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Department of Health and Human Services


OFFICE OF 

INSPECTOR GENERAL 

MEDICAID PROVIDER 


ENROLLMENT STANDARDS:


MEDICAL EQUIPMENT PROVIDERS


Daniel R. Levinson


Inspector General 


October 2006


OEI-04-05-00180

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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. 
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Δ EXECUTIVE SUMMAR Y 

OBJECTIVE 

To (1) identify the standards used by selected States to enroll Medicaid 

durable medical equipment (DME) providers, (2) determine the extent 

to which States verify that providers meet these standards, and 

(3) determine the extent to which States reenroll Medicaid DME 

providers. 

BACKGROUND 

The Office of Inspector General has previously identified concerns about 

fraudulent DME providers in the Medicare program. Similarly, the 

Government Accountability Office has also determined that 

vulnerabilities exist for ensuring the integrity of Medicaid providers. 

Provider enrollment standards represent one mechanism States can use 

to protect the integrity of their Medicaid DME programs. 

States are mandated to provide certain basic services to recipients of 

Medicaid home health services. These include medical supplies, 

equipment, and appliances, which are often referred to as DME. States 

enroll providers to supply DME to Medicaid beneficiaries, and assign 

providers identification numbers entitling them to receive 

reimbursements under the State’s Medicaid program. 

Each State sets its own standards (defined in this report as any 

safeguards, guidelines, requirements, or practices) for the enrollment of 

Medicaid DME providers. In addition, States may verify whether 

providers meet standards at initial enrollment, and may also review 

providers after enrollment, to determine whether providers continue to 

adhere to State standards. One method of verifying whether a DME 

provider meets State standards is to conduct site visits of the provider’s 

location. 

Unlike Medicaid, Medicare has provider enrollment standards that are 

uniform across all States (except licensure requirements that vary from 

State to State). Compliance with most of these standards is verified by 

the National Supplier Clearinghouse (NSC) through site visits, while 

compliance with other standards is verified when the application is 

reviewed. In addition to initial enrollment, Medicare also requires 

providers to reenroll every 3 years, during which time providers must 

certify they meet and will continue to meet Medicare standards. 

There are planned changes for DME provider enrollment in the 

Medicare program. In August 2006, CMS issued a final rule requiring 

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EXE CUTIVE S U MMAR Y 

DME suppliers to go through an accreditation process. This process will 

utilize approved quality standards that DME suppliers must meet to 

participate in and bill the Medicare program. Until these changes are 

fully implemented, NSC will continue with its enrollment 

responsibilities, which include conducting site visits and reenrolling 

DME providers. 

Providers may enroll in both the Medicare and Medicaid programs. If 

providers are enrolled in both programs, they are subject to both the 

Medicare standards as well as State provider enrollment standards. 

There are no estimates currently available for the number of providers 

dually enrolled. 

To address the three objectives of our evaluation, we collected data from 

14 States and the District of Columbia (referred to as 15 States 

throughout the report) using e-mail and telephone surveys. We also 

examined States’ provider enrollment applications and written 

documentation about State standards to conduct a selective review of 

State-reported information. Our data collection was completed during 

September and October 2005. 

FINDINGS 

States that we reviewed employed a variety of standards for DME 

provider enrollment. All 15 States in our evaluation reported various 

DME provider enrollment standards. The goal of some of these 

standards, such as providers posting a sign and hours of operation, help 

ensure that an appropriate physical facility is being operated. In 

addition, standards include licensure of providers and obtaining surety 

bonds. One State imposed a moratorium for enrollment of new DME 

providers. 

Seven of the fifteen States required providers to enroll as Medicare 

DME providers, which subjects all Medicaid providers in these seven 

States to Medicare standards. The eight remaining States did not 

require providers to be enrolled in the Medicare DME program. For 

these eight States, data regarding how many Medicaid DME providers 

choose to enroll as Medicare DME providers (and, therefore would be 

subject to Medicare standards) are not available. 

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EXE CUTIVE S U MMAR Y

Most States that we reviewed were not routinely verifying whether 

providers met all State DME provider enrollment standards. While 

the States in our review requested information from providers during 

the enrollment process, most of these States were not routinely 

verifying all of the information submitted by providers. For example, 

while all 15 States requested that applicants disclose their criminal 

history, only 2 States routinely conducted criminal background checks 

at enrollment. Florida and New York were the only States in our review 

that verified whether providers met all of their reported standards. 

Seven of the fifteen States did not conduct routine site visits at 

enrollment; however, four of these seven States did require Medicare 

enrollment as a condition of Medicaid enrollment. By requiring 

Medicare enrollment, applicants should receive site visits by NSC in 

order to enroll in the Medicare program. The remaining three States 

neither performed routine site visits to verify enrollment information 

nor required Medicare DME participation as a condition of enrollment. 

Four of the fifteen States routinely reenrolled DME providers; two 

additional States reported recent initiatives to reenroll providers. 

For the four States that routinely reenrolled providers, the timeframe 

for reenrollment varied from 2 to approximately every 5 years. One of 

the 2 States that reported recent reenrollment initiatives, California, 

reported that 646 of its 1,420 DME providers voluntarily chose to leave 

the program during 1999 through 2004. The other State, New Jersey, 

was reenrolling all providers for the first time; this process is expected 

to continue during 2006. 

