Department of Health and Human Services 
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
H   S M F
AWAII  TATE  EDICAID  RAUD 
 
C U :  
  ONTROL  NIT  
 
2014 O R  
  NSITE  EVIEW
Suzanne Murrin 
Deputy Inspector General for 
Evaluation and Inspections 
 
September 2015 
OEI-09-14-00540 
 
   
 
HAWAII STATE MEDICAID FRAUD CONTROL UNIT:  
2014 ONSITE REVIEW 
OEI-09-14-00540 
 
WHY WE DID THIS STUDY  
The Office of Inspector General (OIG) oversees all State Medicaid Fraud Control Units (MFCUs or 
Units).  As part of this oversight, OIG conducts periodic reviews of all Units and prepares public 
reports based on these reviews.  The reviews assess Unit performance in accordance with the 
12 MFCU performance standards and monitor Unit compliance with Federal grant requirements.   
 
HOW WE DID THIS STUDY 
We conducted a review of the Hawaii Unit in October 2014.  We analyzed data from seven sources:  
(1) a review of any documentation related to the Units operations, staffing, and caseload; (2) a 
review of financial documentation for fiscal years (FYs) 2011 through 2013; (3) structured 
interviews with key stakeholders; (4) a survey of Unit staff; (5) structured interviews with the Units 
management and selected staff; (6) an onsite review of a sample of files for cases that were open at 
any point during FYs 2011 through 2013; and (7) an onsite observation of Unit operations. 
 
WHAT WE FOUND 
During the FY 2011 through FY 2013 review period, the Unit expended $3.9 million and generated 
18 patient abuse and neglect convictions, 6 fraud convictions, $330,000 in criminal fraud 
recoveries, and $7,000 of civil recoveries from fraud cases investigated directly by the Unit.  We 
found that the Unit had a number of operational deficiencies.  Among other findings, only two of 
the Units seven investigators were hired as long-term employees (as required), the Unit did not 
have an auditor, it did not have written policies and procedures for its operations, and it did not have 
a required training plan for its professional employees.  Furthermore, the Unit did not regularly 
communicate with Federal law enforcement agencies, it worked cases outside of its grant authority, 
and it did not exercise adequate fiscal control of its resources.     
 
WHAT WE RECOMMEND 
On the basis of our findings, OIG is concerned about the Units ability to carry out its statutory 
functions and meet program requirements.  In addition to reimbursing OIG for Federal financial 
participation claimed for costs related to investigations of ineligible cases, to misplaced equipment, 
and to unallowable costs for equipment, the Unit should develop and implement a corrective action 
plan to address the deficiencies described in this report.  That plan should addressamong other 
thingsmodifying the Units hiring practices, including hiring an auditor; establishing written 
policies and procedures for the Units operations; establishing a training plan for the Units 
professional employees; establishing regular communication with Federal agencies; establishing 
procedures ensuring that Unit staff investigate cases solely within the Units grant authority; and 
establishing fiscal control of the Units resources.  OIG will take appropriate action to ensure that 
these deficiencies are addressed; this action may include imposing special conditions on and/or 
restricting the MFCU grant and conducting a follow-up review to monitor implementation of the 
plan.  The Unit concurred with one of the reports recommendations, concurred in part with four 
recommendations, and did not indicate whether it concurred with the other recommendation.  The 
Units comments included a plan to address all six recommendations. 
 
   
 
TABLE OF CONTENTS 
Objective ......................................................................................................1 
Background ..................................................................................................1 
Methodology ................................................................................................4 
Findings:   
MFCU Performance and Operations ...........................................................6 
FYs 201113 case outcomes ............................................................6 
Hiring, procedures, and training ......................................................8 
MOU with the Medicaid agency ....................................................10 
Case file security ............................................................................10 
Documentation of periodic supervisory reviews ........................... 11 
Investigation and prosecution delays ............................................. 11 
MFCU External Communications .............................................................12 
Notification of referral acceptance or declination .........................12 
Communication with Federal agencies ..........................................12 
Reporting to the National Practitioner Data Bank (NPDB) ...........13 
Financial and Internal Controls ..................................................................14 
Cases investigated outside of grant authority ................................14 
Internal controls .............................................................................14 
Indirect costs and program income reporting ................................16 
Conclusion and Recommendations ............................................................17 
Unit Comments and Office of Inspector General Response ..........20 
Appendixes ................................................................................................22 
A:  Referrals of Provider Fraud and Patient Abuse and Neglect     
to the Hawaii MFCU by Source, FYs 2011 Through 2013 ...........22 
B:  Investigations Opened and Closed by the Hawaii MFCU,       
by Provider Category and Case Type, FYs 2011 Through 2013 ...23 
C:  Methodology ............................................................................25 
D:  Case File Review Population, Sample Size Counts, and  
Confidence Interval Estimates .......................................................28 
E:  Unit Comments.........................................................................30 
Acknowledgments......................................................................................38
 
 
   
 
OBJECTIVE 
To conduct an onsite review of the Hawaii State Medicaid Fraud Control 
Unit (MFCU or Unit). 
BACKGROUND 
The mission of State MFCUs, as established by Federal statute, is to 
investigate and prosecute Medicaid provider fraud and patient abuse and 
neglect under State law.1  Pursuant to Title XIX of the SSA, each State 
must maintain a certified Unit unless the Secretary of Health and Human 
Services determines that operation of a Unit would not be cost-effective 
because (1) minimal Medicaid fraud exists in that State; and (2) the State 
has other, adequate safeguards to protect Medicaid beneficiaries from 
abuse and neglect.2  Currently, 49 States and the District of Columbia 
(States) have created such Units.3  In fiscal year (FY) 2014, combined 
Federal and State grant expenditures for the Units totaled $235 million.4, 5  
That year, the 50 Units employed 1,958 individuals.6 
To carry out its duties in an effective and efficient manner, each MFCU 
must employ an interdisciplinary staff that consists of at least an 
investigator, an auditor, and an attorney.7  The staff reviews complaints 
referred by the State Medicaid agency (Medicaid agency) and other 
sources and determines their potential for criminal prosecution and/or civil 
action.  In FY 2014, the 50 Units reported a collective 1,318 convictions 
 
1 Social Security Act (SSA)  1903(q).  Regulations at 42 CFR 1007.11(b)(1) add that the 
MFCUs responsibilities may include reviewing complaints of misappropriation of 
patients private funds in residential health care facilities.   
2 SSA  1902(a)(61).   
3 North Dakota and the territories of American Samoa, Guam, the Northern Mariana 
Islands, Puerto Rico, and the U.S. Virgin Islands have not established MFCUs.  Medicaid 
Fraud Control Units, Office of Inspector General (OIG) web site.  Accessed at 
http://oig.hhs.gov/fraud/medicaid-fraud-control-units-mfcu/index.asp on March 17, 2015. 
4 All FY references in this report are based on the Federal FY (October 1 through 
September 30). 
5 OIG, MFCU Statistical Data for Fiscal Year 2014.  Accessed at 
http://oig.hhs.gov/fraud/medicaid-fraud-control-units-
mfcu/expenditures_statistics/fy2014-statistical-chart.htmon March 17, 2015. 
6 Ibid. 
7 SSA  1903(q)(6) and 42 CFR  1007.13. 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  1 
   
   
and 874 civil judgments and settlements.  That year, the Units reported 
recoveries of approximately $2 billion.8 
MFCUs are required to have either Statewide authority to prosecute cases 
or formal procedures to refer suspected criminal violations to an office 
with such authority.9  In Hawaii and 43 other States, the Units are located 
within offices of State Attorneys General that have this authority.  In the 
remaining six States, the Units are located within other State agencies; 
generally, such Units must refer cases to offices with prosecutorial 
authority.10, 11  Additionally, each Unit must be a single, identifiable entity 
of State government, distinct from the Medicaid agency, and each Unit 
must develop a formal agreementi.e., a memorandum of understanding 
(MOU)that describes the Units relationship with that agency.12  
Oversight of the MFCU Program 
The Secretary of Health and Human Services delegated to OIG the authority 
both to annually certify the Units and to administer grant awards to 
reimburse States for a percentage of their costs of operating them.13  All 
Units are currently funded by the Federal Government on a 75-percent 
matching basis, with the States contributing the remaining 25 percent.14  To 
receive Federal reimbursement, each Unit must submit an initial application 
to OIG.15  OIG reviews the application and notifies the Unit as to whether it 
is approved and the Unit is certified.  Approval and certification are valid for 
a 1-year period; the Unit must be recertified each year thereafter.16   
 
