Department of Health and Human Services
 
OFFICE OF 

INSPECTOR GENERAL 

M  P
EDICARE S  ROGRAM 

S C :
 
AFEGUARD  ONTRACTORS
A D
CTIVITIES TO  ETECT AND 

D F A
ETER  RAUD AND  BUSE 

Daniel R. Levinson
 
Inspector General 

July 2007 

OEI-03-06-00010 
 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.    E X E C U T I V E   S U M M A R Y  
OBJECTIVE 
To assess three selected activities that program safeguard contractors 
(PSC) performed in 2005 to detect and deter fraud and abuse in 
Medicare Parts A and B. 
BACKGROUND 
The Medicare Integrity Program was established in 1996 to strengthen 
the Centers for Medicare & Medicaid Services (CMS) ability to reduce 
fraud and abuse in the Medicare program.  In 1999, CMS began 
transferring the responsibility for detecting and deterring fraud and 
abuse in Medicare Parts A and B from carrier and fiscal intermediary 
fraud units to PSCs.  CMS completed this transfer of responsibilities in 
2006. CMS now awards benefit integrity task orders to PSCs to perform 
the work of detecting and deterring fraud and abuse. CMS has the 
option of renewing or terminating task orders at the end of a 
performance period.  A typical performance period lasts 1 year.  In 2005, 
the year of our evaluation, seven PSCs performed the work under  
17 task orders (not including a 2-month task order that was excluded 
from our analysis).  In this report, the term PSC represents a PSC 
benefit integrity task order. 
As part of their duties, PSCs conduct investigations to determine the 
facts and magnitude of alleged fraud and abuse.  Upon completing 
investigations, PSCs determine whether to refer the investigations as 
cases to law enforcement.  CMS expects PSCs to be innovative and 
effective in data analysis, moving beyond the capabilities of carrier and 
fiscal intermediary fraud units. This was one of the reasons for 
awarding contracts to PSCs.  CMS expects a significant part of PSC 
data analysis to be proactive, i.e., self-initiated exploratory analysis that 
seeks previously unidentified patterns or instances of fraud and abuse. 
The Office of Inspector General conducted this study to gain an 
understanding of PSC accomplishments in the primary activities of 
investigations, case referrals to law enforcement, and proactive data 
analysis as reflected in PSC workload statistics.   
We collected PSC workload statistics as well as all PSC monthly status 
reports for calendar year 2005 from CMS.  The monthly status reports 
contain PSCs narrative and numerical information about their 
activities and issues.  We also collected budget allocation and level of 
  OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  i  EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY
PSC oversight responsibility (i.e., dollar amount of paid claims) from 
CMS for each task order. 
FINDINGS 
Program safeguard contractors differed substantially in the number 
of new investigations and case referrals to law enforcement 
produced in 2005; some had minimal activity in these primary 
workload categories. PSCs produced between 5 and 479 new Part A 
investigations, with a median of 60. The four lowest PSCs had between 
5 and 19 new Part A investigations for the year. PSCs produced 
between 0 and 10 new Part A case referrals to law enforcement, with a 
median of 3. Three PSCs had only one new Part A case referral, and 
two PSCs had none. 
PSCs produced between 18 and 3,707 new Part B investigations, with a 
median of 196. Three of these PSCs had 80 or fewer new Part B 
investigations. PSCs referred between 2 and 39 Part B cases to law 
enforcement, with a median of 13. Three PSCs had two, three, and four 
new Part B case referrals, respectively. 
Although PSCs might be expected to differ from one another in 
workload activity levels, neither the size of a PSCs budget nor its 
oversight responsibility was strongly correlated with the number of new 
investigations or the number of new case referrals to law enforcement 
produced in 2005. 
Most program safeguard contractors had minimal results from 
proactive data analysis. Thirteen of seventeen PSCs (77 percent) 
reported 18 percent or less of new investigations from proactive data 
analysis. Of these 13 PSCs, 7 had 8 percent or less. Two of the seven 
PSCs produced no new investigations from proactive data analysis, and 
one PSC had only one new investigation from this source. Almost half 
the PSCs (7 of 17) had only one case referral to law enforcement that 
originated from proactive data analysis. One PSC had none. 
In addition to conducting our review of workload statistics, we reviewed 
PSC monthly status reports for any descriptions of proactive data 
analysis. Although CMS does not specifically require that descriptions 
of proactive data analysis or its results be included in monthly status 
reports, we found that all PSCs mentioned proactive data analysis in at 
least one months report during the year. We do not know if the absence 
of information about proactive data analysis in the remaining months 
indicates that the activity did not take place. In the reports that 
OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  ii  E X E C U T I V E   S U M M A R Y  
mentioned proactive data analysis, some PSCs repeated the exact 
language about the same project in numerous monthly reports. 
Moreover, we found no consistency across PSCs regarding the level of 
detail about proactive data analysis included in the monthly status 
reports. 
RECOMMENDATIONS 
To determine why certain PSCs have minimal or no activity in new 
investigations or new case referrals to law enforcement, especially as a 
result of proactive data analysis, CMS should: 
Review program safeguard contractors with especially low volumes  
of activity in investigations and case referrals for Medicare Parts A 
and B.  For PSCs with no activity or low levels of activity, CMS should 
determine whether these PSCs have taken all the necessary steps to 
identify potential fraud and abuse. If CMS finds that not all necessary 
steps were taken, CMS could provide additional guidance to PSCs about 
their fraud and abuse detection and deterrence activity levels.  CMS 
could also consider its remedies under the PSC contracts, up to and 
including contract termination.  
Require program safeguard contractors to provide more detailed 
explanations of their investigations, case referrals, and proactive 
data analysis activities in their monthly reports.  CMS should use this 
information to review PSCs for which activity levels appear low.  If 
workload activity levels are high, CMS can determine the techniques 
those PSCs are using and share the techniques with other PSCs. 
CMS should also require PSCs to provide more detailed information 
about their proactive data analysis efforts.  PSCs should identify 
current proactive data analysis projects and identify the projects 
innovative and/or effective aspects. 
AGENCY COMMENTS  
CMS concurred in part with our first recommendation.  CMS stated that 
currently it is difficult to compare PSCs.  However, CMS has begun 
implementing a new strategy of aligning PSC jurisdictions with 
jurisdictions of claimsprocessing contractors and believes this will make 
it easier to compare PSCs in the future.  CMS also noted that it has 
begun allocating funds to PSCs based on PSC performance, workload, 
and Medicare program vulnerabilities.   
  OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  iii  E X E C U T I V E   S U M M A R Y  
CMS stated that acceptable performance of PSCs is not based solely on 
their development of cases for referral to law enforcement.  CMS reports 
that law enforcement often indicates its preference that PSCs pursue 
administrative actions rather than referrals. 
CMS concurred with our second recommendation.  CMS stated that it has 
revised the monthly reporting system to collect more information and to 
improve reporting consistency across PSCs.  Regarding proactive data 
analysis, CMS stated that this activity has other goals besides referring 
cases to law enforcement, such as identifying targets for edits, assessing 
the effectiveness of administrative actions, and assisting law enforcement 
with their open cases.   
  OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  iv    T A B L E   O F   C O N T E N T S  
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
  
