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telephone number. Although we reviewed DMEPOS suppliers deemed to owe CNC debt in 2005 

and 2006, analyzing Medicare payments from 2002 to 2007 allowed us to detect networks of 

associated businesses that existed both before and after CMS deemed the sample DMEPOS 

suppliers’ overpayments to be CNC. 

We found that 6 of the 10 DMEPOS suppliers that we reviewed were associated with 15 other 

DMEPOS suppliers or HHAs that received Medicare payments totaling $58 million during 

2002–2007. Most associated DMEPOS suppliers had lost billing privileges by January 2005 and 

had accumulated a total of $6.2 million of their own CNC debt to Medicare; however, most 

HHAs received Medicare payments as recently as December 2007. We also found that most of 

the DMEPOS suppliers we reviewed were connected with their associated DMEPOS suppliers 

and HHAs through shared owners or managers. Finally, 11 of the 15 associated businesses’ 

enrollment applications did not include the name of at least one individual listed as an owner or a 

manager in public records. 

Although the associations among DMEPOS suppliers with CNC debt and their associates that 

received Medicare payments are not, taken alone, sufficient to establish improper or illegal 

activity, CMS may determine that such associations justify enhanced oversight, e.g., comparison 

of ownership and management information provided by HHA providers and DME suppliers to 

information in public records and following up on apparent inconsistencies. Because this initial 

review examined a small number of DMEPOS suppliers and a limited set of issue questions, we 

intend to conduct follow-up work regarding the issues and vulnerabilities raised in this 

memorandum. 

BACKGROUND 

• DMEPOS are covered under Medicare Part B and include such items as oxygen supplies, 

wheelchairs, prosthetic limbs, and surgical dressings.2 3

 Medicare covers DMEPOS only 

when ordered for a beneficiary by a physician or, in some cases, a nonphysician practitioner.4

 

CMS reported that Medicare expenditures for DMEPOS were $9.2 billion in fiscal year 

2006.5 OIG later determined that a sizable percentage of these expenditures were 

inappropriate overpayments.6

 Overpayments are Medicare payments that a Medicare 

participating provider or supplier has received in excess of amounts due and payable.7

 

2

 Social Security Act §§ 1832(a), 1834(h), 1861(n), 1861(s)(6), and 1861(s)(8). 

3

 The complete list of covered items by Healthcare Common Procedure Coding System can be found online at 

http://www.cms.hhs.gov/DMEPOSFeeSched/LSDMEPOSFEE/list.asp. Accessed on June 27, 2008. 4

 “Medicare Program Integrity Manual,” Pub. No. 100-08, ch. 5, § 5.2. 

5

 Figure cited is for DMEPOS claims for the 12-month period ending September 30, 2006. Available online at 

https://www.cms.hhs.gov/apps/er_report/preview_er_report_print.asp?from=public&which =long&reportID=6. 

Accessed on July 2, 2008.

6

 An OIG study found in two separate reviews that DMEPOS overpayment errors in fiscal year 2006 were 

17.3 percent and 28.9 percent. Department of Health and Human Services, OIG, “Medical Review of Claims for the 

Fiscal Year 2006 Comprehensive Error Rate Testing Program” (A-01-07-00508), August 2008. 

7

 “Medicare Financial Management Manual,” Pub. No. 100-06, ch. 3, § 10. 

OEI-06-07-00080 Payments to Suppliers and HHAs Associated With Overpayments 
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Overpayments Deemed “Currently Not Collectible” 

When a Medicare overpayment is made, CMS and its contractors make recovery attempts, which 

involve contacting the DMEPOS supplier through a series of written demand letters and/or by 

telephone. If the DMEPOS supplier fails to make any payment within 210 days of the first 

demand letter, CMS classifies the debt as CNC. CMS then refers CNC debt to the Department of 

the Treasury, which makes its own efforts to collect the overpayment.8 

Medicare Participation Requirements for Suppliers and Home Health Agencies 

To participate in the Medicare program, all providers and suppliers must complete an enrollment 

application and adhere to a series of requirements set forth in 42 CFR Part 424, 

Subpart P; DMEPOS suppliers must adhere to additional requirements at 42 CFR § 424.57. 

