The Department of Health and Human Services 
 
  And 
  The Department of Justice 
  Health Care Fraud and Abuse Control Program 
  Annual Report for Fiscal Year 2016 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
January 2017 
 
 
    TABLE OF CONTENTS
  
 
   
I.   Executive Summary 	                  1 

   
II.   Statutory Background	                  3 

   
III. 	  Program Results and Accomplishments             5 

              Monetary Results                  5 

    Expenditures                   7 

    Overall Recoveries                 8 

    Health Care  Fraud Prevention and  Enforcement Action Team       8 

    Health Care  Fraud Prevention Partnership          9 

    Medicare Fraud Strike Force               10 

    Highlights of Successful Criminal and Civil Investigations       12 

 
IV. 	  Department of  Health and Human Services             34 

  Office of  Inspector General          34 

  Centers for Medicare &  Medicaid Services         43 

  Administration on Community  Living            60 

  Office of the General Counsel               62 

  Food and Drug Administration Pharmaceutical Fraud Program      66 

 
V.  	 Department of Justice                  69 

  United States Attorneys       69 

  Civil Division       70 

  Criminal Division       74 

  Civil Rights Division       77 

   
VI.   Appendix                    82 

  Federal Bureau of Investigation               82 

  Return on Investment Calculation             85 

  Total HCFAC Resources                86 

 
VII.   Glossary of Terms 	                  87 
                                                                                          
   
 
 
   
  GENERAL NOTE  
 
All  years are fiscal  years unless otherwise 
stated  in the text.   EXECUTIVE SUMMARY 
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) established a national 
Health Care Fraud and Abuse Control Program (HCFAC or the Program) under the joint 
direction of the Attorney General and the Secretary of the Department of Health and Human 
Services (HHS)1, acting through the Inspector General, designed to coordinate federal, state and 
local law enforcement activities with respect to health care fraud and abuse.  In its twentieth year 
of operation, the Programs continued success confirms the soundness of a collaborative 
approach to identify and prosecute the most egregious instances of health care fraud, to prevent 
future fraud and abuse, and to protect program beneficiaries. 
Monetary Results 
During Fiscal Year (FY) 2016, the Federal Government won or negotiated over $2.5 billion in 
health care fraud judgments and settlements2, and it attained additional administrative 
impositions in health care fraud cases and proceedings.  As a result of these efforts, as well as 
those of preceding years, in FY 2016 over $3.3 billion was returned to the Federal Government 
or paid to private persons.  Of this $3.3 billion, the Medicare Trust Funds3 received transfers of 
approximately $1.7 billion during this period, and $235.2 million in Federal Medicaid money 
was similarly transferred separately to the Treasury as a result of these efforts.  Of the 
approximately $31.0 billion returned by the HCFAC account to the Medicare Trust Funds since 
the inception of the Program in 1997, over $17.9 billion has been returned from 2009 through 
2016. 
Enforcement Actions 
In FY 2016, the Department of Justice (DOJ) opened 975 new criminal health care fraud 
investigations.  Federal prosecutors filed criminal charges in 480 cases involving 802 defendants.  
A total of 658 defendants were convicted of health care fraud-related crimes during the year.  
Also in FY 2016, DOJ opened 930 new civil health care fraud investigations and had 1,422 civil 
health care fraud matters pending at the end of the fiscal year.  In FY 2016, the FBI investigative 
efforts resulted in over 555 operational disruptions of criminal fraud organizations and the 
dismantlement of the criminal hierarchy of more than 128 health care fraud criminal enterprises.  
In FY 2016, investigations conducted by HHS Office of Inspector General (HHS-OIG) resulted 
in 765 criminal actions against individuals or entities that engaged in crimes related to Medicare 
and Medicaid, and 690 civil actions, which include false claims and unjust-enrichment lawsuits 
filed in federal district court, civil monetary penalties (CMP) settlements, and administrative 
recoveries related to provider self-disclosure matters.  HHS-OIG also excluded 3,635 individuals 
1 Hereafter, referred to as the Secretary. 
2 The amount reported as won or negotiated only reflects the federal recoveries and therefore does not reflect state 
Medicaid monies recovered as part of any global federal-state settlements. 
3 The Medicare Trust Funds are also known as the Medicare Hospital Insurance (Part A) Trust Fund and the 
Supplemental Medical Insurance (Part B) Trust Fund. 
1  and entities from participation in Medicare, Medicaid, and other federal health care programs.  
Among these were exclusions based on criminal convictions for crimes related to Medicare and 
Medicaid (1,362) or to other health care programs (262), for patient abuse or neglect (299), and 
as a result of licensure revocations (1,448).  HHS-OIG also issued numerous audits and 
evaluations with recommendations that, when implemented, would correct program 
vulnerabilities and save program funds. 
 
Sequestration Impact 
  
Due to sequestration of mandatory funding in 2016, there were fewer resources for DOJ, FBI, 
HHS, and HHS-OIG to fight fraud and abuses against Medicare, Medicaid, and other health care 
programs.  A total of $20.6 million was sequestered from the HCFAC program in FY 2016, for a 
combined total of $94.8 million in the past four years.  Including funds sequestered from the FBI 
and the FY 2013 discretionary HCFAC sequester, the total equals $131.3 million in the past four 
years. 
   
 
  2  STATUTORY BACKGROUND 
 
The Annual Report of the Attorney General and the Secretary detailing expenditures and 
revenues under the Health Care Fraud and Abuse Control Program for Fiscal Year 2016 is 
provided as required by Section 1817(k)(5) of the Social Security Act.  
 
The Social Security Act Section 1128C(a), as established by the Health Insurance Portability and 
Accountability Act of 1996 (P.L. 104-191, HIPAA or the Act), created the Health Care Fraud 
and Abuse Control Program, a far-reaching program to combat fraud and abuse in health care, 
including both public and private health plans.   
 
As was the case before HIPAA, amounts paid to Medicare in restitution or for compensatory 
damages must be deposited in the Medicare Trust Funds.  The Act requires that an amount 
equaling recoveries from health care investigations  including criminal fines, forfeitures, civil 
settlements and judgments, and administrative penalties  also be deposited in the Trust Funds.   
 
The Act appropriates monies from the Medicare Hospital Insurance Trust Fund to an expenditure 
account, called the Health Care Fraud and Abuse Control Account (the Account), in amounts that 
the Secretary and Attorney General jointly certify as necessary to finance anti-fraud activities.  
The maximum amounts available for certification are specified in the Act.  Certain of these sums 
are to be used only for activities of the HHS-OIG, with respect to the Medicare and Medicaid 
programs.  In FY 2006, the Tax Relief and Health Care Act (TRHCA) (P.L 109-432, 303) 
amended the Act so that funds allotted from the Account are available until expended.  
TRHCA also allowed for yearly increases to the Account based on the change in the consumer 
price index for all urban consumers (all items, United States city average) (CPI-U) over the 
previous fiscal year for fiscal years for 2007 through 2010.4  In FY 2010, the Patient Protection 
and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, 
collectively referred to as the Affordable Care Act (P.L. 111-148, ACA) extended permanently 
the yearly increases to the Account based upon the change in the consumer price index for all 
urban consumers, or CPI-U. 
  
In FY 2016, the Secretary and the Attorney General certified $282.1 million in mandatory 
funding to the Account after accounting for sequester reductions of $20.6 million to the total 
appropriation.  Additionally, Congress appropriated $681.0 million in discretionary funding.  A 
detailed breakdown of the allocation of these funds is set forth later in this report.  HCFAC 
appropriations generally supplement the direct appropriations of HHS that are devoted to health 
care fraud enforcement and have supported over two-thirds of DOJs health care fraud funding 
and over three-fourths of HHS-OIGs appropriated budget in FY 2016.  (Separately, the FBI, 
which is discussed in the appendix, received $130.3 million from HIPAA, after accounting for 
$9.5 million in mandatory sequester reductions.)  Under the joint direction of the Attorney 
General and the Secretary, the Programs goals are:  
 
                                                 
4 The CPI-U adjustment in TRHCA did not apply to the Medicare Integrity Program (MIP).  Section 6402 of the 
ACA indexed Medicare Integrity Program funding to inflation starting in FY 2010. 
3 
  (1) To coordinate federal, state and local law enforcement efforts relating to health care fraud 
and abuse with respect to health plans; 
 
(2) To conduct investigations, audits, inspections, and evaluations relating to the delivery of 
and payment for health care in the United States; 
 
(3) To facilitate enforcement of all applicable remedies for such fraud; and 
 
(4) To provide education and guidance regarding complying with current health care law. 
 
(5) The Act requires the Attorney General and the Secretary to submit a joint annual report to 
the Congress that identifies both: 
 
(6) The amounts appropriated to the Trust Funds for the previous fiscal year under various 
categories and the source of such amounts; and 
 
(7) The amounts appropriated from the Trust Funds for such year for use by the Attorney 
General and the Secretary and the justification for the expenditure of such amounts. 
 
This annual report fulfills the above statutory requirements.   
 
Additionally, this report fulfills the requirement in the annual discretionary HCFAC 
appropriation (Public Law 114-123 Consolidated Appropriations Act, 2016) that this report 
include measures of the operational efficiency and impact on fraud, waste, and abuse in the 
Medicare, Medicaid, and CHIP programs for the funds provided by this appropriation.   
 
 
 
4 
    PROGRAM RESULTS  AND ACCOMPLISHMENTS  

 
As required by the Act, HHS and DOJ must detail in this Annual Report the amounts deposited 
to the Medicare Trust  Funds and the source of such deposits.  In FY 2016, over $3.3 billion was  
deposited with the Department of the Treasury and CMS, transferred to other federal agencies  
administering health care programs, or paid to private persons during the  fiscal  year.  Monetary  
results from these transfers and deposits are provided in the table below:   
 
Monetary Results:  Total Transfers / Deposits by Recipient  FY 2016  
Department of  the Treasury      
Amount
  Deposits to the Medicare Trust  Fund, as  required by  HIPAA:     
    Gifts and Bequests   $7,840  
    Amount Equal  to Criminal Fines   24,043,913  
    Civil Monetary  Penalties   59,055,263  
    Asset Forfeiture   53,998,735  
    Penalties and Multiple Damages   788,337,475  
          Subtotal   925,443,226  
Centers for Medicare and  Medicaid Services     
   HHS/OIG Audit Disallowances:  RecoveredMedicare   79,251,778  
   Restitution/Compensatory Damages*   655,019,371  
          Subtotal    734,271,149  
Total  Transferred  to the Medicare  Trust Funds   $1,659,714,375  
Restitution/Compensatory Damages to Federal Agencies     
   TRICARE   58,348,500  
   HHS/OIG   11,687,803  
   Office of Personnel  Management   9,709,802  
   National Institutes of Health   7,505,000  
   Other Agencies   341,130,314  
          Subtotal    428,381,420  
Centers for Medicare and  Medicaid Services     
   Federal Share of Medicaid   235,157,903  
   HHS/OIG Audit Disallowances:  RecoveredMedicaid   503,844,355  
          Subtotal    739,002,258  
Total   1,167,383,677  
Relators' Payments**   526,969,605  
GRAND TOTAL MONETARY RESULTS***   $3,354,067,657  
 
*Restitution, compensatory damages, and recovered audit disallowances include returns to both the Medicare
Hospital Insurance (Part A) Trust Fund and the Supplemental Medical Insurance (Part B)  Trust Fund. 
 
**These are funds awarded to private persons  who  file suits  on behalf of the Federal  Government  under the  qui tam  

(whistleblower) provisions of  the False Claims  Act, 31 U.S.C.    3730(b). 
 
***State funds are also collected on behalf of state Medicaid programs; only the Federal share of Medicaid funds 
 
transferred to CMS are represented here.
  
5 
  The above transfers include certain collections, or amounts equal to certain collections, required 
by HIPAA to be deposited directly into the Medicare Trust Funds.  These amounts include: 
 
(1) Gifts and bequests made unconditionally to the Trust Funds, for the benefit of the 
Account or any activity financed through the Account; 
 
(2) Criminal fines recovered in cases involving a federal health care offense, including 
collections under section 24(a) of Title 18, United States Code (relating to health care 
fraud); 
 
(3) Civil monetary penalties in cases involving a federal health care offense; 
 
(4) Amounts resulting from the forfeiture of property by reason of a federal health care 
offense, including collections under section 982(a)(7) of Title 18, United States Code; 
and 
 
(5) Penalties and damages obtained and otherwise creditable to miscellaneous receipts of the 
general fund of the Treasury obtained under sections 3729 through 3733 of Title 31, 
United States Code (known as the False Claims Act, or FCA), in cases involving claims 
related to the provision of health care items and services (other than funds awarded to a 
relator, for restitution or otherwise authorized by law). 
 
 
 
  6  Expenditures  
 
In the  twentieth  year of operation, the Secretary  and the Attorney General  certified  
$282.1 million in mandatory  funding  as necessary  for the Program, after  accounting for  
mandatory sequester reductions of $20.6 million as required by law.  Additionally, Congress  
appropriated $681.0 million in discretionary funding.  See  allocation by recipient below:  
 
FY 2016 ALLOCATION OF HCFAC APPROPRIATION  
Mandatory  Discretionary   Funds   Total  
Organization  
Allocation5   Allocation   Sequestered   Allocation  
Department of  Health and Human 
           
Services  
Office of Inspector General6   $201,305,390   $67,200,000   ($13,688,767)   $254,816,623  
Office of the General Counsel   7,550,000   0   0   7,550,000  
Administration for Community  
0  18,000,000   0  18,000,000  
Living7  
Food and Drug Administration   4,250,000   0   0   4,250,000  
Centers for Medicare &  Medicaid  
24,083,926   535,320,000   0  559,403,926  
Services  
Unallocated Funding   2,618,140   0   (2,618,140)   0  
   Subtotal   $239,807,456   $620,520,000   ($16,306,907)   $836,470,549  
          
Department of Justice          
United States Attorneys   34,983,708   19,791,053   0   54,774,761  
Civil Division8   20,900,000   14,358,250   0   35,258,250  
Criminal Division   1,183,623   16,410,697   0   17,594,320  
Civil Rights Division   1,311,744   3,875,000   0   5,186,744  
Justice Management Division   200,000   0   0   200,000  
Federal Bureau of Investigation   0   6,045,000   0   6,045,000  
Unallocated  Funding   4,274,010   0   (4,274,010)   0  
   Subtotal   62,853,085   60,480,000   (4,274,010)   119,059,075  
TOTAL9   $302,660,541   $681,000,000   ($20,580,917)   $963,079,624  
 
                                                 
5  As of FY  2007, mandatory funds are available until expended.  Discretionary  funds are available for two  years.
   
6  In addition, HHS-OIG obligated $12 million in  funds received as reimbursement  for the costs of conducting 
 
investigations and audits and for monitoring compliance plans as authorized by section 1128C(b)  of the Social 
 
Security  Act, 42 U.S.C.  1320a-7c(b).
    
7  CMSs discretionary HCFAC funds  were allocated to the Administration for Community Living to support the 
 
Senior Medicare Patrol  Program.
  
8  The Elder  Justice Initiative,  managed by the Civil Division, is included in the  Civil Division figures. 
   
9  Amounts only represent those that are provided by statute,  and do not include other  mandatory  sources or
  
discretionary appropriated sources provided through Departments annual appropriations.
  
 
  7 
  Overall Recoveries 
During this fiscal year, the Federal Government won or negotiated over $2.5 billion in judgments 
and settlements, and attained additional administrative impositions in health care fraud cases and 
proceedings.  As a result of these efforts, as well as those of preceding years, approximately   
$3.3 billion was returned to the Federal Government or private persons.  Of this $3.3 billion, the 
Medicare Trust Funds received transfers of approximately $1.7 billion during this period; and 
another $235.2 million in Federal Medicaid money was transferred to the Treasury separately as 
a result of these efforts.10 
 
In addition to these enforcement actions, numerous audits, evaluations and other coordinated 
efforts yielded recoveries of overpaid funds, and prompted changes in federal health care 
programs that reduce vulnerability to fraud.   
 
The return on investment (ROI) for the HCFAC program over the last three years (2014-2016) is 
$5.00 returned for every $1.00 expended.  Because the annual ROI can vary from year to year 
depending on the number and type of cases that are settled or adjudicated during that year, DOJ 
and HHS use a three-year rolling average ROI for results contained in the report.  Additional 
information on how the ROI is calculated can be found in the Appendix. 
 
Health Care Fraud Prevention and Enforcement Action Team (HEAT) 
 
The Attorney General and the Secretary maintain regular consultation at both senior and staff 
levels to accomplish the goals of the HCFAC Program.  On May 20, 2009, the Attorney General 
and the Secretary announced the Health Care Fraud Prevention & Enforcement Action Team 
(HEAT), a new effort with increased tools and resources, and a sustained focus by senior level 
leadership to enhance collaboration between the Departments of Health and Human Services and 
Justice.  With the creation of the new HEAT effort, DOJ and HHS pledged a Cabinet-level 
commitment to prevent and prosecute health care fraud.  HEAT, which is jointly led by the 
Deputy Attorney General and HHS Deputy Secretary, is comprised of top level law enforcement 
agents, prosecutors, attorneys, auditors, evaluators, and other staff from DOJ and HHS and their 
operating divisions, and is dedicated to joint efforts across government to both prevent fraud and 
enforce current anti-fraud laws around the country.  The Medicare Fraud Strike Force teams are a 
key component of HEAT.     
 
The mission of HEAT is: 
 
  To marshal significant resources across government to prevent waste, fraud and 
abuse in the Medicare and Medicaid programs and crack down on the fraud 
perpetrators who are abusing the system and costing us all billions of dollars. 
 
  To reduce health care costs and improve the quality of care by ridding the system of 
perpetrators who are preying on Medicare and Medicaid beneficiaries. 
                                                 
10 Note that some of the judgments, settlements, and administrative actions that occurred in FY 2016 will result in 
transfers in future years, just as some of the transfers in FY 2016 are attributable to actions from prior years. 
 
  8    To highlight best practices by providers and public sector employees who are 
dedicated to ending waste, fraud, and abuse in Medicare. 
 
  To build upon existing partnerships between DOJ and HHS, such as our Medicare 
Fraud Strike Force Teams, to reduce fraud and recover taxpayer dollars. 
 
Since its creation in May 2009, HEAT has focused on key areas for coordination and 
improvement.  HEAT members are working to identify new enforcement initiatives and areas for 
increased oversight and prevention to increase efficiency in areas such as pharmaceutical and 
device investigations.  DOJ and HHS have expanded data sharing and improved information 
sharing procedures in order to get critical data and information into the hands of law enforcement 
to track patterns of fraud and abuse and increase efficiency in investigating and prosecuting 
complex health care fraud cases. This expanded data sharing enables the DOJ and HHS to 
efficiently identify and target the worst actors in the system. The departments established a 
cross-government health care fraud data intelligence sharing workgroup to share fraud trends, 
new initiatives, ideas, and success stories to improve awareness across of issues relating to health 
care fraud.  
 
Both departments also have developed training programs to prevent honest mistakes and help 
stop potential fraud before it happens.  This includes CMS compliance training for providers, on-
going meetings at U.S. Attorneys Offices (USAOs) with the public and private sector, and 
increased efforts by HHS to educate specific groupsincluding elderly and immigrant 
communitiesto help protect them.  In addition, DOJ conducts, with the support of HHS, a 
Medicare Fraud Strike Force training program designed to teach the Strike Force concept and 
case model to prosecutors, law enforcement agents, and administrative support teams.   
 
Healthcare Fraud Prevention Partnership (HFPP) 
 
The Healthcare Fraud Prevention Partnership (HFPP) is the groundbreaking public/private 
partnership between the Federal Government, State officials, law enforcement, private health 
insurance plans and associations, and health care anti-fraud associations.  The purpose of the 
partnership is to exchange data and information between the partners to help improve capabilities 
to fight fraud, waste and abuse in the health care industry.  Since its inception in 2012, the 
number of participants has increased to 70 public, private and state partner organizations.  The 
Partnership has completed several studies associated with fraud, waste or abuse that have yielded 
successful results for participating partners.  Studies have examined such subjects as false store 
fronts or phantom providers and top billing pharmacies.  Additional studies are underway and 
the Partnership has established a Trusted Third Party (TTP) which conducts HFPP data 
exchanges, research, data consolidation and aggregation, reporting, and analysis.  The TTP will 
not share the source of the data (i.e., which partner submitted what data) during an exchange in 
order to keep the identity of the data source confidential.   
 
The Partnership is a demonstrated example of effective departmental collaboration between HHS 
and DOJ, working together to create a strong partnership with the states and private payers to 
detect fraud, waste, and abuse.  In FY 2016, the Partnership hosted its sixth Executive Board 
meeting.  The meeting focused on strategies to streamline, strengthen, and grow the Partnership, 
including a call to action to broaden the HFPPs impact.   
 
  9   
Medicare Fraud Strike Force 
 
The first Medicare Fraud Strike Force (Strike Force) was launched in March 2007 as part of the 
South Florida Initiative, a joint investigative and prosecutorial effort against Medicare fraud and 
abuse in South Florida.  The Strike Force is comprised of interagency teams made up of 
investigators and prosecutors that focus on the worst offenders in regions with the highest known 
concentration of fraudulent activities.  The Strike Force uses advanced data analysis techniques 
to identify aberrant billing levels in health care fraud hot spotscities with high levels of billing 
fraudand target suspicious billing patterns, as well as emerging schemes and schemes that 
migrate from one community to another.  Based on the success of these efforts and increased 
appropriated funding for the HCFAC program from Congress and the Administration, DOJ and 
HHS expanded Strike Force operations to a total of nine areas in the United States:  Los Angeles, 
California; Miami and Tampa, Florida; Chicago, Illinois; Brooklyn, New York; Detroit, 
Michigan; Southern Louisiana; and Dallas and Southern Texas.     
 
Each Medicare Fraud Strike Force team brings the investigative and data analytic resources of 
the FBI and HHS-OIG and the prosecutorial resources of the Criminal Divisions Fraud Section 
and the USAOs to analyze data obtained from a wide variety of sources including CMS, and 
bring cases in federal district court.  Strike Force accomplishments in the areas noted above and 
USAO accomplishments in their districts during FY 2016 include11:  
 
  246 indictments, informations and complaints involving charges filed against 
482 defendants who allegedly collectively billed the Medicare program approximately 
$2.8 billion;   
 
  260 guilty pleas negotiated and 34 jury trials litigated, with guilty verdicts against 
32 defendants; and  
 
  Imprisonment for 290 defendants sentenced during the fiscal year, averaging more than 
48 months of incarceration.  
 
Since its inception, Strike Force prosecutors filed more than 1,410 cases charging more than 
3,018 defendants who collectively billed the Medicare program more than $10.8 billion; 2,041 
defendants pleaded guilty and 275 others were convicted in jury trials; and 1,767 defendants 
were sentenced to imprisonment for an average term of approximately 49 months.12  Medicare 
payment trends demonstrate the positive impact of Strike Force enforcement and prevention 
efforts.   
 
Medicare payment trends also demonstrate the positive impact of Strike Force enforcement and 
prevention efforts beyond the several Strike Force locations.  The HEAT Strike Force team in 
Miami initiated federal law enforcement actions against fraudulent home health schemes that 
                                                 
11 The accomplishments figures presented in the bullets include all reported Strike Force cases handled by DOJ 
Criminal Division attorneys and AUSAs in the respective USAOs during FY 2016.   
12 These statistics are for the period of May 7, 2007 through September 30, 2016. 
 
  10  exploited the Home Health Agency (HHA) outlier payment provisions in 2009.  An HHS-OIG 
evaluation published that same year found that Miami-Dade County accounted for more home 
health outlier payments than the rest of the nation combined for claims paid the previous year.  
Twenty-three other counties nationwide also exhibited aberrant home health payment patterns 
similar to that of Miami, but to a lesser extent.  In 2010, CMS implemented a cap on total outlier 
payments not to exceed more than 10 percent of home health payments that an individual home 
health provider may receive annually.  The following chart shows the rapid increase in annual 
Medicare home health payments until peaking in 2010, and the decline in home health payments 
by approximately one billion dollars annually since that time compared to a hypothetical 
constant level of HHA payments at the 2010 level.  
 
 
 
For examples of successful Strike Force cases initiated or concluded during FY 2016, please see 
Highlights of Successful Criminal and Civil Investigations beginning on p. 12.   
 
   
 
  11  Highlights of Successful Criminal and Civil Investigations  
 
Our respective Departments successfully pursued Medicare Fraud Strike Force matters, as well 
as other criminal and civil investigations in a wide range of areas.  Cases are organized by type 
and presented in chronological order.  Strike Force cases are denoted by (SF) before the lead 
sentence.  
 
Ambulance and Transportation Services 
 
In November 2015, Regent Management Services L.P.a Galveston, Texas skilled nursing 
facility companypaid $2.7 million to settle civil FCA allegations that it received kickbacks 
from various ambulance companies in exchange for rights to Regents more lucrative Medicare 
and Medicaid transport referrals.  Regent manages twelve separately owned and operated nursing 
facilities.  The alleged remuneration included patients at Regent facilities receiving free or 
heavily discounted ambulance transports that Regent would otherwise have been financially 
responsible for at higher Medicaid rates.  This settlement is the first in the nation to hold 
accountable the medical institution as opposed to the ambulance in this kind of swapping 
arrangement.  As a part of settlement, Regent also entered into a five-year Corporate Integrity 
Agreement with HHS-OIG. 
 
In November 2015, the owner of Advantage Medical Transport Inc. (Advantage) was sentenced 
to 2 years in prison and ordered to pay a $300,000 fine and $194,378 in restitution, joint and 
several with Advantage, for his guilty plea to false statements in health care matters.  Advantage 
was also ordered to pay a $250,000 fine.  According to court documents, employees at 
Advantage submitted fraudulent claims to Medicare for the transport of beneficiaries to and from 
dialysis treatment centers.  The owner directed Advantages EMTs to complete their trip sheets 
in a manner that concealed the fact that the patients were ambulatory and not eligible for 
Medicare paid ambulance transport. 
 
In June 2016, ten North Texas companies and individuals paid $1.1 million to resolve civil FCA 
allegations that Irving Holdings submitted a false affidavit to the State of Texas that CMS relied 
upon when paying inflated amounts for transport services.  Irving Holdings, Inc. is one of the 
largest taxicab companies in the United States. 
 
Clinics 
 
In March 2016, an owner of several mental and behavioral health clinics in the Eastern District 
of North Carolina was sentenced to the statutory maximum of 20 years for health care fraud and 
money laundering for defrauding North Carolinas Medicaid program.  He was also ordered to 
make restitution of more than $5.9 million to the victims of the offense, which included the 
North Carolina Medicaid program and a physician, whose name and identification number he 
used to commit the fraud. The owner had owned a company which a Medicaid audit flagged for 
unsupported billing.  The owner closed down that company and was excluded from Medicaid.  
Unbeknownst to the North Carolina Medicaid program, the owner worked with a fraudulent 
biller to concoct numerous schemes to continue billing the Medicaid program by stealing the 
identities of numerous practitioners and children.  The owner not only committed health care 
fraud, but also laundered the proceeds through his nonprofit, and then further laundered the 
 
  12  proceeds through another conspirator in the form of no-document loan payments.  The owner 
later threatened to kill one of the shell company owners that he was using to bill the Medicaid 
program if she talked to federal agents. 
 
