OIG Recommends Further Strengthening DMEPOS Supplier Enrollment Process

On March 3, 2008, the Department of Health and Human Services' Office of Inspector General (OIG) issued a Press Release announcing the release of a Report entitled Los Angeles County Suppliers' Compliance With Medicare Standards: Results From Unannounced Visits (Report).

According to the Report, Los Angeles is a high-risk area for fraudulent activity involving suppliers of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS).  Further, the Report indicates that in late 2007 the OIG conducted unannounced site visits on 905 DMEPOS suppliers in Los Angeles County.  During the visits, the OIG focused on 4 DMEPOS supplier standards that could be quickly verified through observation.  The 4 standards require that suppliers:

• maintain physical facilities;
• be accessible during business hours;
• have visible signs; and
• post hours of operation.

The OIG found that 115 of the 905 suppliers (or 13 percent) did not maintain physical facilities or were not open during unannounced site visits.  Furthermore, the Report indicates that 79 suppliers (or 9 percent) were open but did not meet at least one of the 2 additional standards (i.e., did not post hours of operation or post signs indicating a business name). 

The OIG also found that 124 suppliers (or 14 percent) met the 4 requirements, but their claims had in common an atypical characteristic. For instance, the OIG reports that more than half of the beneficiaries for whom the suppliers billed did not receive other Medicare services (such as an office visit) from the physicians who ordered the DMEPOS. The OIG reports that this characteristic is prevalent among non-compliant suppliers.

In the Report, the OIG recommends that the Centers for Medicare & Medicaid Services (CMS) strengthen the Medicare DMEPOS supplier enrollment process and ensure that suppliers meet Medicare supplier standards.  In fact, the OIG continues to recommend that CMS:

• conduct more unannounced site visits to suppliers, which could include full site inspections and abbreviated site inspections, to supplement, not replace full site inspections and to determine whether suppliers still exist at the addresses on record;
• perform more rigorous background checks of applicants and currently enrolled high-risk suppliers (including business owners and managing employees);
• assess the fraud risk of suppliers and focus monitoring and enforcement on high-risk suppliers;
• increase prepayment review of DMEPOS claims, especially claims from new suppliers and suppliers deemed high risk;
• require suppliers in areas particularly vulnerable to fraud and abuse to reenroll with the National Supplier Clearinghouse more frequently than every 3 years; and
• strengthen the Medicare supplier standards by establishing a minimum number of hours of operation and establishing minimum inventory requirements for product and service types.

In addition, the OIG recommends that CMS:

• require all suppliers to pay a Medicare enrollment application fee to cover the cost of:
  • full site inspections or abbreviated site inspections to monitor suppliers' compliance with Medicare standards; and
  • criminal background checks;
• require a supplier to pay an additional Medicare enrollment fee if, during a site visit (conducted during business hours), the supplier's facility is closed or inaccessible, necessitating an additional site visit; and
• seek legislative authority to impose temporary moratoriums, on an as needed basis, on supplier enrollment in high-fraud areas.

According to the Report, CMS believes that it has already addressed the majority of the recommendations that also appear in the Report entitled South Florida Suppliers' Compliance With Medicare Standards: Results From Unannounced Visits.