Nine States did not conduct Medicaid reenrollment. However, five of 

these nine States did require that the provider be enrolled in the 

Medicare program. For Medicare reenrollment, providers must certify 

every 3 years that they meet Medicare standards and should receive site 

visits as part of the Medicare reenrollment process. In contrast, the 

remaining four States neither routinely reenrolled DME providers nor 

required that providers be enrolled in Medicare. 

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CONCLUSION 

Our review determined that the 15 States reviewed employed a variety 

of provider enrollment standards to protect their Medicaid DME 

programs. Some of these standards, such as providers posting a sign 

and hours of operation, help ensure that an appropriate physical facility 

is being operated. Also, standards include licensure of providers and 

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EXE CUTIVE S U MMAR Y

obtaining surety bonds. In addition, seven of the States that we 

reviewed also required Medicaid providers to enroll as providers in the 

Medicare program, which subjects Medicaid providers in these States to 

Medicare standards. 

Despite the presence of these standards, we determined that most of the 

15 States were not verifying whether providers met all provider 

enrollment standards, and that 7 of the 15 States were not conducting 

routine site visits at initial enrollment. In addition, only 6 of the 

15 States reported that they either routinely reenrolled providers, or 

had recent initiatives to reenroll providers. 

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Δ T ABLE OF CONTENTS 

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

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

FINDI NGS ................................................. 6

State Medicaid standards for DME provider enrollment ........ 6

Verification of DME provider enrollment standards ........... 7

Reenrollment of Medicaid DME providers.................... 9

CON C L U SION ............................................ 11

ENDN OTE S ............................................... 12

APPENDIXES ............................................. 15

A: Medicare Standards ................................. 15

B: Categories and Definitions of State Standards ............ 19

C: Medicaid Standards Implemented by the 15 States......... 21

D: Effect of Requirements to Enroll in Medicare on State 

 Standards ......................................... 24

 . 

ACKN O W LEDGMENTS .................................... 26
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Δ INTRODU C TION 

OBJECTIVE 

To (1) identify the standards used by selected States to enroll Medicaid 

durable medical equipment (DME) providers, (2) determine the extent 

to which States verify that providers meet these standards, and 

(3) determine the extent to which States reenroll Medicaid DME 

providers. 

BACKGROUND 

The Office of Inspector General (OIG) has previously highlighted 

concerns about fraudulent DME providers in the Medicare program.1 

Similarly, the Government Accountability Office (GAO) has also 

determined that vulnerabilities exist for ensuring the integrity of 

Medicaid providers.2 A 2004 GAO report advised that preventing high 

risk providers, intent on fraudulently billing, from entering the 

Medicaid program is more efficient than attempting recovery of 

payments once they have been made.3 Provider enrollment standards 

represent one mechanism States can use to protect the integrity of their 

Medicaid DME programs. 

Durable Medical Equipment, Supplies, and Appliances 

States are mandated to provide certain basic services to recipients of 

Medicaid home health services. These include the provision of medical 

supplies, equipment, and appliances,4 which are often referred to as 

DME. DME includes many different types of devices, such as 

wheelchairs, oxygen equipment, diabetic equipment, and canes. Federal 

regulations do not define DME for Medicaid, and each State decides 

what equipment to cover. In addition, States may offer other devices, 

such as prosthetics, at their discretion.5 The Centers for Medicare & 

Medicaid Services (CMS) does not estimate expenditures specifically for 

Medicaid DME. 

Enrollment of Medicaid DME Providers 

Federal Requirements. At enrollment, Medicaid providers are required to 

disclose information regarding ownership and control of the DME 

business.6 In addition, providers must disclose whether individuals 

with ownership and control of, or management or other similar 

responsibilities for, the DME provider have been convicted of any 

criminal offense relating to the Medicare or Medicaid program.7 

Providers must also disclose if an individual with ownership or 

management responsibilities has had civil or monetary penalties 

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INTROD UCT ION 

imposed relating to health care programs, and if such a person has been 

excluded from participation in Medicare or any State health care 

program.8 States must notify the Department of Health and Human 

Service’s (HHS) Inspector General of any disclosures made by a 

provider,9 as well as any action taken regarding the provider’s 

participation in the program.10 To ensure that they are not enrolling 

excluded individuals, States may check any provider seeking Medicaid 

enrollment against OIG’s List of Excluded Individuals/Entities, 

available on the Internet. 

State Standards for Provider Enrollment. Each State sets its own 

standards for enrollment of Medicaid providers. Pursuant to 

42 CFR § 431.51(b)(1), Medicaid services may only be provided by 

individuals or organizations that are qualified to provide a specified 

service. States differ in their definition of a “qualified” provider. State 

standards for Medicaid DME provider enrollment can range from 

requiring that the DME business location be accessible during 

reasonable business hours to requiring that Medicaid applicants enroll 

in the Medicare program as a condition of Medicaid enrollment. In 

addition, States may verify whether providers meet standards at initial 

enrollment, and may also review providers after enrollment to 

determine whether providers continue to adhere to State standards. 

One method of verifying whether a DME provider meets State 

standards is to conduct site visits of the provider’s location. 