In April 2016, a doctor in Maryland who specialized in interventional pain management was 
sentenced to 9 years and 3 months in prison, followed by three years of supervised release for 
one count of health care fraud, two counts of making a false statement related to a health care 
program, one count of obstruction of justice, four counts of wire fraud, and one count of 
aggravated identity theft.  The doctor owned and operated Washington Pain Management Center 
along with his wife, who was also a licensed physician and who is now deceased.  Working 
together, the doctors submitted claims for nerve block injections when in fact neither owned nor 
used imaging guidance which was necessary to administer nerve block injections.  They also 
falsely documented patient files to indicate that imaging guidance was used when in fact it was 
not.  Finally, when Medicare contractors visited Washington Pain Management and inquired 
about the imaging guidance machine, they created a false lease document reflecting the fact that 
they had leased the machine.  As part of his sentence, the doctor was also ordered to forfeit and 
pay restitution of $3.1 million. 
 
In June 2016, the owner and operator of multiple HIV/AIDS clinics was sentenced in New York 
to 5 years and 3 months in prison and ordered to pay $12.2 million in restitution, joint and 
several, for his guilty plea to conspiracy to commit health care fraud.  According to court 
documents, the defendants operated health care clinics that purported to provide injection and 
infusion treatments to Medicare-eligible HIV/AIDS patients, but that were, in reality, health care 
fraud mills.  As part of the scheme, he and his co-conspirators paid patients cash kickbacks for 
coming to the clinics, coached patients on lies to tell clinic doctors to enable fraudulent billing, 
and billed Medicare for medications that were never administered, administered at incorrect 
dosages, or were medically unnecessary.  Two defendants involved in the scheme were 
previously sentenced to a combined 8 years and 3 months in prison and ordered to pay $9 million 
in restitution, joint and several. 
 
In July 2016, Drayer Physical Therapy Institute, LLCwith clinic locations in South Carolina 
and fourteen other statespaid $7 million to the federal health care programs to settle civil FCA 
allegations that it was excessively billing for physical therapy services.  The government alleged 
that Drayer would bill for services provided to multiple patients simultaneously as though the 
services were being provided by a physical therapist or therapist assistant to one patient at a time.  
As a part of settlement, Drayer also entered into a five-year Corporate Integrity Agreement with 
HHS-OIG.  
 
Device Companies 
 
In December 2015, Maryland-based splint supplier, Dynasplint Systems, Inc., and its founder 
and president paid approximately $10.3 million to resolve civil FCA allegations that they 
improperly billed Medicare for splints provided to patients in skilled nursing facilities.  Medicare 
pays for the health care needs of patients in skilled nursing facilities with a bundled payment 
intended to include splints, as well as other patient needs. The government alleged that 
Dynasplint and its president misrepresented that patients were in their homes or other places and 
 
  13  not in skilled nursing facilities to avoid this bundled payment and improperly receive separate 
reimbursement from the Medicare program.   
 
In March 2016, Olympus Corporation of the Americas (OCA), the largest distributor of 
endoscopes and related equipment, paid $623.2 million to resolve criminal charges and civil 
FCA claims relating to a scheme to pay kickbacks to doctors and hospitals in exchange for their 
purchase of OCAs endoscopes and other medical and surgical equipment.  OCA was charged in 
a criminal complaint with conspiracy to violate the Anti-Kickback Statute (AKS), which 
prohibits payments to induce purchases paid for by federal health care programs.  As a result, 
Olympus allegedly caused the submission of false claims to the Medicare, Medicaid, and 
TRICARE programs.  OCA has entered into a three-year deferred prosecution agreement that 
will allow it to avoid conviction if it complies with the reform and compliance requirements.  
The $623.2 million included a $312.4 million criminal penalty and $310.8 million to settle civil 
claims under the federal and various state False Claims Acts.  This is the largest total amount 
paid in U.S. history for violations of the AKS by a medical device manufacturer.  As a part of 
settlement, OCA also entered into a five-year Corporate Integrity Agreement with HHS-OIG.     
 
In June 2016, Minneapolis-based Cardiovascular Systems, Inc. (CSI) paid $8 million to resolve 
civil FCA allegations that it paid kickbacks to physicians to induce those physicians to use CSIs 
medical devices in violation of the Anti-Kickback Statute.  The government alleged that CSI 
developed, distributed, and implemented certain practice development services to assist 
physicians in performing atherectomies in exchange for those physicians ordering or continuing 
to use CSIs devices for atherectomy procedures.  As a part of settlement, CSI also entered into a 
five-year Corporate Integrity Agreement with HHS-OIG.  
 
In July 2016, California-based manufacturer Acclarent, Inc., a subsidiary of Johnson & Johnson, 
paid $18 million to resolve civil FCA liability for marketing and distributing its Relieva Stratus 
sinus spacer for unapproved uses that were not covered by federal health programs.  The 
government alleged that Acclarent received FDA marketing clearance for the Stratus device 
based on misrepresentations concerning the intended use of the device.  The company advised 
FDA that the device was intended only for use as a spacer to maintain sinus openings following 
surgery and that it was to be used only with saline; however, the government alleged that the 
company engineered and designed the product specifically for use as a drug-delivery device to 
elute prescription corticosteroids, the only use for which the device was marketed.  The 
government alleged that Acclarent continued to market the Stratus for drug delivery even after a 
warning was added to the label concerning use of active drug substances in the device.  The 
government filed a criminal action against Acclarents former Chief Executive Officer and 
former Vice President of Sales based, in part, on the same facts, and both executives were 
convicted in July 2016 of ten misdemeanor counts for introducing adulterated and misbranded 
medical devices into interstate commerce.  These individuals have filed notices of appeal. 
 
Diagnostic Services 
 
(SF) In December 2015, following a two-week jury trial in Tampa, Florida, a businessman and 
an audiologist were convicted of all charges against them in a $12 million Medicare fraud 
scheme.  The fraud scheme involved false and fraudulent reimbursement claims for radiology, 
audiology, cardiology, and neurology diagnostic services.  The jury found the businessman, who 
 
  14  was the lead defendant, guilty on all counts, which included conspiracy to commit health care 
fraud and wire fraud, health care fraud, conspiracy to commit money laundering, money 
laundering, and aggravated identity theft.  The jury found the audiologist guilty on all counts as 
well, which included the same charges.  The businessman was sentenced to over 14 years in 
prison, and the audiologist was sentenced to over 7 years in prison.  Three other defendants had 
been previously convicted in the case. 
 
In August 2016, the owners of Bristol Laboratories LLC (Bristol) were each sentenced to 3 years 
in prison and ordered to pay $1.4 million in restitution, joint and several, for their guilty plea to 
charges of health care fraud and conspiracy to commit health care fraud.  From May 2009 to 
April 2012 the defendants conspired with an opioid addiction therapy doctor to bill medically 
unnecessary and excessive urine drug screen tests to federal and private health insurances.  The  
doctor directed all of his patients to be tested at Bristol.  The doctor died during the course of this 
investigation and was not charged. This was a joint investigation with the Virginia Medicaid 
Fraud Control Unit. 
 
Dietary Supplements 
In May 2016, a diet pill distributor was sentenced to 4 years and 2 months in federal prison for 
his scheme to sell illegal and mislabeled diet pills to victims throughout the United States, 
including Louisiana.  This distributor pled guilty to engaging in a conspiracy to distribute and 
possess with the intent to distribute sibutramine, and introducing misbranded drugs into interstate 
commerce.  This conduct was part of a multi-state scheme to illegally distribute diet pills 
containing sibutramine, a Schedule IV controlled substance, which were falsely labeled and 
marketed as all natural dietary supplements.  Sibutramine was the active pharmaceutical 
ingredient in Meridia, a prescription weight loss drug removed from the market in 2010 
following studies that showed significantly increased risk of strokes and heart attacks.  Since the 
removal of Meridia, no drug containing sibutramine has been approved for use in humans in the 
United States. 
 
Drug Companies 
 
In October 2015, Warner Chilcott U.S. Sales LLCa subsidiary of pharmaceutical manufacturer 
Warner Chilcott PLCpaid $91.5 million to settle civil FCA allegations that it violated the AKS 
by paying illegal remuneration, including payments for Medical Education Events and speaker 
programs to prescribing physicians to induce prescriptions for several of the companys 
drugs.  The government also alleged that Warner Chilcott caused the submission of false prior 
authorization requests for the osteoporosis drugs Atelvia and Actonel in order to circumvent 
coverage restrictions implemented by certain federal health care programs.  Warner Chilcott and 
several individuals affiliated with the company pled guilty to various criminal offenses relating 
to the alleged misconduct.  Under the terms of the companys plea agreement, Warner Chilcott 
pled guilty to a felony charge of health care fraud and paid a criminal fine of $22.9 million. 
 
In November 2015, Novartis Pharmaceuticals paid $286.8 million to settle civil federal FCA 
allegations of a kickback scheme involving marketing and selling an iron chelation drug known 
as Exjade and an anti-rejection drug for kidney transplants known as Myfortic.  The government 
alleged that Novartis paid kickbacks in the form of patient referrals and rebates to specialty 
 
  15  pharmacies, Bioscrip, Inc. and Accredo Health Group to induce those pharmacies to recommend 
Exjade refills while understating the drugs serious, potentially life-threatening side effects, and 
to recommend to doctors that they switch patients to Myfortic from competitor drugs.  This 
settlement is the third recovery in this kickback scheme following settlements with Bioscrip and 
Accredo for $56.7 million to resolve the same allegations.  In addition to the federal recovery, 
Novartis paid approximately $80 million to resolve state Medicaid liability.  Novartis also made 
a civil forfeiture payment of $20 million.   
 
In April 2016, drug manufacturers Wyeth and Pfizer, Inc. paid $413 million to settle civil federal 
FCA allegations that Wyeth underpaid rebates owed under the Medicaid Drug Rebate Program 
(MDRP) and caused the submission of false claims to the federal health care programs.  Pursuant 
to the MDRP, drug manufacturers must pay quarterly rebates to state Medicaid programs in 
exchange for Medicaids coverage of the manufacturers drugs.  The government alleged that 
Wyeth underpaid drug rebates for its proton pump inhibitor drugs, Protonix Oral and Protonix 
IV, by failing to disclose to the Medicaid program the best prices Wyeth had offered to 
thousands of hospitals under a contract that bundled the two drugs together.  Wyeth offered 
hospitals steep discounts on both Protonix Oral and Protonix IV with the expectation that 
patients would continue using Protonix Oral after they were discharged from the hospitals.  The 
United States alleged that by failing to account for these steep hospital discounts, Wyeth 
underestimated and underpaid the quarterly rebates it owed on those drugs to the state Medicaid 
programs.  Pfizer acquired Wyeth approximately three years after Wyeth ended the conduct that 
gave rise to this settlement.  In addition to the federal recovery, Wyeth paid $371.4 million to 
resolve its state Medicaid liability. 
 
In June 2016, Genentech, Inc. and OSI Pharmaceuticals, LLC paid $62.6 million to resolve civil 
FCA allegations that they caused the submission of false claims to the federal health care 
programs when making misleading statements to market and sell the drug Tarceva.  The FDA 
approved Tarceva to treat certain patients with non-small cell lung cancer or pancreatic cancer.  
The government alleged that Genentech and OSI Pharmaceuticals made misleading 
representations to physicians and other health care providers about the effectiveness of Tarceva 
to treat certain patients with non-small cell lung cancer, when there was little evidence to show 
that Tarceva was effective unless the patient also had never smoked or had a mutation in their 
epidermal growth factor receptor, a protein involved in the growth and spread of cancer cells.  
 
In June 2016, Salix Pharmaceuticals paid a total of $46.5 million to settle civil FCA allegations 
of a kickback scheme involving marketing and selling at least seven products used to treat 
various gastroenterology conditions.  The government alleged that Salix paid kickbacks to 
physicians to induce them to increase their prescriptions for the products.  The alleged 
remuneration paid to the physicians included substantial honoraria for speaker programs at high-
end restaurants during which little to no time was spent discussing the products with the same 
physicians attending multiple dinners with their spouses who were not health care professionals.  
 
Durable Medical Equipment (DME) 
 
In November 2015, a supplier of durable medical equipment in North Carolina was sentenced to 
3 years and 6 months in prison and ordered to pay $2.6 million in restitution for his guilty plea to 
health care fraud.  According to court documents, this individual submitted false claims to 
 
  16  Medicare for reimbursement of DME items that were allegedly provided to beneficiaries.  As 
part of the scheme, he set up sham DME companies and purchased lists of individually 
identifiable health information.  He used this information to submit false claims without the 
beneficiarys knowledge.  Through this scheme, he submitted more than $7 million in false 
claims for reimbursement from Medicare. 
 
(SF) In November 2015 an owner of a durable medical equipment company in Texas was 
sentenced to 5 years and 3 months in prison and ordered to pay $1.9 million in restitution after a 
jury found him guilty of health care fraud.  He owned and operated the DME companies 
Hermann Medical Supplies Inc. and Hermann Medical Supplies II (collectively Hermann 
Medical).  Through these companies, he submitted approximately $3.4 million in fraudulent 
DME claims to Medicare.  Specifically, the owner caused Hermann Medical to bill Medicare for 
components of an arthritis kit which included expensive, rigid braces and orthotics with 
adjustable joints that required fitting and adjustment.  However, in actuality, he never purchased 
any of the expensive braces and instead purchased and provided to beneficiaries inexpensive, 
flimsy neoprene braces and equipment, to the extent that he provided any equipment at all.  
Medicare paid Hermann Medical $1.9 million on these claims.  This was a joint investigation 
with the FBI and the Texas MFCU. 
 
In March 2016, Respironics, Inc. paid $34 million to resolve civil FCA allegations for paying 
kickbacks to DME suppliers to induce those suppliers to buy Respironics masks that treat sleep 
apnea.  The alleged remuneration or kickback was the provision of call-center and other related 
services to the DME companies to meet their patients resupply needs at no charge as long as the 
DMEs promoted and sold Respironic manufactured masks to their patients.  As a part of 
settlement, Respironics entered into a five-year Corporate Integrity Agreement with HHS-OIG. 
  
In April 2016, Hollister, Inc., an Illinois-based manufacturer of disposable health care products 
including products for ostomy and continence care, and Byram Healthcare Centers, Inc., a 
supplier of medical products, paid a total of $20.8 million to resolve civil FCA allegations that 
Hollister paid unlawful kickbacks to Byram with the intent to induce Byram to conduct 
promotional campaigns designed to refer patients to Hollisters products.  The alleged illegal 
kickbacks included bonus commissions paid directly to Byram sales employees for successfully 
referring patients to Hollisters products and money for catalogs that promoted Hollister 
products.  This settlement relates to a prior settlement with another manufacturer of these health 
care products, Coloplast Corp, and supplier of the products, Liberator Medical Supply, Inc., who 
collectively paid $1.2 million for similar conduct.  
 
(SF) In April 2016, the former president of a Salt Lake City durable medical equipment company 
was sentenced to 60 months of imprisonment followed by three years of supervised release after 
being convicted of three counts of conspiracy to commit health care fraud as a part of a Medicare 
fraud scheme.  The president was also co-owner of Orbit Medical, a Utah- and Indiana-based 
national supplier of durable medical equipment that specialized in power wheelchairs.  In order 
to induce Medicare into paying for their wheelchairs, Orbit sales representatives would create or 
alter medical charts and other documents, or forge physician signatures on prescriptions and 
chart notes.  They would then use these forged documents to support their fraudulent Medicare 
claims.  The former president paid $4 million in restitution, and he also must forfeit $776,001, 
the amount of his personal gain from the criminal conduct.   
 
  17   
Electronic Health Records 
In June 2016, the former owner and CEO of Nashville drug testing laboratory Prost-Data, Inc., or 
OURLab, OPKO Health, Inc., and OPKO Lab, LLC paid $9.4 million to settle civil FCA 
allegations that they contributed to the purchase of electronic health records (EHR) systems for 
client physician practices in exchange for referrals to their drug testing laboratories.  The 
contributions for the EHR systems did not conform to the Anti-Kickback Statute EHR safe 
harbor or the Stark EHR exception and constituted illegal kickbacks and physician remuneration.  
This settlement is significant because it sets the first precedent for abuse of the EHR safe harbor 
and Stark exception.   
 
In September 2016, an associate of the Traveling Vice Lords (TVL) street gang pleaded guilty to 
witness tampering for obtaining and disclosing private health information of Traveling Vice 
Lords shooting victims and victims family members to a member of the gang.  The defendant 
admitted that from May 8, 2015 through at least January 2016, he was employed at a medical 
facility where he had access to a private database that contained individually identifiable health 
information for anyone who had been treated at a Detroit Medical Center facility.  At the request 
of a TVL member and while employed at the medical facility, he accessed this database on at 
least 15 occasions to search for three TVL shooting victims.  The defendant then provided 
information, including dates of birth, phone numbers, addresses, and information pertaining to 
relatives of these individuals to the TVL.  He admitted that he knew the TVL member wanted 
this information to locate these individuals and prevent them from cooperating in the 
investigation and prosecution of the TVL shooting.  Sentencing is scheduled for January 2017. 
 
Health Maintenance Organization 
 
In January 2016, CenterLight Healthcare, Inc., which administers health care plans for residents 
in the New York City metropolitan area, paid $18.7 million to settle civil federal FCA 
allegations that it enrolled ineligible members in its Medicaid managed long-term care plan 
(MLTCP) who attended or were referred by social adult day care centers (SADCCs) and did not 
met the criteria of the plan.  The settlement resolved claims that CenterLight engaged in 
improper marketing practices to enroll over a thousand members through SADCCs and induced 
such members to use SADCCs as the members primary source of personal care services.  
CenterLight continued to seek and obtain monthly capitation payments for members well after 
the New York State Department of Health issued guidance in early 2013 explicitly stating that an 
individuals attendance at SADCCs does not satisfy the MLTCP eligibility standard.  In addition 
to the federal recovery, CenterLight paid $28.1 million to resolve state Medicaid liability.     
 
Home Health Providers 
 
In October 2015, Nurses Registry and Home Health Corporation of Lexington, Kentucky, and 
the estate of its former owner paid $16 million to resolve civil FCA allegations that they 
fraudulently billed Medicare for medically unnecessary home health services and services tainted 
by kickbacks provided by the company and former owner to local physicians and others who 
referred patients to Nurses Registry.  The government alleged that Nurses Registry falsified 
medical records and falsely certified patients to bill for medically unnecessary skilled nursing 
 
  18  and therapy services.  The government also alleged that Nurses Registry and its former owner 
provided remuneration to physicians and referral sources, such as athletic event and concert 
tickets and bottles of liquor, to induce referrals.  
 
In October 2015, three office managers each pleaded guilty to health care fraud conspiracy and 
were ordered to pay restitution of $5.9 million, joint and several.  One was also excluded from 
participation in federal health care programs for 15 years, and another was sentenced to   
1 year and 1 day in prison.  The defendants artificially increased demand for medical services by 
providing beneficiaries with free goods and services and submitting false claims to Medicare for 
medically unnecessary services.  The defendants created fake medical documents to conceal 
fraudulent claims submitted to Medicare that were induced by kickback, not medically 
necessary, and not provided.   
 
In October 2015, Deaconess Home Health, Inc. in Wisconsin and its owner paid $3.7 million to 
resolve their civil and criminal liability for submitting claims to Medicaid for personal care 
services that were not provided, were not provided pursuant to appropriate supervision, or were 
not medically necessary.  The settlement also resolved allegations that Deaconess paid patient 
recruiters for referrals for personal care services in violation of the AKS.  The investigation 
found that Deaconess paid patient recruiters for referrals of patients for personal care services.  
Both Deaconess and its owner agreed to a 15-year exclusion from federal health care programs. 
 
(SF) In December 2015, the owner of Advance Home Health Care Services, Inc. (Advance) was 
sentenced to 6 years and 8 months in prison and ordered to pay $4.5 million in restitution, joint 
and several, for his guilty plea to health care fraud conspiracy.  The owner admitted that he billed 
Medicare for unnecessary home health care and therapy services, paid physicians to refer 
Medicare beneficiaries to Advance and sign medical documents falsely certifying that they 
required home health care, and paid Medicare beneficiaries cash kickbacks in exchange for 
signing multiple blank physical therapy records.  Twelve defendants involved in the scheme 
were previously sentenced to a combined 37 years and 1 month in prison and ordered to pay   
$17 million restitution, joint and several. 
 
In January 2016, the lead doctor of Home Care Physicians Inc. was sentenced to 2 years 
imprisonment for fraudulently certifying patients as confined to the home which allowed 
healthcare agencies to bill Medicare for unnecessary in-home treatment.  Home Care is a 
Bloomingdale, Illinois company which provides home visits to patients in Illinois and which 
received most of its referrals from home-health nursing agencies.  To get and keep patients, the 
doctor falsely certified patients as confined to the home and needing nursing services even when 
he knew that many patients did not qualify for such services.  As part of his sentence the doctor 
was also ordered to pay $4 million in restitution. 
 
(SF) In March 2016, a federal jury in New Orleans convicted two defendants, a physician as well 
as the owner and operator of Christian Home Health Care, Inc., of conspiracy to commit health 
care fraud and health care fraud for their roles in a $33 million Medicare fraud scheme.  Between 
2007 and 2015, the company, Christian Home Health Care, Inc., submitted over 14,000 claims to 
Medicare, receiving over $28 million for these claims. In many cases, the defendants submitted 
claims for services that were either never provided, or not medically necessary. These same two 
defendants were later sentenced in October 2016 to 96 and 72 months in prison respectively. 
 
  19   
In March 2016, the former owner, operator, and sole shareholder of Recovery Home Care, Inc. 
and Recovery Home Care Services, Inc. (collectively, RHC) paid $1.8 million to resolve civil 
FCA allegations that he was responsible for RHCs payment of illegal kickbacks to physicians 
who in exchange agreed to refer Medicare patients to RHC for home health care services.  The 
former owner orchestrated a scheme paying dozens of physicians thousands of dollars per month 
to serve as sham medical directors purportedly performing quality reviews of RHC patient charts 
when, in fact, they did little to no work for these payments.   
 
In March 2016, the owner of Rosner Home Healthcare, an Illinois home-health nursing agency 
paid kickbacks to physicians and non-physicians for patient referrals was sentenced to 12 months 
and a day of imprisonment.  The court also ordered that he pay a forfeiture judgment of $2.26 
million which represented the proceeds of the kickback conspiracy.  Another doctor in the 
kickback conspiracy was sentenced in April 2016 to three years of probation, as well as a 
forfeiture judgment of $10,800 which represented the proceeds to him from the kickbacks.  Other 
defendants in the case pled guilty to kickback and/or health-care fraud charges, including nurses 
who admitted putting false information into nursing assessments.    
 
(SF) In April 2016, the co-owner and medical director of Merfi Corp. in Florida was sentenced to 
9 years in prison and ordered to pay $30.2 million in restitution for his guilty plea to conspiracy 
to commit health care fraud and conspiracy to defraud the United States, namely to receive 
health care kickbacks and make false statements regarding health care matters.  He admitted that 
in exchange for kickbacks and bribes, he and his co-conspirators ordered home health care and 
other services for Medicare beneficiaries that were not medically necessary and also falsified 
patient records to make it appear as if the beneficiaries qualified for these services.  The co-
owner of Merfi Corp. was previously sentenced to 9 years in prison and ordered to pay   
$8.4 million in restitution, joint and several.          
 
In June 2016, the owners of Global Home Health Healthcare Inc. in Washington, D.C. were 
sentenced to prison terms for health care fraud, money laundering, and other charges stemming 
from a scheme in which two owners of a home health care businesses and others defrauded the 
District of Columbias Medicaid program of over $80 million.  The owners of Global Healthcare 
Inc. were a former nurse and her husband.  According to the governments evidence, the former 
nurse was not entitled to take part in the Medicaid program and fraudulently got approval to 
become a provider.  She and her owner husband led a scheme to bill Medicaid for services that 
were not fully providedrecruiting others, including family members, into the scam and 
creating fraudulent paperwork to hide the illegal activity.  At trial the nurse owner was found 
guilty of 12 health care related charges and she was sentenced to 10 years in prison.  The 
husband owner was also found guilty at trial of ten health care fraud related charges was 
sentenced to 7 years in prison.  Following their prison terms, they will be placed on three years 
of supervised release.  The defendants were ordered to pay $80.6 million in restitution to D.C. 
Medicaid.  They were also ordered to forfeit over $11 million seized from 76 bank accounts; 
their residence, worth approximately $1 million; $73,000 in cash seized from their residence, and 
five luxury vehicles with a total purchase price of more than $400,000.  The court also imposed a 
forfeiture money judgment of nearly $40 million on both defendants.   
 
 
  20  (SF) In August 2016, the owner of a HHA pleaded guilty to conspiracy to commit health care 
fraud for her involvement in a scheme to submit claims to Medicare for home health services that 
were medically unnecessary and/or induced by kickbacks. In furtherance of the scheme, the 
defendant recycled and reused Medicare information she had obtained via kickbacks.  The 
defendant obtained more than $1.9 million in proceeds from the fraud.   
 
(SF) In August 2016, the owner and manager of three Miami-area HHAs was sentenced to 20 
years in prison and ordered to pay $36.4 million in restitution, joint and several.  The 
owner/manager was convicted of conspiracy to commit health care fraud and wire fraud and 
conspiracy to defraud the United States and pay health care kickbacks for his role in a  
$57 million Medicare fraud scheme.  According to evidence presented at trial, from 
approximately 2006 to 2013, he and his co-conspirators purported to provide home health 
services to Medicare beneficiaries, which were not medically necessary and often were never  
provided.  They paid kickbacks to doctors, patient recruiters and staffing groups, which, in 
exchange, referred beneficiaries to his home health agencies.  
 
Hospice Care 
 
In December 2015, the owner of Sandanna Hospice, Inc., Milestone Hospice, Inc., and Carols 
Hospice & Palliative Services of Shelby, Mississippi, was sentenced to 3 years in prison and 
ordered to pay $1.1 million in restitution for her guilty plea to conspiracy to commit health care 
fraud.  The owner admitted to her involvement in a conspiracy to bill Medicare and Medicaid for 
hospice services for patients who were not terminally ill.  She paid recruiters upwards of $800 
per patient and paid cash kickbacks to the hospice medical director for him to sign hospice orders 
for patients that he knew were not hospice appropriate.  A billing clerk at Sandanna and 
Milestone was also sentenced to 1 year and 1 month of incarceration and ordered to pay more 
than $1 million in restitution, joint and several, after pleading guilty to conspiracy to commit 
health care fraud.  This case was initiated based on fraud tips provided to the HHS-OIG Hotline. 
 
In March 2016, in the Eastern District of Pennsylvania, a nurse who authorized and supervised 
the admission of inappropriate and ineligible patients for hospice services at Home Care 
Hospice, Inc. (HCH) was sentenced to over one year in prison, three years supervised release and 
over $230,000 in restitution.  In April 2016, HCH also agreed to pay $8 million to settle claims 
for falsely billing Medicare for hospice services.  HCH billed for services their nurses and health 
aides provided to hospice patients who resided at nursing homes, hospitals, and private 
residences but who did not meet the Medicare criteria for hospice care.  In addition to restitution 
and the settlement agreement, approximately $11 million worth of assets belonging to the 
defendant were seized by the government pursuant to an injunction. 
 
