HHS Inspector General Flags Gaps in Screening Medical Equipment Suppliers in Medicare Advantage

The Department of Health and Human Services' Office of Inspector General (OIG) said Medicare Advantage plans and the Centers for Medicare & Medicaid Services (CMS) leave gaps in how they screen suppliers of durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), and that the suppliers with the least screening pose an increased fraud risk.

The issue brief, report number OEI-02-24-00310, was issued on September 9 and posted on September 14. OIG wrote that DMEPOS fraud "has been a long-standing issue in Medicare, putting millions of taxpayer dollars at risk each year," and that CMS's prevention efforts have mainly focused on Original Medicare rather than Medicare Advantage, which now accounts for more spending than Original Medicare.

What OIG found

According to the brief, Medicare Advantage organizations conduct some screening checks of in-network suppliers but fewer checks of out-of-network suppliers. CMS does not screen all DMEPOS suppliers before they bill Medicare Advantage, because not all of them are enrolled in Medicare. And the Preclusion List, a CMS tool that blocks certain suppliers from billing Medicare Advantage, "has limitations in preventing fraud," OIG said.

The suppliers with the least screening, those that bill out of network and are not enrolled in Medicare, pose an increased fraud risk to the program, the brief concluded.

OIG examined six Medicare Advantage organizations that together manage 21,029 DMEPOS suppliers, nearly 8,000 of them out of network, MedTech Dive reported. The publication said OIG found that, for orthotics supplies, out-of-network suppliers billed an average of $1,399 a month, seven times the $210 average among suppliers enrolled in Medicare, and that two of the organizations told OIG that out-of-network suppliers accounted for nearly all fraud schemes they saw in Medicare Advantage.

MedTech Dive also reported that OIG criticized CMS for using the Preclusion List only reactively, after a problem has been identified, and that current law prohibits Medicare Advantage organizations from requiring DMEPOS suppliers to be enrolled in Medicare to serve their members.

Recommendations

OIG made three recommendations to CMS: ensure that Medicare Advantage organizations strengthen checks of out-of-network DMEPOS suppliers; strengthen the use of the Preclusion List; and require that all DMEPOS suppliers that bill Medicare Advantage be enrolled in Medicare, or seek statutory authority to do so if necessary. CMS concurred with or stated that it would take into consideration all of the recommendations, OIG said.

The brief follows other federal action on equipment suppliers. CMS imposed a six-month moratorium on DMEPOS enrollment in Medicare this year, and in 2025 said it stopped more than $1.5 billion in suspected fraudulent billing by medical supply companies, according to MedTech Dive. In its brief, OIG noted that in one recent case alone, defendants are accused of fraudulently billing Medicare for more than $10 billion in DMEPOS.