Testimony before the United States House of  Representatives
Committee on Energy and Commerce
Subcommittee on Oversight & Investigations
II'
....
''Waste, Fraud and Abuse: A Continuing Threat to Medicare and
Medicaid"
of:
Testimony 
Gerald T. Roy
Deputy Inspector General for Investigations
U.S. Department of Health & Human Services
...
~I
March 2, 2011
10:00AM
2322 Rayburn House Office Building
SERVIC~.a
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~c1a~ Testimony of:
Gerald T. Roy
Deputy Inspector General for Investigations
Health & Human Services
Office ofInspector General, U.S. Departent of 
OIG'S LAW ENFORCEMENT ACTIVITIES TO COMBAT
MEDICAR AND MEDICAID FRUD
Good morning Chairman Stears, Ranking Member DeGette, and distinguished Members of the
Subcommittee. I am Gerald Roy, Deputy Inspector General for Investigations at the U.S.
Health & Human Services' (HHS) Offce ofInspector General (OIG). Today, I
Deparent of 
am privileged to have with me OIG Assistant Special Agent in Charge Omar Perez who has
served in the Miami Regional Office since 2007. We thank you for the opportnity to discuss
GIG's health care anti-fraud strategy, focusing primarly on our law enforcement activities to
combat Medicare and Medicaid fraud.
OIG's Role and Partners iI Protecting the Integrity of  Medicare and Medicaid
the more
GIG is an independent, nonpartisan agency committed to protecting the integrty of 
than 300 programs administered by HHS. Approximately 80 percent ofOIG's resources are
dedicated to promoting the effciency and effectiveness of federally funded health care programs
and protecting these programs and our beneficiaries from fraud, waste, and abuse.
over 450 highly
GIG employs more than 1,700 dedicated professionals, including a cadre of 
skiled criminal investigators trained to conduct criminal, civil, and administrative investigations
of fraud, waste, and abuse related to HHS programs and operations. Our special agents have full
law enforcement authority to effectuate the broad range of available law enforcement actions,
including the execution of search and arrest warrants. We utilize state-of-the-ar technologies
and a wide range oflaw enforcement tools in carrng out these important responsibilities. We
are the Nation's premiere health care fraud law enforcement agency.
Gur constituents are the Amercan tax payers and we work hard to ensure that their money is not
stolen or misspent. Thans to the work of our dedicated professionals, over the past fiscal year
health care investigations and obtained over 900 criminal convictions
GIG opened over 1,700 
and civil actions. OIG investigations also have resulted in over $3.7 bilion in expected criminal
and civil recoveries.
Range of Investigations
Fraud, waste, and abuse in the Medicare and Medicaid programs cost taxpayers bilions of
dollars each year and put beneficiaries' health and welfare at risk. The impact of these losses
and risks is exacerbated by the growing number of people served by these programs and the
increased strain on Federal and State budgets. Health care fraud schemes commonly include
purposely billng for services that were not provided or were not medically necessary, biling for
Committee on Energy and Commerce
Subcommittee on Oversight and Investigations
March 2,201 i
Page 1 a higher level of serice than what was provided, misreporting costs or other data to increase
payments, paying kickbacks, ilegally marketing products, and stealing providers' or
beneficiaries' identities. From street gang members to corporate officers, our investigations are
uncovering a wide range of individuals and entities committing health care fraud. Below are
examples of fraud schemes we that have encountered.
In southern California, an individual set out to defraud the Medicare program by establishing
multiple fraudulent durable medical equipment (DME) companes. The owner used members of
his DME companies. He paid the gang members
a street gang as nominee owners of 
approximately $5,000 each to establish bank accounts and fill out Medicare enrollment
paperork. The nominee owners submitted claims for reimbursement to Medicare for power
wheelchairs and orthotic devices that were not medically necessar or legitimately prescribed by
a physician. Nine of the gang members and associates were indicted for charges including health
the nine defendants, eight
care fraud and providing false statements to Governent agents. Of 
for their crimes.
have pled guilty and are currently serving or have completed sering  jail time 
example of one ofthe more prevalent fraud schemes that OIG is
Not only is this investigation an 
seeing, but it also highlights the increasing number of violent criminals entering the health care
fraud arena. The criminal records for the gang members involved in this fraud ranged from
traffcking.
assault on a peace officer to drg 
Another recent case involving violent criminals and organized criminal networks involved 73
defendants charged with various health care fraud-related crimes with more than $163 milion in
fraudulent bilings. According to the indictments, the Arenian-American organized crme ring
behind the scheme was the Mirzoyan- Terdjanian Organization, which has allegedly used
violence and threats of violence to ensure payments to its leadership.