After a State approves an applicant to provide DME, the State assigns a 

Medicaid DME identification number entitling the provider to receive 

reimbursements under the State’s Medicaid program. 

Medicare DME Provider Standards 

Unlike Medicaid, Medicare provider enrollment requirements are 

standardized across all States (except licensure requirements that vary 

from State to State). CMS contracts out the enrollment process to the 

National Supplier Clearinghouse (NSC). At the time our review was 

conducted, Medicare DME providers were required to meet 

21 standards in order to obtain billing privileges.11 These standards 

include accessibility during reasonable business hours, liability 

insurance, and compliance with Federal and State licensure 

requirements.12 (See Appendix A for the complete listing of Medicare 

standards.) Compliance with most of these standards is verified by 

NSC through site visits. OIG has previously found that the site visit 

process improved supplier compliance with Medicare standards.13 

Other types of standards are verified when the application is reviewed. 

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INTROD UCT ION 

For example, the analyst reviewing the provider application will verify 

liability insurance through the insurance company underwriting the 

policy. 

In addition to initial enrollment, Medicare also requires providers to 

renew their application every 3 years, which is referred to as 

reenrollment. Medicare DME providers must certify in their 

applications that they meet and will continue to meet all Medicare 

standards. NSC conducts site visits of the providers during 

reenrollment to verify continued compliance with the standards. 

There are planned changes for provider enrollment in the Medicare 

program. Section 302(a)(1) of the Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003 requires the Medicare 

program to develop and implement quality standards for DME 

suppliers.14 Pursuant to a final rule published by CMS, all suppliers 

are required to meet quality standards included as part of the 

accreditation process to participate in and bill the Medicare program.15 

According to the final rule, CMS will phase in the accreditation process 

of DME suppliers.16 Until these changes are fully implemented, NSC 

will continue with its enrollment responsibilities, which include 

conducting site visits and reenrolling DME providers. 

Vulnerabilities in Medicare Enrollment 

Both OIG and GAO have identified vulnerabilities in the Medicare 

enrollment process. In a 1997 report, OIG recommended numerous 

improvements to the Medicare enrollment process, including surety 

bond requirements and site visits of DME suppliers.17 In a follow-up 

report in 2001, OIG determined that Medicare’s expansion of oversight 

activities improved compliance with Medicare standards, but that more 

measures were needed to receive a higher compliance rate.18 In 2005, 

GAO determined that CMS should improve DME supplier compliance 

with Medicare standards.19 Among its recommendations, GAO stated 

that CMS should both strengthen its procedures to verify that suppliers 

were meeting the Medicare standards, as well as enhance the standards 

themselves. 

Dual Enrollment and the National Provider Identifier 

Any Medicaid provider who voluntarily enrolls in the Medicare 

program, or is required to enroll in Medicare by a State agency as a 

condition of Medicaid enrollment, is required to meet Medicare 

standards. When the new quality standards and the accreditation 

process are implemented, such providers will fall under these new 

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INTROD UCT ION 

requirements. CMS does not track the number of DME providers 

exclusively enrolled in the Medicaid program, nor those who are dually 

enrolled in both Medicare and Medicaid. One of the obstacles in 

determining these figures is the absence of a unique, national 

identification number for providers. The Health Insurance Portability 

and Accountability Act of 1996 required the Secretary of HHS to 

implement unique identifiers for all health care providers. In 

January 2004, the National Provider Identifier (NPI) was established by 

final rule. All Medicare and Medicaid DME providers that are covered 

health care providers, as defined by the rule, are required to use an NPI 

by May 2007.20 In the future, the NPI may provide data to determine 

which providers are dually enrolled in both Medicare and Medicaid. 

METHODOLOGY 

Scope 

The purpose of our evaluation was to provide a report that broadly 

outlined the standards used by selected States for their DME provider 

enrollment programs; determine the extent to which States verify that 

providers meet these standards; and determine the extent to which 

these States reenroll Medicaid DME providers. We examined 

reenrollment because the Medicare program uses reenrollment to verify 

continued compliance with the Medicare standards; we sought to 

determine if States similarly had reenrollment processes in place. 

Reenrollment is important as it provides States the opportunity to 

verify continued compliance with their standards. 

Our evaluation was designed to provide descriptive information about 

State-implemented standards, and we did not assess the effectiveness of 

the standards. Also, we did not determine whether States were meeting 

the specific Federal requirements pertaining to disclosure of ownership 

and criminal history disclosure.21 

For this evaluation, we defined DME provider enrollment standards as 

any safeguards, guidelines, requirements, or practices that State 

provider enrollment programs use to protect the integrity of their 

Medicaid DME programs. We included 14 States and the District of 

Columbia in our evaluation of DME provider enrollment standards 

(referred to as 15 States throughout this report). The 15 States are 

listed in Appendix C. These 15 States represent a mix of States with 

different population sizes; are geographically diverse; and include 

States participating in the Medi-Medi program.22 While results from 

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INTROD UCT ION 

this report cannot be projected to other States, our selection process 

ensured that a diverse selection of States were included to provide 

insight on DME provider enrollment practices. 