8 OIG, MFCU Statistical Data for Fiscal Year 2014.  Accessed at http://oig.hhs.gov/fraud 
/medicaid-fraud-control-units-mfcu/expenditures_statistics/fy2014-statistical-chart.htm 
on March 17, 2015.  Pursuant to 42 CFR  1007.17, Units report the total amount of 
recovered funds in their annual reports to OIG.  Recoveries are defined as the amount 
of money that defendants are required to pay as a result of a judgment or settlement in 
criminal and civil cases, and may not reflect actual collections.  Recoveries may involve 
cases that include participation by other State and Federal agencies. 
9 SSA  1903(q)(1). 
10 OIG, Medicaid Fraud Control Units.  Accessed at http://oig.hhs.gov/fraud/medicaid-
fraud-control-units-mfcu/index.asp on March 17, 2015. 
11 In States with a Unit, the Unit shares responsibility for protecting the integrity of the 
Medicaid program with the section of the Medicaid agency that functions as the program 
integrity unit.  Some States also employ a Medicaid Inspector General who conducts and 
coordinates efforts to combat fraud, waste, and abuse for the Medicaid agency. 
12 SSA  1903(q)(2) and 42 CFR  1007.5 and 1007.9(d). 
13 The portion of funds reimbursed to States by the Federal Government for its share of 
expenditures for the Federal Medicaid program, including the MFCUs, is referred to as 
Federal Financial Participation (FFP). 
14 SSA  1903(a)(6)(B).  
15 42 CFR  1007.15(a). 
16 42 CFR  1007.15(b) and (c). 
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  2 
   
   
Pursuant to Title XIX of the SSA, States must operate Units that effectively 
carry out their statutory functions and meet program requirements.17  OIG 
developed and issued 12 performance standards to define the criteria that 
OIG applies in assessing whether a Unit is effectively carrying out statutory 
functions and meeting program requirements.18  Examples of standards 
include maintaining an adequate caseload through referrals from several 
sources, maintaining an annual training plan for all three of the professional 
disciplines (i.e., for auditors, investigators, and attorneys), and establishing 
policy and procedures manuals to reflect the Units operations.19 
Hawaii MFCU  
Located in Honolulu, the Unit is an autonomous entity within the Hawaii 
Office of the Attorney General.  The Unit has the authority to investigate 
and prosecute cases of Medicaid fraud and cases of patient abuse and 
neglect.20  The Unit had 13 total staff at the time of our October 2014 
onsite review.  The Unit director serves as the chief attorney and directly 
supervises all Unit attorneys, the chief investigator, and Unit support staff.  
The chief investigator directly supervises all Unit investigators.  During 
our FY 201113 review period, the Unit expended $3.9 million (State and 
Federal share); the Units annual average expenditures for this period were 
$1.3 million. 
The Unit receives referrals of provider fraud primarily from the Hawaii 
Medicaid agency.  The Unit also receives such referrals from private 
citizens.  The Unit receives most of its referrals of patient abuse and 
neglect from the Adult Protective and Community Services Branch of the 
Hawaii Department of Human Services, from the Office of Health Care 
Assurance of the Hawaii State Department of Health, and from private 
citizens.21  For additional information on Unit referrals, see Appendix A. 
 
17 SSA  1902(a)(61). 
18 59 Fed. Reg. 49080 (Sept. 26, 1994).  See also footnote 19, below. 
19 In June 2012, OIG published a revision of the original 1994 performance standards   
(77 Fed. Reg. 32645, June 1, 2012).  The performance standards referred to in this report 
are the revised standards published in 2012, which were in effect during FYs 2012 and 
2013.  Our onsite data collection took place in October 2014.  When referring to the 
performance standards, we refer to the 2012 standards, unless otherwise noted.  Full text 
of the 2012 standards is available online at http://oig.hhs.gov/authorities/docs/2012/ 
PerformanceStandardsFinal060112.pdf.  Full text of the 1994 standards is available 
online at http://oig.hhs.gov/fraud/medicaid-fraud-control-units-mfcu/files/ 
Performance%20Standards.pdf. 
20 For the purposes of this report, the misappropriation or theft of the private funds of 
patients in residential health care facilities is included in the category of patient abuse and 
neglect. 
21 The Office of Health Care Assurance is Hawaiis healthcare facility licensing and 
certification agency. 
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  3 
   
   
Upon receiving a referral of fraud or abuse and neglect, Unit staff enter the 
referral details as a matter into the electronic case tracking system, 
which assigns a case number to the referral.  The Unit director reviews the 
matter to ensure it is within the Units grant authority and that it warrants 
further investigation; if not, the Unit closes the matter and possibly refers 
it to another agency.  If the scope is unclear, the director instructs the chief 
investigator to conduct a preliminary investigation to determine whether 
the matter is within the Units scope of responsibility.  If, after this 
preliminary investigation, the director determines that the matter warrants 
a full investigation, the Unit opens the matter as a case and the chief 
investigator assigns an investigator to conduct the full investigation.  After 
the Unit completes the full investigation, a Unit attorney determines 
whether to prosecute the case or close it.   
The Unit may open a case and pursue it through criminal investigation and 
prosecution, civil action, or a combination of the two.  The Unit may close 
a case for various reasons, including resolving it through criminal and/or 
civil action or referring it to another agency.  For additional information 
on the Units opened and closed investigations, including a breakdown by 
case type and provider category, see Appendix B. 
Previous Review 
OIG conducted the previous onsite review of the Hawaii Unit in 2009.  
The final report on that review identified the following concerns:  the 
Units case files were not properly indexed; the Units MOU with the 
Medicaid agency had expired; and Unit investigators were using private 
vehicles for investigations, creating a potential safety risk.  The report also 
identified a concern about the fact that the direct supervisor of the Units 
chief investigator was not the Unit director, but rather the Investigations 
Division Chief in the Hawaii Attorney Generals Office.  In the final 
report, OIG noted that the Unit had resolved all areas of concern by 
January 2010 except for investigators use of private vehicles for 
investigations.  During the 2014 onsite review, we found no evidence that 
investigators were still using their private vehicles for investigations.   
METHODOLOGY 
We based our review on an analysis of data from seven sources:  
(1) a review of any Unit documentation, policies, and procedures related 
to the Units operations, staffing, and caseload; (2) a review of financial 
documentation for FYs 2011 through 2013; (3) structured interviews with 
key stakeholders; (4) a survey of Unit staff; (5) structured interviews with 
the Units management and selected staff; (6) an onsite review of a sample 
of files for cases that were open at any point during FYs 2011 through 
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  4 
   
   
2013; and (7) onsite observation of Unit operations.  Appendix C contains 
a detailed methodology.  Appendix D contains the point estimates and 
95-percent confidence intervals for the statistics in this report. 
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General 
on Integrity and Efficiency.22 
 
22 Full text of these standards is available online at http://www.ignet.gov/pande/standards/ 
oeistds11.pdf. 
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  5 
   
   
FINDINGS 
From FY 2011 through FY 2013, the Unit reported 
24 convictions, 26 civil judgments and settlements, 
and recoveries of $11.7 million 
Of the Units 24 convictions over the 3-year period, 6 convictionsor 
one quarterinvolved cases of Medicaid provider fraud.  The other 
18 convictionsor three quartersinvolved cases of patient abuse and 
neglect (see Table 1).  Furthermore, of the Units 26 civil judgments and 
settlements over the 3-year period, 1 involved a civil fraud case worked 
directly by the Unit.  The other 25 involved global cases, which are civil 
False Claims Act cases that are brought by the U.S. Department of Justice 
and involve a group of State MFCUs.23 
Table 1:  Hawaii MFCU Convictions and Civil Judgments and Settlements, 
FYs 2011 through 2013 
  FY 2011  FY 2012  FY 2013  3-Year  Annual 
Total  Average* 
Total Convictions  3  13  8  24  8.0 
Fraud Convictions  1  1  4  6  2.0 
Patient Abuse and Neglect 
2  12  4  18  6.0 
Convictions 
Total Civil Judgments and 
6  7  13  26  8.7 
Settlements 
Global Civil Judgments and 
6  7  12  25  8.3 
Settlements 
Nonglobal Civil Judgments and 
0  0  1  1  0.3 
Settlements 
Source:  OIG review of MFCU self-reported quarterly statistical reports and other data, FYs 20112013. 
*The averages in this table are rounded. 
 