Pursuant to these requirements, all providers and suppliers must submit an enrollment 

application to CMS, which is self-reported but must contain “complete, accurate, and truthful 

responses to all information requested.”9 Application forms for both DMEPOS suppliers and 

HHAs require applicants to disclose the identity of any person or business that has an ownership, 

financial, or controlling interest in the business, or that functions in a management role.10 For 

each person or business, applicants must also report adverse legal actions, including payment 

suspensions, billing number revocation, or exclusion from a Federal or State health care 

program.

11 

The regulation specific to DMEPOS suppliers requires that a supplier repeat the application 

process for each business location. (See Appendix A for a more detailed description of the 

enrollment process.) Further, the regulation requires, among other things, that DMEPOS 

suppliers certify that they meet, and will continue to meet, 25 standards specified by regulation; 

report any changes in information on their enrollment application within 30 days of the change; 

and renew their application every 3 years to continue submitting claims to Medicare.12 

Likewise, regulations applicable to HHAs (and all providers and suppliers) specify that they 

must report not only any changes in information on their enrollment application within 90 days 

of the change, but also changes in ownership or control within 30 days.13 In addition, HHAs 

must “resubmit and recertify the accuracy of its enrollment every 5 years,” and CMS may choose 

to perform more frequent “off-cycle revalidations” to assess the validity of enrollment 

information “when warranted.”14

CMS may deny enrollment or revoke billing privileges for lack of compliance with enrollment 

requirements or supplier participation standards.15 Furthermore, in instances in which CMS 

denies a provider or supplier enrollment, or revokes their Medicare billing number, Federal 

8

 “Medicare Financial Management Manual,” Pub. No. 100-06, ch. 4, § 80.2. 

9

 42 CFR § 424.510(d)(2)(i). See also 42 CFR § 424.57(c)(2). 

10 Sections 5 and 6 of Forms CMS-855S and CMS-855A. 

11 Sections 3 and 6 of Forms CMS-855S and CMS-855A. 

12 42 CFR § 424.57. 

13 42 CFR § 424.520(b). See also 42 CFR § 424.540(a)(2). 

14 42 CFR §§ 424.515 and 424.515(d). 

15 42 CFR §§ 424.530(a), 424.535(a), and 424.57(d). 

OEI-06-07-00080 Payments to Suppliers and HHAs Associated With Overpayments 
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regulations stipulate that CMS “review . . . all other related Medicare enrollment files that the 

denied provider or supplier has an association with (for example, as an owner or managing 

employee) to determine whether the denial warrants an adverse action of the associated Medicare 

provider or supplier.”16

Recent Program Integrity Initiatives 

CMS has recently implemented several additional safeguards to protect against improper 

DMEPOS supplier enrollment, including additional quality standards, pursuant to 

section 302(a)(1)(B) of the Medicare Prescription Drug, Improvement, and Modernization Act of 

2003 (MMA) (P.L. No. 108-173). In addition, pursuant to section 1834(a)(16)(B) of the Social 

Security Act, CMS issued a notice of proposed rulemaking, but has not issued the final rule, that 

would require DMEPOS suppliers to submit a surety bond.17 The surety bond requirement is 

intended to limit the Medicare program risk to fraudulent DMEPOS suppliers, enhance the 

Medicare enrollment process, and ensure that the Medicare program recoups erroneous payments 

that result from fraudulent or abusive billing practices. Also, the MMA established a DMEPOS 

competitive acquisition program but, implementation has been delayed until 2009 by recent 

legislation.18 Finally, CMS published a proposed rule that seeks to clarify several of the 

DMEPOS supplier standards “to ensure that DMEPOS suppliers understand how CMS interprets 

the DMEPOS supplier standards.” The rule proposes to add new standards which, among other 

things, would prohibit a DMEPOS supplier from sharing a practice location with another 

Medicare supplier.19

METHODOLOGY 

Scope 

This study examines: (1) a small random sample of DMEPOS suppliers in Texas that had at least 

$50,000 in Medicare overpayments deemed CNC by CMS during 2005–2006 and (2) other 

DMEPOS suppliers and HHAs that received Medicare payments during 2002–2007 and were 

associated with the sample DMEPOS suppliers. 