Data Collection 

To meet our three objectives, we collected data through e-mail and 

telephone surveys. The surveys included questions addressing the 

following areas: 

o DME provider enrollment standards that must be met for an 

applicant to be enrolled as a Medicaid provider (e.g., licensure and 

accessibility during reasonable business hours), 

o The extent to which States routinely verify that providers meet 

State standards, 

o The extent to which States routinely conduct site visits as part of 

their verification processes, and 

o Whether States reenroll Medicaid DME providers, what activities 

occur during reenrollment, and how often reenrollment occurs. 

As a part of the e-mail survey, we also requested that States submit 

provider enrollment application packages as well as written documents 

that supported their reported standards. We used this information to 

conduct a document review. This was a selective review of the general 

accuracy of State-reported information. If there were discrepancies 

between State documentation and State responses, we worked with the 

States to resolve these differences. 

The data collection was completed during September and October 2005. 

Therefore, unless otherwise noted, the standards included in this report 

reflect standards in place during that timeframe. If State responses 

were incomplete, we continued to follow up with States throughout the 

fall of 2005. 

Standards 

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

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

Efficiency and the Executive Council on Integrity and Efficiency. 

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Δ FINDINGS

States that we reviewed employed a variety of All 15 States reported various DME 

standards for DME provider enrollment provider enrollment standards. 

Table 1 provides the standards 

that 15 States reported had been implemented specifically for their 

Medicaid programs. For the definition of each standard listed below, 

refer to Appendix B. For a State-by-State comparison of Medicaid 

standards, refer to Appendix C. 

Table 1: State Enrollment Standards Reported by 15 States 

September – October 2005 

Standard 

States With 

Implemented 

Standards 

Percentage Who Have 

the Standard 

Criminal History Disclosure 15/15 100% 

Ownership Disclosure 15/15 100% 

P.O. Box Prohibition 14/15 93% 

Primary Phone Number 12/15 80% 

Licensure 8/15 53% 

Records Storage 8/15 53% 

Signage and Hours Posted 8/15 53% 

Accessibility During 

Reasonable Business 

Hours 

8/15 53% 

Medicare Enrollment 

Required 7/15 47% 

Inventory 6/15 40% 

Liability Insurance 3/15 20% 

Surety Bonds 1/15 7% 

Moratorium* 1/15 7% 

*A moratorium for provider enrollment is a safeguard that prevents the entry of new 

providers into the program. This differs from the other standards in Table 1, which 

are standards that providers must meet. 

The standards in Table 1 provide safeguards for DME programs in 

different ways. For example, standards such as the P.O. Box 

Prohibition and the requirement to post a sign and hours of operation 

help to ensure that an appropriate physical facility is being operated. 

Additionally, in eight States, providers must comply with State 

licensure requirements. Licensure is often required to make certain 

that guidelines or regulations are being followed to ensure that 

providers are offering services in a correct and safe manner to 

beneficiaries. The type of licensure that is required varies from State to 

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F I NDING S 

State; some States only require a sales tax permit, while others require 

a professional license, such as a DME or a hearing aid license. 

Two other standards included in Table 1 illustrate additional ways 

States protect their DME programs from fraud and abuse. Florida 

requires providers to obtain a surety bond as a condition of participation 

in the Medicaid program. Surety bonds help indemnify the State 

against fraud by requiring enrolling providers to post a bond that can be 

later used by the State to recover any losses incurred by the provider. 

Florida’s surety bond amount was $50,000. Two other States had taken 

steps to develop a surety bond requirement, but due to opposition from 

the provider community, these initiatives have not been implemented. 

In another example of State safeguards, California imposed a 

moratorium for new DME providers, an initiative that began in 1999. 

Through the moratorium, California stopped issuing new Medicaid 

DME provider numbers, with a few exceptions (e.g., a provider who has 

restructured ownership). 

As noted in Table 1, seven States required providers to enroll as 

Medicare DME providers. Therefore, Medicaid providers in these States 

were subject to Medicare standards, which include all of the State 

standards included in Table 1, except surety bonds and moratorium.23 

For the seven States with the requirement to enroll in Medicare, Table 

1 includes only those standards that States reported they had instituted 

specifically for their Medicaid program. If a State did not report having 

a particular standard that is indirectly addressed through the 

requirement to enroll in Medicare, we did not classify the State as 

having the standard in Table 1. However, Appendix D provides analysis 

of the effect of the Medicare requirement on the total number of 

standards. 

Most Sta States can verify whether tes that we reviewed were not routinely 

providers meet some standards verifying whether providers met all State DME 

through site visits, while other provider enrollment standards standards can be verified when 

the application is reviewed. For example, a State’s review process of 

providers’ applications can include verifying the legitimacy of licenses 

online via State databases or Web sites, and verifying primary phone 

numbers via Web searches or calling the number directly. 

While the States in our review requested information from providers 

during the enrollment process, we found that gaps exist between 

standards and State verification processes. For example, while all 15 

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F I NDING S 

States requested that applicants disclose their criminal history, only 2 

States routinely conducted criminal background checks at enrollment. 

Florida and New York were the only States in our review that verified 

all of their reported standards. 

Table 2 outlines State standards, the number of States verifying 

providers met each standard, and the percentage of States verifying 

whether providers met the standards. Appendix B provides a definition 

of each standard and verification process listed below. Appendix C 

details totals for each State. 