I N T RO DUC T IO N  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
  
F I N D IN G S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7
  
PSCs differered substantially in workload activities. . . . . . . . . . . .  7
  
PSCs had minimal results from proactive data analysis  . . . . . . . .  9
  
R E C O MMEN D A T ION S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
  
Agency Comments. . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12 

APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
  
A: 	2005 Program Safeguard Contractors With Benefit  

   Integrity Task Orders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
  
B:	  Correlation Coefficients  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
  
C:	   AgencyComments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
  
A C K NO WL E D G M E N T S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
     I N T R O D U C T I O N  
OBJECTIVE 
To assess three selected activities that program safeguard contractors 
(PSC) performed in 2005 to detect and deter fraud and abuse in 
Medicare Parts A and B. 
BACKGROUND 
In our March 2006 study, Medicares Program Safeguard Contractors:  
Performance Evaluation Reports (OEI-03-04-00050), the Office of 
Inspector General (OIG) reviewed annual PSC performance evaluation 
reports issued by the Centers for Medicare & Medicaid Services (CMS).  
OIG found that these reports provided minimal information and limited 
quantitative data about PSC achievements related to detecting and 
deterring fraud and abuse.  The OIG report was preceded by a 2001 
Government Accountability Office report (GAO-01-616) on PSCs, which 
found that CMS had not established clear, measurable performance 
criteria to assess the PSCs performance on individual task orders.   
In 2004, CMS began collecting from PSCs a variety of monthly 
summary statistics for each benefit integrity task order.  Because these 
statistics reflect the volume of PSC workload activities to detect and 
deter fraud and abuse in Medicare Parts A and B, OIG conducted this 
current study to gain an understanding of PSC accomplishments in 
primary workload activities (investigations, case referrals to law 
enforcement, and proactive data analysis) as reflected in the statistics.   
Medicare Vulnerabilities 
Medicare Parts A and B are vulnerable to fraud and abuse because of 
their size and complexity. In 2005, PSCs were responsible for fraud and 
abuse oversight of $303 billion in paid claims for Medicare Parts A    
and B. In addition to services provided by hospitals and physicians, 
Medicare Parts A and B cover services by home health agencies, 
laboratories, end stage renal disease facilities, physical therapy 
facilities, ambulatory surgical centers, rural health clinics, 
comprehensive outpatient rehabilitation facilities, hospices, ambulance 
suppliers, and medical equipment suppliers. 
Fraud and Abuse Contractors 
The Health Insurance Portability and Accountability Act of 1996 
(HIPAA), section 202, established the Medicare Integrity Program to 
strengthen CMSs ability to deter potential fraud and abuse in the 
Medicare program.  It also gave CMS the authority to transfer the work 
  OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  1  I N T R O D U C T I O N  
of detecting and deterring fraud and abuse from carrier and fiscal 
intermediary fraud units to new entities under competitive contracts.1 
As part of the Medicare Integrity Program, CMS replaced all carrier 
and fiscal intermediary fraud units with PSCs through the award of 
contracts called benefit integrity task orders.  In 2006, CMS completed 
the transfer of fraud and abuse work from the fraud units to the PSCs. 
A typical PSC performance period lasts 1 year, after which CMS has the 
option of renewing or terminating the task order.  In 2005, the year of 
our evaluation, seven PSCs performed fraud and abuse work under 
17 benefit integrity task orders.  This does not include a task order that 
lasted only 2 months and was not renewed by CMS.  In this report, the 
term PSC represents a PSC benefit integrity task order.   
Of the 17 PSCs, 14 have responsibility for both Medicare Parts A and B, 
1 has Part A only, and 2 have Part B only. 
Primary Activities of Program Safeguard Contractors 
Pursuant to HIPAA, section 202, PSCs are expected to have capabilities 
surpassing those of carrier and fiscal intermediary fraud units to detect 
and deter fraud and abuse and are expected to cooperate with OIG and 
other law enforcement agencies in the detection and deterrence of fraud 
and abuse. 
In CMSs comments on OIGs previous report on PSCs (OEI-03-04-
00050), CMS stated that PSCs are tasked with identifying potentially 
fraudulent providers and supporting the efforts of law enforcement and 
CMS in pursuing civil, criminal, and administrative remedies for fraud. 
CMS also stated that PSCs focus primarily on investigating allegations 
of fraud, referring potential fraud cases to law enforcement, and 
conducting data analysis. 
Investigations.  CMSs Program Integrity Manual (Rev. 71, 04-09-04) 
states that the purpose of a PSC investigation is to determine the facts 
and magnitude of alleged fraud and abuse.  This includes research and 
analysis conducted in followup to leads identified proactively or in 
response to complaints screened by the claims-processing contractor 
(formerly carriers and fiscal intermediaries and now transitioning to 
1 The 1998 and 2005 publications of CMSs proposed rules in the Federal Register         
(63 Federal Register 13590 and 70 Federal Register 35204, respectively) establish the 
Medicare Integrity Program permitting CMS to contract with eligible entities prior to the 
publication of a final rule.  
  OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  2  I N T R O D U C T I O N  
Medicare administrative contractors).  PSCs identify the actual or 
estimated overpayments associated with their investigations and notify 
the claims-processing contractor to collect the overpayments.  PSCs 
reported to CMS that in 2005 they identified overpayments of 
$54,673,571 in connection with their investigations.2 
Case Referrals to Law Enforcement.  Upon completing its investigation, 
the PSC determines whether to refer the investigation to law 
enforcement, namely to OIGs Office of Investigations.  Once the referral 
is made, it is counted as a case in the PSC statistics reported to CMS. 
Not all investigations become cases.  In this report, we use the term 
case referral when discussing cases that have been referred to law 
enforcement. 
PSCs identify the actual or estimated overpayments associated with 
case referrals and notify the claims-processing contractor to collect the 
overpayments. PSCs reported to CMS that in 2005 they identified 
overpayments of $119,053,255 in connection with case referrals to law 
enforcement.3 
Data Analysis.  PSCs are expected to conduct innovative and effective 
data analysis for early detection, prevention, intervention, and 
investigation of potential fraud.4  CMS expects a significant part of 
PSC data analysis to be proactive, i.e., self-initiated exploratory 
analysis that seeks previously unidentified patterns or instances of 
fraud and abuse.5  PSCs are also expected to use equipment and 
software technologies that surpass the capability of the equipment and 
technologies used by their predecessors and to move beyond carrier and 
fiscal intermediary data analysis methods and choices in data-mining 
software.6  Unlike the carrier and fiscal intermediary fraud units that 
had access only to either Part A or Part B data, most PSCs have access 
to both. This gives PSCs the ability to perform more comprehensive and 
proactive data analysis of Medicare Parts A and B.    
2 CMSs Benefit Integrity Workload Template database, calendar year 2005. 