 

Methods 

We drew on multiple data sources, including the National Claims History Standard Analytical 

File (SAF), DMEPOS supplier and HHA enrollment information, public records, enrollment data 

from the National Supplier Clearinghouse (NSC) and the Online Survey and Certification and 

Reporting system (OSCAR), CNC debt data from the Durable Medical Equipment Medicare 

Administrative Contractors (DME MAC), and the Department of Health and Human Services 

Fraud Investigations Database (FID). Our review took place from September to December 2007 

and followed a multistep sequential process. 

16 42 CFR §§ 424.530(d) and 424.535(e). 

17 72 Fed. Reg. 42001 (Aug. 1, 2007). 

18 MMA § 302(b)(1) established the Competitive Bidding Program. Section 154 of the Medicare Improvements for 

Patients and Providers Act of 2008 (P.L. No. 110-275), however, delayed further implementation. 

19 73 Fed. Reg. 4503 (Jan. 25, 2008). 

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We randomly selected a sample of 10 DMEPOS suppliers in Texas that each had Medicare debt 

of at least $50,000 deemed CNC during 2005–2006. We chose Texas because the database of 

public records that we used (described below) contains more data for Texas than for many other 

States. We chose a minimum debt of $50,000 to ensure that our analysis included DMEPOS 

suppliers with debt of sufficient size. A total of 807 DMEPOS suppliers in Texas had debt 

deemed CNC by CMS during 2005–2006, and 134 of these each had CNC debt of at least 

$50,000. We randomly selected 10 of the 134 DMEPOS suppliers for review. Collectively, 

these 10 DMEPOS sample suppliers received Medicare payments of $15 million during 

2002–2007 and had $8.6 million in CNC debt. The Medicare billing numbers of 8 of the 

10 DMEPOS sample suppliers were revoked in either 2003 or 2004. During 2005–2006, these 

eight DMEPOS suppliers had a total of $6.7 million in CNC debt. The two remaining DMEPOS 

suppliers we reviewed went into inactive billing status during 2000 and 2001 and had a total of 

$1.8 million in debt deemed CNC during 2005–2006.20 

After selecting the sample of 10 DMEPOS suppliers, we obtained their Medicare enrollment 

applications (Form CMS-855S) from the NSC and reviewed these applications to identify all 

individuals and organizations that CMS requires to be reported on the application, including 

those with the following ownership or managerial relationship with the sample DMEPOS 

suppliers: 

• direct or indirect ownership totaling 5 percent or more; 

• partnership interest, regardless of the percentage of ownership; and 

• operational or managerial control of the DMEPOS supplier, or responsibilities to conduct the 

day-to-day operations of the DMEPOS supplier. 

We then used a database that contains a variety of public records to corroborate and supplement 

the ownership and managerial information identified on the enrollment applications. 

Lexis/Nexis Accurint (hereafter referred to as “Accurint”) is a database available to law 

enforcement agencies that culls a broad array of public records and consumer information to 

facilitate in-depth searches for information on both businesses and individuals. For business 

searches, Accurint draws from corporate filings, property information, phone listings, 

professional licenses, and Securities and Exchange Commission filings, among other data. For 

personal searches, Accurint contains information on Social Security numbers, driver’s licenses, 

and professional licenses. Information on property assets and court proceedings is also available 

for both individuals and businesses. 