From FY 2011 through FY 2013, the Unit reported total criminal and civil 
recoveries of $11.7 millionan annual combined average of $3.9 million 
(see Table 2).  Of the $11.7 million in total recoveries during this 3-year 
review period, $11.4 million were from global civil false claims cases (see 
Table 2).24  Civil fraud cases worked directly by the Unit accounted for 
less than 1 percent ($6,980) of the Units recoveries.  The Unit attributed 
 
23 The National Association of Medicaid Fraud Control Units facilitates the settlement of 
global cases on behalf of the States. 
24 Global cases accounted for 27 of the Units 458 cases over the 3-year period. 
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  6 
   
   
$329,437 to criminal recoveries.25  During our FY 20112013 review 
period, the Unit spent $3.9 million (State and Federal share); the Units 
annual average expenditures for this period were $1.3 million. 
Table 2:  Funds Reported Recovered by the Hawaii MFCU and Total 
Expenditures, by Year, FYs 2011 Through 2013* 
  FY 2011  FY 2012  FY 2013  3-Year  Annual 
Total  Average 
Criminal 
$52,468  $228,952  $48,017  $329,437  $109,812 
Recoveries 
Global Civil 
$2,010,249  $4,892,143  $4,482,673  $11,385,065  $3,795,022 
Recoveries 
Nonglobal Civil 
$0  $0  $6,980  $6,980  $2,327 
Recoveries 
Total Civil 
$2,010,249  $4,892,143  $4,489,653  $11,392,045  $3,797,348 
Recoveries 
Total Civil and 
Criminal  $2,062,717  $5,121,095  $4,537,670   $11,721,482  $3,907,161 
Recoveries 
Total Expenditures  $1,323,368  $1,266,733  $1,288,535  $3,878,636  $1,292,879 
    
Source:  OIG review of MFCU self-reported quarterly statistical reports and other data, FYs 2011-2013. 
*Figures in this table are rounded. 
From FYs 2011 through 2013, the Unit opened an average of 73 cases 
annually, with an average of 15 cases of provider fraud and 58 cases of 
patient abuse and neglect.26  During this time, the Unit closed an average 
of 106 cases annually, with an average of 31 cases of provider fraud and 
76 cases of patient abuse and neglect.27  From FYs 2011 through 2013, the 
Unit received an average of 1,614 referrals annually, with an average of 
36 referrals of provider fraud and 1,578 referrals of patient abuse and 
neglect.28 
   
 
25 The figures presented in this paragraph are rounded. 
26 The averages in this paragraph are rounded. 
27 Closures include multiple cases opened before FY 2011.   
28 Unit management told us that the Unit receives a relatively large number of referrals of 
patient abuse and neglect because the Unit is the primary law enforcement agency that 
investigates and prosecutes patient abuse and neglect in Hawaii. 
 
 
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Aspects of the Units hiring, procedures, and training 
did not comply with Federal regulations or adhere to 
OIG performance standards 
According to Performance Standard 1, a Unit should comply with all 
Federal regulations, grant administration requirements, OIG policy 
transmittals, and the terms and conditions of the MFCU grant.  However, 
we determined that four aspects of the Units hiring and training practices 
did not comply with Federal regulations or adhere to OIG performance 
standards:  (1) the Unit did not hire all investigators as long-term 
employees, (2) the Unit did not have an auditor, (3) the Unit lacked 
written policies and procedures specific to its operations, and (4) the Unit 
lacked a training plan.  These practices may have limited the Units ability 
to effectively investigate and prosecute Medicaid provider fraud, as 
evidenced by its low number of fraud convictions. 
Although required by Federal regulations, the Unit did not hire 
all Unit investigators as long-term employees 
According to Federal regulations, FFP is not available for any 
management function, audit, investigation, or prosecution conducted by 
anyone other than full-time employees.29  With regard to professional 
employees, Federal regulations define an employee as someone who is 
hired for full-time, long-term duty intended to last for at least a year.30  
One purpose of the requirement to hire employees long-term is to ensure 
that Unit employees gain adequate training and experience to investigate 
and prosecute Medicaid fraud in an effective manner.31  However, rather 
than hire all of its investigators as long-term employees, the Unit 
appointed five of its seven investigators (including the chief investigator) 
to 89-day renewable positions.32  The 89-day non-civil service 
appointments are used by the Unit to fulfill relatively short-term 
operational needs.33  Because the renewable appointments were not 
guaranteed, the Unit had to request that the Hawaii Attorney Generals 
Office Division Chief and Administrative Services Manager sign 
agreements to renew each investigators appointment at the end of the 
89-day term.  As a result of the continual renewal of these appointments, 
 
29 42 CFR  1007.19(e)(4).   
30 42 CFR  1007.1. 
31 OIG State Fraud Transmittal 89-1, Clarification of the Hiring of Full-Time and 
Part-Time Employees (Jan. 13, 1989); 43 Fed. Reg. 320789 (July 24, 1978). 
32 State of Hawaii, Department of Human Resources Development Policies and 
Procedures, Types of Appointments (Policy 300.001)  V5(B). 
33 Ibid.   
 
 
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four of the five investigators under the short-term renewable appointments 
each performed Unit duties for a cumulative period of at least 1 year. 
According to Unit management, the Unit assigned cases of patient abuse 
and neglect primarily to the five nonpermanent investigators because these 
investigators had training and experience conducive to investigating this 
type of case.  Unit management reported that the Unit assigned provider 
fraud cases primarily to the two permanent investigators, which resulted in 
a relatively high workload for these individuals.  According to Unit 
management, hiring investigators on a permanent basis is difficult because 
of union rules, because the Units pay scale for investigators is not 
competitive, and because there is not a sufficient pool of qualified 
applicants from which to choose. 
Although required by Federal regulations, the Unit did not have 
an auditor 
According to Federal regulations, a Units staff must include at least one 
experienced auditor.34  Unit auditors provide services such as conducting 
financial record reviews and assisting fraud investigations and 
prosecutions.  As of our onsite review in October 2014, the Unit had not 
employed an auditor for approximately 10 months, despite having 
approval to hire two auditors under its MFCU grant.  According to Unit 
management, hiring auditors is difficult because of union rules and 
because the Units pay scale for auditors is not competitive. 
The Unit lacked written policies and procedures specific to its 
operations 
According to Performance Standard 3, a Unit should have written policies 
and procedures for its operations and should ensure that staff are familiar 
with, and adhere to, these policies and procedures.  Written policies and 
procedures help to ensure that a Unit conducts its operations, case file 
reviews, and training consistently.  Unit policies and procedures should 
address the investigation and prosecution of Medicaid fraud and patient 
abuse and neglect, should include a process for referring cases to Federal 
and State agencies, and should include a training plan for the Units 
professional employees.35  However, the Unit did not have written policies 
and procedures during our review period.  According to Unit management, 
the Unit relies on the Criminal Justice Divisions policies and procedures; 
therefore, it does not have written policies and procedures specific to Unit 
 
34 42 CFR  1007.13(a)(2). 
35 Performance Standard 3(e) states that training standards should be included in the 
Units written policies and procedures manual.   
 