In June 2016, the owner of California Hospice Care (CHC), based in Covina, California was 
sentenced to 8 years in prison for defrauding Medicare and Medicaid.  The owner of CHC and 
her daughter paid marketers to recruit Medicare and Medicaid beneficiaries, which CHC then 
falsely assessed as being terminally ill and in need of hospice services.  Between March 2009 
and June 2013, CHC submitted approximately $8.8 million in fraudulent claims for those 
hospice services, for which Medicare and Medicaid paid nearly $7.4 million to CHC.  Two of 
CHCs doctors were convicted following a jury trial in May 2016 for their role in falsely 
certifying that the beneficiaries suffered from a terminal illness.  Of the defendants who have 
 
  21  been sentenced one received four years for his conduct and will be required to pay more than 
$1.3 million in restitution, the owner, who previously pleaded guilty, received an eight-year 
sentence and was ordered to pay more than $7.4 million in restitution.   
 
In July 2016, Evercare Hospice and Palliative Care, a Minnesota based provider, paid   
$18 million to resolve civil FCA allegations that it admitted and recertified patients for hospice 
care who were not eligible for such care because they were not terminally ill.  The government 
alleged that Evercares business practices, which included discouraging physicians from 
recommending that ineligible patients be discharged from hospice, were designed to maximize 
the number of patients for whom it could bill Medicare without regard to whether the patients 
were eligible for and needed hospice.  This is one of the largest hospice settlements to date. 
 
Hospitals and Health Systems 
 
In October 2015, Tuomey Healthcare Systema single-hospital system based in Sumter, South 
Carolinapaid $72.4 million to resolve a civil FCA judgment entered against it for illegally 
billing the Medicare program for services referred by physicians with whom the hospital had 
improper financial relationships.  During a month-long trial that concluded in May 2013, the 
government presented evidence that Tuomey entered into contracts with 19 specialist physicians 
that required the physicians to refer their outpatient procedures to Tuomey and, in exchange, paid 
them compensation that far exceeded fair market value and took into account part of the money 
Tuomey received from Medicare for the referred procedures.  The jury determined that the 
contracts violated the Stark Law and the False Claims Act, and the trial court entered judgment 
for more than $237 million in treble damages and penalties.  In July 2015, the United States 
Court of Appeals for the Fourth Circuit affirmed the judgment.  Tuomey was recently sold to 
Palmetto Health, a multi-hospital health care system based in Columbia, South Carolina.  In 
September, 2016, Tuomeys former chief executive officer paid $1 million and accepted a four-
year exclusion from participation in federal health care programs to resolve civil and 
administrative allegations arising from his involvement in Tuomeys misconduct.  As a part of 
settlement, Toumey also entered into a five-year Corporate Integrity Agreement with HHS-OIG. 
 
In December 2015, 32 hospitals located in 15 states paid more than $28 million to resolve civil 
FCA allegations regarding kyphoplasty procedures.  Kyphoplasty is a minimally-invasive 
procedure used to treat spinal compression fractures, and the procedure can often be performed 
safely and effectively on an outpatient basis.  These settlements resolve allegations that hospitals 
frequently billed for kyphoplasty procedures on a more costly inpatient basis to increase their 
Medicare billings.  To date, the Department has resolved allegations of improper kyphoplasty 
billing with more than 140 hospitals, recovering approximately $107 million.   
                                                                             
In December 2015, Memorial Health, Inc., Memorial Health University Medical Center, Inc., 
Provident Health Services, Inc., and Memorial Health University Physiciansregional practices 
in Southern Georgiapaid nearly $10 million to settle civil FCA allegations that they engaged in 
improper financial relationships with referring physicians that violated the Stark Law.  The 
settlement resolved allegations that these parties executed arrangements that were not 
commercially reasonable or for fair market value with the intent to induce patient referrals.  As a 
part of settlement, Memorial Health also entered into a five-year Corporate Integrity Agreement 
with HHS-OIG. 
 
  22   
In February 2016, 51 hospitals located in fifteen states paid more than $23 million to resolve 
civil FCA allegations regarding cardiac devices that were implanted in Medicare patients in 
violation of Medicare coverage requirements.  The government alleged that hospitals were 
implanting these cardiac devicesalso known as implantable cardioverter defibrillators
without regard to National Coverage Determination (NCD) that required a medically justified 
waiting period before implantation for patients who had recently suffered a heart attack, had 
heart bypass surgery, or had an angioplasty.  Hospitals were implanting these cardiac devices 
during the periods prohibited by the NCD.  These settlements represent the final stage of a 
nationwide investigation that has yielded settlements with more than 500 hospitals totaling more 
than $280 million.  As a part of settlement, two of the hospitals entered into five-year Corporate 
Integrity Agreements with HHS-OIG. 
 
In July 2016, Lexington County Health Services District, Inc. d/b/a Lexington Medical Center 
(LMC), in South Carolina agreed to pay $17 million to resolve its liability under the FCA.  LMC 
operates the Lexington Medical Center hospital and associated office-based clinics.  The 
Government alleged that LMC had compensation arrangements within the meaning of the Stark 
law in the form of asset purchase arrangements and employment arrangements with certain 
physicians that did not satisfy all the requirements of any applicable exception to Starks referral 
and billing prohibition.  These problematic arrangements led LMC to submit fraudulent claims to 
Medicare for designated health services referred by these physicians in violation of the FCA.  As 
a part of settlement, LMC entered into a five-year Corporate Integrity Agreement with HHS-
OIG. 
 
(SF) In September 2016, Tenet Healthcare Corporation and four of its hospitals agreed to pay 
approximately $390 million to resolve criminal charges and civil federal FCA claims relating to 
a scheme to pay kickbacks in return for patient referrals.  This amount includes approximately 
$145.7 million that two of its Atlanta-area hospitalsAtlanta Medical Center, Inc. and North 
Fulton Medical Center, Inc.agreed to forfeit in connection with a criminal plea.  The 
government alleged that Tenet and its affiliated hospitals paid kickbacks to obstetric clinics 
serving primarily undocumented Hispanic women in return for referral of those patients for labor 
and delivery at Tenet hospitals.  In addition to the federal recovery, Tenet paid approximately 
$123.7 million to resolve state Medicaid liability.  As a part of settlement, Tenet agreed to three-
year Independent Compliance Monitor Agreement. 
 
In September 2016, Vibra Healthcare LLCa national hospital chain headquartered in 
Mechanicsburg, Pennsylvaniapaid $27.6 million to resolve civil FCA allegations that it billed 
Medicare for medically unnecessary services.  Vibra operates numerous freestanding long term 
care hospitals (LTCHs) and inpatient rehabilitation facilities (IRFs).  The government alleged 
that Vibra admitted and retained patients in its LTCHs and IRFs without regard to medical 
necessity or qualification for those services.  In some instances, Vibra allegedly ignored the 
recommendations of its own clinicians to discharge patients.  As a part of settlement, Vibra 
entered into a five-year Corporate Integrity Agreement with HHS-OIG.  
 
Identity Theft 
 
 
  23  In October 2015, a registered nurse in Ohio was sentenced to nearly 8 years in prison and 
ordered to pay $18.1 million in restitution for her guilty plea to health care fraud and aggravated 
identity theft.  The nurse, whose nursing license lapsed in 2005, was excluded in April 2005 after 
being convicted of Medicaid fraud.  During the entire time the nurse was excluded and 
unlicensed, she owned Heritage Home Health Agency where she provided nursing services to 
home-bound clients.  She used the identity of another nurse with the same name to hide the fact 
that she was unlicensed.  Heritage billed Medicaid exclusively and received more than   
$20 million in reimbursement.  The nurses mother was part owner and office manager of 
Heritage and created false background check reports for Heritage employees who were 
disqualified from working as home health aides due to their felony criminal convictions.  The 
mother was also convicted of health care fraud and sentenced to five years supervised release, 
300 hours of community service, and ordered to pay $434,747 in restitution for her guilty plea to 
health care fraud. 
 
Laboratories 
In October 2015, Millennium Health, LLC (Millennium)formerly Millennium Laboratories of 
San Diego, Californiapaid $205.6 million to resolve civil FCA allegations that it billed federal 
health care programs for medically unnecessary urine drug testing and genetic testing, and paid 
physicians kickbacks in exchange for referrals for those tests.  Millennium allegedly caused 
physicians to order unnecessary urine drug tests (in some instances, dozens per patient) and 
unnecessary genetic testing without an individualized assessment of each patients needs for 
those tests.  To further propagate its urine drug testing scheme, Millennium allegedly provided 
free urine drug test cups to physicians, expressly conditioned on the physicians agreement to 
return the urine specimens to Millennium for additional testing.  Under a separate settlement 
agreement, Millennium paid $19.2 million to CMS to resolve certain administrative actions 
related to Millenniums urine drug test billing practices.  As a part of settlement, Millennium 
Health entered into a comprehensive five-year Corporate Integrity Agreement with HHS-OIG 
wherein Millennium agreed to make extensive changes to its business practices. 
    
In December 2015, Pharmasan Labs, Inc., NeuroScience, Inc., and its former owners paid                   
$5.7 million and forfeited another $2.9 million to resolve civil FCA allegations that they 
submitted false information for laboratory services billed to Medicare and billed for services 
referred by non-physician practitioners when such referrals are non-billable.  The government 
alleged that Pharmasan, located in Osceola, Wisconsin, billed Medicare for food sensitivity 
testing that was otherwise not reimbursable but for Pharmasan creating false records about the 
type of test ordered.  As a part of settlement, Pharmasan entered into a five-year Corporate 
Integrity Agreement with HHS-OIG. 
 
In January 2016, the former owner and chief executive officer of Bostwick Laboratoriesa 
pathology laboratory headquartered in Glen Allen, Virginiaagreed to pay approximately   
$3.7 million to resolve civil FCA allegations that he knowingly caused Bostwick Laboratories to 
bill the federal health care programs for medically unnecessary cancer detection tests and offered 
incentives to physicians to induce referrals in violation of the AKS.  
 
In August 2016, the two owners and operators of Biosound Medical Services Inc. and Heart 
Solutions (collectively, Biosound), of Parsippany, New Jersey, were sentenced to 100 and 78 
 
  24  months respectively in prison for health care fraud.  In July 2016 they were also ordered to pay 
the United States $5 million in damages and $2.8 million in civil monetary penalties.  Biosound 
provided mobile diagnostic testing, including ultrasounds, echocardiograms and nerve 
conduction studies that were used to diagnose heart defects, blood clots, abdominal aortic 
aneurysms and other serious medical conditions.  One owner admitted to fraudulently 
interpreting and writing diagnostic reports produced by Biosound despite having no medical 
license and knowing that the reports would be used by the referring physicians to make 
important patient treatment decisions.  The other owner admitted to assisting in forging physician 
signatures on the fraudulently produced reports to make them appear legitimate.  Both owners 
admitted to falsely representing to Medicare that the neurological testing performed by Biosound 
was being supervised by a licensed neurologist.  
 
In June 2016, the owner of Owings Mills, Maryland-based Alpha Diagnostics, LLC, was 
sentenced to 10 years imprisonment followed by 2 years of supervised release for health care 
fraud and wire fraud conspiracy, among other conduct, related to a scheme to defraud Medicare 
and Medicaid of more than $7.5 million.  Alpha Diagnostics was a portable diagnostic service 
provider, principally of X-rays for patients that resided in nursing homes.  Based upon the 
evidence presented at trial, the jury found that the owner instructed his non-physician employees 
to interpret X-rays, ultrasounds, and cardiologic examinations and report their findings as if they 
were read by a licensed radiologist.  In fact, no licensed radiologist ordered or interpreted the 
films.  The jury also found that two of the reports were wrongfully interpreted by the non-
physician employees resulting in the deaths of two patients.   
 
Nursing Homes and Facilities 
 
In January 2016, contract therapy providers RehabCare Group, Inc., RehabCare Group East, Inc., 
and their parent, Kindred Healthcare, Inc., paid a total of $125 million to resolve civil FCA 
allegations that they caused the submission of false claims to Medicare for rehabilitation services 
that were not reasonable, necessary, or that never occurred.  RehabCare is the largest provider of 
therapy in the nation, contracting with more than 1,000 skilled nursing facilities (SNFs) in 44 
states to provide rehabilitation therapy to their patients.  The government alleged that 
RehabCares policies and practices set unrealistic financial goals and routinely scheduled 
unreasonably high levels of therapy irrespective of the clinical need of the patient.  The 
government further alleged that RehabCare billed for skilled therapy that was not provided to 
patients because the patients were asleep or otherwise unable to undergo or benefit from the 
skilled therapy.  This settlement relates to numerous other settlements with skilled nursing 
facilities that frequently billed Medicare for this unnecessary therapy and failed to prevent 
RehabCares fraudulent practice.  As a part of settlement, RehabCare entered into a five-year 
Corporate Integrity Agreement with HHS-OIG. 
 
In June 2016, California-based Five Star Quality Care-CA, LLC d/b/a Lancaster Healthcare 
Center agreed to pay $8.6 million to resolve its liability under the CMPL for conduct it disclosed 
to HHS-OIG. Specifically, HHS-OIG alleged that, that during the period of January 2010 
through July 2014, it submitted claims for skilled nursing services without proper certifications 
and recertifications for services, establishment and content of therapy plans, and/or maintenance 
of clinical records, and that during the period of September 2014 through December 2014, it paid 
remuneration to a medical director for referrals. 
 
  25   
(SF) In July 2016, three defendants were charged in a complex scheme involving the owners of 
nursing homes and assisted living facilities, physicians, Miami-based hospitals, and Miami-area 
health care providers.  The lead defendant, who operated a network of skilled nursing homes and 
assisted living facilities, gained access to thousands of Medicare and Medicaid beneficiaries 
through the payment of kickbacks and bribes, and used this access to bill Medicare for medically 
unnecessary services.  The defendants and their co-conspirators, in turn, received kickbacks from 
other health care providers to allow those providers to bill for medically unnecessary services for 
these same beneficiaries, many of whom did not need or want the services.  During the course of 
the scheme, the defendants and their co-conspirators submitted over $1 billion in false and 
fraudulent claims to the Medicare and Medicaid programs. To date, this is the Department of 
Justices largest single criminal health care fraud case against individuals; trial is scheduled to 
commence in September 2017. 
 
In September 2016, North American Health Care, Inc. (NAHC), its board chairman, and its 
senior vice president paid $30 million to resolve civil FCA allegations that they caused the 
submission of false claims to the federal health care programs for medically unnecessary 
rehabilitation therapy services provided to residents at NAHCs skilled nursing facilities.  NAHC 
is a private, for-profit company headquartered in Orange County, California and operates 35 
SNFs, mostly in California.  The government alleged that its executives helped create and 
reinforce the fraudulent billing scheme.  As a part of settlement, NAHC entered into a five-year 
Corporate Integrity Agreement with HHS-OIG. 
 
Pharmacies 
 
In October 2015, the CEO of Kentwood Pharmacy was sentenced to 10 years in prison, ordered 
to pay $8.8 million in restitution, joint and several, and banned from participation in federal 
health care programs for 50 years for his guilty plea to conspiracy to commit health care fraud.  
According to the investigation, Kentwood Pharmacy of Grand Rapids, Michigan billed Medicare 
and private health insurers for prescription drugs that had been dispensed to patients and 
subsequently inappropriately returned to pharmacy stock.  During the course of the investigation, 
pornographic images were discovered on the computer of Kentwood Pharmacys vice president 
of sales.  He was convicted of child pornography as well as health care fraud and sentenced to   
14 years in prison and ordered to pay $8.8 million in restitution, joint and several.  Sixteen 
defendants involved in the scheme were previously sentenced to a combined 22 years in prison 
and were excluded from participation in Federal health care programs for a combined 145 years.  
This case was initiated based upon fraud tips provided to the HHS OIG Hotline.   
 
(SF) In December 2015, nine defendants were sentenced to more than 29 years in prison and 
ordered to pay a combined $22.1 million in restitution for their roles in a scheme to defraud 
Medicare.  According to court records, five of the defendants were the owners of eight 
pharmacies that submitted more than $20 million in fraudulent claims to Medicare.  The false 
claims included prescriptions for drugs that were not properly prescribed or provided to the 
beneficiaries.  The other defendants were involved in schemes in which millions of dollars in 
fraudulent claims were submitted to Medicare.  These conspiracies were accomplished in part by 
the use of patient recruiters who received kickbacks in return for referring Medicare Part D 
beneficiaries to the pharmacies. 
 
  26   
In May 2016, the owner of a Florida pharmacy and a patient recruiter pled guilty to conspiracy to 
commit health care fraud for their part in a scheme to defraud Medicare. The two were sentenced 
to a total of 6 years and 6 months in prison, and ordered to pay $5.9 million in restitution, joint 
and several.  From November 2012 through February 2015, the owner and her husband owned 
and operated three pharmacies in Miami.  They and others committed fraud by paying kickbacks 
to patients and recruiters, and for billing Medicare for medications not delivered to Medicare 
beneficiaries.  The patient recruiter also received compensation for recruiting patients to obtain 
pharmaceutical drugs at the pharmacies. The patient recruiter pled guilty and is awaiting 
sentencing. 
 
In June 2016, the president and owner and operator of Pharmalogical, Inc. (Pharmalogical) d/b/a 
Medical Device King and MDK, and Taranis Medical Corp. (Taranis), was sentenced to   
5 years of imprisonment and ordered to forfeit to the government close to $900,000 in criminal 
proceeds, for 64 felony counts of mail and wire fraud, and violations of the Federal Food Drug 
and Cosmetic Act (FFDCA).  A six-week trial established the presidents leadership role in a 
long-running scheme to sell misbranded and unapproved pharmaceutical products, including 
chemotherapy drugs for infusion into Stage 4 cancer patients, to medical providers across the 
United States.  Many of the products sold did not have FDA-required warnings of potentially 
deadly side effects.  The president would execute bait-and-switch transactions with doctors by 
advertising FDA-approved products on his website but then sending them misbranded and 
unapproved products.  These drugs were infused into patients, including cancer patients and 
patients with Crohns disease. He continued to sell these drugs well after his office was searched 
by FDA agents and all of his existing products were seized.  To conceal the continued sales, he 
covertly set up a new company, Taranis, which he operated without a license and out of a storage 
space where he kept the drugs.  As a result many of the doctors that were knowingly purchasing 
unapproved or misbranded drugs under this scheme are being pursued for perpetrating a fraud on 
government healthcare programs.      
   
Physical Therapy 
 
(SF) In October 2015, an owner of two Brooklyn-area clinics, pleaded guilty to conspiracy to 
commit health care fraud and conspiracy to commit money laundering in connection with a 
scheme to submit false claims to Medicare and Medicaid for, among other things, fraudulent 
physical and occupational therapy services purportedly provided.  From approximately February 
2008 through February 2011, the defendant and others executed a scheme in which patients were 
paid cash kickbacks to present themselves for treatment at the defendants clinics. The patients 
received medically unnecessary services that were later falsely billed to Medicare and Medicaid 
as genuine physical and occupational therapy treatments. In total, fraudulent claims totaling over 
$55 million were submitted to Medicare and Medicaid in connection with the scheme, and the 
programs paid out over $29 million in reimbursement of those claims. 
 
Physician and Other Practitioners 
 
In December 2015 a Westlake, Ohio cardiologist was sentenced to 20 years in prison for 
overbilling Medicare and private insurers for unnecessary catheterizations, tests, stent insertions 
and causing unnecessary coronary artery bypass surgeries.   He performed medically 
 
  27  unnecessary nuclear stress tests and inserted cardiac stents in patients who did not have 70 
percent blockage or any blockage in their cardiac vessel. He also placed a stent in an already 
stenosed artery which not only failed to provide any medical benefit but also increased the risk of 
harm to the patient.  As a result of this scheme, the cardiologist caused Medicare to be overbilled 
in the amount of approximately $29 million, and Medicare and the private insurers paid him 
approximately $5.7 million. 
 
(SF) In February 2016 and April 2016, respectively, a biller and a licensed physician pled guilty 
for their roles in an $11 million Medicare fraud scheme involving a home visiting physician 
practice.  Previously, the practices owner, a licensed physician, was sentenced to 6 years 
imprisonment for his role in the fraud.  The practices office manager and an unlicensed 
physician who worked for the practice also pled guilty and are awaiting sentencing.  According 
to court documents, the visiting physician practice employed unlicensed individuals who held 
themselves out as licensed physicians and visited beneficiaries in their homes and purported to 
provide physicians services. The unlicensed individuals completed, but did not sign, medical 
forms documenting the purported services.  Licensed physicians, including the practices owner, 
signed the forms as if they provided the care when, in fact, they did not treat or even see the 
beneficiaries.  The practice then fraudulently billed the services to Medicare as if they were 
performed by licensed physicians. 
 
In March 2016, a general practitioner with a clinic in Quebradillas, Puerto Rico, was sentenced 
to 10 years imprisonment and a term of supervised release of 5 years after being found guilty by 
a jury of 21 conspiracies and 61 individual counts of mail fraud relating to health care fraud.   
The doctor was charged along with 35 patients for orchestrating a large-scale scheme where he 
fraudulently signed American Family Life Assurance Company (AFLAC) accidental insurance 
claim forms without examining the patients.  The evidence presented at trial showed that the 
doctor caused a loss to AFLAC in excess of $6 million.  The three-week trial included the 
testimony of three of the doctors employees and four patients who indicated that the doctor 
personally instructed them to submit the documents for his signature without examination.  The 
evidence also showed that the scheme had grown so large and lucrative that the doctor had to 
hire two employees to do data entry full time in order to generate the thousands of AFLAC claim 
forms submitted for reimbursement under his signature.  The 35 patients involved in the scheme 
were charged alongside and pled guilty prior to the doctors trial.  The doctor was also ordered to 
pay $2.1 million in restitution to AFLAC of Columbus, Georgia. 
 
(SF) In April 2016, a licensed physician pleaded guilty to health care fraud, admitting that he 
submitted false claims to Medicare for purported visits with Medicare beneficiaries, including on 
dates when he was out of the country, for beneficiaries who were deceased on the dates he 
purportedly treated them, and for services totaling more than 24 hours in one day.  He agreed 
that he submitted approximately $2.4 million in fraudulent claims to Medicare for which he was 
paid approximately $1.2 million. 
 
In April 2016, a Roseville, California podiatrist was sentenced to three years in prison and 
ordered to pay a $10,000 fine for one count of health care fraud and he was also ordered to pay 
restitution in the amount of $1.2 million.  Between 2009 and 2014, this podiatrist submitted over 
$2.8 million in fraudulent claims for reimbursement to Medicare, Medicaid, TRICARE and 
private insurers.  He falsely claimed that he performed more expensive procedures than he 
 
  28  actually performed or that the routine foot care was justified because of illnesses or symptoms 
that were not present.  To satisfy the restitution order, $1.2 million from the podiatrists 
retirement account was forfeited.    
 
In May 2016, in the Western District of Kentucky, a doctor was sentenced to 8 years and 4 
months for conspiracy to unlawfully distribute controlled substances, among other conduct.  The 
doctor operated pain management clinics in both Louisville, Kentucky and Jeffersonville, 
Indiana where he unlawfully distributed Schedule III controlled substances.  He saw more than 
100 patients on various dates, by himself, spending approximately three minutes or less with 
each patient but falsely and fraudulently billed various health care benefit programs by 
submitting claims for office visits at a higher code than the service provided. The doctor also 
illegally billed group sessions as individual counseling, and upcoded for numerous services.  As 
part of his sentence the doctor was also ordered to pay $827,000 in restitution to various health 
care benefit programs, pay $20,000 to DEA for investigative costs, ordered to forfeit his medical 
license and a building.    
 
In June 2016, the University of Missouri-Columbia paid the United States $2.2 million to settle 
allegations that it violated the civil FCA by submitting claims for radiology services to federal 
health care programs.  The United States alleged that certain attending physicians certified that 
they had reviewed the images associated with interpretative reports prepared by resident 
physicians when, in fact, they had not reviewed those images.  As a part of settlement, the 
University of Missouri-Columbia entered into a five-year Corporate Integrity Agreement with 
HHS-OIG. 
 
(SF) In July 2016, following a three-week trial in the Eastern District of New York, a physician 
was convicted of one count of health care fraud, three counts of making false statements in 
connection with health care matters, and two counts of money laundering.  The evidence at trial 
showed that the defendant, a general surgeon, billed the Medicare program for thousands of 
wound-debridement and incision-and-drainage surgical procedures that he did not in fact 
perform.  The defendant billed Medicare over $7 million and was paid well over $3 million in 
reimbursement by Medicare in the three year period 2011 through 2013 for claims that were 
shown at trial to be fraudulent. 
 
In August 2016, a pediatric dentist who operates two dental practices in Connecticut was alleged 
to have violated the FCA.  The allegations arise out of the taking of pediatric dental x-rays.  
Under Connecticut law, a licensed dentist may delegate to dental assistants the taking of dental 
x-rays if the dental assistant can demonstrate successful completion of the dental radiography 
portion of an examination prescribed by the Dental Assisting National Board (DANB).  The 
certification provided by the DANB examination is important to ensure dental assistants are 
appropriately trained in the use of x-ray procedures and to ensure the x-rays are performed 
safely.  The Governments investigation found that the majority of x-rays taken at the dental 
clinics were taken by dental assistants who were not DANB certified.  X-rays taken by 
uncertified dental assistants are not payable by the Medicaid program.  To resolve the allegations 
under the federal and state False Claims Acts, the dentist and his clinics paid $1.4 million.  As a 
part of settlement, the dentist and his two dental practices entered into a three-year Integrity 
Agreement with HHS-OIG. 
 
 
  29     
 
  30  Prescription Drugs / Medicare Part D 
In January 2016, in the first case of its kind in the nation, in the Central District of California a 
total of 16 defendants at Manor Medical Clinic were convicted in a $20-million scheme to 
defraud Medicare and Medicaid by filing fraudulent claims for expensive anti-psychotic 
medications.  As a part of the scheme, a doctor pre-signed thousands of prescriptions for those 
anti-psychotic medications.  Other employees at Manor Medical in Glendale, California, then 
used the prescriptions to submit claims for medications by using the names of victims of identity 
theft.  These victims were often elderly Vietnamese beneficiaries, military veterans recruited 
from drug rehab programs, and homeless individuals living on Los Angeles Skid Row.  Once 
the prescriptions were filled, the drugs were often sold on the black market and redistributed to 
pharmacies, where they were subject to new claims to Medicare and Medicaid.  The doctor 
received a 9-year sentence.  The owners of Manor Medical were also sentenced and, one owner 
received a 15-year sentence.  Fifteen defendants involved in the scheme were previously 
sentenced to a combined 46 years and 3 months in prison.  Those convicted were ordered to pay 
$9 million in restitution to Medicare and Medicaid. 
 
(SF) In March 2016, five defendantsincluding the owners of several Detroit-area home health 
and hospice companies and two physicianspleaded guilty to conspiracy to commit health care 
fraud and wire fraud charged in a June 2015 Indictment.  As part of the fraudulent scheme, 
defendants paid numerous physicians for beneficiary referrals to their home health companies, 
the largest of which was At Home Network.  These kickbacks took multiple forms, including 
cash payments, checks for purported medical director services, and checks for purported rent.  In 
the case of a co-defendant, the kickbacks also included free labor and the purchase of a Mercedes 
Benz.  A co-defendant physician would receive illegal kickbacks, and in exchange, bribe his 
patients to accept services from At Home Network by providing them with medically 
unnecessary controlled substance prescriptions, which were billed to Medicare Part D.  The 
associated companies were paid over $33 million by Medicare for purported home health and 
hospice services many of which were induced by kickbacks, medically unnecessary and/or not 
provided. 
 