Using Accurint, we determined whether the individuals identified as owners or managers of the 

10 sample DMEPOS suppliers were associated with any other DMEPOS suppliers or HHAs. We 

20 Although we did not review CMS’s overpayment collection process, the overpayments of eight DMEPOS 

suppliers that we reviewed were not deemed CNC until 18 to 21 months after their billing number was revoked. The 

other two DMEPOS suppliers we reviewed were inactive for about 5 and 6 years, respectively, prior to their 

overpayments being deemed CNC. 

OEI-06-07-00080 Payments to Suppliers and HHAs Associated With Overpayments 
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considered another DMEPOS supplier or HHA to be associated with a sample DMEPOS supplier 

if it shared an owner or a manager or if it was owned or operated by a family member of an 

owner/manager of the sample DMEPOS supplier.21 We noted when sample DMEPOS suppliers 

also shared telephone numbers and addresses. However, because of our conversations with OIG 

investigators about the nature of DMEPOS fraud, we considered connections based on shared 

telephone numbers and addresses to be of secondary importance to connections through shared 

owners/managers and/or family. To uncover additional associations, we applied the same 

analysis methods to the associated DMEPOS suppliers and HHAs and found businesses that 

were indirectly associated with the sample DMEPOS suppliers. 

Once we had identified DMEPOS suppliers and HHAs associated with owners/managers of the 

sample DMEPOS suppliers, we used enrollment data from the NSC and OSCAR to identify 

Medicare billing numbers. For those with a Medicare billing number, we calculated the amount 

of Medicare payments that associated DMEPOS suppliers and HHAs received during 2002–2007 

using data from the SAF. For DMEPOS suppliers, we also referenced the NSC enrollment data 

to determine their enrollment status, i.e., active, inactive, or revoked. 

We then reviewed the enrollment applications of the associated DMEPOS suppliers and HHAs to 

determine whether their applications contained the same ownership and managing control 

information as presented in Accurint. We also checked CNC debt data to determine whether the 

associated DMEPOS suppliers had any CNC debt. Finally, we obtained information from the 

FID to determine whether any of the associated businesses were under investigation. 

Limitations 

Because this study examines a random sample of 10 DMEPOS suppliers in Texas, its findings 

cannot be projected beyond those DMEPOS suppliers. Although Accurint revealed a variety of 

business associations, we limited our analysis of businesses associated with the sample 

DMEPOS suppliers to those that were either DMEPOS suppliers or HHAs because of data 

availability constraints. 

Additionally, Accurint is a provider of third-party data from a variety of public sources, including 

State civil, property, and criminal records. Verification of the information contained in Accurint 

is beyond the scope of this review. Because of this limitation, the findings in this memorandum 

should not be the basis of any action with respect to any DMEPOS supplier or HHA prior to 

verifying that the information obtained from Accurint is correct. 

Further, we had CNC debt data from the DME MACs for all DMEPOS suppliers in 2005–2006, 

but did not have any CNC debt data for HHAs. Therefore, we could not determine whether 

associated HHAs had any CNC debt. Lastly, we had enrollment status data for DMEPOS 

suppliers, but not for HHAs. We used HHA claims themselves as a proxy for enrollment status, 

i.e., if an HHA received Medicare payment as recently as 2007, we considered its status to be 

“active.” 

21 Accurint identifies individuals who are likely to be relatives based on a proprietary algorithm. 

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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. 

RESULTS 

Six of Ten Suppliers Reviewed Were Associated With 15 Other Suppliers and Home Health 

Agencies That Received Medicare Payments During 2002–2007 

Based on data from public records, enrollment applications, and Medicare claims, we identified 

instances in which owners or managers of 6 of the 10 sample DMEPOS suppliers were 

associated with other DMEPOS suppliers or HHAs that received Medicare payments of 

$58 million during 2002–2007. (See Table 1 on the next page.) Our review did not find 

associations with DMEPOS suppliers or HHAs for the other four sample DMEPOS suppliers. 