 
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operations.  During our onsite review, Unit management reported that it 
was developing policies and procedures specific to Unit operations. 
The Unit lacked a training plan  
According to Performance Standard 12(a), a Unit should have a training 
plan that includes an annual number of required training hours for each 
professional discipline.  However, the Unit did not have a training plan 
during our review period.  Unit management reported that all Unit staff 
undergo some level of training, but that staff are not required to complete 
any specific training other than what is necessary to maintain professional 
credentials.36  During our onsite visit, Unit management reported that the 
Unit was developing a written training plan. 
The Units MOU with the Medicaid agency did not 
reflect current law and practice  
According to Performance Standard 10, a Unit should periodically review 
its MOU with the Medicaid agency to ensure that the MOU reflects 
current law and practice.  Although the Unit and the Medicaid agency had 
an MOU, the MOU did not include procedures regarding how the Unit and 
the Medicaid agency should handle providers that are subject to a payment 
suspension on the basis of a credible allegation of fraud (implemented by 
regulation in March 2011, as required by the Affordable Care Act).  
During our onsite review, Unit management provided us with a draft of a 
revised MOU that was intended to incorporate such procedures. 
The Unit lacked adequate safeguards to secure case 
files and the personally identifiable information (PII) 
associated with those case files 
According to Federal regulations, a Unit must safeguard the privacy 
rights of all individuals and will provide safeguards to prevent the misuse 
of information under the Units control.37  This includes securing case 
files containing potentially sensitive PII about witnesses, victims, 
suspects, and informants.  However, the Unit could not locate 5 of the 
100 case files (from FYs 201113) that we requested for our sample and 
had no explanation about what happened to these files.  In addition, Unit 
case files containing PII were not secured from access by non-Unit 
individuals.  Although Unit staff use a coded access system to enter the 
general office space, the Unit also grants non-Unit individuals access to 
 
36 Performance Standard 12(b) states that the Unit should maintain records of staff 
compliance with the Units training plan. 
37 42 CFR  1007.11(f); OIG State Fraud Transmittal 99-02, Public Disclosure Requests 
and Safeguarding of Privacy Rights (December 22, 1999). 
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  10 
   
   
the office for various reasons (e.g., case interviews, cleaning, and 
information technology services).  As a result, non-Unit individuals have 
access to open areassuch as a hallwayswhere case files are stored, and 
these case files clearly display the related case file numbers and names of 
suspects.   
Seventy-one percent of Unit case files lacked 
documentation of periodic supervisory reviews 
According to Performance Standard 7(a), supervisors should review Unit 
cases periodically and note their reviews in the case files.38  According to 
Unit management, the Unit has no established policy regarding the 
frequency of supervisory reviews.  However, when a supervisory review 
occurs, Unit managers expect investigators to note this review in the 
Units electronic case file tracking system.39  Among Unit cases that were 
open for at least 6 months, 71 percent of the case files lacked 
documentation of any periodic supervisory reviews.40  Unit management 
reported that a policy for supervisory review of case files will be included 
in the policies and procedures manual that is under development. 
Some Unit case files had unexplained delays of a year 
or more during the investigation and/or prosecution 
phases of cases 
According to Performance Standard 5, the MFCU should complete cases 
in an appropriate timeframe based on the complexity of the cases.  In 
addition, Performance Standard 5(c) states that investigation and 
prosecution delays should be limited to situations imposed by resource 
constraints or other exigencies.  However, during our case file review and 
interviews with Unit staff, we determined that 22 percent of the Units 
cases had unexplained investigation delays of a year or more. 41  In 
addition, 4 percent of the Units cases were not fully investigated before 
the statute of limitations expired.  None of the files for these cases 
 
38 For the purposes of this report, supervisory approval to open and close a case does not 
constitute a periodic supervisory review.  Periodic supervisory reviews are demonstrated 
by a supervisors reviewing a case more than once between the cases opening and 
closing and documenting those reviews in the case file. 
39 For the purposes of our case file review, we considered documentation in the Units 
electronic case file tracking system to be sufficient documentation of periodic 
supervisory reviews. 
40 We reviewed the files of 44 cases that were open for at least 6 months for evidence of 
supervisory reviews. 
41 According to Performance Standard 7(b), case files should include all relevant facts 
and information.  For the purposes of this report, we defined a delay as a period of at 
least a year with no documented activity in the case file.   
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  11 
   
   
contained documentation to account for the delays, nor could Unit staff 
explain these delays.  
Additionally, of the 11 reviewed cases that had progressed to the 
prosecution/litigation phase, 6 had unexplained delays of a year or more 
during that phase of the case.  Five of these six cases were criminal and 
the other was a civil matter.  None of these case files contained 
documentation to explain the delays, nor could Unit staff explain these 
delays.  
The Unit did not notify the Medicaid agency of referral 
acceptance or declination  
According to Federal regulations, when a Unit receives a referral from the 
Medicaid agency, the Unit must notify the Medicaid agency as to whether 
it accepts or declines the referral.42  In addition, the Units MOU with the 
Medicaid agency states that the Unit will notify the Medicaid agency if the 
Unit determines that a referral does not warrant criminal prosecution.43  
However, Unit management and Medicaid agency staff reported that the 
Unit does not notify the Medicaid agency of referral decisions.  In 
addition, there was no documentation of such notification in any of the 
26 case files we reviewed that were based on referrals from the Medicaid 
agency.  The failure to notify the Medicaid agency of the Units decision 
to accept or decline the referral could limit the Medicaid agencys ability 
to refer the case to another law enforcement agency, discontinue or not 
impose a payment suspension in a timely manner, or take administrative 
action.44 
The Unit did not regularly communicate with Federal 
agencies regarding healthcare fraud 
According to Performance Standard 8(a), a Unit should communicate with 
OIG and other Federal agencies on a regular basis about Medicaid fraud in 
its State.  However, Unit management reported that the Unit has no regular 
contact with OIGs Office of Investigations or any other Federal agencies.  
 
42 42 CFR  1007.9(g). 
43 Memorandum of Understanding between the Hawaii MFCU and the Medicaid Agency, 
Section III(2). 
44 The Patient Protection and Affordable Care Act, P.L. No. 111-148  6402(h)(2) 
(March 23, 2010), as amended by the Health Care Reconciliation Act of 2010, P.L. No. 
111-152 (March 30, 2010), requires State Medicaid programs, as a condition of receiving 
FFP, to suspend payments to providers for whom there is a credible allegation of fraud, 
unless good cause exists to not suspend payments.  One way to establish good cause is 
for the MFCU to inform the Medicaid agency that the suspension would compromise its 
investigation of the provider.  CMS and OIG implemented this provision in revisions to 
42 CFR  455.23 and 1007.9(e) effective March 25, 2011 (76 Fed. Reg. 5862, 
February 2, 2011). 
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  12 
   
   
Furthermore, stakeholders at the U.S. Attorneys Office (USAO) in 
Hawaii reported that the Unit has not regularly communicated with them 
in several years, despite efforts by USAO staff to reach out to the Unit.  
The lack of regular communication with Federal agencies may have 
limited the Units fraud referrals and, consequently, its convictions. 
The Unit did not always report adverse actions to the 
National Practitioner Data Bank (NPDB) within an 
appropriate timeframe 
According to Federal regulations, all State and Federal government 
agencies must report adverse actions resulting from investigations or 
prosecutions of healthcare providers to the NPDB.45  The NPDB is 
intended to restrict the ability of physicians, dentists, and other health care 
practitioners to move from State to State without disclosure or discovery 
of previous medical malpractice and adverse actions.46  Examples of 
adverse actions include, but are not limited to, convictions, civil 
judgments (but not civil settlements), and program exclusions.47  Adverse 
actions must be reported to the NPDB within 30 days following the 
action.48  Although the Unit reported 22 adverse actions to the NPDB 
during the review period, the Unit reported 15 (68 percent) of these more 
than 91 days after the final adverse action was taken.  The Unit reported 
 