Table 2: State-Implemented Standards vs. Verification Process 

15 Reviewed States* 

 September - October 2005 

Type of Standard* Number of 

States With 

Standards 

Number of 

States That 

Verified the 

Standard 

Percentage That 

Verified the 

Standard 

Criminal History 

Disclosure 15 2 13% 

Ownership 

Disclosure 

15 14** 93% 

P.O. Box Prohibition 14 10 71% 

Primary Phone 

Number 

12 5 42% 

Licensure 8 7 88% 

Records Storage 8 5 63% 

Signage and Posted 

Hours 

8 8 100% 

Accessibility During 

Reasonable 

Business Hours 

8 7 88% 

Medicare 

Enrollment Required 7 7 100% 

Inventory 6 6 100% 

Liability Insurance 3 2 67% 

Surety Bonds 1 1 100% 

*The safeguard of moratorium that was listed in Table 1 was not applicable to 

this table, because a moratorium stops issuance of DME numbers to new 

providers. 

**We define verification of ownership disclosure as States checking owners 

against OIG’s List of Excluded Individuals/Entities. 

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F I NDING S 

Seven of the fifteen States did not routinely conduct site visits at enrollment 

to verify whether providers were meeting State standards 

Site visits can determine whether certain information provided during 

enrollment is accurate and the provider is operating a legitimate DME 

business. Site visits are often the only method available to verify 

specific standards. For example, a site visit enables a State to 

determine whether a provider’s business is accessible during reasonable 

business hours. Other standards that can be verified through site visits 

include: records storage, inventory, and posted sign and hours of 

operation. 

Seven of the fifteen States did not conduct routine site visits as part of 

their provider enrollment process. However, four of these States did 

require Medicare enrollment as a condition of Medicaid enrollment. By 

requiring Medicare enrollment, applicants should receive site visits by 

NSC in order to enroll in the Medicare program. The remaining three 

States neither performed routine site visits to verify enrollment 

information nor required Medicare DME participation as a condition of 

enrollment. Without State-conducted site visits or enrollment in 

Medicare, Medicaid-only providers were unlikely to have their DME 

business reviewed through routine site visits at enrollment. 

Eight of the fifteen States routinely conducted site visits at 

enrollment.24 Four of the eight States conducting site visits reported 

that site visits were the most effective component of their provider 

enrollment standards and verification processes. 

Four of the fifteen States routinely reenrolled 

DME providers; two additional States reported 

recent initiatives to reenroll providers 

Connecticut, Florida, 

Georgia, and Illinois 

routinely reenroll DME 

providers, but 

reenrollment in these 

States does not include routine site visits. An example of the types of 

activities that occur at reenrollment is illustrated by the State of 

Florida. In that State, the provider must verify basic demographic 

information, such as name, tax identification number, address, 

telephone number, and whether or not a change of ownership has 

occurred. Further, providers are required to sign a new provider 

agreement at reenrollment. The timeframes the four States used for 

reenrollment varied as specified below: 

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F I NDING S 

o Every 2 years (Connecticut and Georgia), 

o Every 5 years (Illinois), and 

o Once every fiscal agent contract, approximately every 5 years 

(Florida). 

Although New Jersey and California did not report conducting 

reenrollment on a routine basis, both States reported recent initiatives 

to reenroll providers. New Jersey reported that they were reenrolling 

all providers for the first time; this process is expected to continue 

during 2006. California recently completed a 5-year effort to reenroll all 

DME providers. From 1999 through 2004, 646 of the 1,420 DME 

providers voluntarily chose to leave the program.25 In addition to 

reenrollment, the State restricted entry of new DME providers into 

California Medicaid, imposing a moratorium for new DME providers 

beginning in 1999. 

Nine States did not conduct Medicaid reenrollment. However, five of 

these nine States did require that the provider be enrolled in the 

Medicare program. For Medicare reenrollment, providers must certify 

every 3 years that they meet Medicare standards and should receive site 

visits as a part of the Medicare reenrollment process. In contrast, the 

remaining four States neither routinely reenrolled DME providers nor 

required that providers be enrolled in Medicare. Therefore, providers in 

these States were unlikely to be routinely reviewed for continued 

compliance with provider enrollment standards, unless they had 

voluntarily enrolled in the Medicare program. 

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Δ CONCLUSION 

Our review determined that the 15 States reviewed employed a variety 

of provider enrollment standards to protect their Medicaid DME 

programs. Some of these standards, such as providers posting a sign 

and hours of operation, help ensure that an appropriate physical facility 

is being operated. Also, standards include licensure of providers and 

obtaining surety bonds. In addition, seven of the States that we 

reviewed also required Medicaid providers to enroll as providers in the 

Medicare program, which subjects Medicaid providers in these States to 

Medicare standards. 

Despite the presence of these standards, we determined that most of the 

15 States were not verifying whether providers met all provider 

enrollment standards, and that 7 of the 15 States were not conducting 

routine site visits at initial enrollment. In addition, only 6 of the 

15 States reported that they either routinely reenrolled providers, or 

had recent initiatives to reenroll providers. 

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Δ ENDNOTE S 

1 “Medical Equipment Suppliers: Assuring Legitimacy” (OEI-04-96-

00240, December 1997). 