3 Ibid. 

4 CMSs 2004 Record of Evaluation, an internal rating tool used during the annual
 
performance evaluation of PSCs. 
5 CMSs 2006 PSC Performance Evaluations Guidelines. 
6 HIPAA, section 202, and CMSs 2006 PSC Performance Evaluations Guidelines. 
  OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  3  II NN TT RR OO DD UU CC TT II OO NN
Program Safeguard Contractor Workload Statistics 
As of July 2004, CMS began collecting monthly summary statistics 
about PSC workload activities in the Benefit Integrity Workload 
Template database. This database is part of CMSs online CMS 
Analysis, Reporting, and Tracking System (CMS ARTS). The workload 
activities represented in the 2005 statistics include investigations, case 
referrals to law enforcement agencies, medical review in support of 
benefit integrity cases, payment suspensions, law enforcement data 
requests, fraud alerts, and training and conferences. The numbers of 
statistics for each activity vary. Below are examples of types of 
statistics available for investigations and case referrals for Medicare 
Parts A and B. 
	  Number of new investigations opened during the reporting month, 
source (e.g., proactive data analysis, complaints), and dollar amount 
of potential overpayments identified. 
	  Number of new case referrals to law enforcement during the 
reporting month, source (e.g., proactive data analysis, complaints), 
and dollar amount of potential overpayments identified. 
In this report, the term workload statistics refers to statistics included 
in the Benefit Integrity Workload Template. 
Program Safeguard Contractor Monthly Status Reports 
At the time of our review, PSCs provided CMS with required monthly 
status reports that contained narrative and numerical information 
describing PSC activities and issues under a specific task order. CMS 
required that these reports be uploaded monthly into CMS ARTS. CMS 
did not require a standard format for the reports but did have minimum 
general requirements for what should be included, such as prior 
months activities by task and activity and any unresolved issues from 
the prior month. 
Recent Changes to Benefit Integrity Workload Template 
CMS reported that several changes were made to the Benefit Integrity 
Workload Template beginning in 2007. CMS will now include PSC 
budget and cost allocations in the template. CMS also eliminated the 
separate monthly status report and instead PSCs will now add 
narrative information to the statistics collected in the template. 
OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  4  II NN TT RR OO DD UU CC TT II OO NN