For the six sample DMEPOS suppliers that were associated with businesses that received 

Medicare payment, we found a total of 15 associated businesses: eight DMEPOS suppliers and 

seven HHAs. 

The eight associated DMEPOS suppliers received Medicare payments totaling $33 million 

during 2002–2007. Eighty percent of these payments went to one DMEPOS supplier, which 

received $26.5 million during this time. The seven associated HHAs received Medicare 

payments totaling $25 million during 2002–2007. Payments made to these HHAs ranged from 

$152,000 to one HHA to $11.8 million to another. 

Most Associated Suppliers Had Lost Billing Privileges by January 2005 and Accumulated 

Their Own CNC Debt to Medicare, Although Most Associated Home Health Agencies 

Received Payments as Recently as December 2007 

As of December 2007, five of the eight associated DMEPOS suppliers had revoked billing 

numbers, two had inactive Medicare billing numbers, and one was actively receiving Medicare 

payments. Among the two DMEPOS suppliers with inactive billing numbers, one became 

inactive in November 2003 and the other became inactive in January 2005. According to 

information in the FID, the one remaining DMEPOS supplier actively receiving Medicare 

payments in December 2007 was under investigation (as of May 2008) for providing false claims 

to Medicare. At the time of our review, in addition to the CNC debt owed by the sample 

DMEPOS suppliers, six of the eight associated DMEPOS suppliers had CNC debt totaling 

$6.2 million.22 Of the five associated DMEPOS suppliers that had their Medicare billing number 

revoked, four were revoked for making a false statement or misrepresenting a material fact on 

their enrollment application, in addition to committing other violations of the Medicare 

participation standards. 

In contrast, five of the seven associated HHAs received Medicare payments as recently as 

December 2007. One of the associated HHAs last received Medicare payments in 

22 The six sample DMEPOS suppliers with which these DMEPOS suppliers were associated had CNC debt totaling 

$7.3 million. 

OEI-06-07-00080 Payments to Suppliers and HHAs Associated With Overpayments 
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November 2007, and the remaining HHA last received Medicare payments in November 2006. 

According to the FID, none of the associated HHAs were under active investigation as of May 

2008, and, because of the data limitations described above, OIG was not able to determine 

whether CNC debt is owed by any of these associated HHAs. 

Table 1: Provider Type, Medicare Payments, Debt, and Billing Status for DMEPOS 

Suppliers and HHAs Associated With DMEPOS Suppliers With CNC Debt

Sample 

DMEPOS 

Suppliers 

Associated 

Business 

DMEPOS 

Supplier 

Home 

Health 

Agency 

Medicare Payments 

Received 2002–2007 

Currently Not 

Collectible Debta Billing Statusb

Supplier A 

A1 • $3,836,339 # Active 

Supplier B 

B1 • $331,151 $326,387 Revoked 

B2 • $791,386 $930,989 Revoked 

B3 • $11,882,096 # Active 

B4 • $6,353,730 # Active 

B5 • $152,157 # Active 

B6 • $862,674 # Inactive 

B7 • $521,112 # Active 

Supplier C 

C1 • $2,236,664 $2,357,015 Revoked 

Supplier D 

D1 • $434,380 $34,258 Revoked 

Supplier E 

E1 • $2,541,744 $2,594,996 Revoked 

E2 • $1,187,631 # Active 

Supplier F 

F1 • $3,500 $48,342 Inactive 

F2 • $26,521,875 $0 Active 

F3 • $309,826 # Inactive 

Totals 8 7 $57,966,265 $6,291,987 

Active= 7 

Revoked= 5 

Inactive= 3 

Source: OIG analysis, 2008. 

a=We did not have any CNC debt data for associated HHAs. 

b=HHAs were considered “active” if they received Medicare payments in 2007. 

#=Data not available. 