2 “Medicaid: HCFA and States Could Work Together to Better Ensure 

the Integrity of Providers” (GAO/T-HEHS-00-159, July 18, 2000), and 

“Medicaid Program Integrity: State and Federal Efforts to Prevent and 

Detect Improper Payments” (GAO-04-707, July 16, 2004). 

3 “Opportunities for Congressional Oversight and Improved Use of 

Taxpayer Funds: Budgetary Implications of Selected GAO Work” (GAO04-649, May 7, 2004). 

4 42 CFR § 440.70(b)(3) and 42 CFR § 441.15(a)(3). 

5 CMS details information about State Medicaid programs including 

optional services offered by States in “Medicaid At-a-Glance 2005.” 

Available online at http://www.cms.hhs.gov/MedicaidGenInfo/ 

Downloads/ MedicaidAtAGlance2005.pdf. Accessed February 8, 2006. 

6 42 CFR § 455.104. 

7 42 CFR § 455.106. 

8 42 CFR § 1002.3(a). 

9 42 CFR § 455.106(b)(1) and 42 CFR § 1002.3(b)(1). 

10 42 CFR § 455.106(b)(2) and 42 CFR § 1002.3(b)(3). 

11 CMS published a final rule on August 18, 2006, at 71 FR 48354, 

entitled “Medicare Program; Inpatient Rehabilitation Facility Prospective 

Payment System for Federal Fiscal Year 2007; Certain Provisions 

Concerning Competitive Acquisition for Durable Medical Equipment, 

Prosthetics, Orthotics, and Supplies (DMEPOS); Accreditation of 

DMEPOS Suppliers.” In part, this final rule amends the durable medical 

equipment certification standards regulation at 42 CFR § 424.57(c) by 

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adding four additional standards. See Appendix A for the standards in 

place at the time of evaluation, as well as the text of the new standards. 

12 42 CFR § 424.57(c). 

13 “Medical Equipment Suppliers: Compliance with Medicare 

Standards” (OEI-04-99-00670, August 2001). 

14 Pub. L. 108-173, adding section 1834(a)(20) of the Social Security Act. 

15 See 42 CFR § 424.57(c)(24) (as added by the Medicare program final 

rule at 71 FR 48354 (August 18, 2006)). CMS has posted quality 

standards for suppliers of DMEPOS on its Web site at 

http://www.cms.hhs.gov/CompetitiveAcqforDMEPOS/downloads/CMS_ 

DMEPOS_Quality_ Standards_081406.pdf. 

16 See the preamble to the Medicare program final rule at 71 FR at 

48392. 

17 “Medical Equipment Suppliers: Assuring Legitimacy” (OEI-04-96-

00240, December 1997). 

18 “Medical Equipment Suppliers: Compliance with Medicare 

Standards” (OEI-04-99-00670, August 2001). 

19 “Medicare: More Effective Screening and Stronger Enrollment 

Standards Needed for Medical Equipment Suppliers” (GAO-05-656, 

September 22, 2005). 

20 45 CFR § 162.404. 

21 Our study included general survey questions to States, including 

whether States obtain ownership disclosure from providers, and whether 

States obtain providers’ and business owners’ criminal history 

disclosures. However, we did not determine whether States fully met the 

specific Federal requirements for ownership disclosure (42 CFR 

§ 455.104) and criminal history disclosure (42 CFR § 455.106). 

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22 Medi-Medi is the Medicare-Medicaid match program in which claims 

data are analyzed to determine vulnerabilities in both programs. By 

analyzing data from both programs together, patterns may be detected 

that may not be evident when billings for either program are viewed in 

isolation. 

23 The eight remaining States did not require providers to be enrolled 

in the Medicare DME program. For these States, data regarding how 

many Medicaid DME providers choose to enroll as Medicare DME 

providers (and, therefore would be subject to Medicare standards) were 

not available. 

24 The eight States that routinely conducted site visits at enrollment 

were California, Connecticut, Florida, Georgia, Illinois, Nevada, New 

Jersey, and New York. Connecticut conducted site visits only for 

Medicaid DME providers that offered services that were not covered by 

Medicare (e.g., hearing aids), and subsequently were not enrolled in the 

Medicare program. If a provider was enrolled in Medicare, Connecticut 

verified the Medicare supplier number and relied on Medicare’s site visit 

verification. 

25 California estimated a savings of approximately $193 million per 

year from this reenrollment project. The State based this estimate on the 

average monthly billing for this provider type, which is $25,000 per 

month. OIG did not independently assess this estimate. 

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Δ
 APPENDIX A 

Medicare Standards 

This appendix contains both the standards in place at the time of our 

review as well as standards recently added by CMS. 

The following are the 21 Medicare standards as outlined in 

42 CFR § 424.57(c), at the time of our review. The supplier: 

(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 capped rental items, as described 

in § 414.229 of this subchapter. The supplier must provide, upon 

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APP E N D I X A 

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 on-site inspections to 

ascertain supplier compliance with the requirements of this section. 