Medicare
In this crime scheme, criminals allegedly stole the identities of  thousands of 
beneficiaries from around the country, as well as the identities of doctors who were usually
the syndicate allegedly leased
licensed to practice in more than one State. Other members of 
office space, set up fraudulent clinics and opened ban accounts to receive Medicare fuds-
often in the name of the doctor whose identity they had stolen. Upon becoming approved
Medicare providers, the crooks allegedly biled Medicare for services never provided, using the
stolen beneficiary information. The funds received from Medicare were quickly withdrawn and
laundered; sometimes sent overseas... Although Medicare identified and shut down several of the
opened up more fraudulent clinics,
phony clinics, members of the criminal enterprise simply 
usually in another State. The investigation uncovered at least 118 sham clinics in 25 States.
Our agents also work on investigations involving fraud committed by large corporate entities.
For instance, OIG investigated the "Small Smiles" case, a horrfic example of egregious health
care fraud. FORBA Holdings, LLC (FORBA), a management company operating Medicaid
pediatrc dental clinics, recently agreed to pay $24 milion plus interest and entered into a 5-year
allegations that it perormed
quality-of-care Corporate Integrty Agreement (CIA) to settle 
painful services on children to maximize Medicaid reimbursement.
unnecessary  and often 
FORBA managed a chain of 68 pediatrc dental clinics in 22 States and the Distrct of Columbia
"Small Smiles Centers." The investigation revealed that among other
commonly known as 
things, FORBA allegedly caused the submission of claims forteimbursement for dental serVices
Commttee on Energy and Commerce
Subcommttee on Oversight and Investigations
March 2,2011 Page 2 that either were not medically necessary or did not meet professionally recognized standards of
care. Such services biled to the Medicaid programs included performing pulpotomies (baby root
canals), placing multiple crowns, administering anesthesia, performing extractions, and
providing fillings and sealants. This investigation involved OIG, the Federal Bureau of
Medicaid Fraud Control Units.
Investigation (FBI), and the National Association of 
the
In 2009, OIG, along with our law enforcement parners, successfully completed one of 
largest Federal Governent settlements in history. Pfizer Inc., a drug manufacturer, and its
subsidiary, Pharmacia & Upjohn Company, Inc., entered a $2.3 billon global resolution with the
Federal Governent and participating States. The agreement settled charges that Pfizer
promoted four drugs, including its pain drug Bextra, for uses not approved by Food and Drug
Administration and that the company paid kickbacks to health care professionals to induce them
to prescribe Pfizer drugs. In its plea agreement, Pfizer's subsidiary admitted that it promoted
Bextra for unapproved uses and at unapproved dosage levels. Pfizer also entered into a
comprehensiveS-year CIA with OIG, which requires procedures and reviews to be put in place
to avoid and promptly detect fraud or misconduct. Two corporate managers were charged
cnminally for their role in this matter.
Federal health care
GIG is not alone in the fight to combat fraud and protect the integrty of 
programs. We work closely with the Department of Justice (DOJ); our Federal, State, and local
law enforcement parners; and our colleagues at the Centers for Medicare & Medicaid Services
(CMS). Additionally, commercial and private insurance entities and trade associations, such as
the National Health Care Anti-Fraud Association are also involved in the identification and
health care fraud. OIG conducts joint investigations with law enforcement agencies
prevention of 
lead to the
where there is concurrent jurisdiction and where sharing expertise or authority wil 
best results possible.