(SF) In August 2016, mother-and-son co-owners of Miami-area pharmacies each pleaded guilty 
to charges of conspiracy to commit health care fraud in connection with an approximately $14 
million scheme that exploited Part D of the Medicare Program.  The defendants pharmacies 
engaged in massive overbilling fraud by submitting claims for millions of dollars' worth of 
medications that they never ordered.   
 
Psychiatric and Psychological Testing and Services 
 
In November 2015, the owner, director, and administrator of Greater Miami Behavioral 
Healthcare Center (GMBC), was sentenced to 16 years in prison and ordered to pay more than 
$15.2 million in restitution after pleading guilty to conspiracy to commit health care and wire 
fraud.  The owner and another defendant devised a scheme to pay kickbacks and bribes to patient 
brokers in return for referring Medicare beneficiaries and falsifying medical records to support 
claims for services that were never provided.  GMBCs director of finance was sentenced to 8 
years and 1 month in prison after pleading guilty to conspiracy to commit money laundering.  
The director of finance and other defendants devised a scheme to conduct financial transactions 
 
  31  in order to conceal the payment of kickbacks to patient brokers.  Two other defendants involved 
in the scheme were previously sentenced to a combined 6 years and 4 months in prison and 
ordered to pay $848,106 in restitution. 
 
(SF) In January 2016, a jury in the Southern District of Florida convicted the president of a 
transportation company for his role in a scheme to defraud Medicare effectuated through several 
Miami-area mental health centers. The evidence showed that the defendant and his co-
conspirators used the transportation company to coordinate the payment of illegal health care 
kickbacks to recruiters, who in return referred Medicare beneficiaries to three now-defunct 
mental health clinics, which purported to provide mental health services to these beneficiaries, 
though the beneficiaries did not qualify or receive the services, and were themselves receiving 
kickbacks.  Between January 2008 and December 2010, the centers submitted approximately   
$70 million in false and fraudulent claims to Medicare and were paid approximately $28 million 
on those claims.  In March 2016, the defendant was sentenced to a 5 year prison term.  
 
In April 2016, a psychiatrist at Riverside General Hospital (Riverside) in Texas was sentenced to 
12 years in prison and ordered to pay $6.3 million in restitution.  A jury convicted the 
psychiatrist of conspiracy to commit health care fraud, health care fraud, and making false 
statements relating to health care matters.  According to evidence presented at trial, from 2006 
until 2012 the psychiatrist and others engaged in a scheme to defraud Medicare by submitting 
through Riverside approximately $158 million in false claims for partial hospitalization program 
(PHP) services, an intensive outpatient treatment for severe mental illness. Beneficiaries for 
whom Riverside billed Medicare did not receive PHP services; in fact, beneficiaries rarely saw a 
psychiatrist and did not receive intensive psychiatric treatment at all.  Six defendants involved in 
the scheme were previously sentenced to a combined 120 years in prison and ordered to pay 
$46.7 million in restitution, joint and several.  Six additional defendants pled guilty or were 
found guilty and are awaiting sentencing. 
 
(SF) In September 2016, two clinical psychologists pled guilty in the Eastern District of 
Louisiana to conspiracy to commit health care fraud, and conspiracy to submit false statements.  
The defendants and their co-conspirators carried out the scheme by contracting with nursing 
homes to give their companys psychologists access to nursing home residents, some of whom 
were incapacitated.  The psychologists then billed for services that were not needed and were not 
provided, often billing for the work of unlicensed assistants as if it were rendered by licensed 
clinical psychologists.  In over a little more than five years, the defendants billed Medicare for 
more than $26.2 million in psychological testing and related services, the vast majority of which 
were fraudulent.    
 
Quality of Care 
 
In March 2016, 21st Century Oncology, Inc., the largest physician led integrated cancer care 
provider in the country, paid $34.7 million to resolve civil FCA allegations that it billed 
Medicare and TRICARE for performing a procedure known as Gamma function in situations 
that were medically unnecessary, where the medical personnel performing the procedure and 
interpreting the results were untrained, and where the results were reported too late to be of use 
or not reported at all due to technical failures with the imaging equipment.  Previously, in 
December 2015, a wholly owned subsidiary of 21st Century Oncology, Inc. (21st Century 
 
  32  Oncology, LLC) paid $19.75 million to settle civil FCA claims that it performed medically 
unnecessary laboratory tests used to detect genetic abnormalities associated with bladder cancer 
(also known as fluorescence in situ-hybridization cytology or FISH tests), and that it encouraged 
its physicians to order the unnecessary tests by offering bonuses based in part on the number of 
tests referred to the company.  As part of this settlement, two individual physicians paid $1.5 
million and $250,000, respectively.  Pursuant to both settlements, 21st Century Oncology is 
under a five-year Corporate Integrity Agreement with HHS-OIG.  
 
In May 2016, the owner and operator of Advanced Pain Management in Kentucky was sentenced 
to 8 years and 4 months in prison and ordered to pay $827,000 in restitution for his guilty plea to 
conspiracy to unlawfully distribute and dispense Schedule II and III controlled substances, health 
care fraud, and money laundering.  According to court records, from November 2009 through 
May 2014, the owner/operator distributed and dispensed narcotics to patients without a 
legitimate medical purpose and beyond the bounds of professional practice, leading to a patients 
death. In addition, he falsely billed the health care benefit programs by submitting claims for 
office visits at a higher code than the services provided. 
 
Other Medicare and Medicaid Matters 
 
In November 2015, a licensed insurance agent in Florida was sentenced to 1 year and 6 months 
in prison and ordered to pay $2.4 million in restitution, joint and several, for her role in a 
Medicare Part C and Medicaid fraud scheme.  Evidence showed that, from June 2013 to April 
2014, the agent was employed by a Medicare Advantage Organization (an HMO) to market and 
sell their plans.  Under the scheme, the agent recruited Medicare beneficiaries living in 
Nicaragua to enroll in a Medicare Advantage plan.  She submitted fraudulent enrollment requests 
to Medicare, falsely representing that the beneficiaries actually resided in Florida.  This was a 
joint investigation with the FBI and the Florida MFCU. 
 
In June 2016, Planned Parenthood Health Systems, Inc. (Planned Parenthood) agreed to pay   
$1.5 million to resolve its liability under the CMPL for conduct it disclosed to HHS-OIG. 
Specifically, HHS-OIG alleged that, between November 2004 and February 2015, Planned 
Parenthood submitted claims to Medicaid in North Carolina, South Carolina, Virginia, and West 
Virginia for services using a provider number different than the medical professional who 
provided the services and billed for the services of non-physician practitioners who were not 
properly enrolled in their state Medicaid program.                                                                                                       
  
In July 2016, MD2U Holding Company, its related companies, and individually named owners, 
paid $21.5 million to resolve civil FCA allegations that they billed for medically unnecessary 
services and altered records to support those false claims.  MD2U was a regional provider of 
home-based care in Louisville, Kentucky.  The government alleged that MD2U and affiliated 
companies and owners submitted false claims for patients who were neither homebound nor 
home-limited and for services that were medically unnecessary, upcoded, or not properly 
rendered.  As a part of settlement, MD2U entered into a five-year Corporate Integrity Agreement 
with HHS-OIG. 
 
In August 2016, a registered nurse owned and operated Mt. Zion Home Health Agency in 
Denton, Texas.  From April 2008 to October 2013, a nurse carried out a scheme to defraud 
 
  33  Medicare through the submission of false and fraudulent claims for skilled nursing services 
which were not provided and which were not authorized by the patients physicians.  At times, 
the nurse submitted claims for services which she allegedly provided when she was out of state.  
At other times, the nurse submitted claims for services which she allegedly provided to patients 
who testified that they did not know her and had never heard of her company.  She was found 
guilty by a jury of nine counts of health care fraud following a four-day trial.  She was sentenced 
to 97 months in federal prison and ordered to pay restitution in the amount of $775,099 to 
Medicare, and to pay a forfeiture judgment in the amount of $491,488. 
   
 
  34  DEPARTMENT OF HEALTH AND HUMAN SERVICES 
  
Office of Inspector General 
 
A certain portion of the funds appropriated under HIPAA are, by law, set aside for Medicare and 
Medicaid activities of HHS-OIG.  In FY 2016, the Secretary and the Attorney General jointly 
allotted $187.6 million to HHS-OIG after accounting for a sequester reduction of   
$13.7 million.  Additionally, Congress appropriated $67.2 million in discretionary funding for 
HHS-OIG HCFAC activities.   
 
In FY 2016, HHS-OIG investigations resulted in 765 criminal actions against individuals or 
entities that engaged in crimes related to Medicare and Medicaid; and 690 civil actions, which 
include false claims and unjust-enrichment lawsuits filed in federal district court, civil monetary 
penalties (CMP) settlements, and administrative recoveries related to provider self-disclosure 
matters.  In addition, during FY 2016, HHS-OIG excluded a total of 3,635 individuals and 
entities, the details of which are below. 
 
In FY 2016, HHS-OIG continued to staff and support Medicare Strike Force operations worked 
in conjunction with DOJ Criminal Divisions Fraud Section, local USAOs, the FBI, and state and 
local law enforcement agencies.  HHS-OIG has assigned agents to Strike Forces in Miami, New 
York City, Houston, Tampa, Detroit, Los Angeles, Southern Louisiana, Dallas, and Chicago.  
HHS-OIG has supported Strike Force operations by providing investigative, analytic, and 
forensic resources.  These Strike Forces have effectively investigated and prosecuted individuals 
and entities that do not provide legitimate health care services, but exist solely for the purpose of 
defrauding Medicare and other government health care programs.  The continued support of 
Medicare Strike Force operations is a top priority for HHS-OIG.   
 
Program Savings 
 
Investigations, audits, and evaluations frequently reveal vulnerabilities or incentives for 
questionable or fraudulent practices in agency programs or administrative processes.  As 
required by the Inspector General Act, HHS-OIG makes recommendations to agency managers 
to address these vulnerabilities.  In turn, agency managers recommend legislative proposals or 
other corrective actions that, when enacted or implemented, close loopholes and reduce improper 
payments or conduct.  The savings from these joint efforts toward program improvements can be 
substantial.  For FY 2016, potential savings from legislative and administrative actions that were 
supported by HHS-OIG recommendations were estimated by third parties, such as the 
Congressional Budget Office or actuaries within HHS, to be $22.1 billion$21.0 billion in 
Medicare savings and $1.1 billion in savings to the federal share of Medicaid.   
 
Additional information about savings achieved through such policy and procedural changes may 
be found in the HHS-OIG fall Semiannual Report to Congress, on-line at http://oig.hhs.gov.    
 
   
 
  35  Exclusions 
One important mechanism for safeguarding the care provided to program beneficiaries is through 
exclusion of providers and suppliers who have engaged in the abuse or neglect of patients or 
fraud from participation in Medicare, Medicaid, and other federal health care programs.   
During FY 2016, HHS-OIG excluded a total of 3,635 individuals and entities.  Among these 
were exclusions based on criminal convictions for crimes related to Medicare and Medicaid 
(1,326) or to other health care programs (262); for patient abuse or neglect (299); or as a result of 
licensure revocations (1,448).  This list of conduct is not meant to be exhaustive, but identifies 
the most prevalent causes underlying HHS-OIGs exclusions of individuals or entities in FY 
2016.  In addition to those mentioned in the Program Accomplishments section above, exclusion 
actions by HHS-OIG included: 
 
IowaIn October 2015, a provider of personal care services was ordered to pay restitution of 
$8,327 for her guilty plea to tampering with records.  The provider was also excluded from 
participation in Federal health care programs.  According to the investigation, she billed 
Medicaid for personal care services that she did not actually perform.  In most instances, it was 
determined that she was working for her outside, full-time employer while also billing for 
personal care services that she did not provide. 
 
ColoradoIn December 2015, a certified nurse assistant was excluded for a minimum period of 
25 years based on his convictions for sexual assault.  The nurse assistant performed sexual acts 
on a person who had a traumatic brain injury that rendered her unable to give consent to the acts.  
He was sentenced to 15 years of incarceration.  In addition, his license to practice as a certified 
nurse assistant was revoked by the Colorado State Board of Nursing. 
 
TexasIn January 2016, a doctor of osteopathy was excluded for a minimum period of 25 years 
based on his conviction of conspiracy to commit health care fraud, among other charges.  
Beginning around April 2009 and continuing to about February 2010, the doctor conspired with 
others to defraud the Medicare program.  As part of the conspiracy, he billed Medicare for 
procedures and services that were never performed.  As a result of this activity, the court 
sentenced the doctor to pay $1.2 million in restitution and serve 10 years in prison.  The Texas 
State Board of Medicine revoked his license to practice and the Virginia State Board of Medicine 
suspended his license.  
 
CaliforniaIn May 2016, a doctor of osteopathy was excluded for a minimum period of 50 
years based on her conviction of 2nd degree murder, unlawful controlled substance prescription, 
and obtaining a controlled substance by fraud.  According to court documents, the doctor 
prescribed massive quantities of controlled substances to patients with no legitimate need.  She 
was sentenced to 30 years in prison.  In addition, her license to practice as a doctor was 
suspended by the Osteopathic Medical Board of California.    
 
FloridaIn June 2016, the owner and registered representative of Comprehensive Care Clinic 
(CCC) was excluded for a minimum period of 55 years based on his conviction of conspiracy to 
commit health care fraud and wire fraud.  The owner conspired with CCC employees to pay 
kickbacks to Medicare beneficiaries for allowing them to utilize their Medicare information for  
   
 
  36  fraudulent purposes and was sentenced to 4 years and 3 months in prison and ordered to pay   
$20 million in restitution. 
 
Civil Monetary Penalties 
 
HHS-OIG has the authority to impose civil monetary penalties (CMPs) against providers and 
suppliers who knowingly submit false claims to the Federal Government, who participate in 
unlawful patient referral or kickback schemes, who fail to appropriately treat or refer patients at 
hospital emergency rooms, or who engage in other activities prescribed in statute.  HHS-OIG  
continues to pursue its affirmative enforcement actions under these authorities.  Examples 
include:   
 
New JerseyIn October 2015, Ascend Laboratories, LLC (Ascend) agreed to pay $1.3 million 
to settle allegations that it failed to submit drug pricing data to CMS.  The Medicaid Drug Rebate 
Program requires pharmaceutical companies to enter into and have in effect a national rebate 
agreement with the Secretary of HHS in order for Medicaid payments to be available for the 
pharmaceutical companys covered drugs.  Companies with such rebate agreements are required 
to submit certain drug pricing information to CMS, including quarterly and monthly average 
manufacturers price (AMP) data.  HHS-OIG can seek penalties against manufacturers that 
misrepresent, or fail to timely report, drug pricing information.  HHS-OIG alleged that Ascend 
failed to submit timely monthly and quarterly AMP data for certain months and quarters in 2013 
and 2014.  
 
TexasIn December 2015, two physicians and a podiatrist agreed to pay $208,000, $75,000, 
and $65,000, respectively, to settle allegations that they received improper remuneration in 
exchange for the referral of patients to an independent diagnostic testing center, OneStep 
Diagnostic, Inc. (OneStep), in the Houston area.  Specifically, HHS-OIG alleged that from 
January 1, 2008, through June 30, 2012, the three practitioners each received improper 
remuneration from OneStep in the form of compensation from a Medical Directorship agreement 
and that took into account the value and volume of referrals made to OneStep.  In October 2014, 
OneStep agreed to pay $1.2 million and adhere to a 5-year CIA to resolve their related liability. 
 
OhioIn December 2015, the Kroger Company agreed to pay $21.5 million to resolve its 
liability under the CMPL for conduct disclosed to HHS-OIG.  Kroger is an Ohio for-profit 
corporation that operates more than 2,109 pharmacies and 2,640 supermarkets and multi-
department stores in 34 states.  HHS-OIG alleged that Kroger employed 14 individuals who were 
excluded from participation in Federal health care programs.  Kroger also filled prescriptions, for 
which payment was made under a federal health care program, that were written by 84 excluded 
prescribers.   
 
AlabamaIn October 2015, Community Health United Home Care, LLC (CHUHC) agreed to 
pay $9.8 million to resolve its liability under the CMPL for conduct it disclosed to HHS-OIG.  
Specifically, HHS-OIG alleged that, from January 1, 2008, through February 29, 2012, CHUHC 
submitted claims for hospice services at Center Home Care Corporation and Fallbrook Home 
Care Services without certifications of terminal illness, face-to-face encounters, and/or physician 
narratives, as required by hospice regulations.  
 
 
  37  GeorgiaIn May 2016, Grady Memorial Hospital Corporation d/b/a/ Grady Health System 
(Grady) agreed to pay a penalty of $40,000 to resolve its potential liability under EMTALA.  
HHS-OIG alleged that Grady failed to provide an adequate medical screening examination and 
stabilizing treatment to a patient, specifically that a patient was extracted from his apartment by a 
SWAT team and brought to Gradys emergency department (ED) by a police officer due to 
complaints of suicidal and homicidal ideations.  While at Grady, two Licensed Professional 
Counselors (LPCs) evaluated the patient and determined that the patient should be held 
involuntarily for further evaluation and treatment.  Approximately five hours after the patients 
arrival in the ED, the ED physician discharged the patient without consulting the LPCs or the on-
call psychiatrist.      
 
CaliforniaIn June 2016, Enloe Medical Center (Enloe) agreed to pay $570,912 to settle 
allegations that Enloe submitted claims for emergency ambulance transportation to destinations 
such as skilled nursing facilities and patient residences that should have been billed at the lower 
non-emergency rate.                                                                                                                                                                                                                                                                                                                     
 
Audits and Evaluations 
 
The focus of HHS-OIGs audits and evaluations is determined through a dynamic process and 
adjustments are made to HHS-OIGs work plan throughout the year to meet priorities and to 
anticipate and respond to emerging issues with the resources available.  HHS-OIG assesses 
relative risks in Medicare and Medicaid (as well as the many other programs for which HHS-
OIG has oversight authority) to identify the areas most in need of attention and, accordingly, to 
set priorities for the sequence and proportion of resources to be allocated.  In assessing this 
relative risk, HHS-OIG considers a number of factors, including:  
 
  Mandatory requirements for OIG reviews, as set forth in laws, regulations, or other 
directives;  
  Requests made or concerns raised by Congress, HHS management, or the Office of 
Management and Budget (OMB);  
  Top management and performance challenges facing HHS;  
  Work to be performed in collaboration with partner organizations;  
  Managements actions to implement our recommendations from previous reviews; and  
  Timeliness. 
 
Through this work planning process, HHS-OIG focuses its efforts on four important outcomes: 
 
  Fraud Prevention through Effective Provider Enrollment Safeguards and Oversight; 
  Analyzing Payment Trends, Questionable Billing, and Potential Fraud; 
  Preventing and Reducing Improper Payments; and 
  Protecting Beneficiaries.   
 
Among HHS-OIGs audit and evaluation findings in FY 2016 were the following, organized by 
outcome:  
 
   
 
  38  Fraud Prevention through Effective Provider Enrollment Safeguards and Oversight 
 
Screening of Medicare Providers:  After CMS implemented risk screening and site visit 
enhancements to strengthen the provider enrollment process, HHS-OIG found that providers 
submitted fewer enrollment applications to CMS in the post implementation period.  There was 
also an increase in the rate of applications that CMS returned to providers and a higher rate of 
approvals (lower rate of denials) among CMSs enrollment determinations.  CMSs additional 
efforts to revalidate all existing enrollments yielded substantial revocations and deactivations of 
existing providers billing privileges.  HHS-OIG also found gaps in contractors verification of 
key information on enrollment applications that could leave Medicare vulnerable to illegitimate 
providers.  In addition, contractors were inconsistent in applying site visit procedures and using 
site visit results for enrollment decisions.  Finally, CMSs enrollment data system does not 
contain the information needed for effective oversight and evaluation of the enhancements to the 
enrollment screening process.  (OEI-03-13-00050)   
 
Screening of Medicaid Providers:  HHS-OIG found that State implementation of risk-based 
screening is incomplete. Most states reported not having fingerprint-based criminal background 
checks while waiting for the requirement to take effect.  Although CMS did not initially require 
States to conduct these checks, pending additional guidance, CMS did issue this guidance in June 
2015.  In addition, 11 states reported that they have not implemented site visits.  Meanwhile, 
most states reported challenges and concerns regarding substitution of screening results from 
Medicare or other states for their own. These included difficulties accessing external screening 
data and ensuring the quality of other state and/or Medicare screening efforts. Some states that 
did not have all screening activities in place still enrolled and revalidated thousands of providers 
categorized as posing a high or moderate risk to Medicaid.  (OEI-05-13-00520) 
 
Medicare Provider Enrollment:  HHS-OIG found that over three-quarters of Medicare providers 
in our review had owner names on record with CMS that did not match those that providers 
submitted to HHS-OIG.  Further, nearly all providers in this review had owner names on record 
with CMS that did not match those on record with state Medicaid programs.  Additionally, two 
of the 11 CMS contractors did not check all required exclusions databases, which could allow 
providers with excluded owners to enroll in the Medicare program.  Taken together, these 
findings reveal vulnerabilities that could allow potentially fraudulent providers to enroll in the 
Medicare program and limit CMS's ability to provide adequate oversight.  (OEI-04-11-00591) 
 
Medicaid Provider Enrollment:  HHS-OIG found that few state Medicaid programs requested 
that providers disclose all federally required ownership information. In addition, 14 state 
Medicaid programs reported that they did not verify the completeness or accuracy of provider 
ownership information.  HHS-OIG also found that 14 state Medicaid programs reported that they 
did not check all required exclusions databases.  Further, most providers in our review had 
names on record with state Medicaid programs that did not match those on record with CMS or 
with HHS-OIG.  The prevalence of nonmatching owner names raises concern about the 
completeness and accuracy of information about Medicaid providers' ownership.  It also 
demonstrates that providers may not be complying with the requirement to report ownership 
changes to state Medicaid programs. (OEI-04-11-00590) 
 
   
 
  39  Analyzing Payment Trends, Questionable Billing, and Potential Fraud 
 
Medicaid Drug Prices:  HHS-OIG found that generic drug price increases exceeded the specified 
statutory inflation factor applicable to brand-name drugs for 22 percent of the quarterly average 
manufacturer prices we reviewed.  If the provision for brand-name drugs were extended to 
generic drugs, Medicaid would receive additional rebates.  Medicaid would have received   
$1.4 billion in additional rebates for the top 200 generic drugs, ranked by Medicaid 
reimbursement, from 2005 through 2014.  (A-06-15-00030) 
 
Provider-preventable conditions (PPCs):  PPCs are certain reasonably preventable conditions 
caused by medical accidents or errors in a health care setting.  Federal regulations effective July 
1, 2011 prohibit Medicaid payments for services related to PPCs.  HHS-OIG conducted this 
review to determine whether Washington was in compliance with the new regulations for 
inpatient hospital services. HHS-OIG found that Washington State claimed Federal Medicaid 
reimbursement for inpatient hospital services related to treating certain PPCs.  Washington did 
not determine the unallowable portion of $18.3 million ($10.8 million federal share) that was for 
services related to treating PPCs and should not have been claimed for Federal Medicaid 
reimbursement.  HHS-OIG set aside this amount for resolution by CMS and Washington.  (A-09-
14-02012) 
 
Home Health Fraud:  HHS-OIG analyzed Medicare claims data from calendar years 2014 and 
2015 to assess the national prevalence and distribution of selected characteristics commonly 
found in HHS-OIG-investigated home health fraud cases.  Our analysis identified a substantial 
number of providersover 500 HHAs and over 4,500 physiciansthat were outliers in 
comparison to their peers nationally with respect to multiple characteristics commonly found in 
HHS-OIG-investigated cases of home health fraud. It is important to note that our analysis does 
not demonstrate that these providers were engaged in fraudulent activity.  Our analysis also 
identified 27 geographic hotspots in 12 states, i.e., areas where characteristics commonly found 
in HHS-OIG home health fraud cases are prevalent. (This data brief was released in tandem with 
an HHS-OIG Alert which focused on improper arrangements and conduct by HHAs and 
physicians).  (OEI-05-16-00031) 
 
Power Mobility Devices:  HHS-OIGs objective was to determine whether Hoveround 
Corporation, which received the second largest Medicare reimbursement for power mobility 
devices (PMDs) in 2010, claimed federal reimbursement for PMDs in accordance with Medicare 
requirements.  For this review, HHS-OIG found that for 154 of the 200 sampled beneficiaries 
reviewed, Hoveround received payments for claims that did not comply with Medicare 
requirements.  For 144 sampled beneficiaries, Hoveround did not support the medical necessity 
of PMDs, and for 10 sampled beneficiaries, Hoveround provided incomplete documentation to 
support the PMD claims.  HHS-OIG estimated that Medicare paid Hoveround at least $27 
million for PMDs that did not meet Medicare requirements during 2010.  (A-05-12-00057) 
 
Medicaid Durable Medical Equipment and Supplies:  During recent Medicaid audits, HHS-OIG 
determined that selected durable medical equipment and supplies (DME) are available to CMS at 
a cost well below what is available to state Medicaid agencies. In audits of four state Medicaid 
agencies, HHS-OIG found that the states could have saved $18.1 million on the purchase of 
selected DME items if they obtained pricing comparable to pricing under Round 1 of Medicares 
 
  40  Competitive Bidding Program.  Since issuing those audit reports, HHS-OIG identified $12 
million in additional savings for the selected DME items if the four states had used pricing 
comparable to Medicares Round 2 Competitive Bidding and National Mail-Order Programs. 
Medicaid provider reimbursement rates for selected DME items varied significantly among those 
States.  Opportunities exist for these states to lower provider reimbursement rates, resulting in 
$30.1 million in potential savings for the states and the Federal Government.  (A-05-15-00025) 
 
Opioids and Compounding Drugs:  In 2015, HHS-OIG found that total Part D spending reached 
$137 billion, marking the third consecutive year that spending increases surpassed $10 billion. 
Notably, spending for commonly abused opioids exceeded $4 billion, raising concerns about 
misuse.  The growth in Part D spending for compounded drugs is also striking-particularly 
spending for compounded topical drugs, which has increased more than 3,400 percent since 
2006.  (OEI-02-16-00290) 
 
Preventing and Reducing Improper Payments 
 
Improper Payments to Hospices:  HHS-OIGs review found that hospices billed one-third of 
general inpatient care (GIP) stays inappropriately, costing Medicare $268 million in 2012.  HHS-
OIG also found that hospices often did not meet all care planning requirements and sometimes 
provided poor-quality care. Recent HHS-OIG investigations have shown instances in which 
hospices inappropriately billed Medicare for GIP, including care being billed but not provided 
and beneficiaries receiving care they did not need.  (OEI-02-10-00491) 
 