The supplier location must be accessible during reasonable business 

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

posted hours of operation; 

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

the business locally or toll-free for beneficiaries. The supplier must 

furnish information to beneficiaries at the time of delivery of items on 

how the beneficiary can contact the supplier by telephone. The 

exclusive use of a beeper number, answering service, pager, facsimile 

machine, car phone, or an answering machine may not be used as the 

primary business telephone for purposes of this regulation; 

(10) Has a comprehensive liability insurance policy in the amount of at 

least $300,000 that covers both the supplier's place of business and all 

customers and employees of the supplier. In the case of a supplier that 

manufactures its own items, this insurance must also cover product 

liability and completed operations. Failure to maintain required 

insurance at all times will result in revocation of the supplier's billing 

privileges retroactive to the date the insurance lapsed; 

(11) Must agree not to contact a beneficiary by telephone when 

supplying a Medicare-covered item unless one of the following applies: 

(i) The individual has given written permission to the supplier to 

contact them by telephone concerning the furnishing of a 

Medicare-covered item that is to be rented or purchased. 

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

individual and the supplier is contacting the individual to 

coordinate the delivery of the item. 

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

item other than a covered item already furnished to the individual, 

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APP E N D I X A 

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; 

(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. 

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A PPE N D I X A

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

name of the person receiving the complaint, and a summary of 

actions taken to resolve the complaint. 

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

making the decision and the reason for the decision. 

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

Medicare statute and implementing regulations. 

The additional standards recently added by CMS, see footnote 11, are: 

(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 enrollment may be revoked, if CMS determines that 

they are not in compliance with the DMEPOS quality standards. 

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

and services, including the addition of new product lines for which they 

are seeking accreditation. If a new product line is added after 

enrollment, the DMEPOS supplier will be responsible for notifying the 

accrediting body of the new product so that the DMEPOS supplier can 

be re-surveyed and accredited for these new products. 

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Δ
 APPENDIX B 

This appendix consists of categories and definitions of State provider enrollment 

standards we developed to analyze State standards for DME providers. 

Categories and Definitions for State Provider Enrollment Standards 

Accessibility During Reasonable Business Hours: Provider’s location 

must be accessible during reasonable business hours to beneficiaries 

and to the State. 

Accessibility Verified: State verifies that providers are accessible 

during reasonable business hours. 

Criminal History Disclosure: Criminal history must be disclosed by 

providers. 

Criminal History Verified: State conducts criminal background checks 

of providers. 

Inventory: State requires providers to fill DME orders from their own 

inventory or have contracts in place to fill the order. 

Inventory Verified: State verifies that providers fill DME orders from 

their own inventory or have contracts in place to fill the order. 

Liability Insurance: State requires providers to have liability 

insurance. 

Liability Insurance Verified: State verifies that providers have liability 

insurance. 

Licensure: State requires some or all providers to hold a license 

(e.g., sales tax permit or professional license). 

Licensure Verified: State verifies that providers hold appropriate 

licensure (e.g., sales tax permit or professional license). 

Medicare Enrollment Required: State requires Medicaid DME 

providers to be enrolled in the Medicare program in order to be enrolled 

in the State Medicaid DME program. Any provider enrolled in 

Medicare is required to meet Medicare standards (see Appendix A). 

States Requiring Medicare that Verify: For State with the Medicare 

enrollment requirement, State verifies whether the provider is enrolled 

in Medicare. 

Moratorium: State has stopped issuing DME provider numbers. 

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APP E N D I X B 

Ownership Disclosure: Provider must disclose who has business 

ownership and/or control of the DME business. 

Ownership Reviewed for Exclusions: State checks owners against OIG’s 

List of Excluded Individuals/Entities. 

P.O. Box Prohibition: State prohibits the providers from using a P.O. 

Box or commercial mailbox as their physical facility. 

P.O. Box Verified: State verifies that providers are not using a P.O. Box 

or commercial mailbox as their physical facility. 

Primary Phone Number: Provider must have a primary business 

telephone number. 

Primary Phone Number Verified: State verifies the primary business 

phone number of DME provider applicants. 

Records Storage: Provider’s physical facility must contain space for 

storing records (including delivery, maintenance, and beneficiary 

communication records). 

Records Storage Verified: State verifies that provider’s physical facility 

contains space for storing records. 

Signage and Hours Posted: Providers are required to maintain a visible 

sign and posted hours of operation. 

Signage and Hours Posted Verified: State verifies that providers are 

maintaining a visible sign and posted hours of operation. 

Surety Bonds: Providers must post a surety bond prior to enrollment. 

Surety Bonds Verified: State verifies that providers meet the surety 

bond requirement. 

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.. APPENDIX C

Table 1: Medicaid Standards Implemented by the 15 States as of October 2005

State Accessibilty Accessibility Criminal Criminal Inventory Inventory Liabilty Liabilty During Verified History History Verified Insurance Insurance Reasonable Disclosure Verified Verified

Business

Hours

CA X X X X X X X

CT X X X X X

DC X X

FL X X X X X X

GA X X

IL X X X X XMN X

MT XNV X X X X X

NJ X X X X X

NY X X X X X X

NC X

OH X

TX X

WY X

Total 8 7 15 2 6 6 3 2

Source: Analysis of State Medicaid DME standards compiled by OIG.