45 SSA  1128E(g)(1) and 45 CFR  61.3 (2012).  In addition to the Federal Regulations, 
Performance Standard 9(8(G) states that Units should report qualifying cases to the 
Healthcare Integrity & Protection Databank, the National Practitioner Data Bank, or 
successor data bases.  We reviewed the reporting of adverse actions under HIPDB 
because the HIPDB and the NPDB had not yet been merged during most of our review 
period (FYs 2011 through 2013).  Current MFCU requirements for reporting to the 
merged NPDB are in 45 CFR pt. 60. 
46 SSA  1128E(a) and 45 CFR  61.1 (2012).  During most of our review period, the 
data bank containing conviction information and other adverse actions was designated as 
the Healthcare Integrity and Protection Databank (HIPDB).  In May 2013, the HIPDB 
was merged with a separate NPDB to create a single data bank that is designated as the 
NPDB.  78 Fed. Reg. 20473 (April 5, 2013). 
47 An adverse action is any action that involves reducing, restricting, suspending, 
revoking, or denying clinical privileges or membership in a health care entity.  
45 CFR  60.3.  For a more detailed list of types of adverse actions, see 
SSA  1128E(g)(1)(A) and 45 CFR  60.5.            
48 45 CFR  60.5.  Under the HIPDB reporting requirements, adverse actions must be 
reported within 30 calendar days from the date the adverse action was taken, or the date 
when the reporting entity became aware of the final adverse action; or by the close of the 
entitys next monthly reporting cycle, whichever is later.  45 CFR  61.5(a).  The date 
that constitutes when an adverse action occurred may vary depending on the type of 
adverse action.  For criminal matters related to the provision of healthcare, the 30-day 
obligation to report starts at the time of judgement (i.e., conviction).  45 CFR  60.5.        
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  13 
   
   
one within 6190 days after the final adverse action and three within  
3160 days after the final adverse action.49   
The Unit investigated three cases that were outside of 
its grant authority 
According to Federal regulations, the scope of a Units grant authority is 
the investigation of fraud allegations relating to Medicaid providers and 
patient abuse and neglect allegations in Medicaid-funded and board-and-
care facilities.50  A Unit may only receive FFP for activities relating to the 
investigation and prosecution of these allegations.51  However, our review 
of documentation and interviews with Unit staff determined that three Unit 
investigations did not involve either Medicaid provider fraud or patient 
abuse and neglect in a Medicaid-funded facility.52  Two of these 
investigations involved allegations of potential abuse of Medicaid 
recipients.  However, neither of these incidents occurred in a Medicaid-
funded or board-and-care facility,53 and a third investigation involved an 
alleged crime unrelated to health care fraud or abuse that was initially 
thought to be committed by a Medicare recipient.54, 55  Costs associated 
with these investigations are not eligible for FFP under the MFCU grant 
terms and conditions. 
The Unit did not maintain adequate internal controls 
related to staffing and equipment 
According to Performance Standard 11, a Unit should exercise proper 
fiscal control of its resources.  Control includes maintaining staff 
activity records, maintaining an accurate equipment inventory, and 
ensuring that equipment purchased by and for the Unit is used only by 
Unit staff.  From FY 2011 through FY 2013, the Unit did not maintain 
complete staff records, nor did its equipment inventory accurately reflect 
what equipment was under the Units control.  In addition, the Unit 
 
49 HHS provided this data to OIG on July 24, 2014. 
50 42 CFR  1007.11(a) and (b)(1); SSA  1903(q). 
51 42 CFR  1007.19(d). 
52 Three investigations in the sample of case files that we reviewed were outside of the 
Units grant authority. 
53 One incident allegedly occurred on a bus; the other allegedly occurred in a private 
home. 
54 The alleged crime was impersonating a police officer. 
55 Unit staff reported that the subjects in these three cases were either Medicaid recipients 
or potential Medicaid recipients, and that staff believed that the Unit was authorized to 
investigate abuse and neglect of Medicaid recipients, regardless of where the abuse or 
neglect allegedly occurred.  Unit staff were unable to provide any further documentation 
to indicate a nexus for investigation by the Unit. 
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  14 
   
   
allowed a computer purchased by the MFCU to be routinely used by, and 
kept in the office of, a non-Unit employee.  
The Unit did not maintain complete staff records that 
documented whether Unit staff worked solely on MFCU-related 
matters 
According to Federal guidelines, charges for salaries and wages of MFCU 
employees must be supported by periodic certifications that these 
employees worked solely on MFCU-related matters.56  However, the Unit 
did not maintain annual certifications or timesheets that indicated whether 
permanent employees worked solely on MFCU-related matters.  The Unit 
also did not maintain certifications that identified the work performed by 
its nonpermanent investigators.  As a result, we could not determine 
whether Unit employees worked solely on MFCU-related matters. 
At the time of our onsite review, the Units inventory did not 
accurately reflect what equipment was under its control 
According to Performance Standard 11(b), a Unit should maintain an 
equipment inventory that is updated regularly to reflect all property under 
the Units control.  The Unit did maintain an equipment inventory.  
However, during our onsite review, the Unit was unable to locate three 
items listed as part of its inventory.  Neither we nor the Unit could 
determine whether this equipment had been lost, damaged, stolen, and/or 
used for non-MFCU-related matters.  After our onsite review, the Unit 
located one of the missing items.  The Unit also provided documentation 
to OIG indicating that after our onsite review it updated its inventory to 
reflect that another of the missing items had been disposed of by the Unit 
in March 2015.  As of the date of this report, one inventory item remained 
missing.  That item had an original purchase cost of 
$1,495 ($1,121 Federal share).  
The Unit allowed non-MFCU staff to house and use Unit 
equipment 
According to Federal guidelines, equipment purchased by a Unit must be 
allocable to the Federal grant.57  However, our review determined that the 
Unit purchased a computer which a non-MFCU employee of the Criminal 
Justice Division of the Attorney Generals Office housed and used on a 
 
56 2 CFR pt. 225, Appendix B (8)(h)(3) states that These certifications will be prepared 
at least semi-annually and signed by the employee or supervisory official having first-
hand knowledge of the work performed by the employee.          
57 2 CFR pt. 225, Appendix A, (H)(C)(3)(a) establishes the basic guideline that allowable 
State agency expenditures must be allocable, meaning that they must be charged and 
assigned to the cost objective in accordance with the relative benefits received.   
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  15 
   
   
regular basis.  Equipment used by a non-MFCU employee is not allocable 
to the Federal MFCU grant.  Therefore, the $1,347 expenditure 
($1,010 Federal share) claimed by the Unit for this purchase is 
unallowable.  After our onsite review, the Unit reported that the Attorney 
Generals office returned the computer.    
The Unit did not report its costs or income correctly 
According to Federal regulations, indirect cost rates for MFCUs are 
reviewed, negotiated, and approved by the appropriate Federal agency.58  
These indirect cost rates are then included in an agreement between the 
appropriate Federal agency (generally HHS or another Federal agency, 
such as the U.S. Department of Justice) and the grantee agency, such as 
the State Attorney Generals Office.  From FY 2011 through FY 2013, the 
Unit overclaimed its indirect costs by a net total of $14,418 (Federal 
share).59  The Unit overclaimed its indirect costs during this period because 
it did not use the appropriate approved rates. 
According to instructions on the Federal SF-425 form, Units should report 
on the form 75 percent of their program income earned.60  Program 
income, defined as gross income received by a Unit as the result of a grant 
activity,61 should be deducted from a Units total allowable costs to 
determine the net allowable costs.62  However, during FYs 20112013, the 
Unit did not report a total of $2,685 that it received from service fees.63  
As a result, the Unit overstated its net allowable costs during the review 
period by $2,685 ($2,014 Federal share). 
 