Most Sample Suppliers Were Connected to Associated Businesses Through Shared 

Owners/Managers 

Analysis of public records revealed that 11 associated DMEPOS suppliers and HHAs were 

connected to sample DMEPOS suppliers through shared ownership/management, e.g., the 

owner/manager of the sample DMEPOS supplier also owned/managed the associated DMEPOS 

supplier or HHA. (See Table 2 on the next page.) Five associated businesses were connected 

through a family member, e.g., a mother owned the sample DMEPOS supplier and her son 

managed a separate DMEPOS supplier. Some sample DMEPOS suppliers and associated 

businesses also shared business or residential addresses (10) or business telephone numbers (4). 

OEI-06-07-00080 Payments to Suppliers and HHAs Associated With Overpayments 
Page 9 – Kerry Weems 

In some cases, we identified a web of relationships among the individuals involved with the 

sample DMEPOS suppliers and the associated businesses, as well as between the associated 

businesses themselves. (See Appendix B for illustrations of such associations.) For example, a 

relative (and cohabitant) of the owner of DMEPOS Supplier A owned and operated an HHA at 

DMEPOS Supplier A’s address and used DMEPOS Supplier A’s business telephone number. In 

another case, the principal owner of DMEPOS Supplier B also owned five other DMEPOS 

suppliers or HHAs, four of which operated out of the same office building. In this same case, a 

manager at one of the businesses also managed four associated businesses. 

Table 2: Nature of the Association Between 6 Sample DMEPOS Suppliers and 

15 Associated DMEPOS Suppliers or Home Health Agencies 

Sample 

DMEPOS 

Suppliers 

Associated 

Business 

Owner/ 

Manager Family Member Address Telephone Number 

Supplier A 

A1 • • •

Supplier B 

B1 • •

B2 • •

B3 • •

B4 • •

B5 • •

B6 • •

B7 •

Supplier C

C1 •

Supplier D 

D1 • •

Supplier E 

E1 • •

E2 • •

Supplier F 

F1 • • •

F2 • •

F3 • •

Totals 11 5 10 4 

Source: OIG analysis, 2008. 

Eleven Associated Supplier and Home Health Agency Enrollment Applications Did Not 

Include the Name of at Least One Owner or Manager Listed in Accurint 

To enroll in the Medicare program, providers and suppliers must complete an enrollment 

application, which requires applicants to disclose the identity of any person or business “with 

ownership, financial, or controlling interest in the company,” as well as all individuals who 

OEI-06-07-00080 Payments to Suppliers and HHAs Associated With Overpayments 
Page 10 – Kerry Weems 

 

function in a management role.23 If a DMEPOS supplier or an HHA submitted false or 

misleading information with respect to ownership or control, its billing privileges would be 

subject to revocation, among other administrative and criminal penalties.24

Eleven of fifteen associated DMEPOS suppliers’ or HHAs’ enrollment applications did not 

contain the name of at least one owner or manager listed in Accurint. Seven of the eleven were 

HHAs and four were DMEPOS suppliers. Six of these eleven applications did not contain the 

name of two or more owners or managers. Based on Accurint data, some of these owners or 

managers who were not listed on enrollment applications appear to be relatives of the listed 

owners or managers of sample DMEPOS suppliers. 

CONCLUSION 

Because of our limited sample size, we cannot conclude that the associations between DMEPOS 

suppliers with debt owed to the Medicare program and other businesses that received Medicare 

payments cited in this early alert memorandum also exist in the larger population. Also, 

additional research and investigative work would be needed to confirm whether DMEPOS 

suppliers and HHAs associated with our sample DMEPOS suppliers are involved in fraudulent 

activities. Accordingly, our results should not be viewed as conclusive evidence of either 

impropriety or illegal activity. 

Nonetheless, our analysis shows associations between 6 sample DMEPOS suppliers with 

Medicare debt totaling $7.3 million and 15 other DMEPOS suppliers and HHAs that received 

Medicare payments totaling $58 million during 2002–2007. Although nearly all associated 

DMEPOS suppliers had lost their billing privileges or have discontinued billing Medicare, five 

of the seven associated HHAs received Medicare payments as recently as December 2007. 