OEI.04.05.00180 MEDICAID PROVIDER ENROLLMENT STANDARDS: MEDICAL EQUIPMENT PROVIDERS
Ii-PPENDIX C

Table 1 (cont): Medicaid Standards Implemented by the 15 States as of October 2005

State Licensure Licensure Medicare States Moratorium Ownership Ownership Primary Primar

Verified Enrollment Requiring Disclosure Reviewed Phone Phone

Required Medicare for Number Numb

that Exclusions Verifie

Verify

CA X X X X X X X

CT X* X X X X X

DC X X X X X

FL X X X X X X

GA X X X

IL X X X X XMN X X X

MT X X XNV X X X X X XNJ X X X X

NY X X X X X XNC X X X X X X X

OH X X X X X X

TX** X X X X XWY X X X X

Total 8 7 7 7 1 15 14 12 5 *For hearing aid dealers only.

**Although Texas does not have a licensure requirement for the purpose of DME provider enrollment, the Department of State Health Sedoes license all wholesalers and manufacturers of DME, which may include some DME providers.

Source: Analysis of State Medicaid DME standards compiled by OIG.

OEI.04.05.00180 MEDICAID PROVIDER ENROLLMENT STANDARDS: MEDICAL EQUIPMENT PROVIDERS
APPENDIX C

Table 1 (cont): Medicaid Standards Implemented by the 15 States as of October 2005

State P.o. Box P.O. Box Records Records Signage Signage Surety Surety Prohibition Verified Storage Storage and Hours and Hours Bonds Bonds

Verified Posted Posted Verified

Verified

CA X X X X X X

CT X X X X

DC X X X

FL X X X X X X X X

GA X X X X

IL X X X X X X

MN X X

MT X

NV X X X X X X

NJ X X X X

NY X X X X X X

NC X X

OH X X

TX XWY

Total 14 10 8 5 8 8 1 1

Source: Analysis of State Medicaid DME standards compiled by OIG.

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.. APPENDIX D

Seven States required providers to enroll as a Medicare DME provider in order to become Medicaid providers.

Although the purpose of our inspection was to determine the extent to which States themselves had implemen

standards and whether States followed the imp Ie mentation ofthese standards with a State review of providers 

determine if they were compliant, the requirement to enroll in Medicare does provide additional standards for 

Medicaid programs. The following table provides analysis of the effect of the Medicare requirement on the tota

number of reviewed State-implemented standards. Please note the following about the information provided:

· Column A lists each standard. For the definition of each standard, refer to Appendix B.

· Column B provides the number of States that have implemented each standard exclusively through their 

programs. This column does not include any States with the requirement to enroll in Medicare.

· Column C provides the number of States that have exclusively established each standard by requiring pr

in the Medicare program as a condition of Medicaid enrollment. States in this column do not review if pmet these standards, and instead rely upon the Medicare program for both the establishment of the sta

verifying and enforcing compliance with each of the standards. We do not know the extent to which suc

aware of Medicare's verification or enforcement of compliance with each of the standards.

· Column D provides the number of States that have both implemented each standard specifically through 

Medicaid programs, as well as through the requirement for Medicaid providers to enroll in Medicare.

· Columns B- D are mutually exclusively; States can only be included in one column.

· Column E provides the total number of States with each standard, by adding columns B-D.

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;.,PPENDIX D

Table i: Effect ofthe Requirement to Enroll in Medicare on State Standards*

September - October 2005

Column B: Column C: Column D: Co

Number of States Number of States Number of States with both Total 

Column A:

with State- Establishing Standards State-Implemented State

Standard Implemented Exclusively Through Standards and the St

Medicare Requirement Standards Only Medicare Requirement (B

Criminal History

Disclosure 8 0 7 

Ownership

Disclosure 8 0 7 P.O. Box

Prohibition 8 1 6 Primary Phone

Number 8 3 4 Licensure 8 NA** NA** 

Records Storage 5 4 3 

Signage and

Hours Posted 5 4 3 

Accessibility

During

Reasonable 4 3 4 

Business HoursInventorv 3 4 3 

Liability

Insurance 3 7 0 

Suretv Bonds 1 NA *** NA *** 

Moratorium 1 NA *** NA *** 

*Providers enrolled in the Medicare program are subject to Medicare standards in addition to those listed in the table. Refer to

Appendix A for a complete listing of Medicare standards.

-Medicare providers must operate their business in compliance with all applicable Federal and State licensure and regulatory requi

required in 42 CFR § 424.57(c)(1). However, there is no Federal licensure for Medicare DME providers. **Surety Bonds and Moratorium are not Medicare requirements, and therefore have been exclusively implemented by States.

Source: Analysis of State Medicaid DME standards compiled by OIG.

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ΔAPP E N D I X A ACKNOWLEDGMENTS 

This report was prepared under the direction of Ann E. O’Connor, 

Regional Inspector General for Evaluation and Inspections in the 

Atlanta regional office. Other principal Office of Evaluation and 

Inspections staff who contributed include: 

Linda Abbott, Program Specialist 

Mark Biagioni, Co-Lead Analyst 

Stacey Bloomer, Team Leader 

Peggy Daniel, Co-Lead Analyst 

Tricia Davis, Director, Medicare Branch 

Sharon Koehler, Program Analyst 

Scott Manley, Program Specialist 

Gerius Patterson, Data and Statistical Analyst 

Rob Rutland-Brown, Program Analyst 

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