58 2 CFR pt. 225, Appendix E (1).  HHS is the cognizant agency for the Hawaii MFCUs 
indirect cost rate.   
59 The Unit overclaimed the Federal share of indirect costs by $26,642 in FY 2011.  The 
Unit underclaimed the Federal share of indirect costs by $1,400 in FY 2012 and by 
$10,824 in FY 2013.  Therefore, the net total over-claim for the 3-year period was 
$14,418 (Federal share). 
60 Unit expenditures, program income, and indirect costs are reported on the 
SF-425 form; the percentage represents the FFP rate.  OIG has provided guidance to 
MFCUs about what constitutes program income.  OIG State Fraud Transmittal 10-01, 
Program Income (March 22, 2010) 
61 45 CFR  92.25(b). 
62 45 CFR  92.25(g)(1). 
63 An example of service fees is the fees that the Unit levied against defendants for use of 
the Units copy machine. 
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  16 
   
   
CONCLUSION AND RECOMMENDATIONS 
As the primary agency to investigate and prosecute Medicaid provider 
fraud, the Unit expended $3.9 million during the period of our review.  
Over the 3-year period, the Unit generated 18 convictions of patient abuse 
and neglect, 6 convictions of fraud, $330,000 in criminal fraud recoveries, 
and $7,000 in civil recoveries from fraud cases investigated directly by the 
Unit.  Our findings demonstrate that the Unit had a number of operational 
deficiencies.  We foundamong other thingsthat only two of the Units 
seven investigators were hired as long-term employees, that the Unit did 
not have an auditor, that it did not have policies and procedures for its 
operations, that it did not have a required training plan for its professional 
employees, and that it did not regularly communicate with Federal law 
enforcement agencies about health care fraud.     
On the basis of our findings, OIG is concerned about the Units ability to 
carry out its statutory functions and meet program requirements.  In 
addition to reimbursing OIG for FFP claimed for costs related to 
investigating ineligible cases, misplacing equipment, and unallowable 
equipment costs, the Unit should develop and implement a corrective 
action plan to address the breadth of deficiencies described in this report 
and to improve its effectiveness.  OIG will take appropriate action to 
ensure that these deficiencies are addressed, which may include imposing 
special conditions on and/or restricting the MFCU grant and conducting a 
follow-up review to monitor implementation of the corrective action 
plan.  We recommend that the corrective action plan address, at a 
minimum, how the Unit will accomplish the following: 
Develop and implement effective hiring and training practices 
that conform to current laws, regulations, and performance 
standards 
Specifically, the Unit should hire all investigators on a long-term basis; 
hire an auditor or auditors, as appropriate; develop and implement written 
policies and procedures specific to its operations; and develop and 
implement a written training plan for its professional employees.  Because 
FFP is not available for activities conducted by anyone other than full-time 
professional employees, the Unit should immediately discontinue its 
practice of appointing investigators to temporary positions and should 
work with OIG to determine an amount that the Unit should reimburse 
OIG for costs associated with activities conducted by such staff. 
   
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  17 
   
   
Revise its MOU with the Medicaid agency to reflect current law 
and practice  
The Unit should revise its MOU with the Medicaid agency to include a 
provision describing the referral process between the Unit and the 
Medicaid agency for providers that are subject to a payment suspension on 
the basis of a credible allegation of fraud.  The Unit should also develop 
and implement a procedure to ensure thatper Federal regulationsit 
notifies the Medicaid agency of all referral decisions, and the Unit should 
include this procedure in the revised MOU. 
Develop and implement policies and procedures that conform 
to current laws, regulations, and performance standards 
At a minimum, these policies and procedures should address the 
following:  notifying the Medicaid agency of the acceptance or declination 
of all referrals from the Medicaid agency; safeguarding sensitive 
information; reviewing cases periodically to ensure their timely progress 
and avoidance of delays, and documenting these reviews in the case files; 
and ensuring the timely reporting of adverse actions to the NPDB. 
Establish regular communication with Federal agencies 
The Unit should establish regular communication with OIGs Office of 
Investigations and other Federal agencies, such as the U.S. Attorneys 
Office.  This communication could address current cases and trends in 
health care fraud in Hawaii, which could result in mutual referrals and 
joint investigations. 
Develop and implement procedures to ensure Unit staff 
investigate cases within the grant authority  
The Unit should develop and implement procedures to ensure that Unit 
staff investigate cases solely within the Units grant authority.  The Unit 
should also work with OIG to identify the staff hours and expenditures 
associated with investigating the three ineligible cases and, as appropriate, 
repay those Federal matching funds.   
   
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  18 
   
   
Establish fiscal controls 
The Unit should establish fiscal controls to ensure that (1) it maintains 
documentation certifying that staff activities are attributable to the grant, 
(2) it maintains an accurate inventory of equipment under its control, 
(3) all Unit equipment is housed in the Unit and used solely by Unit staff, 
and (4) it reports indirect costs and program income correctly.  The Unit 
should work with OIG to reimburse the Federal share of costs for 
misplaced equipment and unallowable equipment costs, as appropriate.  
The Unit should also work with OIG to reimburse OIG for indirect costs 
that were claimed incorrectly during the review period. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  19 
   
   
UNIT COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
In its written comments to the draft report, the Unit concurred with one of 
the reports recommendations, concurred in part with four 
recommendations, and did not indicate whether it concurred with the other 
recommendation.  The Units comments included a plan to address all six 
OIG recommendations.   
The Unit concurred in part with the recommendation to develop and 
implement effective hiring and training practices that conform to current 
laws, regulations, and performance standards.  The Unit stated that it is 
exploring immediate and long-term solutions to correct its hiring issues.  
The Unit reported that it will work with OIG to reimburse any costs 
associated with hiring investigators for 89-day appointments.  The Unit 
also reported plans to hire an auditor by September 2015, and reported that 
it has adopted and implemented Unit-specific policies and procedures for 
its operations and that these policies and procedures include a training 
plan for all professional staff.  The Unit stated that it continually renewed 
89-day short-term appointment contracts to fill investigator positions, and 
therefore consistently employed investigators for more than a year.  
However, the State of Hawaii Human Resources Manual states that 89-day 
non-civil service appointments should be used to fulfill relatively short-
term needs not exceeding 89 calendar days.  OIG reiterates that applicable 
Federal regulations define a Unit employee as someone who is hired for 
long-term duty intended to last for at least a year, and that OIG State 
Fraud Transmittal 89-1 states that hiring temporary staff does not meet 
the Congressional intent of developing a MFCU team with specialized 
expertise.   
The Unit concurred with the recommendation to revise its MOU with the 
Medicaid agency to reflect current law and practice and indicated that a 
revised MOU was signed and implemented in July 2015. 
Although the Unit did not indicate whether it concurred with the 
recommendation to develop and implement policies and procedures that 
conform to current laws, regulations, and performance standards, the Unit 
concurred with the related finding and indicated its plans to address this 
recommendation.  The Unit reported that it has officially adopted and 
implemented Unit-specific policies and procedures, that it will 
memorialize all periodic supervisory reviews in its electronic case tracking 
system, and that it will use the electronic case tracking system to monitor 
case progress and document explanations for investigation and/or 
prosecution delays.  Additionally, the Unit stated its belief that OIG did 
not give due attention to the Units electronic case tracking system in 
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  20 
   
   
conducting our review.  OIG disagrees, because we included all relevant 
information from the Units case tracking system in our review and 
analysis of Unit cases.  However, because the Units utilization of its case 
tracking system started near the end of the review period, information 
from the system had only limited impact on the finding overall.   
The Unit concurred in part with the recommendation to establish regular 
communications with Federal agencies.  The Unit stated that it had regular 
communications with Federal agencies, but acknowledged that these 
communications werent documented.  The Unit indicated that it will 
document all communications with Federal partners going forward and 
will host quarterly meetings with Federal partners to discuss fraud trends 
and specific fraud cases.  
The Unit concurred in part with the recommendation to develop and 
implement procedures to ensure Unit staff investigate cases within the 
Units grant authority.  The Unit reported that it has included in its new 
written policies and procedures a checklist to guide Unit staff on 
determining whether a potential case is within the Units grant authority.  
The Unit also indicated that it will work with OIG to determine the 
amount the Unit will reimburse OIG for work performed on cases outside 
of the Units grant authority.  Finally, the Unit indicated that it has created 
a form that will certify that Unit staff work solely on Unit-related matters.  
In its comments, the Unit also stated its beliefs that it had sufficient 
policies and procedures in place to determine if cases were within the 
Units grant authority and that it had the authority to act on the three cases 
in question.  However, as described in the report, the Unit did not have 
such authority because none of the three patient abuse and neglect 
allegations occurred in Medicaid-funded or board-and-care facilities.  
The Unit concurred in part with the recommendation to establish fiscal 
controls.  The Unit indicated that it will work with OIG to determine the 
amount the Unit should reimburse OIG for missing equipment and for 
incorrectly reported program income and indirect costs.  The Unit reported 
that two items missing during the onsite review have been located, and 
that Unit equipment is no longer used by non-Unit staff.  Although the 
Unit stated its intent to continue classifying copying costs as 
reimbursement, it stated that it will include these costs as program income 
in its reports to OIG.  OIG reiterates that these costs are defined as 
program income, pursuant to Federal regulations, and should be recorded 
as such in Unit financial records. 
    The full text of the Units comments is provided in Appendix E. 
 