OIG's partnerships extend to one ofthe Administration's signature initiatives, the Health Care
joint effort by HHS and
Fraud Prevention and Enforcement Action Team (HEAT). HEAT is a 
DOJ to leverage resources, experise, and authorities to prevent fraud, waste, and abuse in
Medicare and Medicaid. The HEAT initiative, established by Secretar Kathleen Sebelius and
Attorney General Eric Holder in May 2009, is an unprecedented partnership that brings together
senior offcials from both Departents with the stated goals of sharing information, spotting
fraud trends, coordinating prevention and enforcement strategies, and developing new fraud
fraud;
prevention tools. OIG contrbutes its expertise to HEAT by analyzing data for patters of 
providers who commit criminal
conducting investigations; supporting Federal prosecutions of 
and civil fraud; and pursuing administrative remedies, such as excluding providers from biling
Federal health care programs. OIG also makes recommendations to HHS to remedy program
vulnerabilities and prevent fraud and abuse.
Committee on Energy and Commerce
Subcommittee on Oversight and Investigations
March 2, 2011 3
Page  Investigative Strategies
Strike Forces
the Medicare Fraud Strke Force. Strike Forces are
A critical component of  HEAT is 
collaborative efforts, combining OIG's law enforcement skills and resources with those of our
law enforcement
partners in the FBI, Medicaid Fraud Control Units, and other State and local 
agencies. The Medicare Fraud Strke Force concentrates its antifraud efforts in geographic areas
and has changed the way health care fraud cases are investigated
at high risk for Medicare fraud 
the development and implementation of a
and prosecuted. Strke Force cases focus on 
technologically sophisticated and collaborative approach to combat fraud.
The typical Strke Force case differs from traditional health care fraud investigations.
Traditional health care fraud investigations are often initiated months after the fraud has been
perpetrated and rely heavily on information from individuals and dated evidence gathered by
the perpetrator, who has
contract  program integrty  entities. It is often diffcult to identify 
dropped the "business" under investigation, and is on to the next.
In contrast, Strke Force cases are data driven to pinpoint fraud "hot spots" through the
identification of unexplainable biling patters-as they occur. Further, in traditional health care
often provide some level of legitimate services. The
cases, the subjects of the investigations 
majority of subjects in Strike Force cases are engaging in 100 percent fraud, i.e., not providing
to be
any legitimate services to beneficiaries. These differences allow Strike Force cases 
completed more quickly. Strke Force coordination has accelerated the Goverent's response
to criminal fraud, decreasing by roughly halfthe average time from an investigation's start to the
case's prosecution.
Strike Force efforts in 2007 in SouthFlorida to identify,
OIG and DOJ first launched  their 
Medicare fraud.
investigate, and prosecute, DME suppliers and infusion clinics suspected of 
Building on the success in South Florida, the Strke Force model was expanded to eight
Brooklyn, Tampa, Baton Rouge, and most
additional  locations-Los Angeles, Houston, Detroit, 
recently, Chicago and Dallas.
Just last month, HEAT Strke Forces engaged in the largest Federal health care fraud takedown
over 100 defendants in 9 cities, including doctors,
in history. Teams across thecountr charged 
nurses, health care company owners, and executives for their alleged participation in Medicare
More than 300 OIG special
fraud schemes involving morethan $225 milion  in false biling. 
agents paricipated in parnership with other Federal and State agencies. The defendants charged
care-related crimes ranging from violating
as a par of  the operation are accused of  various health 
the anti-kickback statute to money laundering to aggravated identity theft.
Februar 28,2011, OIG's Strke Force efforts nationwide have charged over 800
As of 
which 390 have been convicted and sentenced, resulting in over $376 milion in
defendants, of 
court-ordered restitutions, fines, and penalties.
Commttee on Energy and Commerce
Subcommittee on Oversight and Investigations
March 2, 201 1 4
Page  Corporate Fraud
Health care fraud is not limited to blatant fraud by career criminals and sham providers. Major
corporations and institutions, such as pharmaceutical and device manufacturers, hospitals and
nursing facilities also commit fraud, often on a grand scale. These corporate and institutional
frauds often involve complex kickbacks, accounting schemes, ilegal marketing, and physician
self-referral schemes. These cases necessitate different, and often more laborious, investigative
techniques to unavel the complex fraud schemes and build strong cases.