These results indicate that the associations between DMEPOS suppliers and HHAs may be less 

frequently detected than those between DMEPOS suppliers alone. Our findings also show that 

some enrollment applications for DMEPOS suppliers and HHAs associated with our sample 

DMEPOS suppliers did not contain the names of all owners or managers. These results suggest 

that individuals associated with Medicare debt could inappropriately receive Medicare payments 

by omitting owner/manager information on their enrollment application and working through 

other DMEPOS suppliers and HHAs. 

Given these associations, CMS may deem it appropriate to conduct a similar review of DMEPOS 

suppliers with CNC debt to identify associations with other suppliers or home health agencies 

receiving Medicare payments. Specifically, CMS could compare its list of suppliers with CNC 

debt against public records to determine if the owners or managers of these suppliers appear to own 

or manage other suppliers or home health agencies. If these owner/manager associations are 

identified, CMS could review the associated businesses’ enrollment applications to determine if 

complete and accurate information was reported, and follow up on any apparent inconsistencies.25 

23 Forms CMS-855S and CMS-855A. CMS requests this information pursuant to authority under 

42 CFR § 420.206. 

24 42 CFR §§ 424.530(a)(4) and 424.535(a)(1) and (4). 

25 Pursuant to 42 CFR § 424.515(d), CMS has the authority to conduct such “off-cycle revalidations” to assess the 

validity of enrollment information. 

OEI-06-07-00080 Payments to Suppliers and HHAs Associated With Overpayments 
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OEI-06-07-00080 Payments to Suppliers and HHAs Associated With Overpayments 

If CMS confirms that ownership or management information has been misreported on enrollment 

applications, it may consider whether denial or revocation of the DMEPOS supplier or HHA’s 

enrollment is appropriate. 

Because this initial review examined a small number of DMEPOS suppliers using a limited set 

of issue questions, OIG intends to conduct follow-up work regarding the issues and 

vulnerabilities raised in this memorandum. 

This early alert memorandum is being issued directly in final form because it contains no 

recommendations. If you have comments or questions about this early alert memorandum, 

please provide them within 60 days. Please refer to report number OEI-06-07-00080 in all 

correspondence. 
Page 12 – Kerry Weems 

 

APP APPENDIX ~ A ENDIX ~ A 

Durable Medical Equipment Supplier and Home Health Agency Enrollment Primer 

APPENDIX A 

Suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) and 

home health agencies (HHA) go through similar, but distinct, processes to enroll in the Medicare 

program. To enroll in Medicare, each must first obtain a National Provider Identifier (NPI) 

number from the National Plan and Provider Enumeration System. This requires completing an 

application with identifying information, such as the individual or business name, business 

location, and any provider identification numbers held prior to the establishment of the NPI. 

After receiving the NPI, the process for DMEPOS suppliers and HHAs differs. 

DMEPOS suppliers must obtain a billing number from the National Supplier Clearinghouse 

(NSC). NSC is responsible for issuing Medicare billing numbers to DMEPOS suppliers, 

revoking billing numbers, and verifying compliance with the participation standards. To obtain a 

billing number, the DMEPOS supplier must complete Form CMS-855S. This detailed form 

requires the DMEPOS supplier to provide the following types of information: 

1. identifying information—business location, type of supplies sold, services offered, 

incorporation and accreditation information; 

2. adverse legal actions—convictions, exclusions, revocations, or suspensions; 

3. ownership interest and/or managing control information—all organizations or individuals 

with 5-percent ownership or more; managing control of the DMEPOS supplier; or a 

partnership interest, including the adverse legal history for these organizations or 

individuals with ownership interest or managing control; and 

4. listing of authorized or delegated officials.26

In addition, the DMEPOS supplier must submit supporting documents along with Form CMS855S. Supporting documents include: 

1. Federal/State/local professional and business licenses, certifications, or registrations; 

2. liability insurance policy; 

3. tax identification number; 

4. completed form for electronic funds transfer; 

5. NPI notification; 

6. adverse legal action documentation; 

7. bank statements waiving Medicare offsets as loan collateral; and 

8. copy of delegated official’s Form W-2. 