METHODOLOGY 
Scope 
For calendar year 2005, we reviewed PSCs workload activity for 
Medicare Parts A and B in the areas of investigations, case referrals to 
law enforcement agencies, and proactive data analysis. We reviewed 
data for 17 benefit integrity task orders. Fifteen of these task orders 
were in effect for 12 months and 2 were in effect for 10 months during 
2005. Because one additional task order was in effect for only 2 months 
and it was not renewed by CMS, we did not include it in our review. 
We assigned an identification letter, from AQ, to the 17 PSCs in our 
review. We use these identification letters in our report so that the 
reader can identify information related to the same PSC across the 
different tables while still maintaining the confidentiality of the PSC. 
Appendix A provides the following information about PSCs for 2005. 
	  Medicare programs covered by the task order 
	  Number of months the task order was active 
	  Budget allocation 
	  Number of paid Part A and Part B claims for which the PSC had 
oversight 
	  Dollar amount of paid Part A and Part B claims for which the PSC 
had oversight 
Data Collection 
For each PSC task order, we collected monthly workload statistics from 
the Benefit Integrity Workload Template. We also collected the 2005 
and 2006 definitions of PSC workload categories in the Template. 
We collected monthly status reports for each PSC task order. Because 
15 task orders were in effect for 12 months and the remaining 2 task 
orders were in effect for 10 months, we collected a total of 200 reports. 
We also collected the budget allocation and the oversight responsibility 
data associated with each task order. We use the term oversight 
responsibility to mean dollar amount of Medicare paid claims. 
Analysis 
We summarized the workload statistics by workload activity, by 
Medicare Parts A and B, by month, and by the entire year, for each PSC 
task order and across all PSC task orders. We identified averages, 
medians, maximums, and minimums for each activity. 
OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  5  II NN TT RR OO DD UU CC TT II OO NN
We calculated the sum of new investigations and new case referrals 
from reactive and proactive sources in calendar year 2005. We also 
calculated the percentages of new investigations and new case referrals 
that originated from proactive data analysis. 
We analyzed the correlation (strength of relationship) between the level 
of activity in new investigations and case referrals and the size of PSC 
budget and oversight responsibilities. 
We reviewed the monthly status reports to determine whether PSCs 
addressed proactive data analysis. 
Limitations 
We did not collect information from CMS, PSCs, or claims-processing 
contractors to verify the workload statistics or information in the 
monthly status reports. We did not determine the quality of either the 
PSCs investigations or their case referrals to law enforcement. 
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspections issued by the Presidents Council on Integrity and 
Efficiency and the Executive Council on Integrity and Efficiency. 
OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  6    F I N D I N G S
Program safeguard contractors differed  The number of new investigations 
substantially in the number of new  and case referrals varied greatly by 
PSC, and some PSCs produced few 
investigations and case referrals to law 
new investigations and case 
enforcement produced in 2005; some had 
referrals in 2005. 
minimal activity in these primary workload 
As shown in Table 1, the 15 PSCs 
categories 
that had responsibility for Medicare 
Part A produced between 5 and 479 new Part A investigations, with a 
median of 60.  The four lowest PSCs had between 5 and 19 new Part A 
investigations for the year. In the area of new case referrals to law 
enforcement, these 15 PSCs produced between 0 and 10 new case 
referrals, with a median of 3 for the year.  Three PSCs had only one new 
Part A case referral, and two PSCs had none. 
The 16 PSCs having responsibility for Medicare Part B produced 
between 18 and 3,707 new Part B investigations, with a median of 196.  
Three of these 16 PSCs had 80 or fewer new Part B investigations.  In 