Investigations oflarge corporations are often initiated after a "whistleblower" files a law suit on
the Governent, known as a "qui tam," alleging wrongdoing by the company. The
behalf of 
allegations include information that the company engaged in ilegal activities that violated the
False Claims Act. In doing so, the companies cause false claims to be submitted to Federal
health care programs for payment. The investigations involve coordination among many Federal
Governent deparents and agencies whose programs are alleged to have been hared.
Investigative technques utilized in these multi-year, complex corporate investigations include
reviewing voluminous paper and electronic documents obtained via subpoenas, interviewing
now use cutting-edge electronic
witnesses, and analyzing diagnosis and claims data. We 
discovery tools to maximize investigative efficiency in the processing and review of voluminous
law enforcement agency to
electronic evidence. Notably, our office was the first Federal 
implement such technology. This technology enables OIG to analyze large quantities of email or
other electronic documents quickly, and to associate or link emails contained in multiple
accounts based on content and data.
OIG often negotiates compliance obligations, known as CIAs, such as those discussed earlier in
the FORBA and Pfizer investigations, with health care providers and other corporate entities as
part of the settlement of Federal health care program investigations arising under a variety of
civil false claims statutes. The typical term of a comprehensive CIA is 5 years. This compliance
measure seeks to ensure the integrty of corporate activities and the Federal health care program
claims submitted by providers. Whle many CIAs have common elements, each agreement
addresses, in part, the specific facts of the conduct at issue.
I wil now address OIG's strategy to counter through our exclusion authority the fraud schemes
discussed above and discuss additional high impact tools we employ in our fight against health
care fraud.
Employig Effective Fraud-Fighting Tools
The effectiveness of our fraud-fighting efforts is enhanced by our use of several tools. We
continuously implement and evaluate these new tools to ensure we are maximizing our impact on
health care fraud.
Committee on Energy and Commerce
Subcommittee on Oversight and Investigations
March 2, 2011
Page 5 Exclusion
Once we determine that an individual or entity is engaged in fraud, waste, abuse, or the provision
of substandard care, OIG can use one of the most powerful tools in our arsenal: exclusion from
participating in Federal health care programs. Program exclusions bolster our fraud fighting
efforts by removing from the Federal health care programs those who pose the greatest risk to
programs and beneficiares.
There are many grounds for exclusion. Some are mandatory and imposed for a minimum of 5
years. These include a conviction related to the Medicare or Medicaid program and a conviction
related to patient abuse. Other exclusions are imposed at OIG's discretion. There are a
signficant number of such exclusions, including actions based on a sanction taken by a State
licensing authority or conduct that could trgger False Claims Act liability.
No program payment may be made for any item or service that an excluded person or entity
whether the
furnishes, orders, or prescribes. This payment prohibition applies regardless of 
excluded person is paid directly by the programs (like a physician) or whether the payment is
from the program to another person (such as payments to a hospital for services by its
made 
employed nurses and other staff, or payments to a pharmacy for drugs manufactured by a
pharmaceutical company). Those who employ the serces of an excluded individual or entity
for the provision of items or services reimbursable by Medicare or Medicaid may be subject to
monetary penalties and program exclusion. Because of its scope and effect, the risk of exclusion
creates a strong incentive to comply with the programs' rules and requirements.
In imposing discretionary exclusions, OIG must weigh the fraud and abuse risks to the programs
and beneficiaries against the impact on patient access to care if the provider or entity is excluded
from the Federal health care programs. Some hospital systems, pharaceutical manufacturers,
and other providers play such a crtical role in the care delivery system that they may believe that
they are "too big to fire" and thus OIG would never exclude them and thereby risk compromising
the welfare of our beneficiaries. Weare concerned that the providers that engage in health care
fraud may consider civil penalties and criminal fines a cost of doing business. As long as the
profit from fraud outweighs those costs, abusive corporate behavior is likely to continue. For
example, some major pharaceutical corporations have been convicted of crmes and paid
hundreds of milions of dollars in False Claims Act settlements and yet continue to paricipate in
the Federal health care programs.