Bone Marrow and Stem Cell Transplant Procedures:  HHS-OIGs objective was to determine 
whether Medicare paid selected inpatient claims for stem cell transplants in accordance with 
Medicare requirements.  Recent HHS-OIG reviews identified Medicare overpayments to two 
hospitals that did not always comply with Medicare billing requirements for inpatient claims for 
stem cell transplants, resulting in overpayments of approximately $4 million.  For this review, 
HHS-OIG found that 133 of the 143 selected Medicare inpatient claims we reviewed for bone 
marrow and stem cell transplant procedures did not comply with Medicare requirements.  As a 
result, Medicare overpaid the hospitals by $6.3 million.  (A-09-14-02037) 
 
Mechanical Ventilation:  A previous HHS-OIG review found that hospitals did not fully comply 
with Medicare requirements for billing inpatient claims with certain Medicare Severity 
Diagnosis-Related Groups (MS-DRGs) that required beneficiaries to have received 96 or more 
consecutive hours of mechanical ventilation.  A subsequent HHS-OIG review found that claims 
with longer lengths of stay were also at risk for billing errors.  The objective was to determine 
whether Medicare payments to hospitals for inpatient claims with certain MS-DRGs that 
required 96 or more consecutive hours of mechanical ventilation complied with Medicare 
requirements.  HHS-OIG found that, for 63 of the 200 claims we reviewed, Medicare payments 
to hospitals were assigned incorrectly to MS-DRGs 207 and 870, resulting in $1.5 million of 
overpayments.  Based on this sample, HHS-OIG estimated that the hospitals received (1) 
overpayments of $3.7 million for claims with a potential procedure length of 4 days or fewer; 
and (2) overpayments of $15.9 million for claims with a potential procedure length of 5 days.  
(A-09-14-02041) 
 
 
  41  Incorrect Coding:  HHS-OIG found that states inconsistent implementation and use of National 
Correct Coding Initiative (NCCI) edits may reduce their ability to promote correct coding by 
providers and prevent improper Medicaid payments.  Additionally, states lack of reporting of 
cost savings estimates, and the limitations of the estimates that were reported, inhibit CMSs 
ability to meaningfully estimate national NCCI cost savings.  (OEI-09-14-00440) 
 
Withdrawal of Federal Medicaid Funds by States:  CMS has not issued guidance instructing 
states on the appropriate handling of Medicaid withdrawals.  All three states that HHS-OIG 
audited withdrew more funds than necessary to meet immediate cash needs:  Alabama and 
Maryland had overdrawn more than $130 million in Medicaid funds that they had not refunded 
to the Federal Government.  Although Illinois refunded overdrawn Medicaid funds, its 
withdrawals exceeded its expenditures by an average of $60 million a quarter.  (A-06-14-00068) 
 
Federal Matching Without State Contributions:  During its audit of the Alabamas hospital 
certified public expenditures (CPEs) program for FY 2010, HHS-OIG noticed that Alabama had 
claimed, for FYs 2010 and 2011, more than $5 million in Federal funds related to CPEs for three 
hospitals that appeared to be private hospitals.  The three hospitals were owned but not operated 
by State or local governments.  Alabamas definition of a public hospital indicates that a facility 
only has to be owned by a public entity, regardless of whether the facility is operated by a public 
entity or whether State or local government funds are used in its operation.  As a result, Alabama 
received more than $5 million in federal funding by claiming CPEs from the three hospitals, 
even though no state or local government funding was used to operate the hospitals.  (A-06-16-
08005) 
 
Protecting Beneficiaries 
 
Adverse Events:  HHS-OIG found that an estimated 29 percent of Medicare beneficiaries 
experienced adverse or temporary harm events during their rehab hospital stays, resulting in 
temporary harm; prolonged stays or transfers to other hospitals; permanent harm; life-sustaining 
intervention; or death.  This harm rate is in line with what HHS-OIG found in prior work in 
hospitals (27 percent) and in SNFs (33 percent).  Physician reviewers determined that 46 percent 
of these adverse and temporary harm events were clearly or likely preventable.  Physicians 
attributed much of the preventable harm to substandard treatment, inadequate patient monitoring, 
and failure to provide needed treatment.  Nearly one-quarter of the patients who experienced 
adverse or temporary harm events were transferred to an acute-care hospital for treatment, with 
an estimated cost to Medicare of at least $7.7 million in one month, or at least $92 million in one 
year, assuming a constant rate of hospitalization throughout the year.  (OEI-06-14-00110) 
 
Medicaid Data Integrity:  HHS-OIG summarized the high-risk security vulnerabilities that we 
identified in our previous reviews of information system general controls at three California 
Medicaid managed care organizations (MCOs).  HHS-OIG identified 74 high-risk security 
vulnerabilities, most of which were significant and pervasive, in the information system general 
controls at the three Medicaid MCOs.  These consolidated findings from the individual reports 
raise concerns about the integrity of the systems used to process Medicaid managed-care claims. 
(A-09-15-03004) 
 
 
  42  Inadequate Dental Care:  HHS-OIG found that three out of four Medicaid children in in 
California, Indiana, Louisiana, and Maryland did not receive all required dental services, with 
one in four children failing to see a dentist at all.  While these States reported that they employ a 
variety of strategies to address this problem and CMS has taken some positive steps in this area, 
HHS-OIG continues to have concerns that children are not receiving required dental services. 
(OEI-02-14-00490) 
 
Background Checks for Long Term Care Employees:  The ACA provides grants to states to 
implement background check programs for prospective long-term-care employees.  HHS-OIG 
found that, four years into the National Background Check Program, the 25 states that are 
receiving program grants reported having achieved varying levels of program implementation. 
For example, only six of the 25 states submitted to CMS data sufficient to calculate the 
percentage of prospective employees who were disqualified.  This raises concerns about whether 
CMS can determine program outcomes and conduct effective oversight of the National 
Background Check Program.  (OEI-07-10-00420) 
 
Medicaid Critical-Incident Reporting:  HHS-OIG found that Connecticut and Massachusetts did 
not comply with federal waiver and state requirements for critical incidents involving 
developmentally disabled Medicaid beneficiaries living in group homes.  Connecticut did not 
adequately safeguard 137 of 245 developmentally disabled Medicaid beneficiaries living in 
group homes that we reviewed, and Massachusetts did not adequately safeguard 146 out of 334.  
Neither State ensured that (1) group homes reported all critical incidents to the appropriate 
agencies; (2) data on all critical incidents were obtained, analyzed, or reported; and (3) all 
reasonable suspicions of abuse or neglect were reported.  Connecticut also did not ensure that 
group homes always reported incidents at the correct severity level.  (A-01-14-00002 and A-01-
14-00008) 
 
Potentially Avoidable Hospitalizations:  HHS-OIG conducted a review of West Carroll Care 
Center (the Nursing Home).  About 75 percent of its resident hospitalizations during the audit 
period occurred because of conditions a CMS-sponsored study found to be associated with 
potentially avoidable hospitalizations.  A urinary tract infection was the most frequent reason for 
the hospitalizations.  HHS-OIG found that the Nursing Home did not always provide services to 
its residents in accordance with their care plans, as required by Federal regulations, before they 
were hospitalized with UTIs.  Specifically, the Nursing Home staff did not monitor and 
document residents hydration status, monitor and document residents conditions, or document 
residents urine appearances as their care plans required.  (A-06-14-00073) 
 
Other OIG Fraud and Abuse Prevention Activities 
 
HCFAC funding also supported HHS-OIGs continued enhancement of data analysis and mining 
capabilities for detecting health care fraud, including tools that allow for complex data 
analysis.  HHS-OIG continues to use data mining, predictive analytics, trend evaluation, and 
modeling approaches to better analyze and target the oversight of HHS programs.  Analysis 
teams use near-time data to examine Medicare claims for known fraud patterns, identify 
suspected fraud trends, and to calculate ratios of allowed services as compared with national 
averages, as well as other assessments.  When united with the expertise of HHS-OIG agents, 
auditors, and evaluators, as well as our HEAT partners, HHS-OIGs data analysis fosters a 
 
  43  highly effective combination of technologies and traditional skills to the fight against fraud, 
waste, and abuse.  
 
Industry Outreach and Guidance 
 
Advisory Opinions   
Central to the HIPAA guidance initiatives is an advisory opinion process through which parties 
may obtain binding legal guidance as to whether their existing or proposed health care business 
transactions run afoul of the AKS, the CMP laws, or the exclusion provisions.  During FY 2016, 
the HHS-OIG, in consultation with DOJ, issued 14 advisory opinions, modified 10 advisory 
opinions, and terminated three advisory opinions.  A total of 343 advisory opinions and 20 
modifications to advisory opinions have been issued, and four opinions terminated, during the 20 
years of the HCFAC program. 
 
Corporate Integrity Agreements (CIA) 
Many health care providers elect to settle their cases before litigation.  As part of the settlements, 
providers often agree to enter into CIAs with HHS-OIG to avoid exclusions from Medicare, 
Medicaid, and other federal health care programs.  Under a CIA, a provider commits to 
establishing a program and taking other specified steps to ensure future compliance with 
Medicare and Medicaid rules.  The compliance programs are designed, in part, to prevent future 
fraud.  HHS-OIG monitors providers compliance with these agreements.  HHS-OIG may 
impose penalties on entities that fail to comply with the requirements of their CIAs, as shown in 
the example below:  
 
IllinoisIn March 2015, LifeWatch Services, Inc., a durable medical equipment supplier, agreed 
to pay $737,572 to settle allegations that it knowingly submitted false claims to Medicare from 
February 21, 2013 through June 30, 2014 for cardiac monitoring services.  Specifically, OIG 
alleged that LifeWatch submitted claims to Medicare for Ambulatory Cardiac Telemetry (ACT) 
services for which the medical record documentation did not support that the physician had 
ordered ACT services.  The settlement resolves a reportable event submitted by LifeWatch as 
required under its CIA.  LifeWatch entered into the CIA in March 2012 as part of an $18.5 
million civil settlement with the United States, resolving allegations that, among other things, it 
submitted claims to Medicare for cardiac monitoring services that were not medically necessary 
and encouraged the use of more expensive cardiac monitoring devices when a less expensive 
device was sufficient to meet the patients needs. 
 
Centers for Medicare & Medicaid Services 
 
In FY 2016, CMS was allocated $24.1 million by HHS, and appropriated $553.3 million in 
discretionary funds by Congress to support its comprehensive program integrity strategy for 
Medicare, Medicaid, and the Childrens Health Insurance Program (CHIP).  In FY 2016, Congress 
required HHS to fully fund the Administration for Community Livings (ACL) Senior Medicare 
Patrols activity.  Therefore, $18.0 million of CMSs $553.3 million in discretionary funding was 
allocated to ACL to support the program.  With these funds, CMS is working to ensure that public 
funds are not diverted from their intended purpose: to make accurate payments to legitimate entities 
for allowable services or activities on behalf of eligible beneficiaries of federal health care programs. 
CMS also performs many program integrity activities that are beyond the scope of this report because 
 
  44  they are not funded directly by the HCFAC Account or discretionary HCFAC funding.  Medicare 
Fee-for-Service and Medicaid improper payment rate measurement and activities, the Fraud 
Prevention System, Recovery Audit Program activities, and prior authorization initiatives are 
discussed in separate reports, and CMS will submit a combined Medicare and Medicaid Integrity 
Program report to Congress later this year. 
 
Address the Full Spectrum of Fraud, Waste, and Abuse 
 
CMS uses a multi-faceted approach to target all causes of fraud, waste, and abuse (FWA) that 
result in improper payments, with an emphasis towards prevention activities.  This includes a 
focus on initiatives that are foundational to addressing program integrity across the continuum of 
FWA and improving payment accuracy. 
   
During FY 2016, CMS continued to integrate Medicare and Medicaid efforts, and provide 
technical guidance to states, providers, and other stakeholders on program integrity activities.  
CMS continued to conduct Medicare and Medicaid fraud investigations and provider audits, as 
well as state program integrity reviews.  
 
This section describes the wide range of program integrity activities that CMS utilizes to 
comprehensively address FWA.  These activities include many different approaches to program 
integrity, such as data analysis, investigations and audits, and recovery actions. 
 
Fraud Prevention System 
 
The Fraud Prevention System (FPS) is the predictive analytics technology required under the 
Small Business Jobs Act of 201013 (SBJA).  Since June 30, 2011, the FPS has run predictive 
algorithms and other sophisticated analytics nationwide against all Medicare FFS claims on a 
continuous basis prior to payment in order to identify, prevent, and stop potentially fraudulent 
claims.  The FPS helps CMS target fraudulent providers and suppliers, reduce the administrative 
and compliance burden on legitimate providers and suppliers, and prevent fraud so that funds are 
not diverted from providing beneficiaries with access to quality health care. 
 
The FPS helped identify or prevent $604.7 million in inappropriate payments during FY 2015 
through actions taken due to the FPS or through investigations expedited, augmented, or 
corroborated by the FPS. This resulted in an $11 to $1 return on investment.  Since CMS 
implemented the technology in June 2011, the FPS has identified or prevented more than   
$1.4 billion in inappropriate payments by identifications of new leads or contribution to existing 
investigations.  During FY 2015, the FPS models generated 718 leads that were included in the 
ZPIC workload.  The leads resulted in 492 new investigations and augmented information for 
226 existing investigations (FY 2016 numbers were not available at the time of this report).  .   
 
   
                                                 
13 Public Law 111-240. 
 
  45  National Correct Coding Initiative  
 
Medicare 
 
Due to the volume of claims processed by Medicare each day and the significant cost associated 
with conducting medical review of an individual claim, CMS heavily relies on automated edits to 
identify inappropriate claims.  The National Correct Coding Initiative (NCCI) program consists 
of edits designed to reduce the Medicare Parts A and B, Medicare DME, and Medicaid improper 
payments.  This program was originally implemented in the Medicare program in January 1996 
with procedure-to-procedure edits to ensure accurate coding and reporting of services by 
physicians.  In addition to procedure-to-procedure edits, CMS established the Medically 
Unlikely Edit (MUE) program to reduce the paid claims error rate for Medicare Part B claims as 
part of the NCCI program.  The first MUE edits were implemented January 1, 2007, and MUE 
edits have since been extended to cover Part A and DME.  
 
Since October 2008, all procedure-to-procedure edits and the majority of MUEs have been made 
public and posted on the CMS website.  Certain edits are not published to protect against use or 
manipulation by fraudulent or abusive individuals and entities.  The use of procedure-to-
procedure edits developed through the NCCI saved the Medicare program $393.9 million in    
FY 2016 In addition, MUE edits within Medicare Part B outpatient and DME saved the 
Medicare program $222.1 million during the first nine months of FY 2016. (Savings for Part A 
are not yet available).  
 
Medicaid  
 
Section 6507 of the Affordable Care Act requires CMS to notify states which NCCI 
methodologies are compatible with claims filed with Medicaid and requires states to use these 
methodologies to process applicable Medicaid claims filed on or after October 1, 2010.14  CMS 
has worked closely with state Medicaid agencies to implement the NCCI methodologies in their 
Medicaid programs.  Fully and correctly implementing the NCCI methodologies in state 
Medicaid programs will be a long-term undertaking by both CMS and the states.  However, use 
of the Medicaid NCCI methodologies in adjudicating Medicaid claims is producing significant 
savings in federal and state Medicaid program expenditures due to reductions in improper 
payments for Medicaid claims with improper coding, as has occurred in the Medicare program. 
In FY 2013, CMS created a major, new technical guidance document for states that compiles, 
organizes, and integrates CMS requirements for state implementation for the Medicaid NCCI 
methodologies.  This document is continually updated as new implementation issues are decided.  
In addition, many new Medicaid NCCI edits were added to the quarterly Medicaid NCCI edit 
files and even more Medicaid-only NCCI edits were developed.  CMS is currently working on 
technical guidance for the states related to calculating savings from Medicaid NCCI savings. 
                                                 
14 CMS reported on the implementation of this requirement in a March 2011 report to Congress, accessible at: 
http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Data-and-
Systems/Downloads/ReporttoCongresspdf.pdf. 
 
  46  One Program Integrity (One PI) Portal  
CMS continues to augment the data available in the Integrated Data Repository (IDR) to provide 
a comprehensive view of Medicare and Medicaid data including claims, beneficiary data, and 
drug information.  CMS is using the IDR to provide broader and easier access to data and 
enhanced data integration while strengthening and supporting CMSs analytical capabilities. 
CMS continues to integrate new data sources into the IDR, including recent additions like Shared 
Systems and submitter data.  CMS is also working to incorporate state Medicaid data into the 
IDR while also working with states to improve the quality and consistency of the data from each 
state, described more fully below. 
CMS uses the One Program Integrity (One PI) web-based portal with the IDR to provide access 
to robust business intelligence analytical tools (including Business Object, SAS, and STARS) 
and to facilitate data sharing with program integrity contractors and law enforcement.  The portal 
provides a single access point to the data within the IDR, as well as the analytic tools to review 
the data. 
Compromised Number Checklist 
 
In January 2010, CMS created the repository of compromised Medicare beneficiary and provider 
ID numbers called the Compromised Number Checklist (CNC).  In March 2013, CMS deployed 
a Web-based application that allows direct update and real-time access of CNC information by 
CNC users.  This database is populated by submissions from CMS program integrity 
contractors.  The purpose of the CNC is to share compromised ID numbers and any associated 
corrective actions that have been taken among CMS staff, program integrity contractors, and law 
enforcement such as the FBI.  CMS uses the national CNC database to enhance efforts to detect 
and prevent fraud and abuse in Medicare.   
 
The Command Center 
 
CMS opened its state-of-the-art Command Center on July 31, 2012 to facilitate improvements in 
health care fraud detection and investigation, drive innovation, and help reduce fraud and 
improper payments in the Medicare and Medicaid programs.  CMS is using the Command 
Center to collaborate in unprecedented ways with the private sector, law enforcement, and our 
State partners.  The Command Centers advanced technologies and collaborative environment 
allow multi-disciplinary teams of experts and decision makers to more efficiently coordinate 
policies and case actions, reduce duplication of efforts, and streamline fraud investigations for 
more immediate administrative action.  These collaborative activities enable CMS to take 
administrative actions, such as revocations of Medicare billing privileges and payment 
suspensions, more quickly and efficiently.   
 
In FY 2016, the Command Center conducted 15 missions that included participants from CMS 
and our partners, including the HHS-OIG and FBI that are designed to lead to improvements in 
the fraud prevention and detection process.  Missions are facilitated collaboration sessions that 
bring together experts from various disciplines to improve the processes for fraud prevention in 
Medicare and Medicaid.  CMS is also working with the FBI, HHS-OIG, and other federal 
 
  47  agencies in the Command Center to pool resources to tackle cross-cutting issues surrounding 
fraud prevention. 
 
DME Initiatives 
 
DME suppliers pose a high risk of fraud to the Medicare program and CMS has undertaken an 
aggressive strategy to address this risk.  ZPICs/Program Safeguard Contractors (PSCs) have 
continued to conduct site visits and interviews of DME suppliers, providers, and beneficiaries 
receiving DME products in high billing areas for DME supplies and products.  In FY 2016, these 
additional funds supported DME investigations, which included site visits to, and interviews of, 
suppliers, doctors, and patients that were identified as potentially suspicious or high risk. 
Probable Fraud Measurement Pilot   
 
The Probable Fraud Measurement (PFM) Pilot was designed to test the methodologies, 
protocols, and instruments used to estimate probable fraud that were developed for possible use 
in a nationwide program. The PFM Pilot was conducted from December 2015 to March 2016 in 
the Miami-Dade County, Florida home health service area. The PFM Pilot consisted of 
extracting claims data; performing field interviews of beneficiaries, HHAs and attending 
providers (APs); collecting medical documentation; evaluating the methodologies; revising and 
re-testing methodologies (when necessary); providing recommendations for improvement; and 
identifying best practices. 
 
In the context of the PFM Pilot, a review panel of experienced health care analysts, clinicians, 
policy experts, and fraud investigators reviewed collected data to determine whether there was 
sufficient evidence to refer any of the cases to ZPICs for further investigation.  At the conclusion 
of the pilot, twenty cases were identified for possible referrals to ZPICs. Although the PFM Pilot 
was not designed to generate actual referrals, the findings warranted that additional analysis be 
conducted to determine whether these cases should, in fact, be referred to the ZPICs for further 
investigation.  This analysis is ongoing.  
 
CMS will assess the value of expanding the pilot to a larger geographic area (e.g., national) and 
expanding the measurement to other areas of Medicare. 
 
Proactively Manage Provider Screening and Enrollment 
 
Provider enrollment is the gateway to the Medicare and Medicaid programs and is the key to 
preventing ineligible providers and suppliers from entering either program.  CMS is committed 
to maintaining operational excellence in its provider enrollment screening process.  Through 
provider screening and enrollment, CMS continues to prevent and reduce fraud, waste, and abuse 
in the Medicare and Medicaid program and ensure that only eligible providers are caring for 
beneficiaries and receiving payment. 
   
 
  48  Medicare Provider Screening and Site Visits 
CMS implemented the Affordable Care Acts additional screening provisions through a final 
rule15 published by the Federal Register on February 2, 2011.  There are three levels of provider 
and supplier enrollment risk-based screening:  limited, moderate, and high, and each 
provider and supplier specialty category is assigned to one of these three screening levels. 
The Advanced Provider Screening system (APS)16 automatically screens all current and 
prospective providers against a number of data sources, including provider licensing and 
criminal records. APS identifies and highlights potential program integrity issues that are 
investigated proactively by CMS. 
CMSs provider screening and enrollment initiatives in Medicare have had a significant impact 
on removing ineligible providers from the program.  Site visits, revalidation and other initiatives 
have contributed to the deactivation17 and revocation18 of more than 652,000 enrollment records 
since CMS started implementing the requirements of the Affordable Care Act. 
Suspensions 
 
CMS in FY 2016 continued its use of the Affordable Care Act authority to suspend Medicare 
payments to providers during an investigation of a credible allegation of fraud.  CMS also has 
authority to suspend Medicare payment; if reliable information of an overpayment exists.  
During FY 2016, there were 508 payment suspensions that were active at some point during the 
fiscal year (data reflected as of October 31, 2016).  Of the 508 payment suspensions, 291 new 
payment suspensions were imposed during FY 2016.  
 
Enrollment Special Study 
 
This is a project designed to utilize and expand the existing programmatic infrastructures to take 
administrative actions under existing CMS authorities by conducting site verifications of 
potentially high risk providers and suppliers.  The information obtained during site verifications 
is used to determine if provider enrollment requirements are met and to calculate a fraud level 
indicator.  
 
Since inception in July 2009, this project has produced significant results; including an increased 
number of revocations, deactivations, and prepayment edit savings.  The project has also 
provided valuable information that CMS has used to identify and implement programmatic 
changes that have proven successful to deter and prevent Medicare fraud. 
 
From July 1, 2015 through September 30, 2016, the Medicare Administrative Contractor 
covering Florida (First Coast Service Operations) had conducted 9,891 site visits to verify 
                                                 
15 76 FR 5862 (Feb. 2, 2011). 
16 Previously referred to as the Automated Provider Screening system. 
17 Deactivation means the providers or suppliers billing privileges were stopped, but can be restored upon the 
submission of updated information.  See 42 CFR 424.540. 
18 Revocation means the providers or suppliers billing privileges are terminated.  See 42 CFR 424.535. 
 
  49  providers and suppliers operational status, deactivated 422 practice locations, and revoked or 
denied 1,157 providers.  CMS saved $12.9 million from prepayment medical record review. 
 
Medicaid Screening and Enrollment 
 
During FY 2016, CMS significantly expanded its efforts to assist states with meeting Medicaid 
screening and enrollment requirements. These efforts include enhanced sharing of Medicare 
enrollment and screening data with states, providing a new data compare service to help states 
identify providers for which the state is able to rely on Medicares screening, providing technical 
assistance to states through site visits, and publishing additional guidance in the Medicaid 
Provider Enrollment Compendium (MPEC). 
 
CMS shares Medicare enrollment and screening data to assist states with meeting Medicaid 
screening and enrollment requirements. Specifically, CMS shares the Medicare provider 
enrollment record via the Provider Enrollment, Chain and Ownership System (PECOS) 
administrative interface and in bulk data extracts from PECOS. CMS also shares OIG exclusion 
data with states.  In May 2016, CMS began to offer a data compare service that allows a state to 
rely on Medicares screening, in lieu of conducting state screening.  Using the data compare 
service, a state provides an extract of Medicaid provider enrollment data to CMS and then CMS 
returns information to the state indicating for which providers the state is able to rely on 
Medicares screening. 
CMS continually provides ongoing guidance, education, and outreach (site visits and technical 
assistance) to states on federal requirements for Medicaid enrollment and screening. In addition, 
CMS published the MPEC in March 2016, which is sub-regulatory guidance designed to assist 
states in applying certain regulatory requirements. 
CMS also offers training, technical assistance, and support to state Medicaid program 
integrity officials through the Medicaid Integrity Institute.  The FY 2016 course schedule 
included seminars in May and September 2016 that focused exclusively on provider 
screening and enrollment compliance provisions of the Affordable Care Act.  More 
information on the Medicaid Integrity Institute can be found at: 
https://www.justice.gov/mii. 
Medicaid Provider Enrollment Oversight 
As part of its oversight role in Medicaid, CMS works closely with state Medicaid agencies to 
provide regulatory guidance, technical assistance, and other support with respect to provider 
enrollment.  State Medicaid agencies may rely on the screening completed by CMS for dually-
enrolling providers to assist them in complying with their Medicaid screening requirements, and 
states may use Medicare screening data including site visits, payment of application fees, and 
fingerprint-based criminal background checks.  
 
 
 
  50  State Medicaid programs must terminate any provider that has been terminated by Medicare or 
another state Medicaid program or CHIP for cause.19  Additionally, CMS has the discretionary 
authority to revoke Medicare billing privileges where a state has terminated a providers or 
suppliers Medicaid billing privileges for cause.  CMS has established a voluntary process and 
system for states to report and share information about Medicaid terminations.   
 
Provider Enrollment Moratoria 
 
CMS has used the authority provided to the Secretary in the Affordable Care Act to temporarily 
prevent the enrollment of new Medicare, Medicaid, and CHIP providers and suppliers where the 
Secretary has determined such moratoria are necessary to combat fraud, waste, or abuse. 
In each moratorium area, CMS prohibits the new enrollment of certain provider and supplier 
types while we take administrative actions, such as payment suspensions and revocations, as well 
as working with law enforcement to support investigations and prosecutions.  Capitalizing on the 
effectiveness of this fraud and abuse preventive tool, in FY 2016, CMS expanded the enrollment 
moratoria statewide for HHA providers in Texas, Florida, Illinois, and Michigan and for Non-
emergent ambulance providers in Texas, New Jersey, and Pennsylvania.   
 
Continue to Build States Capacity to Protect Medicaid 
 
CMS assists states in building their internal capacity to conduct program integrity activities for 
Medicaid.  CMS continues to use HCFAC program discretionary funds to develop and 
implement enterprise systems that support Medicaid, in particular the Medicaid and CHIP 
Business Information Solution (MACBIS) initiative, which will improve the ability of CMS and 
the states to gather and analyze data that will support program integrity activities.  HCFAC 
funding also supports the preparation and dissemination of educational toolkits for states to use 
to enhance awareness of Medicaid fraud, waste, and abuse among providers, beneficiaries, 
managed care organizations, and others.  Through reviews of state processes and procedures, 
CMS also identifies areas of improvement and works with the states to make sure their integrity 
programs are robust. 
 