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  21 
   
   
APPENDIX A 
Referrals of Provider Fraud and Patient Abuse and Neglect to 
the Hawaii MFCU by Source, FYs 2011 Through 2013 
Table A-1:  Total MFCU Referrals of Fraud and Abuse and Annual Average 
 
Case Type  FY 2011  FY 2012  FY 2013  3-Year Total  Annual Average* 
  Patient Abuse 
1,630  1,450  1,653  4,733  1,578 
and Neglect 
 
  Provider Fraud  33  37  39  109  36 
  Total  1,663  1,487  1,692  4,842  1,614 
 
  Source:  MFCU response to OIG data request. 
 
*Averages in this table are rounded.
 
 
Table A-2:  MFCU Referrals, by Referral Source 
 
  FY 2011  FY 2012  FY 2013     
Abuse  Abuse  Abuse  Percentage 
Referral 
Fraud  and  Fraud  and  Fraud  and  Total  of All 
Source 
Neglect  Neglect  Neglect  Referrals* 
Adult Protective 
0  1,601  0  1,418  0  1,637  4,656  96.2% 
Services 
State Medicaid 
25  1  30  2  33  6  97  2.0% 
Agency 
State 
Certification and 
0  26  0  25  1  9  61  1.3% 
Licensing 
Agency 
Private Citizens  1  1  3  3  3  0  11  0.2% 
Other  5  0  2  0  1  0  8  0.2% 
MFCU Hotline  1  1  1  0  1  0  4  0.1% 
Other State 
1  0  0  1  0  0  2  <0.1% 
Agencies 
Law 
0  0  0  0  0  1  1  <0.1% 
Enforcement 
Licensing Board  0  0  1  0  0  0  1  <0.1% 
Provider 
0  0  0  1  0  0  1  <0.1% 
Associations 
Total  33  1,630  37  1,450  39  1,653  4,842  100% 
Annual Total  1,663  1,487  1,692     
Annual  1,614     
Average* 
Source:  MFCU response to OIG data request.   
*These figures are rounded. 
 
 
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  22 
   
   
APPENDIX B 
Investigations Opened and Closed by the Hawaii MFCU, by 
Provider Category and Case Type, FYs 2011 Through 2013 
 
Table B-1:  Total Annual Opened and Closed Investigations 
 
  Annual    
  Case Type  FY 2011  FY 2012  FY 2013  3-Year Total  Average* 
  Opened  88  46  86  220  73 
Patient Abuse and 
65  37  73  175  58 
Neglect 
Provider Fraud  23  9  13  45  15 
Closed  86  149  84  319  106 
Patient Abuse and 
55  106  66  227  76 
Neglect 
Provider Fraud  31  43  18  92  31 
Source:  MFCU response to OIG data request. 
*Averages in this column are rounded. 
 
 
 
Table B-2:  Patient Abuse and Neglect Investigations 
 
Provider Category  FY 2011  FY 2012  FY 2013 
        
Opened  Closed  Opened  Closed  Opened  Closed 
Home Health Aides  10  4  2  10  11  6 
Non-Direct Care  0  2  0  0  0  0 
Nursing Facilities  4  3  5  10  5  4 
Other Long-Term Care 
28  24  22  44  42  46 
Facilities 
Physicians 
Assistants/Nurses/Nurse 
9  5  0  23  5  4 
Practitioner/Certified Nurse 
Aides 
Other  14  17  8  19  10  6 
Total  65  55  37  106  73  66 
Source:  Unit response to OIG data request. 
 
 
 
 
 
 
 
 
 
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  23 
   
   
 
 
Table B-3:  Provider Fraud Investigations 
 
Provider Category  FY 2011  FY 2012  FY 2013 
Facilities  Opened  Closed  Opened  Closed  Opened  Closed 
Hospitals  0  1  0  2  0  0 
Other Facilities  1  0  2  2  0  1 
  Subtotal  1  1  2  4  0  1 
Practitioners  Opened  Closed  Opened  Closed  Opened  Closed 
Counselors/ Psychologists  1  2  2  1  0  1 
Dentists  2  2  0  2  0  0 
Doctors of Medicine or 
10  10  1  16  2  4 
Osteopathy 
Other Practitioners  2  3  0  2  1  1 
  Subtotal  15  17  3  21  3  6 
Medical Support  Opened  Closed  Opened  Closed  Opened  Closed 
Durable Medical 
0  0  0  1  0  1 
Equipment Suppliers 
Home Health Care 
0  0  0  1  0  0 
Agencies 
Laboratories  0  1  1  0  0  0 
Pharmacies  1  3  0  1  2  1 
Transportation Services  0  0  0  6  0  0 
Other Medical Support  6  9  3  9  8  9 
  Subtotal  7  13  4  18  10  11 
  Total  23  31  9  43  13  18 
 
Source:  Unit response to OIG data request.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  24 
   
   
APPENDIX C 
Methodology 
We analyzed data from seven sources to describe the caseload and assess 
the performance of the MFCU.  We also analyzed the data to identify any 
opportunities for improvement and any instances in which the MFCU did 
not meet the performance standards or was not operating in accordance 
with laws, regulations, and/or policy transmittals.64  In addition, we looked 
for any practices that appeared to benefit the MFCU.   
Data Collection and Analysis 
Review of MFCU Documentation.  We collected and reviewed (1) MFCU 
documentation related to the Units operations, staffing, and cases; (2) the 
MFCUs annual reports and quarterly statistical reports; and (3) the 
MFCUs responses to recertification questionnaires.  The documentation 
also included data such as the number of referrals received by the MFCU 
and the number of investigations opened and closed.  We reviewed the 
documentation to determine how the MFCU investigates and prosecutes 
Medicaid cases.  We also checked documentation to ensure that the 
MFCU referred sentenced individuals to OIG for program exclusion and 
that the MFCU reported adverse actions to the NPDB.  Additionally, we 
confirmed with the MFCU director that the documentation we had was 
current at the time of our review, and we requested any additional data or 
clarification, as needed.  The data we collected from the MFCU were 
current as of April 20, 2015.  Subsequent changes to the data would 
therefore not be included in our analyses.   
Review of Financial Documentation.  To evaluate internal control of fiscal 
resources, OIG auditors reviewed policies and procedures related to the 
MFCUs budgeting, accounting systems, cash management, procurement, 
property, and staffing.  We obtained the MFCUs claimed grant 
expenditures for FYs 2011 through 2013 to (1) review final Federal Status 
Reports65 and supporting documentation, (2) select and review transactions 
within direct cost categories to determine if costs were allowable, and 
(3) verify that indirect costs were accurately computed using the approved 
indirect cost rate.  Finally, we reviewed records in the HHS Payment 
 
64 All relevant regulations, statutes, and policy transmittals are available online at 
http://oig.hhs.gov/fraud/medicaid-fraud-control-units-mfcu/index.asp.  
65 The MFCU transmits Federal Status Reports to OIGs Office of Management and 
Policy on a quarterly and annual basis.  These financial reports detail MFCU income and 
expenditures. 
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  25 
   