the area of new case referrals to law enforcement, these 16 PSCs 
referred between 2 and 39 Part B cases, with a median of 13 for the 
year.  Three PSCs had only two, three, and four new Part B case 
referrals, respectively, for the entire year.    
Table 1. PSC Part A and Part B Activity in New Investigations and New Case Referrals to Law 
Enforcement Agencies (sorted by case referrals, n=17) 
PART A  PART B 
PSC Task Order  Investigations  Case Referrals  PSC Task Order  Investigations  Case Referrals 
A  125  0  F  679  2 
L  19  0  J  18  3 
B  31  1  L  80  4 
G  5  1  A  1,141  8 
N  12  1  H  142  8 
F  479  2  D  406  11 
P  28  2  P  139  11 
C  38  3  G  106  12 
D  14  3  M  996  13 
Q  84  3  B  153  14 
H  224  4  K  75  14 
K  79  4  Q  886  15 
I  60  5  O  223  25 
J  127  9  C  169  32 
M  196  10  E  3,707  33 
E  n/a  n/a  I  1,054  39 
O  n/a  n/a  N  n/a  n/a 
Total  1,521  48  Total  9,974  244 
Median  60  3  Median  196  13 
Source:  OIG analysis of CMS's Benefit Integrity Workload Template 2005 data. 
  OEI-03-06-00010  MEDICARE S PSCS :  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  7  FF II NN DD II NN GG SS  
Neither the size of a program safeguard contractors budget nor its 
oversight responsibility was strongly correlated with the number of new 
investigations or case referrals to law enforcement 
Although PSCs might be expected to differ from one another in 
workload activity levels, neither the size of a PSCs budget nor its 
oversight responsibility (dollar amount of Medicare paid claims) was 
strongly correlated with the number of new investigations or the 
number of new case referrals to law enforcement produced in 2005. 
Appendix B contains the correlation coefficients. 
For instance, as shown in Table 2 below, PSCs G and D are both 
responsible for Medicare Parts A and B. In 2005, PSC G had 111 new 
investigations and 13 new case referrals with the highest budget 
allocation and almost the highest oversight responsibility. In contrast, 
PSC D had 420 new investigations and 14 new case referrals but had 
less than half the budget and less than one-third of the oversight 
responsibility of PSC G. 
Although PSCs C and P had similar levels of oversight responsibility, 
PSC C produced more investigations and more than twice as many case 
referrals with a smaller budget allocation than PSC P. 
Table 2. Size of PSC Budget and Oversight Responsibility Compared to Workload Activity in New Investigations and 
New Case Referrals (sorted by budget allocation, n=17) 
PSC  Dollar Amount of  Dollar Amount  Dollar Amount  Number of  Number of 
Task  Budget  Paid Claims  of Paid Claims  of Paid Claims  Investigations  Case Referrals 
Order  Allocations  Parts A and B  Part A  Part B  Parts A and B  Parts A and B 
G  $9,316,750  $32,608,874,051  $30,122,833,543  $2,486,040,508  111  13 
I  $9,234,176  $16,061,254,458  $9,879,110,033  $6,182,144,425  1,114  44 
H  $9,159,828  $38,627,435,953  $32,804,312,314  $5,823,123,639  366  12 
K  $8,191,839  $21,959,723,581  $17,961,026,386  $3,998,697,195  154  18 
Q  $7,159,648  $16,828,770,952  $8,372,462,619  $8,456,308,333  970  18 
A  $7,083,680  $26,044,518,589  $22,433,987,042  $3,610,531,547  1,266  8 
M  $7,035,096  $33,461,032,180  $24,767,547,520  $8,693,484,660  1,192  23 
N  $6,941,000  $4,840,800,571  $4,840,800,571  $0  12  1 
O  $6,579,116  $1,370,257,300  $0  $1,370,257,300  223  25 
E  $5,201,210  $6,938,670,223  $0  $6,938,670,223  3,707  33 
J  $4,708,763  $14,266,760,684  $13,118,796,561  $1,147,964,123  145  12 
F  $4,643,975  $34,001,129,627  $31,486,329,750  $2,514,799,877  1,158  4 
P  $4,208,991  $11,887,536,412  $8,291,721,600  $3,595,814,812  167  13 
D  $4,042,433  $9,360,881,234  $6,142,707,019  $3,218,174,215  420  14 
L  $3,226,096  $11,139,110,800  $7,148,627,324  $3,990,483,476  99  4 
B  $3,038,729  $13,444,256,435  $9,463,286,619  $3,980,969,816  184  15 
C  $2,332,467  $10,162,135,021  $7,485,513,031  $2,676,621,990  207  35 
Totals  $102,103,797  $303,003,148,071  $234,319,061,932  $68,684,086,139  11,495  292 
Source: CMSs Program Integrity Group and OIG analysis of Benefit Integrity Workload Template 2005 data. 
OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  8  F I N D I N G S  