26 Section 15 of Forms CMS-855S and CMS-855A. An “authorized” official is an appointed official to whom the 

organization has granted the legal authority to enroll it in the Medicare program; make changes or updates to the 

organization’s status in the Medicare program; and commit the organization to fully abide by the statutes, 

regulations, and program instructions of the Medicare program. A “delegated” official is an official who is 

delegated by an authorized official to report changes and updates to the DMEPOS supplier’s enrollment record. 

OEI-06-07-00080 Payments to Suppliers and HHAs Associated With Overpayments 
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APPENDIX A (CONTINUED) 

HHAs must also complete a Medicare enrollment application, using Form CMS-855A. This 

form requires information nearly identical to the CMS-855S, discussed above. The form is 

submitted to the Regional Home Health Intermediary (RHHI) for the jurisdiction in which the 

HHA is located. Once the RHHI has determined that the application is acceptable, it notifies 

both CMS and the State in which the HHA is located. The State then decides whether to conduct 

a site visit to the HHA. Once the State determines that it will grant permission for the HHA to 

participate in Medicare, it notifies CMS, and CMS makes the final decision to issue a Medicare 

Part A billing number. 

OEI-06-07-00080 Payments to Suppliers and HHAs Associated With Overpayments 
Page 14 – Kerry Weems 

Diagrams Showing Relationships Between Sample Durable Medical Equipment Suppliers 

and Their Associated Suppliers and Home Health Agencies 

APPENDIX B

The diagrams on the following pages contain detailed information about sample suppliers of 

durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) and associated 

DMEPOS suppliers and home health agencies (HHA) described in the early alert memorandum. 

We substituted fictitious names and addresses for real names and addresses in the diagrams. We 

used consistent fictitious names and addresses across individuals and businesses. For example, 

an individual named “John Doe” at one business is the same “John Doe” listed at another 

business. The same is true for street addresses. In this way, it is possible to see the recurrence of 

individuals and addresses across a network of associated businesses, despite the use of fictitious 

names. Surnames were drawn from the U.S. Census Bureau’s list of most common names. 

Information in oval shapes pertains to sample DMEPOS suppliers, including the DMEPOS 

suppliers’ business name, address, and billing number, as well as its total amount of “currently 

not collectible” (CNC) debt. 

Sample DMEPOS suppliers “A,” “E,” and “B” were chosen to provide examples of small, 

medium, and large networks of associated businesses, respectively. Their networks, while 

unique, are good representations of the relationships seen in the other sample DMEPOS 

suppliers’ networks. The rectangular shapes pertain to associated DMEPOS suppliers and/or 

HHAs, including their total payment amounts during 2002–2007. For both the sample and 

associated businesses, the diagrams identify individuals operating in ownership or managerial 

roles. In each case, the diagrams identify the relationship between the sample DMEPOS supplier 

and the associated business. The diagrams also denote whether enrollment applications for 

associated businesses omitted the name of individuals listed as owners or managers in 

Lexis/Nexis Accurint, a database containing public records. 

 

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APPENDIX B (CONTINUED) 

Sample DMEPOS Supplier “A” 

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Page 16 – Kerry Weems 

APPENDIX B (CONTINUED) 

Sample DMEPOS Supplier “E” 

OEI-06-07-00080 Payments to Suppliers and HHAs Associated With Overpayments 
Page 17 – Kerry Weems 

OEI-06-07-00080 Payments to Suppliers and HHAs Associated With Overpayments 

APPENDIX B (CONTINUED) 

Sample DMEPOS Supplier “B”