   
Management System (PMS)66 and revenue accounts to identify any 
unreported program income.67 
Structured Interviews With Key Stakeholders.  We conducted structured 
interviews with 10 individual stakeholders among 6 agencies who were 
familiar with MFCU operations.  Specifically, we interviewed two staff 
from the Medicaid agencys Financial Integrity Division; two Assistant 
U.S. Attorneys; an investigator for the U.S. Attorneys Office; the 
Criminal Justice Division supervisor for the Hawaii Attorney Generals 
Office;68 the OIG Assistant Special Agent in Charge for the State of 
Hawaii; a Hawaii Adult Protective Services supervisor; and two managers 
from the Recovery Audit Contractor.  These interviews focused on the 
MFCUs interaction with external agencies, MFCU operations, 
opportunities for improvement, and any practices that appeared to benefit 
the MFCU and that could be useful to other MFCUs in their operations. 
Survey of MFCU Staff.  We conducted an online survey of MFCU staff.69  
We requested and received responses from 11 staff members, for 
a 100-percent response rate.  Our questions focused on MFCU operations, 
opportunities for improvement, and practices that appeared to benefit the 
MFCU and that may be useful to other MFCUs in their operations.  The 
survey also sought information about the MFCUs compliance with 
applicable laws, regulations, and policy transmittals.   
Structured Interviews With MFCU Management and Selected Staff.  We 
conducted structured interviews with the MFCUs director, the MFCUs 
chief investigator, and a MFCU data specialist.  We asked them to provide 
us with additional information so that we could better understand the 
MFCUs operations, identify opportunities for improvement, identify 
practices that appeared to benefit the MFCU and that may be useful to 
other MFCUs in their operations, and to clarify information obtained from 
other data sources.  
Onsite Review of Case Files.  We selected a simple random sample of 
100 case files from the 431 cases that were open at any point from 
 
66 The PMS is a grant payment system operated and maintained by the HHS Program 
Support Center, Division of Payment Management.  The PMS provides disbursement, 
grant monitoring, reporting, and case management services to awarding agencies and 
grant recipients, such as MFCUs. 
67 Program income is defined as gross income received by the grantee or subgrantee 
directly generated by a grant supported activity, or earned only as a result of the grant 
agreement during the grant period.  45 CFR  92.25(b). 
68 The Criminal Justice Division supervisor supervises the MFCU director. 
69 We did not survey the MFCU director or chief investigator. 
 
 
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FY 2011 through FY 2013.70  The design of this sample allowed us to 
estimate the percentage of all 431 cases with various characteristics at the 
95-percent confidence level.  We reviewed 91 sampled case files and the 
MFCUs processes for monitoring the status and outcomes of cases.  From 
the 100 case files in the initial sample, we selected another simple random 
sample of 50 files for a more comprehensive review to identify any 
potential issues (such as investigation delays) from a qualitative 
perspective.71  We consulted MFCU staff to address any apparent issues 
with individual case files, such as missing documentation.   
Onsite Observation of MFCU Operations.  While onsite, we observed the 
MFCUs operations.  Specifically, we observed the intake of referrals; the 
security of data and case files; and the general functioning of the MFCU.   
 
 
 
70 This figure includes cases opened before FY 2011 that remained open at some point 
during FYs 20112013.  This figure does not include multi-State (global) civil 
False Claims Act cases, which consist of cases worked by staff from the Federal 
Government or other MFCUs.  The MFCU identified 23 global cases on the list of case 
files submitted to OIG.  For the purposes of our review of case files, these 23 global cases 
were not included as part of the MFCUs population of case files.  In addition, four cases 
in our simple random sample were global cases that were mistakenly identified by the 
MFCU as nonglobal cases.  In addition, the Unit could not locate five case files on our 
sample list.  We did not review these case files; therefore, although we selected 100 case 
files for our initial random sample, the total number of case files we actually reviewed 
was 91.  Including the 27 global cases, the total number of MFCU cases open during the 
review period was 458. 
71 Although we selected 50 case files for a more comprehensive review, 1 of these case 
files was for a global case that was mistakenly identified as a nonglobal case.  In addition, 
the Unit could not locate three of the case files that we selected for a more comprehensive 
review.  Therefore, the total number of case files receiving a more comprehensive review 
was 46. 
 
 
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APPENDIX D 
Case File Review Population, Sample Size Counts, and 
Confidence Interval Estimates 
Table D-1 shows population and sample counts and percentages by case 
type.  Note that both samples have percentages of case types similar to the 
general population of the Units case files, though sample counts for some 
case types are very small.  Because of these small sample sizes, we cannot 
reliably generalize what we found in our sample review to each case type 
in the population, and only our overall estimates project to the population 
of all case files.  We estimated the 3 population values for all 431 
nonglobal case files from the results of our review of the case files 
selected in our simple random samples.  Table D-2 includes the estimate 
descriptions, sample sizes, point estimates, and 95-percent confidence 
intervals for these six estimates.  
 
Table D-1:  Population and Sample Size Counts for Case Types 
Population Count  Sample Count*       Sample Count* 
Case Type 
and (%) n=431  and (%) n=91  and (%) n=46 
Closed  404 (94%)  85 (93%)  42 (91%) 
Open  27 (6%)  6 (7%)  4 (9%) 
       
Civil (Nonglobal)  21 (5%)  1 (1%)  1 (2%) 
Criminal  410 (95%)  90 (99%)  45 (98%) 
       
Patient Abuse/Neglect  282 (65%)  58 (64%)  28 (61%) 
Provider Fraud 
149 (35%)  33 (36%)  18 (39%) 
(Nonglobal) 
Source: The Hawaii MFCU provided a list of all case files open during FYs 2011 through 2013. 
* OIG generated this random sample. 
 
 
 
 
 
 
 
 
 
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Table D-2:  Confidence Intervals for Key Case File Review Data 
Point  95-Percent Confidence 
Estimate Description  Sample Size 
Estimate  Interval 
Cases Files With No 
Documentation of Periodic  44  70.5%  55.782.7%* 
Supervisory Reviews  
Case Files With No 
Documentation Explaining  91  22.0%  14.630.9% 
Investigation Delays 
Cases Closed Because 
the Statute of Limitations  91  4.4%  1.410.2% 
Had Expired 
 
*Because only 44 case files met the criteria for our review of periodic supervisory reviews, our 
95-percent confidence interval is relatively wide for this estimate. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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APPENDIX E 
Unit Comments 
 
 
 
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ACKNOWLEDGMENTS 
This report was prepared under the direction of Joyce M. Greenleaf, Acting 
Regional Inspector General for Evaluation and Inspections in the 
San Francisco regional office, Michael Henry, Deputy Regional Inspector 
General, and Blaine Collins, Acting Deputy Regional Inspector General. 
Matthew DeFraga served as the lead analyst for this study.  Other Office 
of Evaluation and Inspections staff who provided support from the 
San Francisco regional office include Rosemary Rawlins.  Central office 
staff who provided support include Susan Burbach, Kevin Farber, 
Christine Moritz, and Andrew VanLandingham.  Office of Audit Services 
staff who provided support include Linda Siu and Sharmaine Sotelo.  
Office of Investigations staff also participated in this review.   
 
 
Hawaii State Medicaid Fraud Control Unit:  2014 Onsite Review (OEI-09-14-00540)  38 
   
Office of Inspector General
http://oig.hhs.gov  
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95452, 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 individuals 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 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.  These evaluations focus on preventing fraud,  waste, or abuse  and promoting  
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations  
of fraud and misconduct  related to HHS programs, operations, and individuals.  With  
investigators working in all 50 States and the District of Columbia, OI  utilizes its resources 
by actively  coordinating with the Department  of Justice  and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to  criminal 
convictions, administrative sanctions,  and/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 for OIGs  internal operations.  OCIG represents  OIG in all civil and 
administrative fraud and  abuse cases involving HHS programs, including False Claims Act, 
program exclusion, and civil monetary penalty cases.  In  connection with these cases, OCIG 
also negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
opinions, issues compliance program  guidance, publishes fraud alerts, and provides other  
guidance  to  the health care industry concerning the anti-kickback statute and other  OIG  
enforcement authorities.