Most program safeguard contractors had  There were minimal results from 
minimal results from proactive data analysis   proactive data analysis in the 
areas of new investigations and 
case referrals to law enforcement in 2005.  As shown in Table 3 below, 
three-quarters of PSCs (13 of 17) had 18 percent or less of their new 
investigations from proactive data analysis.  Seven of these thirteen 
PSCs had 8 percent or less.  Two of these PSCs produced no new 
investigations from proactive data analysis, and one PSC initiated one 
new investigation based on this source. 
Table 3. Proactive Data Analysis as Source of New Investigations and New Case Referrals to Law 
Enforcement Agencies (n=17) 
Investigations    Case Referrals 
Number of  Percentage of  Number of  Percentage of 
PSC  Investigations  Investigations  PSC  Number of  Case Referrals  Case Referrals 
Task  Number of  From Proactive  From Proactive  Task  Case  From Proactive  From Proactive 
Order  Investigations  Data Analysis  Data Analysis  Order  Referrals  Data Analysis  Data Analysis 
E  3,707  0  0%  F  4  0  0% 
H  366  0  0%  E  33  1  3% 
M  1,192  20  2%  M  23  1  4% 
D  420  8  2%  B  15  1  7% 
Q  970  55  6%  H  12  1  8% 
C  207  12  6%  K  18  2  11% 
N  12  1  8%  A  8  1  13% 
B  184  24  13%  P  13  2  15% 
L  99  13  13%  Q  18  3  17% 
P  167  27  16%  L  4  1  25% 
I  1,114  183  16%  C  35  10  29% 
J  145  24  17%  I  44  13  30% 
O  223  39  18%  J  12  4  33% 
A  1,266  490  39%  D  14  8  57% 
K  154  69  45%  O  25  17  68% 
F  1,158  692  60%  G  13  12  92% 
G  111  74  67%  N  1  1  100% 
Totals  11,495  1,731  15%  Totals  292  78  27% 
Source: OIG analysis of CMS's Benefit Integrity Workload Template 2005 data. 
In the area of new case referrals to law enforcement, almost half the 
PSCs (7 of 17) had only one case referral originating from proactive data 
analysis. For 9 PSCs, 17 percent or less of their new case referrals 
resulted from proactive data analysis.  Of these PSCs, five had 8 percent 
or less, and one had no new case referrals from this source.  
In addition to conducting our review of workload statistics, we reviewed 
PSC monthly status reports for any descriptions of proactive data 
analysis. Although CMS does not specifically require that proactive 
  OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  9  F I N D I N G S  
data analysis projects and their results be included in monthly status 
reports, it does ask that the PSCs prior months activities be included in 
the reports. 
We found that all PSCs mentioned proactive data analysis in at least  
four monthly status reports during the year.  We do not know if the 
absence of information about proactive data analysis in the remaining 
months indicates that the activity did not take place.  In the reports 
that mentioned proactive data analysis, some PSCs repeated the exact 
language about the same project in numerous monthly reports.  After 
the initial mention of a proactive data analysis project, subsequent 
reports that referenced the same project provided no new or additional 
information about the project or its results. 
We found no consistency across PSCs regarding the level of detail about 
proactive data analysis included in the monthly status reports.  
Therefore, based on information in the reports, we could not determine 
whether the low numbers of proactive investigations and case referrals 
to law enforcement reported in the workload statistics were the result of 
PSCs performing proactive data analysis that did not yield cases of 
potential fraud and abuse for further investigation or the result of PSCs 
not performing substantial proactive data analysis overall. 
  OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  10    R E C O M M E N D A T I O N S  
PSCs were established to strengthen CMSs ability to detect and deter 
potential fraud and abuse in the Medicare program.  OIG has not found 
strong evidence that this is occurring across all PSCs for the three 
workload activities we reviewed. Based on the 2005 Benefit Integrity 
Workload Template statistics and monthly status reports, OIG found 
that some PSCs had minimal or no activity in new investigations or case 
referrals to law enforcement.  PSCs also had minimal results from 
proactive data analysis, which was expected to be a significant activity 
of PSCs and distinguish them from their predecessors. 
To determine why certain PSCs have minimal or no activity in new 
investigations or new case referrals to law enforcement, especially as a 
result of proactive data analysis, CMS should: 
Review program safeguard contractors with especially low volumes  
of activity in investigations and case referrals for Medicare Parts A 
and B 
For PSCs with no activity or low levels of activity, CMS should 
determine whether these PSCs have taken all the necessary steps to 
identify potential fraud and abuse. If CMS finds that not all necessary 
steps were taken, CMS could provide additional guidance to PSCs about 
their fraud and abuse detection and deterrence activity levels.  CMS 
could also consider its remedies under the PSC contracts, up to and 
including contract termination.  Under the umbrella contracts 
governing the various task orders, CMS may terminate a contract if the 
PSC defaults in performing its obligations.   
Require program safeguard contractors to provide more detailed 
explanations of their investigations, case referrals, and proactive 
data analysis activities in their monthly reports 
CMS should use this information to review PSCs for which activity levels 
appear low.  If workload activity levels are high, CMS can determine the 
techniques those PSCs are using and possibly share the techniques with 
other PSCs. 
CMS should also require PSCs to provide more detailed information 
about their proactive data analysis efforts.  PSCs should identify 
current proactive data analysis projects and identify the projects 
innovative and/or effective aspects. 
  OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  11  R E C O M M E N D A T I O N S  