Medicaid Enterprise System 
 
Todays modern design of IT systems encompasses the use of current technologies that span 
across the entire Medicaid Enterprise.  These systems work in concert with one another and must 
adhere to certain regulations and guidance, including the Medicaid Information Technology 
Architecture (MITA) framework and the Seven Standards and Conditions.  Adhering to these 
mandates will promote the consistency of business and technical processes and IT platforms, as 
well as standards across the Medicaid Enterprise.   
 
The project includes independent technical assistance for IT and policy requirements, including 
monitoring and oversight, in working with state-specific system requirements, IT system builds, 
and associated interfaces for all states and the territories.  All 50 states and the territories 
                                                 
19 Medicare denial of enrollment is covered at 42 CFR 424.530.  Medicare revocation of enrollment is covered at 42 
CFR 424.535.  Medicaid denial or revocation of enrollment is covered at 42 CFR 455.416. 
 
  51  received technical assistance with moving through the Enterprise Life Cycle (ELC) Gate Review 
Process, including any associated consults.  States received assistance with project management, 
implementation, and operations.  Technical artifacts required by statute were analyzed and 
tracked to assess state progress.  Gap analyses were done on a regular basis and risk registers 
were studied to identify opportunities for improvement.  In addition, numerous tasks as part of 
this effort are geared towards achieving reduction in fraud, waste, and abuse and reduction of 
cost of these Medicaid Management Information Systems.  One such effort includes the 
development of an open source provider enrollment and screening module that will be able to be 
reused and shared by any state and integrated into its MMIS. This could potentially save CMS at 
least 75 percent of the average cost to procure a provider enrollment and screening module per 
state, across all states that will utilize this module. 
 
Improper Payment Rate Measurement and Increased Accountability in Medicaid and CHIP 
Programs 
 
The Improper Payments Information Act (IPIA) of 2002, as amended by the Improper Payments 
Elimination and Recovery Act of 2010 (IPERA) and the Improper Payments Elimination and 
Recovery Improvement Act of 2012 (IPERIA), requires each agency to periodically review 
programs it administers and identify programs that may be susceptible to significant improper 
payments.  For those programs determined to be susceptible, the agency is required to estimate 
the amount of improper payments, submit those estimates to Congress, and report on actions the 
agency is taking to reduce improper payments.   
 
The Medicaid Program and CHIP have been identified as at risk for significant improper 
payments.  CMS estimates improper payment rates in Medicaid and CHIP established through 
the Payment Error Rate Measurement (PERM) Program.  The improper payment rates are based 
on reviews of the Fee-For-Service (FFS), managed care, and eligibility components of Medicaid 
and CHIP in the fiscal year under review.  CMS measures Medicaid and CHIP improper 
payment rates using a 17-state rotation so that each state is reviewed once every three years.  
 
In light of changes to the way states adjudicate eligibility for Medicaid and CHIP under the 
Affordable Care Act, during FY 2016, CMS continued to update the PERM eligibility 
component measurement methodology and related program regulations to reflect the required 
changes.  During this time, CMS did not conduct the eligibility measurement component of 
PERM and the national Medicaid eligibility improper payment rate was held constant at the FY 
2014 reported rate as a proxy in the overall improper payment rate calculation.  In place of 
PERM eligibility, all states are required to conduct eligibility review pilots through FY 2018.  
The eligibility review pilots provide more targeted, detailed information on the accuracy of 
eligibility determinations and provide states and CMS with critical feedback during initial 
implementation. 
 
CMS reported in the FY 2016 Agency Financial Report (AFR) the national Medicaid improper 
payment rate that is based on measurements that were conducted in FYs 2014, 2015, and 
2016.  The FY 2016 national Medicaid improper payment rate is 10.48 percent, representing 
$36.3 billion in gross improper payments  The FY 2016 national component improper payment 
rates are as follows:  Medicaid FFS12.42 percent, and Medicaid managed care0.25 
percent.  The Medicaid eligibility component improper payment rate is held constant at the FY 
 
  52  2014 reported rate of 3.11 percent.  The Medicaid improper payment rate increased from 9.78 
percent in FY 2015 to 10.48 percent in FY 2016.  The increase was due to state difficulties 
coming into compliance with new requirements for: (1) all referring or ordering providers to be 
enrolled in Medicaid and the inclusion of the referring or ordering National Provider Identifier 
(NPI) on claims; (2) states to screen providers under a risk-based screening process prior to 
enrollment; and (3) the inclusion of the attending provider NPI on all electronically filed 
institutional claims. While these requirements will ultimately strengthen Medicaids integrity, it 
is not unusual to see increases in improper payment rates following the implementation and 
initial measurement of new requirements because it takes time for states to make changes 
required for compliance.   
   
CMS also reported in the FY 2016 AFR the national CHIP improper payment rate that is based 
on measurements that were conducted in FYs 2014, 2015, and 2016.  The FY 2016 national 
CHIP improper payment rate is 7.99 percent, representing $0.7 billion in gross improper 
payments.  The national component improper payment rates are as follows:  CHIP FFS10.15 
percent and CHIP managed care1.01 percent.  The CHIP eligibility component improper 
payment rate is held constant at the FY 2014 reported rate of 4.22 percent.  The CHIP improper 
payment rate increased from 6.80 percent in FY 2015 to 7.99 percent in FY 2016. The increase 
was due to state difficulties coming into compliance with the new requirements described in 
Medicaid above. 
 
Medicaid 1115 Financial Oversight 
 
The Medicaid Section 1115 demonstration is an increasingly important vehicle for state 
innovation in Medicaid and CHIP program development, expansion and financing. Three 
quarters of states operate at least one 1115 demonstration, and there are nearly 60 active 
demonstrations for which federal outlays totaled $89 billion in FY2014. The Medicaid portfolio 
of Section 1115 demonstrations is growing in number, federal outlays, and policy importance 
and complexity. CMS has committed additional staff and reorganized Section 1115 
demonstration work to develop and implement a more robust approach to monitoring and 
oversight of these demonstrations.   
 
Staff activities in 2016 included  developing a new budget neutrality calculation policy  under 
which projected expenditures that are compared to estimated demonstration costs will be based 
on more current and realistic expenditure growth assumptions,  a new uncompensated care (UC) 
pools policy that resizes the pools to the extent the pool has been substituting for payment that 
could be provided by Medicaid through payment of appropriate rates or expansion of coverage, 
and participating on a new taskforce to develop a phased approach to building standard operating 
procedures and reporting tools to strengthen Section 1115 fiscal and program monitoring.  The 
staff are working closely with technical assistance contractors to build core performance 
measurement sets for high priority demonstrations.  They also work with states to include these 
measures in the demonstration design and reporting requirements, and then monitor 
demonstration progress against them.  The same staff supports a CMS IT contractor in 
developing business requirements for an information management system that will strengthen 
federal monitoring and analysis of performance trends across states and over time.  The second 
version of this system was recently released and staff are being trained on it.    
   
 
  53  Medicaid/CHIP Financial Management Project 
 
Under this project, funding specialists, including accountants and financial analysts, worked to 
improve CMS financial oversight of the Medicaid Program and CHIP.  In FY 2016 through the 
continued efforts of these specialists, CMS removed an estimated $608 million (with 
approximately $230 million recovered and $378 million resolved) of approximately $8.0 billion 
identified in questionable Medicaid costs.  
 
Furthermore, an estimated $666 million in questionable reimbursement was actually averted due 
to the funding specialists preventive work with states to promote proper state Medicaid 
financing.  The funding specialists activities included reviews of proposed Medicaid state plan 
amendments that related to reimbursement; development of financial management reviews; 
research regarding state Medicaid financing policy and practices; collaboration with states to 
resolve the Medicaid and CHIP portions of the A-133 Single State audits; and identification of 
sources of the non-Federal share of Medicaid program payments to ensure proper financing of 
Medicaid program costs. 
  
Extend Work in Medicare Parts C and D 
 
CMS is committed to expanding program integrity activities in capitated, managed care 
programs in Medicare.  For example, CMS has strengthened oversight of Medicare Part C and 
Part D plan sponsors by conducting audits that detect whether plans are delivering the 
appropriate health care services and medications for which they are being paid. 
 
Medicare Drug Integrity Contractor (MEDIC) 
 
There are two MEDIC contractors, each with distinct responsibilities related to Part C and Part D 
benefits.  
 
  The National Benefit Integrity MEDIC is responsible for processing and tracking all Part 
C and Part D complaints, requests for information, and referrals to law enforcement, and 
conducting proactive data analysis and investigations. 
 
  The Outreach and Education MEDIC is responsible for conducting outreach and 
education activities for Part C and Part D stakeholders. 
 
National Benefit Integrity (NBI) MEDIC 
 
In the first nine months of FY 2016, NBI MEDIC referrals have resulted in sentences ordering 
restitution of $72.5 million, and $0.9 million in civil settlements according to FY 2016 
notifications from law enforcement.  The NBI MEDIC was responsible for assisting the OIG and 
the Department of Justice (DOJ), through data analysis and investigative case development, in 
achieving arrests, indictments, and convictions, from FY 2016 notifications.  As a result of the 
NBI MEDICs data analysis projects, HHS recovered $78.5 million in the first nine months of 
FY 2016 from Part D sponsors.   
 
  54  Outreach and Education (O&E) MEDIC  
 
The Outreach and Education MEDIC provides Part C and Part D plans with training tools 
through online content, webinars, and facilitation of quarterly fraud work groups.  CMS hosts 
Medicare Parts C and D Fraud Waste and Abuse (FWA) Trainings, as in-person events and 
virtual training webinars.  Program integrity professionals from plan sponsors, pharmacy benefit 
managers (PBMs), law enforcement, CMS, and CMSs contractors from across the nation 
attended these events.  These trainings provide valuable information about Part C and 
Prescription Drug fraud schemes and anti-FWA activities and initiatives.  Additionally, during 
in-person trainings, attendees share data and leads on suspected potential fraud that they take 
back to their organizations for further investigation.  CMS also provides outreach and 
educational materials to program integrity stakeholders through the CMS O&E MEDIC website, 
which had more than 3,000 vetted members at the close of FY 2016. 
 
Medicare Parts C and D Marketing Oversight   
 
CMS takes compliance action against Part C, Part D Prescription Drug Plans (PDPs), Section 
1876 Cost Plans, and Medicare-Medicaid Plans (MMPs) that fail to send timely and accurate 
Annual Notice of Change (ANOC)/Evidence of Coverage (EOC) documents to Medicare 
enrollees.  Both documents provide Medicare enrollees with vital information that can impact 
their ability to make informed choices concerning their Medicare health care and prescription 
drug options.   
 
Program Audit  
 
CMS conducts program audits of Part C and Part D plan sponsors to evaluate their delivery of 
health care services and medications to beneficiaries.  In order to conduct a comprehensive audit 
of a sponsors operation and maximize Agency resources, program audits in 2016, as well as in 
prior years, occur at the parent organization level.  
 
Sponsors have all program areas audited when possible, unless a protocol was not applicable to 
their operation.  Sponsors who have deficiencies cited in their audit report are required to correct 
all deficiencies and undergo validation to ensure issues have been corrected before the program 
audit can be closed. 
 
In general, program audits give CMS reasonable assurance that sponsors deliver benefits in 
accordance with the terms of their contract and plan benefit package.  However, we also have 
authority to take enforcement actions, up to and including termination, if warranted, for findings 
that involve direct beneficiary harm or the potential to result in such harm. 
 
We have greatly increased the level of transparency with respect to our audit materials, the 
performance of our audits, and the results of those audits, including any enforcement actions that 
may result.  We believe that program audits and consequences of possible enforcement actions 
are continuing to drive improvements in the industry and are increasing sponsors compliance 
with core program functions in the Part C and Part D program.    
 
  55  Compliance and Enforcement 
CMS has the authority to take enforcement or contract actions when CMS determines that a Part 
C or Part D plan sponsor either: 
 
  Substantially fails to comply with program and/or contract requirements,  
  Is carrying out its contract with CMS in a manner that is inconsistent with the efficient 
and effective administration of the Medicare Part C and Part D program requirements, or 
  No longer substantially meets the applicable conditions of the Medicare Part C and D 
program. 
 
Enforcement and contract actions include: 
 
  Civil monetary penalties (CMP) 
  Intermediate sanctions (i.e., suspension of marketing, enrollment, payment), and 
  Terminations. 
 
Part C Benefits Review Activities 
 
Each year, Part C organizations are required to submit bids and plan benefit packages detailing 
how their Part C plans will provide coverage to beneficiaries for the following year.  These 3,600 
Part C plans cover more than 17 million beneficiaries.  Bid and plan benefit submissions are 
reviewed to ensure they do not discriminate against beneficiaries and comply with CMS 
regulations.  Plan requirements are established and communicated annually and the following 
reviews are performed: 
 
  Low Enrollment PlansEach year, CMS evaluates existing Part C plans that have low 
total enrollment to make sure these plans are sustainable over time and protect 
beneficiaries from selecting a potentially unsustainable plan. 
 
  Total Beneficiary Cost (TBC)Evaluate increases in beneficiary cost sharing or 
decreases in plan benefits from one year to the next.  This evaluation makes sure 
beneficiaries receive value in their benefit package selection and protects them from large 
increases in out of pocket costs. 
 
  Maximum Out of Pocket Costs (MOOP)This review examines the maximum out-of-
pocket costs that face beneficiaries who enroll in Part C and protects beneficiaries from 
very high out of pocket medical costs. 
 
  Meaningful DifferenceThis review helps to reduce potential confusion for beneficiaries 
when they are choosing between multiple plan options.  By conducting this review, CMS 
helps to protect meaningfully different choices between plans and prevent Part C 
organizations from offering similar plans in the same geographic area. 
 
  Service Category Cost-Sharing StandardsEach year, CMS evaluates the cost-sharing 
plans include in their bids and plan benefit packages to make sure the plans do not exceed 
established limits and are not discriminatory.   
 
  56   
  Actuarial EquivalenceCMS also reviews bids to make certain the estimated cost 
sharing presented in the bid is actuarially equivalent to the cost-sharing levels in Original 
Medicare.  CMS currently examines four categories for actuarial equivalence and this 
review helps guard against plans imposing discriminatory cost-sharing on beneficiaries. 
 
  Supplemental BenefitsThere are several reviews conducted in this area, including a 
review of supplemental benefits that help make sure that any optional supplemental 
benefits offered are of reasonable value, as well as a review to make certain the benefits 
are offered in a non-discriminatory fashion. 
 
All of these reviews are conducted in careful coordination with the Office of the Actuary and the 
Medicare Drug Benefit Group to make certain that plans make all necessary changes to their bids 
and plan benefit packages.  These reviews occur between early June and August and involve 
communications with Part C organizations to correct issues and resubmit their bids and plan 
benefit packages as necessary.  Following bid and plan benefit approval, Part C organizations 
must complete the contracting process with CMS and may market to beneficiaries beginning   
October 1.  Part C benefits requirements and review processes are intended to protect 
beneficiaries from discrimination and to make sure that Part C plans provide value to enrollees. 
 
Part C Encounter Data Processing System Contract 
 
The Part C Encounter Data Processing System (EDPS) is currently being maintained and 
modified out of guidance published in the final FY 2009 inpatient prospective payment system 
(IPPS) rule.  In that rule, CMS revised regulations to clarify that CMS has the authority to 
require Part C organizations to submit encounter data for each item and service provided to Part 
C plan enrollees.  Consistent with this authority, CMS is requiring Part C organizations to submit 
encounter data for dates of service January 3, 2012 and later.  Part C plans are required to submit 
data for all institutional, professional, and DME services provided to Part C Medicare Advantage 
plan enrollees on or after that date.  To date, CMS has collected over 1.7 billion encounter data 
(ED) records.   
 
The encounter data detail each item and service provided to enrollees of Part C 
organizations.  These records are comparable in format and detail to claims submitted to the 
MACs by FFS providers.  The encounter data collected by EDPS will allow CMS to recalibrate 
the risk adjustment payment model, so that Part C payments more accurately reflect the patterns 
of care and the predicted costs of diseases for Part C enrollees.  Recalibrating the model on Part 
C diagnoses and expenditures, rather than using the FFS experience, will result in payments that 
are more accurate to Part C organizations.  CMS is also able to use the information to evaluate 
service utilization, assess quality of care, and assess the performance of Part C plans. 
 
Beginning with payment year 2015, CMS began to use encounter data as an additional source of 
diagnoses to risk adjust payments to Part C organizations.  For payment year 2016, CMS 
continued that transition and will ultimately use encounter data as the sole source of plan-
submitted diagnosis information.   
 
 
  57  Improper Payment Rate Measurement and Increased Accountability in Medicare Advantage 
(Part C) and Medicare Prescription Drug Benefit Program (Part D) 
 
In compliance with IPIA, as amended by IPERA and IPERIA, CMS has implemented a 
systematic plan regarding improper payments for Part C and D programs.   
 
The Part C gross improper payment estimate reported for FY 2016 (based on calendar year 2014) 
is   
9.99 percent or $16.2 billion.  The Part C payment error is driven by errors in risk adjustment 
data (clinical diagnosis data) submitted by Part C plans to CMS for payment purposes.  
Specifically, the Part C payment error estimate reflects the extent to which diagnoses that plans 
report to CMS are not supported by medical record documentation.   
 
In an effort to improve the Part C improper payment rate, CMS has implemented four key 
specific corrective actions described below:  
 
  Contract-Level Audits:  CMS is proceeding with the RADV contract-level audits to 
recover overpayments.  RADV verifies, through medical record review, the accuracy of 
enrollee diagnoses submitted by Part C organizations for risk adjusted payment.  RADV 
audits are CMSs primary corrective action to recoup improper payments.  CMS expects 
that payment recovery will have a sentinel effect on the quality of risk adjustment data 
submitted by plans for payment.  Payment recovery for the pilot audits has been 
completed and totaled $13.7 million ($5.4 million was recovered in FY 2014, $5.0 
million in FY 2013, and $3.4 million in FY 2012).  RADV audits of payment year 2011, 
which began in FY 2014, will be the first HHS reviews to recoup funds based on 
extrapolated estimates.  In addition, during FY 2016, payment year 2012 audits continued 
and payment year 2013 audits were initiated.   
  
  Overpayment Recoveries Related to Regulatory Provisions:  In CMS-4159-F, Policy 
and Technical Changes to the Part C and the Medicare Prescription Drug Benefit 
Programs (79 FR 29843, May 23, 2014), CMS codified the Affordable Care Act 
requirement that Part C organizations must report and return overpayments that they 
identify.  In CMS-1613-F, The Calendar Year 2015 Outpatient Prospective Payment 
System (OPPS) and Ambulatory Surgical Center (ASC) Rule (79 FR 66769, November 
10, 2014), CMS also established a payment recovery and appeal mechanism to be applied 
when CMS identifies erroneous payment data submitted by a Part C organization. In FY 
2016, Part C organizations reported and returned approximately $317 million in self-
reported overpayments.  
 
  Recovery Audit Contractor:   As part of the procurement process to secure a Medicare 
Part C RAC, CMS posted a Request for Quote in June 2014; however, no responses were 
received from that solicitation.  More recently, a Request for Information was posted in 
December 2015 to solicit additional feedback from industry regarding this program.  
CMS received several submissions in response to the announcement.  CMS continues its 
implementation efforts and anticipates awarding contract in 2017. 
 
 
  58    Training:  CMS continued its national fraud, waste, and abuse in-person and webinar 
training sessions for Part C plans. 
 
The Part D gross improper payment estimate reported for FY 2016 (based on CY 2014) is 3.41 
percent or $2.4 billion. The methodology for calculating the FY 2016 Part D error estimate has 
been revised from prior years, when CMS reported a Part D composite rate consisting of four 
components:  Payment Error Related to Low Income Subsidy Status (PELS); Payment Error 
Related to Medicaid Status (PEMS); Payment Error Related to Prescription Drug Event Data 
Validation (PEPV); and Payment Error Related to Direct and Indirect Remuneration (PEDIR).   
 
With OMBs approval, for FY 2016 and subsequent years, the Part D error estimate measures 
only one component, the PEPV, which is the area where the majority of error for the program 
exists.  The three other previously measured componentsPELS, PEMS, and PEDIRpose 
very little risk of payment error to the government.  Over the years of measurement, the error 
estimates for these components significantly decreased, such that the effort and resources 
required to measure them were no longer cost effective.   
 
In an effort to improve the Part D error rate, CMS has implemented three key specific corrective 
actions described below:   
 
  Training:  CMS continued its national training sessions for Part D sponsors on payment 
and data submission.  CMS also continued its national fraud, waste, and abuse in-person 
and webinar training sessions for Part D sponsors. 
 
  Outreach:  CMS continued formal outreach to plan sponsors for invalid/incomplete 
documentation.  CMS distributed Plan Sponsor Summary Reports to all plans 
participating in the national payment error estimate.  This report provided feedback on 
their submission and validation results against an aggregate of all participating plan 
sponsors. 
 
  Overpayment Recoveries Related to Regulatory Provisions:  CMS codified the 
Affordable Care Act requirement that Part D sponsors must report and return 
overpayments that they identify.  CMS also established a payment recovery and appeal 
mechanism to be applied when CMS identifies erroneous payment data submitted by a 
Part D sponsor.  In FY 2016, Part D sponsors reported and returned approximately     
$9.5 million in self-reported overpayments. 
 
Provide Greater Transparency into Program Integrity Issues within Medicare and 
Medicaid 
 
CMS is dedicated to providing greater transparency into program integrity issues through 
education, outreach, partnership, strategic communications, and data releases.  CMS is well 
positioned to work with its partners and stakeholders to share best practices and lessons learned 
in program integrity.  Increased transparency and accountability ensure program efficiency and 
effectiveness. 
 
 
  59  Provider Outreach and Education 
 
One of the goals of provider education and outreach is to reduce the Medicare and Medicaid 
improper payment rates by giving Medicare and Medicaid providers the timely and accurate 
information they need to bill correctly the first time.  The Medicare FFS claims processing 
contractors, known as Medicare Administrative Contractors (MACs), educate Medicare 
providers and their staff about Medicare policies and procedures, including local coverage 
policies, significant changes to the Medicare program, and issues identified through review of 
provider inquiries, claim submission errors, medical review data, and Comprehensive Error Rate 
Testing program data.  Medicare contractors use a variety of strategies and communication 
channels to offer Medicare providers and suppliers a broad spectrum of information about the 
Medicare program, including CMS-developed materials and contractor-developed materials. 
 
Beneficiary Education 
 
CMS and HHS launched the Fraud Prevention Campaign in January 2010 to increase public 
awareness about Medicares fight against fraud.  Each year, CMS informs Medicare beneficiaries 
on an ongoing basis about the importance of guarding their personal information against identity 
theft and how they can protect against and report suspected fraud.  In FY 2015, this effort 
included the Medicare & You handbook and other beneficiary education materials, 1-800-
MEDICARE, and www.medicare.gov.  Similar messages are disseminated through a wide range 
of beneficiary touch points, including the Medicare Summary Notice (MSN), the 
myMedicare.gov Message Center, and response letters to beneficiary inquiries.  
 
Healthcare Fraud Prevention Partnership (HFPP) 
 
In July 2012, the Secretary of HHS and the U.S. Attorney General announced a ground-breaking 
partnership to fight fraud, waste, and abuse across the health care system.  The HFPP is a 
voluntary, public-private partnership consisting of the Federal Government, state agencies, law 
enforcement, private health insurance plans, and health care anti-fraud associations.  The purpose 
of the HFPP is to improve the detection and prevention of health care fraud, waste, and abuse by: 
 
  Exchanging data and information between the public and private sectors; 
  Leveraging various analytic tools against data sets provided by HFPP Partners; 
  Providing a forum for public and private leaders and subject matter experts to share 
successful practices and effective methodologies for detecting and preventing health care 
fraud, waste, and abuse.   
 
In FY 2016, the HFPP reached a membership level of 70 partner organizations, representing over 
65 percent of covered lives within the United States, and an increase of 30 percent since   
FY 2015.  The amount of data collected in support of studies has increased by 300 percent in   
FY 2016, leading to the performance of new studies, the replication of prior studies with new 
data, and the attainment of actionable leads.    
   
 
  60  Open Payments  
 
Open Payments is a national program that promotes transparency by publishing data on the 
financial relationships between the health care industry (applicable manufacturers and group 
purchasing organizations, or GPOs) and health care providers (physicians and teaching 
hospitals).  
 
The Affordable Care Act requires the Secretary of the Department of Health and Human 
Services (HHS) to collect and display information on payments and other transfers of value and 
ownership/investment interest annually.  CMS publishes information for each reporting year on 
its public website, and updates the website annually with an additional full year of data.  The 
public can search, download, and evaluate the reported data. The data displayed on the Open 
Payments website are self-reported by applicable manufacturers and GPOs. 
In Fiscal Year 2016, CMS published $7.5 billion in payments and ownership and investment 
interests that were made from applicable manufactures and GPOs to physicians and teaching 
hospitals. This amount is comprised of 11.9 million total records attributable to 618,931 
physicians and 1,116 teaching hospitals. Payments in the three major reporting categories 
included: 
  $2.6 billion in general (i.e., non-research related) payments 
  $3.9 billion in research payments 
  $1.0 billion of ownership or investment interests held by physicians or their immediate 
family members 
 
Over the course of the Open Payments program since 2014, CMS has published $28.2 million 
records, accounting for $16.8 billion in payments and ownership and investment interests.   
 
Administration for Community Living 
 
The mission of the Senior Medicare Patrol (SMP) program is to empower and assist Medicare 
beneficiaries, their families, and caregivers to prevent, detect, and report health care fraud, 
errors, and abuse through outreach, counseling, and education.  In FY 2016, HHS allocated   
$18 million in HCFAC funding to the Administration for Community Living (ACL) to support 
SMP program infrastructure and provide grants to SMPs in 53 states and territories.  
 
Until FY 2016, ACL received funding from a separate Congressional appropriation (the Older 
Americans Act) to support SMP base grants.  However, the Consolidated Appropriations Act of 
2016 required the SMP program to be fully funded by HCFAC in FY 2016.  As such, ACL was 
allocated $18 million from CMSs Medicare Integrity Program portion of the discretionary 
HCFAC appropriation to support the SMP program.    
 
SMP Project Activities and Outcomes 
 
ACL uses the majority of its HCFAC allocation to fund SMP projects in each state, Guam, 
Puerto Rico, and the District of Columbia.  In FY 2016, ACL awarded $14.7 million in grant 
funding to SMPs nationwide.  Each SMP grantee receives a standard, base amount of funding to 
 
  61  support the operation of their project, as well as an additional, variable amount of funding based 
on the number of Medicare beneficiaries residing in the state and the ruralness of the state.  
 
Each year, the HHS Office of the Inspector General (HHS-OIG) completes an annual 
performance report on the SMP projects.  For 2015, ACL requested that the OIG complete only 
an abbreviated version of the report that is typically produced due to transitions in the SMP 
program last year, including a mid-year transition to a new data reporting system and the rollout 
of updated performance measures.  As such, the 2015 OIG report included only data for those 
SMP performance measures that remained the same, including documented cost avoidance 
($21,533), expected recoveries to Medicare and Medicaid ($2.5 million), and savings to 
beneficiaries and others ($35,059) that resulted from the SMP projects.  Annual HHS-OIG 
performance reports on the SMP program will resume as usual beginning for CY 2016.    
 