One way to address this problem is to attempt to alter the cost-benefit calculus of the corporate
executives who run these companies. By excluding the individuals who are responsible for the
fraud, either directly or because of theitpositions of responsibility in the company that engaged
in fraud, we caninf1uence corporate behavior without putting patient access to care at risk. For
the pharmaceutical company
example, in 2008, we excluded three former executive officers  of 
the paiiiller OxyContin. Each
Purdue Frederck based on their convictions for misbranding of 
ofthe executives was convicted based on his status as a responsible corporate officer.
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Subcommittee on Oversight and Investigations
6
March 2,2011 Page  GIG also has the discretionary authority to exclude certain owners, officers, and managing
employees of a sanctioned entity (i.e., an entity that has been convicted of certain offenses or
excluded from participation in the Federal health care programs) even if  the executive has not
been convicted of a crime. This authority, section 1128(b )(15) of the Social Securty Act, allows
GIG to hold responsible individuals accountable for corporate misconduct. DIG has used this
exclusion authority in over 30 cases since it was added to the statute in 1996. But until recently,
we had typically applied this exclusion authority to individuals who controlled smaller
companies, such as pharacies, biling services, and DME companies and not to executives of
large complex organzations like a drug or device manufacturer.
We intend to use this essential fraud-fighting tool in a broader range of circumstances. For
example, in addition to the Purdue Frederick executives, we recently excluded an owner (and
former executive) of Ethex Corporation under our section (b )(15) exclusion authority. Ethex
operated manufacturing facilities in St. Louis. In March oflast year, Ethex pled guilty to felony
criminal charges after it failed to inform the FDA about manufacturing problems that led to the
production of oversized tablets of two prescription drugs. The owner was excluded for a period
of20 years.
We are mindful of our obligation to exercise this authority judiciously, and we do not propose to
exclude all officers and managing employees of a company that is convicted of a health care-
related offense. However, when there is evidence that an executive knew or should have known
the organization, OIG wil operate with a presumption
of  the underlying criminal misconduct of 
in favor of exclusion of that executive. We have published guidance on our Web site that sets
out factors we wil consider when evaluating whether a section (b)( 15) exclusion should be
1 This guidance alerts health care providers and executives to the
imposed in a paricular case. 
standards of ethical conduct and responsibility to which they wil be held accountable by OIG.
Even if  we decide exclusion of a major health care entity is not in the best interests of  Federal
health care programs and their beneficiaries, we may decide that executives in positions of
the fraud should no longer hold such positions with entities that do
responsibilty at the time of 
business with the programs.
Payment Suspension
We work closely with CMS to suspend payments to the perpetrators of  these schemes and in
other cases where we have credible evidence offraud. For example, during a July 2010 Strike
Force operation, OIG worked with CMS to initiate payment suspensions and pre-pay edits on 18
providers and suppliers targeted by the investigation. The prompt action taken by GIG and CMS
loss of over $1.3 milion in claims submitted by the defendants. During the
stopped the potential 
Februar Strike Force operations discussed above, OIG and CMS worked to impose payment
suspensions that immediately prevented a loss of over a quarter milion dollars in claims
submitted by Strike Force targets.
i Available online at http://oig.hhs.gov/fraud/exclusions/fies/pennissive excl under 1128b15 10192010.pdf.
Committee on Energy and Commerce
Subcommittee on Oversight and Investigations
March 2, 2011
Page 7 Access
Data 
Better access to, and use of, CMS claims data is critical to the Strike Force model and for all
health care fraud detection and enforcement activities. To be most effective, it is essential that
law enforcement have access to robust, "real time" claims data - data that are available as soon
as claims are submitted to Medicare. Timely data is also essential to our ability to respond with
agility as criminals shift their schemes and locations to avoid detection. We have made important
strdes in obtaining data more quickly and efficiently. We have obtained limited law
enforcement access to real-time data, and OIG and DOJ are working with CMS to expand this
access.
The Strke Force approach also uses data analysis and a collaborative approach to focus
enforcement resources in geographic areas at high risk for fraud. Strke Force cases are data
driven to pinpoint fraud hot spots through the identification of suspicious biling patterns as they
occur. To support this approach, OIG established a team of data expers comprised ofOIG
special agents, statisticians, programmers, and auditors. Together, the team brings a wealth of
experience in utilizing sophisticated data analysis tools combined with criminal intellgence
gathered directly from special agents in the field to identify more quickly ongoing health care
fraud schemes and trends. To expand the coalition of data experts focused on this effort, OIG
has garnered the support and paricipation of our law enforcement parners at DOJ and FBI.