AGENCY COMMENTS  
CMS concurred in part with our first recommendation to review PSCs 
with especially low volumes of activity in investigations and case 
referrals. CMS stated that the variation in workloads and geographical 
jurisdictions between PSCs makes it difficult to directly compare PSCs 
efforts. However, CMS has begun implementing a new contracting 
strategy to align PSC jurisdictions with the jurisdictions of claims 
processing contractors and believes this will make it easier to compare 
PSCs in the future.  CMS also noted that it has begun allocating funds to 
PSCs based on PSC performance, workload, and Medicare program 
vulnerabilities.   
CMS stated that acceptable performance of PSCs is not based solely on 
their development of cases for referral to law enforcement.  CMS reports 
that law enforcement often indicates its preference that PSCs pursue 
administrative actions rather than referrals. 
CMS concurred with our second recommendation to require PSCs to 
provide more detailed explanations of their investigations, case referrals, 
and proactive data analysis activities in their monthly reports.  CMS 
stated that it has revised the monthly reporting system to collect more 
information and to improve reporting consistency across PSCs. 
With regard to proactive data analysis, CMS stated that this activity has 
other goals besides referring cases to law enforcement, such as identifying 
targets for edits, assessing the effectiveness of administrative actions, 
and assisting law enforcement with their open cases.  The full text of 
CMSs comments is provided in Appendix C.  
  OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  12    A P P E N D I X   A
2005 Program Safeguard Contractors (PSC) With Benefit Integrity Task Orders  (n=17) 
PSC  Months  Number of  Number of  Dollar Amount  Dollar Amount 
Task  Task Order  Budget  Paid Claims  Paid Claims  of Paid Claims   of Paid Claims 
Order  Medicare Programs    Was Active  Allocation  Part A  Part B  Part A  Part B 
Part A hospitals 
A  Part A home health    12  $7,083,680  20,807,426  43,984,933  $22,433,987,042  $3,610,531,547 
Part B physicians  
Part A hospitals 
B  12  $3,038,729  10,467,606  49,807,501  $9,463,286,619  $3,980,969,816 
Part B physicians  
Part A hospitals 
C  12  $2,332,467  7,362,719  30,442,872  $7,485,513,031  $2,676,621,990 
Part B physicians   
Part A hospitals 
D  12  $4,042,433  7,510,708  38,386,833  $6,142,707,019  $3,218,174,215 
Part B physicians         
E  Part B physicians  12  $5,201,210  0  66,776,723  $0  $6,938,670,223 
Part A hospitals 
F  12  $4,643,975  21,875,279  31,118,549  $31,486,329,750  $2,514,799,877 
Part B physicians 
Part A hospitals 
G  12  $9,316,750  24,692,061  25,920,332  $30,122,833,543  $2,486,040,508 
Part B physicians  
Part A hospitals 
H  Part A home health   12  $9,159,828  33,559,768  70,175,227  $32,804,312,314  $5,823,123,639 
Part B physicians 
Part A hospitals 
I  12  $9,234,176  11,505,945  72,066,690  $9,879,110,033  $6,182,144,425 
Part B physicians 
Part A hospitals 
J  Part A home health  12  $4,708,763  6,563,509  13,460,733  $13,118,796,561  $1,147,964,123 
Part B physicians 
Part A hospitals 
K  Part A home health   12  $8,191,839  15,766,970  46,711,525  $17,961,026,386  $3,998,697,195 
Part B physicians 
Part A hospitals 
L  10  $3,226,096  7,415,334  $7,148,627,324  $3,990,483,476 
Part B physicians  48,470,878 
Part A hospitals 
M  12  $7,035,096  22,647,652  90,720,697  $24,767,547,520  $8,693,484,660 
Part B physicians   
