Medicare fraud maintains its position among the fastest growing crimes in the United States. The government loses nearly $75 billion a year to Medicare fraud; which has led to the conception of several anti-fraud initiatives, including the OIG’s Operation Whack-A-Mole (WAM).

Medicare fraud comes in many shapes and forms, with the three most popular including:

  • Phantom Billing
  • Patient Billing
  • Up-coding and unbundling

Durable Medical Equipment opens the door to several billing related fraud schemes, many of which involve repeatedly billing Medicare for equipment that is never delivered (phantom billing) – but there is another form of fraud that the OIG is cracking down on: Phantom DME Suppliers and virtual offices.

DME suppliers may participate in phantom billing schemes, but they may also be operating their businesses as ghosts.

In order to be considered as a compliant DME supplier certain requirements must be met such as a physical, accessible location. When they fail to comply with these statutes, they could be a “phantom” supplier.

OIG’s Project WAM has identified several DME suppliers since its inception, and as a result, they have amended their regulations. These regulations, stated under 42 CFR § 424.57 explain that suppliers must:

Maintain a physical facility on an appropriate site, that…

  • Is at a location accessible to the public, Medicare beneficiaries, CMS, NSC, and its agents (the location must not be in a gated community or other area where access is restricted);
  • Is accessibly and staffed during posted hours of operation;
  • Maintain a permanent and visible sign in plan view and posts hours of operation. If the supplier’s place of business is located within a building complex, the sign must be visible at the main entrance of the building or the hours can be posted at the entrance of the supplier.
  • Except for business records that are stored in a centralized location as described in paragraph (C)(7)(ii) of this section, is in a location that contains space for storing business records (including the supplier’s delivery, maintenance, and beneficiary communication records).
  • Is in a location that contains space for retaining the necessary ordering and referring documentation specified 424.516(f).
    • (ii) May be the centralized location for all of the business records and the ordering and referring documentation of a multisite supplier.
    • (iii) May be a “closed door” business, such as a pharmacy or supplier providing services only to beneficiaries residing in a nursing home, that complies with all applicable Federal, State, and local laws and regulations. “Closed door” businesses must comply with all the requirements in this paragraph.
  • Maintains a primary business telephone that is operating at the appropriate site listed under the name of the business locally or toll-free for beneficiaries.
    • (i) Cellular phones, beepers, or pagers must not be used as the primary business telephone.
    • (ii) Calls must not be exclusively forwarded from the primary business telephone listed under the name of the business to a cellular phone, beeper, or pager.
    • (iii) Answering machines, answering services, facsimile machines or combination of these options must not be used exclusively as the primary business telephone during posted operating hours.

A site visit is the only way to determine whether or not a supplier meets these requirements. If they do not, then they have failed to meet the statutory/civil guidelines of a DME supplier. They are phantoms, able to “ghost” both patients and Medicare at their will.