Mutual Assistance
OIG recently worked with the Council ofthe Inspectors General on Integrty and Efficiency and
the U.S. Departent of Justice to establish assistance agreements within the Inspector General
community to leverage law enforcement resources, maximize efficiency, and reduce operational
enforcement
costs. As a result, special agents in the IG community can assist each other on law 
operations, limited in time and scope. Before, when a local OIG offce lacked the resources to
serve multiple search and arest warants, special agents traveled from other locations at
considerable cost to assist. Now, OIG special agents from various OIG offces can assist each
other. This mutual assistance agreement was used with great success during last month's major
Strke Force operation. Special agents from seven OIG offices assisted us in our historic
takedown. In Miami, for example, those agents knew the geographic areas and were familiar
Most ofthose who assisted us spoke Spanish, they
with the local communities  and customs. 
language spoken almost exclusively in many South Florida communities. Knowledge of local
and familarity of local customs results in a
environment, ability to speak a common language, 
safer environment in which OIG special agents can operate and conduct law enforcement
activities. As a result ofleveraging the resources ofthe IG community, we saved in excess of
$40,000. These funds wil be put towards futue operations and investigations.
Interpol
Recently, we assigned a special agent to INTERPOL Washington, the U.S. National Central
Bureau (USNCB). USNCB is the official U.S. representative to the Interational Criminal
Police Organization (INTERPOL) as designated by the U.S. Attorney General. The USNCB
Committee on Energy and Commerce
Subcommttee on Oversight and Investigations
March 2,2011 Page  8 serves as the national point of contact for INTERPOL matters and coordinates international
investigative cooperation between INTERPOL's 188 member countres and the more than
law enforcement agencies in the United States. HHS GIG
18,000 Federal, State, local and trbal 
is the first in the Inspector General community to have a special agent detailed to INTERPOL.
We have over 200 fugitives from our investigative efforts, more than 170 of which are the result
leverage the resources and relationships of
of  health care fraud investigations. We wil 
health care
INTERPOL's, 18,000 law enforcement partners worldwide to bring perpetrators of 
fraud to justice.
OIG's Fugitive Web site
Recently, OIG established a fugitive Web site to assist in locating fugitives running from health
the most-wanted health care fraud
care fraud charges. We have posted on our website the list of 
fugitives, including photographs and details on the fugitives and their fraud schemes? Our
curent most-wanted list includes 10 individuals who have allegedly defrauded taxpayers of
approximately $136 milion. We have partnered with "America's Most Wanted" and
INTERPOL to feature our Web site and actively engaged the media to spread the word that we
are searching for these fugitives. We are asking the public to help us bring these fugitives to
justice by reporting any information about their whereabouts to our Web site or fugitive hotlne
(1-888-476-4453).
Conclusion
GIG's efforts that I have discussed today are critical aspects of a multi-agency effort to protect
the Federal health care programs. We are committed
the vitality, integrty  and finite resources of 
to investing in program integrty efforts in order to send a clear message that fraud in our Federal
health care programs wil not be tolerated.
By attacking fraud vigorously, wherever it exists, we all stand to benefit. Medicare Trust Fund
resources wil be protected and remain available for their intended puroses. Medicare dollars
that have gone to fraudulent providers wil instead be available to serve the critical health care
needs of our program beneficiaries. And most importantly, we can ensure that our seniors and
persons with disabilities receive the necessary services and care they need to stay healthy, so as
to enjoy enhanced well-being and quality of life.
taxpayer dollars. Over the past 3
Finally, our anti-fraud efforts represent a prudent investment of 
years, for every $1 spent on the health care fraud and abuse control program, an average of$6.80
has been returned to the Governent.
Thank you for the opportty to discuss our law enforcement efforts and strategies used to
Federal health care programs.
protect the integrty of 
2 Available at http://oig.hhs.gov/fugitives/.
Committee on Energy and Commerce
Subcommittee on Oversight and Investigations
March 2, 201 1 9
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