N  Part A hospitals  12  $6,941,000  4,539,310  0  $4,840,800,571  $0 
Part B medical 
O  12  $6,579,116  0  10,850,302  $0  $1,370,257,300 
equipment 
Part A hospitals 
P  12  $4,208,991  7,884,208  44,326,406  $8,291,721,600  $3,595,814,812 
Part B physicians 
Part A hospitals 
Q  10  $7,159,648  7,361,298  79,739,197  $8,372,462,619  $8,456,308,333 
Part B physicians 
Totals    $102,103,797  209,959,793  762,959,398  $234,319,061,932  $68,684,086,139 
Source:  CMS, Program Integrity Group, 2005. 
  OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  13    A P P E N D I X   B
Correlation Coefficients 
We performed Pearsons correlations to determine the strength of the 
relationship between the variables in each of the following four pairs: 
   Budget allocations and new investigations 
   Budget allocations and new case referrals 
   Oversight responsibility and new investigations 
   Oversight responsibility and new case referrals 
As shown in the tables below, a correlation coefficent was calculated for 
each of the relationships listed above.  The correlation coefficient is a 
number that ranges from -1 to +1.  If a positive correlation exists 
between two variables, the value of one variable will increase as the 
value of the other variable increases. If a negative correlation exists 
between two variables, the value of one variable will decrease as the 
value of the other variable increases. 
Table 1. Correlation:  Budget Allocations and New Investigations 
Number of New 
Budget Allocations  Investigations 
Budget allocations  1.0  0.06 
Number of new investigations  0.06  1.0 
Source:  OIG analysis of 2005 CMS data. 
Table 2. Correlation:  Budget Allocations and New Case Referrals 
Number of New 
Case Referrals to 
Budget Allocations  Law Enforcement 
Budget allocations  1.0  0.11 
Number of new case referrals to law enforcement  0.11  1.0 
Source:  OIG analysis of 2005 CMS data. 
Table 3. Correlation: Oversight Responsibility and New Investigations 
Dollar Amount of  Number of New 
Paid Claims  Investigations 
Oversight responsibility (Dollar amount of paid 
claims)  1.0  0.02 
Number of new investigations  0.02  1.0 
Source:  OIG analysis of 2005 CMS data. 
Table 4. Correlation:  Oversight Responsibility and New Case Referrals 
Number of New 
Dollar Amount of  Case Referrals to 
Paid Claims  Law Enforcement 
Oversight responsibility (Dollar amount of paid 
claims)  1.0  -0.22 
Number of new case referrals to law enforcement  -0.22  1.0 
Source:  OIG analysis of 2005 CMS data. 
  OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  14   
   
 A P P E N D I X   C  
 
Agency Comments  
  OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  15   
   
A P P E N D I X   ~   C  
  OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  16   
   
AAA PPP PPP EEE NNN DDD III XXX     ~~~     CCC    
 
  OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  17    A C K N O W L E D G M E N T S
This report was prepared under the direction of Robert A. Vito, Regional 
Inspector General for Evaluation and Inspections in the Philadelphia 
regional office, and Linda M. Ragone, Deputy Regional Inspector 
General. 
Isabelle Buonocore served as the team leader for this study.  Other 
principal Office of Evaluation and Inspections staff from the 
Philadelphia regional office who contributed to this report include 
Cynthia Hansford and Conswelia McCourt; central office staff who 
contributed include Scott Manley and Barbara Tedesco.  
  OEI-03-06-00010  MEDICARES PSCS:  ACTIVITIES TO DETECT AND DETER FRAUD AND ABUSE  18