Since SMPs inception, the program has educated over 6.6 million beneficiaries in group or one-
on-one counseling sessions and has reached more than 30 million people through community 
outreach events.  The primary focus of these sessions is on education, prevention, and teaching 
beneficiaries how to protect themselves and avoid fraud in the first place.  This is the true value 
of the SMP program.  However, the impact of these education and prevention activities is 
extremely difficult to quantify in dollars and cents.  As HHS-OIG indicated in their June 2016 
report on the SMP program: 
 
We continue to emphasize the projects may not be receiving full credit for recoveries, 
savings, and cost avoidance attributable to their work.  It is not always possible to track 
referrals to Medicare contractors or law enforcement from beneficiaries who have 
learned to detect fraud, waste, and abuse from the projects.  In addition, the projects are 
unable to track the substantial savings derived from a sentinel effect whereby Medicare 
beneficiaries scrutiny of their bills reduce fraud and errors.   
 
ACL recognizes the importance of measuring the value of the SMP program impact to the fullest 
degree possible.  Toward that end, in FY 2013, ACL awarded a three-year research grant to Tufts 
University to measure the value of SMP prevention activities.  Tufts has designed a research 
methodology, collaborated with SMPs to pilot the methodology, and collected data about the 
health care fraud knowledge, attitudes, and behaviors of beneficiaries both before and (three to 
six months) after attending SMP education sessions. Preliminary results appear to show it is 
possible to quantify and demonstrate the incredible value of SMP prevention efforts. Final 
research results are expected in early FY 2017.  
 
Despite the factors that have limited ACLs ability to quantify the value of the SMP program in 
preventing, identifying, and reporting health care fraud, HHS-OIG has documented over $124.6 
million in savings attributable to the program as a result of beneficiary complaints since its 
inception in 1997.  
 
SMP Infrastructure and Program Support  
SMP Resource Center 
In FY 2016, the National SMP Resource Center will be awarded year three of their three year 
grant.  The SMP Resource Center has provided technical assistance, support, and training to the 
 
  62  SMP projects since 2003.  The goal of the Center is to provide professional expertise and 
technical support, serve as an accessible and responsive central source of information, maximize 
the effectiveness of the SMP projects in health care fraud outreach and education, and ensure a 
fully consolidated national approach to reaching Medicare beneficiaries.  The Center has also 
been instrumental in supporting ACL efforts to forge national visibility for the SMP program.   
 
SMP Information and Reporting System (SIRS)  
In FY 2016, ACL implemented a new SMP data reporting system (SIRS) to support the evolving 
needs to the SMP program. The previous SMP reporting system, SMART FACTS, had been in 
operation for seven years and was at the end of its functionality.  SIRS is expected to last at least 
10 years and provides SMPs with advanced reporting features and data analytics to help them 
better manage their programs.  
 
Target Population Grants 
The goal of the SMP program is to provide education to all Medicare beneficiaries.  However, 
there are specific populations that are historically hard to reach.  In FY 2015, ACL awarded four 
grants to organizations that initiated seventeen-month projects to increase awareness, 
empowerment, and actions to prevent health care fraud amongst several generally underserved 
populations, including Medicare beneficiaries under age 65, Lesbian, Gay, Bisexual and 
Transgender (LGBT) beneficiaries, Hispanic and Latino beneficiaries, and Asian American and 
Pacific Islander beneficiaries.  The goal of these grants is to develop new, efficient, and 
sustainable approaches for ensuring high-quality, culturally competent service delivery to help 
educate consumers to prevent health care fraud.  This work continued in FY 2016 and will 
conclude in FY 2017.  
 
SMP Customer Satisfaction Survey  
In late FY 2015, ACL issued a contract to develop a customer satisfaction survey for the SMP 
program.  This will be the first national survey to ascertain the quality and effectiveness of the 
services provided by SMP and to determine if beneficiaries are receiving accurate, relevant and 
timely information. While the SMP program currently tracks output and outcome measures such 
as number of SMP team members, group outreach and education events, individual interactions, 
and savings, customer satisfaction is not one of them. As a result, there is no current 
understanding of the link between the quality of the information received and the likelihood to 
avoid health care fraud, errors, and abuse. 
 
The survey will be conducted over a three-year period beginning in early 2017. The intent is to 
have each SMP project surveyed during one of the three years.  The results from the survey will 
be used to measure satisfaction among individuals who attend SMP group education sessions, as 
well, as how the program can be improved to provide better service to its target population.  
 
Office of the General Counsel  
 
In FY 2016, the Office of the General Counsel (OGC) was allocated approximately $7.5 million 
in HCFAC funding by HHS to supplement OGCs efforts to support program integrity activities.  
Many of OGCs efforts were focused heavily on program integrity review, in which OGC 
reviews CMS programs and HCFAC activities in order to strengthen them against potential 
 
  63  fraud, waste, and abuse.  OGC also continued its active litigation role in order to assist in the 
recovery of program funds.  During FY 2016, OGC was involved in a wide range of HCFAC 
efforts that resulted in Government recoveries of over $2 billion in judgments, settlements, or 
other types of recoveries, savings, or receivables as described elsewhere in this report.     
 
The Affordable Care Act 
The Affordable Care Act (ACA) significantly amended existing anti-fraud statutes.  These 
provisions established fundamental expectations for compliance, disclosure, transparency, and 
quality of care, and are matched by corresponding enforcement provisions.  Some specific 
provisions of the ACA that particularly support HCFAC priorities include amending Medicare 
and Medicaid provider/supplier enrollment requirements, strengthening overpayment provisions 
to specifically invoke the False Claims Act (FCA), and creating a statutory disclosure protocol 
for violations of the physician self-referral prohibition known as the Stark law.  During FY 
2016, as ACA programs continued to be implemented, OGC spent significant time and resources 
working with the relevant CMS client components to ensure that program integrity issues were 
reviewed and resolved, and assisted CMS in addressing program integrity and compliance 
problems as they occurred.   
 
HEAT 
During FY 2016, OGC was involved in Health Care Fraud Prevention and Enforcement Action 
Team (HEAT) initiatives and worked closely with other HEAT members to combat fraud, waste, 
and abuse in the Medicare and Medicaid programs by providing advice on the myriad legal 
issues presented as the Federal Government works to initiate innovative anti-fraud programs in 
various hotspots throughout the country.  OGC assisted DOJ in pursuing both criminal and civil 
cases involving individuals and entities seeking to defraud the Medicare and Medicaid programs 
and to defend any federal court challenges that are brought as a result of HEAT initiatives.  
OGCs involvement in HEAT also included advising CMS on provider and supplier revocations, 
payment suspensions, recoupments, and defending the administrative appeals that resulted.  
 
FCA and Qui Tam Actions 
OGC supported DOJ in assessing qui tam actions filed under the FCA by interpreting complex 
Medicare and Medicaid rules and policies to assist DOJ in discerning which allegations were 
program violations and should be pursued, and to help DOJ focus Federal Government resources 
on those matters which were most likely to result in a recovery of money for the Government.  
When DOJ filed or intervened in a FCA matter, OGC provided significant litigation support, 
including assisting DOJ in evaluating the merits of the allegations, interviewing and preparing 
witnesses and responding to often extensive requests for documents and information. OGC also 
expended considerable resources in responding to requests for information and witness testimony 
in declined qui tams that were litigated by relators.  In FY 2016, OGC participated in FCA and 
related matters that recovered over $1.8 billion for the Federal Government.  The types of FCA 
cases that OGC worked collaboratively with DOJ on included: drug pricing manipulation, 
marketing activity by pharmaceutical manufacturers that resulted in Medicare and Medicaid 
paying for drugs for non-covered indications, fraudulent billing by laboratories, hospice fraud, 
physician self-referral violations, incident to violations, provider upcoding, and Medicare 
Advantage matters, especially relating to various risk adjustment issues.   
 
   
 
  64  Provider/Supplier Suspensions and Enrollment Revocations or Denials 
Suspensions play a critical role in protecting against the abuse of program funds.  OGC advised 
CMS on whether to suspend payments to Medicare providers and suppliers and defended the 
suspensions when challenged through the appeal process.  In FY 2016, OGC attorneys were 
involved in a myriad of suspension and recoupment actions, which involved suspected fraudulent 
billings by many different segments of the health care industry, including DME suppliers, 
ambulance companies, physicians, infusion clinics, therapists, home health agencies, and 
diagnostic testing facilities.  OGC also represented CMS when a provider or supplier appealed a 
denial of enrollment or revocation.  In FY 2016, OGC represented CMS in appeals before the 
HHS Departmental Appeals Board (DAB) and worked to resolve these cases without formal 
hearings. Further, OGC continued to advise CMS on the interpretation of enrollment regulations 
and reviewed proposed enrollment rules and manual changes.   
 
Medicare Prescription Drug Program (Part D) and Part C Compliance 
During FY 2016, OGC continued to provide extensive advice to CMS on a variety of Part D and 
Part C-related contract compliance issues, including identifying enforcement options against 
sponsors that are noncompliant or violate program rules, such as the Marketing Guidelines.  
OGC reviewed compliance-related correspondence that CMS issued to Part D sponsors and Part 
C plans in the form of warning letters, corrective action plan letters, intermediate sanctions, Civil 
Monetary Penalty (CMP) notices, and non-renewal or termination notices.   
 
Civil Monetary Penalties 
CMS has the responsibility for administering numerous CMP provisions enacted by Congress to 
combat fraud, waste, and abuse by enforcing program compliance and payment integrity.  In FY 
2016, OGC provided legal advice to CMS regarding the development and imposition of CMPs 
and defended CMS in many administrative appeals and judicial litigation resulting from these 
cases. In addition, OGC provided extensive legal advice and guidance to CMS as well as the 
Department on the implementation and interpretation of the Federal Civil Penalties Inflation 
Adjustment Act Improvements Act of 2015 (Sec. 701 of the Bipartisan Budget Act, Pub. L. 114-
74) which adjusts for inflation all applicable penalty amounts under the Social Security Act. 
 
Petitions for Remission 
OGC collaborated with federal law enforcement, including the FBI, U.S. Attorneys Offices, the 
Secret Service, U.S. Postal Service, and the U.S. Marshals Service in filing petitions for 
remission directed to recover assets subject either to administrative forfeiture by federal law 
enforcement or civil judicial forfeiture by DOJ.  Each petition set forth the background of the 
fraudulent scheme, the history of Medicares payments, and how the fraudulently induced 
payments could be traced to the seized assets.  During FY 2016, OGC petitioned these agencies 
to recover funds in both criminal and civil litigation matters in which Medicare was a victim of 
fraud. 
     
Regulatory Review and Programmatic Advice 
In FY 2016, OGC advised CMS on a vast variety of regulatory and program issues, all to assist 
CMS in strengthening its programs and activities against fraud and to prevent the wrongful 
disbursement of program funds in the first instance.  Some highlights of OGC efforts include: 
providing counsel to the CMS Innovation Center regarding new payment and delivery models 
to improve the quality of care and reduce costs to the Medicare and Medicaid programs, working 
 
  65  with CMS to implement the agencys additional notice related to provider and supplier enroll-
ment moratoria, and providing counsel on the program integrity issues to CMS to assist in the 
ongoing implementation of existing models.   
 
Further, OGC worked on a rule amending CMSs enrollment regulations to strengthen program 
integrity.  Using existing authority from the Social Security Act, including authority added by the 
Affordable Care Act, these proposals would, among other things:  (1) require providers and 
suppliers to disclose any affiliation with a provider or supplier that has certain characteristics 
indicating elevated risk (and would allow CMS to deny or revoke billing privileges based on this 
affiliation); (2) require those who order, refer, or prescribe a Medicare Part A or B item or 
service to be enrolled in Medicare or to have formally opted out of the Medicare program; (3) 
establish several new bases for CMS to revoke Medicare billing privileges; (4) expand the re-
enrollment bar following revocation; and (5) amend the regulations governing moratoria on 
enrollment.  OGC also worked closely with CMS on an extremely complex final regulation that 
clarifies providers and suppliers obligations to report and return self-identified overpayments.  
OGC also provided counsel to CMS in developing a proposed rule to refine the Medicaid error 
rate measure, or PERM, program and counseled CMS regarding the release of more granular 
payment error rate data.  In addition, OGC routinely worked with CMS to review legislative 
proposals regarding program integrity matters.  
 
Medicaid Program Integrity 
Continuing recent trends, OGC saw continued increasing involvement in FY 2016 in Medicaid 
program integrity issues as CMS devoted more resources to financial reviews and oversight and 
as states continued to present innovative proposals to reconfigure their Medicaid programs. OGC 
provided advice on Medicaid payment suspensions as well as advised on regulatory efforts to 
coordinate Medicaid provider and supplier enrollment.   OGC anticipates providing similar 
support to CMS with a recently launched initiative with the State of Ohio Medicaid Program that 
has so far recovered over $100,000. 
 
Physician Self-Referral 
OGC provided guidance to CMS and DOJ in navigating the complexities of the Stark physician 
self-referral law.  This consultation helps to build stronger cases and focus investigatory efforts, 
leading to successful results for the Government.  In FY 2016, OGC provided extensive counsel 
to CMS in its ongoing implementation of the Medicare Physician Self-Referral Disclosure 
Protocol (SRDP)created under the ACA to enable Medicare providers to self-disclose 
technical violations of the Stark laws physician self-referral prohibition.  OGC advised CMS 
regarding numerous matters disclosed under this protocol, now numbering over 580.   
 
Medicare Secondary Payer (MSP) Workload 
OGCs efforts to recover conditional payments by Medicare that are the primary responsibility of 
other payers directly supports the HCFAC statutory goal of facilitating the enforcement of all 
applicable legal remedies for program fraud and abuse.  During FY 2016, OGC has been 
successful in establishing the right to recover over $10.5 million for Medicare under the MSP 
program.  Further, statutory changes implementing mandatory insurance reporting requirements 
to the MSP law have strengthened and expanded OGCs efforts in this areato the benefit of the 
Medicare Trust Fundsincluding the authority for CMS to impose substantial CMPs for failure 
to report.   
 
  66   
Bankruptcy Litigation 
OGC protects Medicare funds from waste in bankruptcy cases by asserting CMS recoupment 
rights to collect overpayments, arguing to continue suspension or termination actions against 
debtors, seeking adequate assurances from the bankruptcy court that CMS interests in the 
debtors estate will be protected, arguing for the assumption of the Medicare provider agreement 
as an executory contract, and petitioning for administrative costs where appropriate.  In FY 2016, 
OGC asserted CMS interests in numerous bankruptcy and receivership actions involving 
physicians, hospitals, independent diagnostic test facilities, DME suppliers, nursing homes, and  
nursing home chains, collecting or establishing the right to collect over $14.5 million in 
recoveries involving bankrupt providers. 
 
Denial of Claims and Payments 
CMS and its contractors engaged in various activities and initiatives to detect and prevent 
abusive and fraudulent billing practices.  These measures included provider and beneficiary 
education, use of claim sampling techniques, and a more rigorous scrutiny of claims with 
increased medical review.  In FY 2016, OGC played a major role in advising CMS regarding the 
development and implementation of these types of program integrity measures and defended 
CMS in litigation brought by providers and suppliers who challenged these efforts.  OGC 
continued to aggressively defend CMS and its contractors in cases seeking damages for the 
alleged wrongful denial of claims, for being placed on payment suspension, and for not being 
granted extended repayment plans.   
 
In summary, OGCs FY 2016 work in support of CMS advances the specific goals of the 
HCFAC program, including program integrity, fraud prevention, and fraud response.  Most CMS 
operations have a fraud/abuse component, and OGCs work supporting all CMS substantive 
program areas directly supports the HCFAC programs goals of fraud and abuse prevention in 
those operational program areas. 
 
Food and Drug Administration Pharmaceutical Fraud Program 
 
In FY 2016, $4.25 million in HCFAC funding was made available for the FDA 
Pharmaceutical Fraud Program (PFP).  The PFP was instituted to enhance the health care 
fraud-related activities of FDA's Office of Criminal Investigations (OCI) and the Office of the 
General Counsel Food and Drug Division (OGC-FDD).  OCI, with the support of OGC-FDD, 
investigates criminal violations of the Federal Food, Drug, and Cosmetic Act (FFDCA), the 
Federal Anti-Tampering Act, and related Federal statutes. 
 
The PFP is designed to detect, prosecute, and prevent pharmaceutical, biologic, and medical 
device fraud.  The PFP gathers information from sources inside and outside FDA and focuses on 
fraudulent marketing schemes, application fraud, clinical trial fraud, and flagrant manufacturing- 
related violations concerning biologics, drugs, and medical devices.  The goal of the program is 
the early detection and prosecution of such fraudulent conduct and furthers FDAs public health 
mission by helping to reduce health care costs, in most cases before they are incurred, and deter 
future violators.  By initiating investigations of medical product fraud schemes earlier in their 
lifecycle, FDA is able to preclude potential public harm by barring medical products, which 
 
  67  have not followed the legal FDA approval processes and do not meet FDA standards, from 
making it to market, thus saving valuable health care dollars from being spent.  
 
The PFP has identified multiple alleged medical product fraud schemes through various avenues.  
Since the inception of the PFP, OCI has opened a total of 151 criminal HCFAC investigations.  
In FY 2016, FDAs sixth full fiscal year of HCFAC Program activity, OCI, through its PFP, 
opened 31 criminal investigations, described below: 
 
  Two investigations involving allegations of questionable manufacturing practices of 
foreign-based drug firms.  These investigations are focused on violations related to 
application fraud, data integrity, data manipulation, and product adulteration. 
 
  Two investigations involving allegations of questionable manufacturing practices of an 
injectable drug by a domestic firm causing the finished product to be super-potent.  These 
investigations focused on of misbranding and/or adulteration violations of misbranding 
and/or adulteration. 
 
  Three investigations involving allegations of questionable manufacturing practices of 
drug and medical devices ultimately causing public safety risks.  These investigations 
focused on misbranding and/or adulteration violations. 
 
  One investigation involving marketing schemes by medical device and drug 
manufacturers.  The investigation focused on device and drug misbranding violations 
related to intended uses, which are not FDA cleared or approved. 
 
  Twenty investigations involving allegations of clinical trial fraud.  These investigations 
focused in part on individuals suspected of falsifying/manipulating clinical trial data or 
conducting clinical trials without FDA oversight. 
 
  Three investigations involving allegations of application fraud.  These investigations are 
focused on individuals or companies who either submitted false/fraudulent information to 
FDA in order to obtain approval/clearance for an article did not submit the required 
information to legally market drugs, devices or biologics.     
 
  Of these investigations, four involve foreign-based companies. 
 
In regard to judicial action, the types of criminal investigations conducted through the PFP tend to 
be complex in nature requiring extensive document review and coordination with the affected FDA 
Center.  It is not unusual for these complex fraud investigations to last five years or more from 
initiation to conclusion.  Nevertheless, in April 2016, one of our PFP investigations opened in 
FY2014 resulted with a clinical trial coordinator being arrested and charged for falsifying 
documents within multiple clinical trials he was controlling.  The investigator was forging the 
primary investigators signature and back dating the forms he submitted to drug sponsors in 
order to receive payments.  It is estimated that the investigator profited nearly $500,000 from his 
actions. 
 
 
  68  Additionally, in July 2016, the majority owner of a compounding pharmacy that infected 750 
people with mold and resulted in 64 deaths and her husband pled guilty.  The remaining 
defendants are scheduled for trial in early 2017. 
 
Furthermore, FDA believes that various investigations already initiated under the PFP show 
promise of future judicial action that may include criminal prosecution and monetary 
recoveries.  These promising cases include several large foreign generic drug manufacturers 
under investigation for data integrity and other manufacturing violations which would deem 
their products adulterated and could possibly pose a risk to the public health and safety.  
Sixty percent of generic drugs in the United States are manufactured in foreign facilities.   
 
In addition to these investigative activities, in May 2016, FDA conducted a one-day training 
session for newly hired criminal investigators covering PFP-related topics.  In July 2016, FDA 
conducted a three day training session for current FDA criminal investigators.  The attendees 
were provided background on FDAs PFP and resources available to assist in investigations 
conducted under the PFP.  Information also included legal training by OGC-FDD on the Federal 
Food, Drug, and Cosmetic Act. 
 
   
 
  69  DEPARTMENT OF JUSTICE 
 
United States Attorneys 
 
In FY 2016, the United States Attorneys Offices (USAOs) were allocated $54.8 million in 
HCFAC funding for civil and criminal health care fraud enforcement efforts.  These funds 
supported attorneys, paralegals, auditors, and investigators, as well as litigation expenses for 
health care fraud investigations and cases.  The USAOs play a major role in health care fraud 
enforcement by bringing criminal and affirmative civil cases to recover funds wrongfully taken 
from the Medicare Trust Funds and other taxpayer-funded health care systems through fraud, 
waste, and abuse.  The USAOs litigate a wide variety of health care fraud matters, including 
false billings by physicians and other providers of medical services, overcharges by hospitals, 
Medicaid fraud, kickbacks to induce referrals of Medicare or Medicaid patients, fraud by 
pharmaceutical and medical device companies, home health and hospice fraud, and failure of 
care allegations against nursing home owners.  The USAOs also coordinate with CMS regarding 
the imposition of potential civil monetary penalties against a provider. 
 
To ensure a focused and coordinated approach to health care fraud enforcement, each USAO has 
designated criminal and civil health care fraud coordinators.  These coordinators work closely 
with outside investigative agencies and with trial attorneys in the Departments Civil and 
Criminal Divisions on health care fraud matters.  While the USAOs receive many health care 
fraud referrals directly from investigative agencies, they also receive referrals from the Civil 
Divisions Commercial Litigation Branch (Civil Fraud Section) and through the filing of qui tam 
(or whistleblower) complaints.  Qui tam cases either are handled jointly with trial attorneys in the 
Civil Fraud Section or are delegated to the USAO to handle independently.  The USAOs also 
handle most criminal and civil litigation at the federal appellate level. 
 
The USAOs also partner with the Departments Criminal Division on Medicare Fraud Strike 
Forces Teams which currently operate in nine areas across the country.  Each Strike Force team 
consists of dedicated AUSAs and support personnel from the USAO, as well as from the  
Criminal Division.  Examples of successful Strike Force cases are noted earlier in this report.   
 
To ensure that USAO personnel are knowledgeable and up-to-date on the law and tools for 
combatting health care fraud, HCFAC funding is used to train AUSAs and trial attorneys, as well 
as paralegals, investigators, and auditors on a wide variety of health care fraud enforcement 
matters.  In FY 2016, the Office of Legal Education (OLE) offered multiple trainings for 
auditors, investigators, and paralegals which included health care fraud topics.  OLE also offered 
an attorneys health care fraud course in May 2016, which was attended by more than 70 AUSAs 
and 30 Department trial Attorneys.  In August 2016, OLE hosted a white collar crime seminar 
that included a breakout session on health care fraud investigations.  Moreover, the Executive 
Office for United States Attorneys (EOUSA) presented approximately one webinar per month 
during FY 2016 on health care fraud issues.  Many AUSAs, investigators, auditors, and 
paralegals served as faculty for these OLE trainings, and also participated in other federal, state, 
and private health care fraud seminars.   
 
  70  Criminal Prosecutions20 
 
In FY 2016, the USAOs opened 975 new criminal health care fraud investigations and filed 
criminal charges in 480 cases involving 802 defendants.  During that same time period, 658 
defendants were convicted of health care fraud-related crimes during the year.    
 
Civil Matters and Cases21 
 
In FY 2016, the USAOs opened 930 new civil health care fraud investigations and had 1,422 
civil health care fraud matters pending at the end of the fiscal year. 
 
Civil Division 
 
In FY 2016, the Civil Division received approximately $35.3 million in FY 2016 HCFAC 
funding to support the health care fraud activities of the Commercial Litigation Branchs Fraud 
Section and the Consumer Protection Branch.  This amount also included funding to support the 
Department of Justices Elder Justice Initiative.   
 
The Commercial Litigation Branchs Fraud Section 
 
The Civil Divisions Commercial Litigation Branch (Fraud Section) investigates complex health 
care fraud allegations and files suit under the False Claims Act (FCA) to recover money on 
behalf of defrauded federal health care programs including Medicare, Medicaid, TRICARE, the 
Department of Veterans Affairs (VA), and the Federal Employee Health Benefits Program 
(FEHBP).  The Fraud Section works closely with the United States Attorneys Offices and often 
teams with the Consumer Protection Branch, HHS-OIG, state Medicaid Fraud Control Units and 
other law enforcement agencies to pursue allegations of health care fraud.  As a result of these 
efforts, the Fraud Section has obtained settlements and judgments in health care cases of over   
$2 billion almost every year since FY 2010 and over $2.4 billion in FY 2016 alone. 
 
The Fraud Section investigates and resolves matters involving a wide array of health care 
providers and suppliers.  Matters involving pharmaceutical and device manufacturers and 
hospitals continued to constitute some of the most significant matters pursued by the Fraud 
Section this past year.  Some cases involved allegations of hospitals and drug and device 
manufacturers paying kickbacks to health care providers, including physician practices, 
pharmacies, and hospitals, for referrals of patients, drugs, or devices (such as the Tenet, Novartis, 
Olympus, Millennium, Salix, Respironics, and Hollister matters discussed in the Highlights 
section) in violation of the Anti-Kickback Statute (AKS).  Other cases involved allegations of 
drug manufacturers underpaying drug rebates to the Medicaid program (the Wyeth/Pfizer matter 
discussed earlier in this report) and marketing and selling products based on misleading or false 
information (the Genentech and Qualitest matters discussed earlier). 
                                                 
20 FY 2016 numbers are actual data through the end of September 2016. This data includes records classified either 
with the primary or tertiary 03G  Health Care Fraud program code.   
21 FY 2016 numbers are actual data through the end of September 2016.  This data includes those records classified 
under with the FRHC  Health Care Fraud civil code. 
 
  71  The Fraud Section also pursued several significant matters involving alleged violations of the 
Stark Law.  The Stark Law prohibits overutilization of services by physicians, practice groups, 
and hospitals that stand to profit from referring patients to other health care providers in which 
they have a financial interest.  The AKS prohibits the willful solicitation or payment of 
remuneration to induce the purchase of a good or service for which payment may be made under 
a federal health care program.  The Fraud Sections recoveries on AKS claims were particularly 
significant this year.  The Department recovered the largest total amount paid to date for 
violations of the AKS by a medical device manufacturer from Olympus Corporation.  The 
Department also recovered hundreds of millions of dollars from hospitals (the Tenet matter) and 
a laboratory (the Millennium matter) for allegations of business schemes that caused the 
submission of thousands of claims to the federal health care programs due to unlawful 
remuneration paid to clinics and physician practice groups.  Likewise, the Fraud Section reached 
FCA settlements resolving Stark law allegations with other hospitals and laboratories, including 
Tuomey Healthcare System, Memorial Health, and OUR Lab discussed earlier. 
 
The Fraud Section also has successfully pursued individuals responsible for illegal conduct.  To 
illustrate, in the past year, the Department has pursued a range of civil cases against individuals, 
including a hospital CEO allegedly responsible for improper financial relationships with 
physicians in violation of the Stark law (the Tuomey matter discussed earlier), the CEO of a 
durable medical equipment supplier that allegedly improperly charged Medicare for splints 
provided to residents in skilled nursing facilities (the Dynasplint matter discussed earlier), and 
the owner of a laboratory that allegedly billed federal health care programs for unnecessary 
cancer detection tests (the Bostwick matter discussed earlier). 
 
The Fraud Section is litigating an increasing number of FCA cases in order to obtain an 
appropriate resolution.  The Section has filed complaints and committed significant resources to 
litigating claims against a number of hospice providers, including Vitas Hospice Services, 
AseraCare Hospice, and Creekside Hospice.  In the AseraCare matter, a jury found that 
AseraCarea for-profit nationwide hospice providersubmitted false claims for a majority of 
sampled patients who were not terminally ill.  Notwithstanding the findings of the jury, the 
district judge set aside the jury verdict, and on August 31, 2016, the United States appealed that 
ruling to the United States Court of Appeals for the Eleventh Circuit where it is pending.  
Similarly, the Department continues to litigate claims against nursing homes and health care 
providers relating to medically unnecessary rehabilitation therapy administered to elderly 
residents, including suits filed against HCR Manorcare, Lifecare, and Sava SeniorCare.  The 
Department also filed suit against Prime Healthcare Services, Inc., its owner, Prem Reddy, MD, 
and 14 of its hospitals in California, alleging that the hospital chain billed for excessive and 
unnecessary inpatient hospital services instead of less costly outpatient or observation services. 
 
Because the Fraud Section receives every FCA complaint filed by whistleblowers (otherwise 
known as relators) across the country, it has a unique vantage point over health care fraud 
trends and developments nationwide and therefore regularly handles some of the most complex 
matters and takes the lead on coordinating national investigations with its law enforcement 
partners.  Likewise, given the diversity of health care fraud cases pursued by the Fraud Section, 
it frequently provides training and guidance on the FCA and health care fraud issues to AUSAs 
and agents.  The Section works closely with HHS Office of the Inspector General (HHS-OIG) 
and the Office of Counsel to the Inspector General (OCIG) in all settlements of health care fraud 
 
  72  allegations in order to ensure that the administrative remedies possessed by HHS are 
appropriately considered and to enable the negotiation of compliance terms that diminish the risk 
that the offending conduct will be repeated.  The Section also collaborates with and counsels 
CMS and HHS-OIG on interagency initiatives and proposed rules and regulations.   
 
The Elder Justice Initiative, which is housed in the Civil Division, coordinates and supports law 
enforcement efforts to combat elder abuse, neglect, and financial exploitation.  The Initiative 
helps law enforcement efforts by maintaining an information bank of Elder Justice related 
materials (including briefs, opinions, indictments, plea agreements, subpoena templates); funding 
medical reviewers, auditors, and other consultants to assist DOJ attorneys and AUSAs in their 
nursing home and/or long term care facility cases; hosting quarterly teleconferences with DOJ 
attorneys and AUSAs across the country to discuss issues or developments in connection with 
our nursing home and failure of care cases; and coordinating nationwide investigations of skilled 
nursing facilities.  In addition to supporting law enforcement efforts, the Initiative continues to 
fund research projects awarded by the Office of Justice Programs, National Institute of Justice, to 
study the abuse, neglect, and exploitation of elderly individuals and residents of residential care 
facilities.   
 
Elder Justice Initiative members represent the Department on Interagency Working Groups such 
as the Elder Justice Coordinating Council.  The Civil Division maintains the Elder Justice 
Website (www.elderjustice.gov), a valuable resource for elder abuse victims and their families, 
state and local prosecutors, elder abuse researchers, as well as practitioners.  On March 30, 
2016, the Department of Justice announced the launch of ten regional Elder Justice Task 
Forces.  These teams bring together federal, state and local prosecutors, law enforcement, and 
agencies that provide services to the elderly, to coordinate and enhance efforts to pursue nursing 
homes that provide grossly substandard care to their residents.  The Elder Justice Task Forces are 
led by representatives from the U.S. Attorneys Offices, state Medicaid Fraud Control Units, 
state and local prosecutors offices, the Department of Health and Human Services (HHS), state 
Adult Protective Services agencies, Long-Term Care Ombudsman programs, and law 
enforcement.  The ten districts are the Northern District of California, Northern District of 
Georgia, District of Kansas, Western District of Kentucky, Northern District of Iowa, District of 
Maryland, Southern District of Ohio, Eastern District of Pennsylvania, Middle District of 
Tennessee, and the Western District of Washington.  
 
The Consumer Protection Branch 
 
The Consumer Protection Branch (CPB) enforces consumer protection laws to end dangerous 
practices that harm Americas most vulnerable populations, like the sick and elderly.  Among its 
top priorities are pursuing cases against those who market unsafe or fraudulent products and 
services that endanger the health and safety of patients.  CPB works closely with the Commercial 
Litigation Branchs Fraud Section, U.S. Attorneys Offices, the Food and Drug Administration, 
and other law enforcement partners on a wide range of health care fraud cases, including those 
involving the promotion and distribution of unapproved and adulterated drugs and medical 
devices.  Under a new provision to the U.S. Attorneys Manual, U.S. Attorneys Offices must 
consult with CPB about investigations under the Federal Food, Drug, and Cosmetic Act (USAM 
4-8.200).  This requirement enables CPB to provide sample pleadings and tools necessary to 
prosecute these cases and to provide guidance on the appropriate exercise of prosecutorial 
 
  73  discretion and enforcement authority.  During FY 2016, CPB made significant headway in 
fighting harmful practices that endanger the public health, employing innovative strategies to 
deter companies and individuals from selling unsafe pharmaceuticals and medical products to the 
American public. 
 
In partnership with the United States Attorneys Office for the Eastern District of North 
Carolina, CPB investigated and resolved criminal liabilities with B. Braun Medical Inc. (B. 
Braun), in connection with its sale of contaminated pre-filled saline flush syringes.  On May 18, 
2016, B. Braun entered into a non-prosecution agreement requiring the company to implement 
compliance measures designed to increase oversight of its product suppliers.  B. Braun also 
agreed to pay $4.8 million in penalties and forfeiture and up to $3 million in restitution as part of 
the settlement.  The agreement represents an important enforcement step in that it holds a health 
care company responsible for its role in failing to properly oversee one of its third-party 
suppliers. 
 
The conduct at issue in the case related to B. Brauns sale of sterile saline syringes it purchased 
from AM2PAT, Inc. (AM2PAT), despite knowing of AM2PATs manufacturing problems.  In 
2007, AM2PAT notified B. Braun of its intentions to move to a new manufacturing facility and 
to change its sterilization process.  B. Braun began selling AM2PATs saline syringes before   
B. Brauns quality department approved either of these changes.  B Braun later approved 
AM2PATs changes, even though B. Braun had received complaints about syringes changing 
color and it knew that AM2PAT was making changes to its sterilization process to avoid 
overcooking the syringes.  Less than two months later, B. Braun recalled all of the syringes it 
had bought from AM2PAT because the sterilization process caused dangerous white particles to 
develop inside the syringes.  Nonetheless, B. Braun eventually resumed buying saline syringes 
from AM2PAT; less than a month afterwards, AM2PAT manufactured saline syringes 
contaminated with Serratia Marcescens bacteria. These contaminated syringes infected patients 
in California, Texas, New York, and Nebraska.  
 
The non-prosecution agreement with B. Braun includes ground-breaking terms requiring the 
company to increase oversight of its product suppliers by conducting on-site audits of companies 
that design and make finished products that bear the B. Braun name.  B. Braun agreed to test 
such products periodically for sterility, identity, and purity.  B. Braun will also be monitored by 
an independent compliance auditor who will assess B. Brauns implementation and maintenance 
of the enhanced compliance measures through on-site audits of B. Braun.  B. Brauns CEO and 
board of directors will review and certify B. Brauns compliance efforts on an annual basis.  
 
The Consumer Protection Branch further extended its efforts to protect consumers from unsafe 
products through a nationwide sweep of dietary supplements in November 2015.  Conservative 
estimates put the market for dietary supplements in the United States at over $20 billion.  
Regulation of that market is less than robust, and has led to the rampant sale of unlawful 
products.  CPB and its federal partners pursued civil and criminal cases against more than 100 
makers and marketers of dietary supplements.  The sweep included federal court cases in 18 
states against 117 individuals and entities.  Of those, 89 were the subject of cases filed since 
November 2014.  As part of the sweep, CPB partnered with the Uniformed Services University 
of the Health Sciences Consortium for Health and Military Performance and with the U.S.  
 
  74  Anti-Doping Agency (USADA), who developed educational resources for service members to 
protect them from risky dietary supplements.  Through this partnership, the organizations jointly 
launched an online interactive educational module and two mobile applications: a high risk 
supplement list for service members and a mobile application for athletes, both of which are 
publicly accessible.  These resources help service members, athletes, and general consumers 
recognize and reduce the risks associated with using supplement products.  Finally, in March 
2016, the Department sought to capitalize on the successful sweep through a public education 
campaign featuring Attorney General Lynch in a video about supplements filmed as part of 
National Consumer Education week.  
 
Criminal Division 
 
In FY 2016, the Criminal Division was allocated $17.6 million in FY 2016 HCFAC funding to 
support criminal health care fraud litigation and interagency coordination, which is carried out 
primarily by the Fraud Section and, to a lesser extent, the Organized Crime and Gang Section.   
 
The Fraud Section 
 
The Fraud Section employs 56 criminal prosecutors focused solely on initiating and coordinating 
complex health care fraud prosecutions and supports the USAOs with legal and expert 
investigative guidance, including the use of data analytics and training, as well as trial attorneys 
to prosecute health care fraud cases.  Beginning in March 2007, the Fraud Section, working with 
the local USAOs, the FBI and law enforcement partners in HHS-OIG, and state and local law 
enforcement agencies, launched the Medicare Fraud Strike Force in Miami-Dade County, 
Florida, to prosecute individuals and entities that do not provide legitimate health care services 
but exist solely for the purpose of defrauding Medicare and other government health care 
programs.  Since 2007, DOJ and HHS have expanded the Strike Force to nine regions.  In FY 
2016, the Fraud Section continued to provide attorney staffing, litigation support, and leadership 
and management oversight for numerous Strike Force prosecutions in all of the nine regions.  
The Fraud Sections key litigation accomplishments in FY 2016 can be summarized as follows:   
 
  Filed 146 indictments, informations and complaints involving charges filed against 
230 defendants who allegedly collectively billed the Medicare program approximately 
$2.1 billion;   
 
  Obtained 131 guilty pleas and litigated 13 jury trials, with guilty verdicts against 
18 defendants; and  
 
  Secured imprisonment for 125 defendants sentenced during the fiscal year, averaging 
more than 53 months of incarceration. 
 
The Fraud Section attorneys staffed and led the Divisions health care fraud litigation through the 
existing Medicare Fraud Strike Force teams in Los Angeles, California; Miami and Tampa, 
Florida; Chicago, Illinois; Southern Louisiana; Detroit Michigan; Brooklyn, New York; and 
Dallas and Southern Texas. 
 
 
  75  In FY 2016, the Criminal Division organized the largest national health care fraud takedown in 
history, both in terms of individuals charged and the loss amount.  On June 22, 2016, Attorney 
General Loretta E. Lynch and Department of Health and Human Services (HHS) Secretary 
Sylvia Mathews Burwell announced a nationwide sweep led by the Medicare Fraud Strike Force 
with the cooperation of 36 U.S. Attorneys Offices and the largest number ever of participating 
Medicaid Fraud Control Units (MFCUs). This effort resulted in charges against 301 individuals, 
including 60 doctors, nurses and other licensed medical professionals, for their alleged 
participation in Medicare and Medicaid fraud schemes involving approximately $900 million in 
false billings.   In addition, the Centers for Medicare & Medicaid Services (CMS) also suspended 
a number of providers using its suspension authority as provided in the Affordable Care Act.  
 
In addition to Medicare Fraud Strike Force cases, the Fraud Section handles corporate criminal 
health care fraud investigations.  Often such cases are handled in a parallel manner by the Fraud 
Sections prosecutors along with DOJ Civil Division attorneys and/or AUSAs from USAOs 
across the country.  In FY 2016, the Criminal Division formally established a Corporate Health 
Care Fraud Strike Force based in Washington, D.C.  This new Corporate Strike Force has opened 
several new corporate health care fraud matters, undertaken over a dozen active investigations, 
and is in active negotiations for corporate resolutions.  In addition, this Strike Force is 
proceeding to build cases to charge responsible individuals within organizations found culpable 
of health care fraud.  The Corporate Strike Force secured its first significant resolution in 
September 2016.  Tenet Healthcare Corporation agreed to a global resolution of criminal and 
civil liability relating to a kickback scheme at four hospitals in Georgia and South Carolina and 
will pay a total of $513 million.  Two of the Tenet hospitals pled guilty to conspiring to violate 
the Anti-Kickback Statute, and a Tenet  subsidiary entered into a Non-Prosecution agreement 
with the Department requiring cooperation with the Departments ongoing investigation and an 
independent compliance monitor. 
 
In addition to health care fraud litigation, the Fraud Section provided legal guidance to FBI and 
HHS-OIG agents, health program agency staff, AUSAs, and other Criminal Division attorneys 
on criminal, civil, and administrative tools to combat health care fraud.  Throughout FY 2016, 
the Fraud Sections prosecutors met with federal prosecutors and agents across the United States 
to provide training, investigative leads based on data analysis, and related support.  The Fraud 
Section also provided advice and written materials on patient medical record confidentiality and 
disclosure issues, and coordinated referrals of possible criminal HIPAA privacy violations from 
the HHS Office for Civil Rights; monitored and coordinated DOJ responses to legislative 
proposals, major regulatory initiatives, and enforcement policy matters; reviewed and 
commented on health care provider requests to the HHS-OIG for advisory opinions and 
consulted with the HHS-OIG on draft advisory opinions; worked with CMS to improve 
Medicare contractors fraud detection, referrals to law enforcement for investigation, and case 
development work; and prepared and distributed to all USAOs and FBI field offices periodic 
summaries of recent and significant health care fraud cases.   
 
Finally, the Fraud Section also held a National Health Care Fraud Training Conference in 
September 2016 that was attended by 290 criminal and civil prosecutors (representing over 59 
U.S. Attorneys Offices) and law enforcement personnel. In addition, as part of its efforts to lead 
and coordinate a national approach to combating health care fraud, in November 2015 the Fraud 
Section launched the Health Care Fraud Intranet.  Through the launch of the HCF Intranet, the 
 
  76  Fraud Sections Health Care Fraud Unit seeks to assist prosecutors in effectively and efficiently 
identifying and prosecuting individuals and entities, and to learn about emerging trends in the 
field.  As with the National Health Care Fraud Training Conference and national health care 
fraud takedowns, the HCF Intranet will continue to strengthen the Fraud Sections partnerships 
with USAOs across the country in combating health care fraud.  These combined efforts will 
better enable USAOs and the Fraud Section to investigate and prosecute fraudulent conduct 
across district lines, including through corporate health care fraud prosecutions and coordinated 
multi-district prosecutions.  
 
The Organized Crime and Gang Section (OCGS) 
 
The Criminal Divisions Organized Crime and Gang Section (OCGS) supports and conducts 
investigations and prosecutions of fraud and abuse targeting private sector health plans as well as 
health care fraud and abuse perpetrated by domestic and international organized crime groups.  
With respect to private sector health care fraud, OCGS supports and conducts enforcement 
efforts combatting fraud and abuse directed at the 2.3 million private sector health plans 
sponsored by employers and/or labor organizations which cover some 143 million Americans.  
OCGS also works to improve strategic coordination in the identification and prosecution of 
domestic and international organized crime groups engaged in sophisticated frauds posing a 
threat to the health care industry. 
 
In FY 2016, six OCGS attorneys were assigned to health care fraud prosecutions and 
investigations.   
 
In Philadelphia, an OCGS attorney worked with the Organized Crime Strike Force in the United 
States Attorneys Office to obtain the trial conviction and sentencing of a registered nurse, who 
served as director of a for-profit hospice service business, for her participation in a scheme to 
defraud Medicare of more than $9 million through the submission of false claims for hospice 
services.  The trial evidence showed that the defendant authorized and supervised the admission 
of inappropriate and ineligible patients for hospice nursing services allegedly provided for 
patients at nursing homes, hospitals and private residences.  This case is summarized above in 
the Hospice Care section of the Highlights of Successful Criminal and Civil Investigations.   
 
A second OCGS attorney worked with the United States Attorneys Office in Detroit to obtain 
the conviction of a medical facility employee who obtained and disclosed individually 
identifiable health information from the facilitys private database at the direction of a member 
of the Traveling Vice Lords (TVL) gang.  The employee, an associate of the Vice Lords street 
gang, pleaded guilty to witness tampering for obtaining private health information of Vice Lords 
shooting victims and victims family members and disclosing the information to a member of the 
TVL gang knowing that this information was wanted to locate these individuals and prevent 
them from cooperating in the investigation and prosecution of a TVL shooting.  This case is 
summarized above in the Electronic Records section of the Highlights of Successful Criminal 
and Civil Investigations.   
 
Additional OCGS attorneys were engaged in investigations of health care fraud and abuse 
including fraud and kickbacks by a service provider in connection with a large employee health 
benefit plan. 
 
  77  In addition to conducting health care fraud investigations and prosecutions, OCGS attorneys 
routinely provide litigation support and advice to AUSAs and criminal investigative agencies in 
the investigation and prosecution of corruption and abuse of private employment-based group 
health plans covered by the Employee Retirement Income Security Act (ERISA).  Litigation 
support is provided as requested at any stage of the prosecution from indictment through trial and 
on appeal.  Private sector employment-based group health plans are the leading source of health 
care coverage for individuals not covered by Medicare or Medicaid.  OCGS attorneys also 
provide support to investigations and prosecutions of fraud schemes by corrupt entities that sell 
unlicensed health insurance products, as well as fraud schemes by corrupt employers that cheat 
workers out of health benefits required by the prevailing wage laws and regulations. 
 
OCGS attorneys regularly provide health care fraud and abuse training and legal guidance to 
AUSAs and to criminal investigators and agents of the Department of Labors Employee 
Benefits Security Administration and Office of Inspector General.  Such training and guidance 
covers prosecutions involving abuse of private sector employee health plans subject to ERISA 
and health plans sponsored by labor organizations, as well as fraud and abuse committed in 
connection with the operation of multiple employer welfare arrangements.  OCGS is also 
responsible for drafting and reviewing criminal legislative proposals affecting employee health 
benefit plans.  Finally, OCGS provides legal guidance to prosecutors and required approvals in 
the use of the Racketeer Influenced and Corrupt Organizations (RICO) statute in prosecutions of 
Medicare and Medicaid frauds as well as private sector health care frauds.  
 
Civil Rights Division 
 
In FY 2016 the Civil Rights Division was allocated approximately $5.2 million in FY 2016 
HCFAC funding to support Civil Rights Division litigation activities related to health care fraud 
and abuse.  The Civil Rights Division pursues relief affecting public, residential and 
nonresidential health care facilities and service systems, as well as conducts investigations to 
eliminate abuse and grossly substandard care in public, Medicare, and Medicaid funded long-
term care facilities.  Consistent with the Supreme Courts decision in Olmstead v. L.C., 527 U.S. 
581 (1999), the Division has also undertaken initiatives to eliminate the needless 
institutionalization of individuals who require health care supports and services. 
  
The Division plays a critical role in the HCFAC Program through the work of several sections.  
The Special Litigation Section of the Civil Rights Division is the sole DOJ component 
responsible for the Civil Rights of Institutionalized Persons Act, 42 U.S.C.1997 (CRIPA).  
CRIPA authorizes the investigation of conditions of confinement at state and local residential 
institutions (including facilities for persons with developmental disabilities or mental illness, and 
nursing homes) and initiation of civil action for injunctive relief to remedy a pattern or practice 
of violations of the Constitution or Federal statutory rights.  The program includes review of 
conditions in facilities for persons who have mental illness, facilities for persons with 
developmental disabilities, and nursing homes.  
 
The Disability Rights Section of the Civil Rights Division has primary enforcement authority 
for the Americans with Disabilities Act (ADA).  Title II of the ADA authorizes investigation of 
allegations of discrimination by public entities against individuals with disabilities, including 
discrimination in the form of needless institutionalization of persons who require health care 
 
  78  supports and services.  See Olmstead, 527 U.S. 581.  Title II also authorizes the initiation of 
civil action to remedy discrimination in violation of the ADA.  In addition to violating the civil 
rights of individuals with disabilities, such unnecessary institutionalization often results in 
unnecessarily increased Medicaid costs inconsistent with the Medicaid requirements for home 
and community-based services.  Both the Special Litigation Section and the Disability Rights 
Section have undertaken initiatives to combat the use of Medicaid funding for the unjustified 
institutionalization of persons with disabilities.  
 
The Educational Opportunities Section of the Civil Rights Division also participates in the 
HCFAC Program to address the use of Medicaid funding for unnecessary institutionalization of 
youth with disabilities in segregated education placements in violation of the ADA.  The 
Special Litigation, Educational Opportunities, and Disability Rights Sections work 
collaboratively with the USAOs and with HHS. 
 
Fiscal Year 2016 Accomplishments  
 
Key litigation and enforcement accomplishments in FY 2016 by the Civil Rights Division can be 
summarized as follows: 
 
  Number of matters in active enforcement:  17; 
  Cumulative estimate of individuals with disabilities affected:  37,017; and 
  Number of institutional facilities affected:  2,251 
 
Special Litigation Section 
 
In Fiscal Year 2016, the Special Litigation Section resolved a Civil Rights of Institutionalized 
Persons Act case involving a nursing facility; suspended an investigation into a states mental 
health system under Title II of the Americans with Disabilities Act when the state issued a plan 
in which it memorialized the steps it will take over the next three years to help individuals with 
serious and persistent mental health illness live successfully in community settings; issued 
findings that a state unnecessarily institutionalizes older adults and adults with disabilities in 
nursing facilities; monitored compliance of 10 statewide settlement agreements and two facility-
focused agreements benefiting thousands of people; monitored an agreement with an urban 
police department requiring it to connect individuals with mental illness to community-based 
services instead of costly institutional services and to avoid unnecessary criminal justice 
involvement; and filed one statement of interest addressing the risk of unnecessary 
institutionalization caused by a states imposition of cost-reimbursement caps on community-
based services below the costs of institutional services.  During this time, the Sections work  
including its formal investigations, monitoring of remedial agreements, and active litigation  
affected more than 1,700 health care facilities in 18 states as well as the District of Columbia.  
The large number of health care facilities reflects the Sections expanded focus on whether states 
are ensuring that nursing facilities and other institutional settings do not inappropriately admit 
persons who should be served in more integrated settings. 
 
An important aspect of the Divisions work is the active enforcement of its agreements (i.e., 
ongoing monitoring to ensure agreements are successfully implemented and pursuit of remedial 
measures where expected compliance is not occurring).  Because of these agreements scope and 
 
  79  complexity, this work typically spans several years.  In FY 2016, the Special Litigation Section 
brought to a successful close one such agreement after years-long enforcement efforts.  In 
Missouri, the Section concluded a three year enforcement effort to ensure that individuals at risk 
of institutionalization at Maple Lawn Nursing Home and individuals living at Maple Lawn are 
served in the most integrated setting appropriate to their needs and that those individuals living at 
Maple Lawn receive necessary care, protections, supports, and services. The parties agreed and 
stipulated that Maple Lawn had achieved substantial compliance on January 15, 2014 and had 
remained in substantial compliance at all times to and through January 15, 2016, and therefore 
the matter was dismissed on April 18, 2016.  
 
The Section continued monitoring implementation of large-scale, systemic reform agreements in 
numerous jurisdictions across the country.  These ongoing enforcement efforts are helping 
individuals with intellectual, developmental, and mental health disabilities avoid unnecessary 
institutionalization in New Hampshire, Virginia, Georgia, and Delaware.   
 
In FY 2016, the Section began monitoring Oregons implementation of a Performance Plan for 
Mental Health Services for Adults with Serious and Persistent Mental Illness (Plan).  Oregon 
developed the Plan in response to the Divisions investigation of the states mental health system 
under Title II of the Americans with Disabilities Act, which had been pending since 2010.  The 
Plan memorializes steps the State will take over the next three years to help individuals with 
serious and persistent mental illness live successfully in community settings.  An Independent 
Consultant will assess and issue semi-annual reports on the States compliance with the Plan.  If 
the State successfully implements the Plan, the Section will close its investigation.   
 
The Section entered a court-enforceable addendum (called an Extension Settlement 
Agreement) to its existing  statewide agreement in United States v. Georgia (N.D. Ga. 2010) 
requiring the development of community resources to serve thousands of people with serious 
mental illness or intellectual disabilities who reside in Georgias State Hospitals or are at risk of 
being institutionalized there.  The Extension Settlement Agreement memorializes additional 
commitments the State will undertake to ensure the health and safety of people with intellectual 
and developmental disabilities in community settings.   
 
In FY 2016, negotiations continued with the State of West Virginia to resolve the Sections 
findings that West Virginia fails to serve children with mental health conditions in the most 
integrated setting appropriate to their needs.  
 
Also in FY 2016, the Section continued an investigation into Louisianas use of nursing facilities 
to serve people with mental illness opened in FY 2015.  
 
In FY 2016, the Section issued findings in its investigation into South Dakotas use of nursing 
facilities to serve older adults and people with disabilities. The United States concluded that 
South Dakota fails to serve older adults and people with disabilities in the most integrated setting 
appropriate to their needs in violation of the Americans with Disabilities Act (ADA) and 
Olmstead v. L.C.  More than 6,300 individuals reside in South Dakotas nursing facilities at any 
given time, often for long periods unrelated to their age or disability, because of a lack of 
community-based service options.  Negotiations began this fiscal to resolve these issues in a 
comprehensive agreement.  
 
  80  The Section filed one statement of interest in California regarding whether Plaintiffs are at risk 
of unnecessarily entering an institution by virtue of Defendants ad hoc practice regarding cost 
limitation exceptions. 
 
Disability Rights Section 
 
In FY 2016, the Disability Rights Section received court approval for the settlement of one 
major, statewide litigation; continued to actively litigate another systemic, statewide case; 
monitored compliance of four statewide settlement agreements, under which more than 15,700 
people collectively will obtain relief; and filed two statements of interest in litigation raising 
issues of needless segregation. 
The Section entered into a seven-year statewide settlement agreement with the State of Oregon in 
Lane v. Brown (D. Or.), and the United States District Court for the District of Oregon approved 
the settlement agreement on December 29, 2015.  The court then entered a Final Judgment, 
which incorporated the settlement agreement as an order of the court, on January 27, 2016.  The 
settlement resolves a class action in which the United States intervened and which addresses the 
unnecessary segregation of individuals with disabilities in sheltered workshop and facility-based 
day programs in violation of Title II of the ADA.  Under the agreement, the State has pledged a 
sustained commitment to transform its service system, impacting approximately 7,000 people.  
The State will provide supported employment services so that 1,115 working-age individuals 
will obtain competitive, integrated employment.  The State will also reduce the number of 
individuals receiving services in segregated settings, provide employment services to at least 
4,900 youth ages 14 to 24, and provide an Individual Plan for Employment to at least half of 
those youth.  The Section is monitoring the States progress toward the agreements goals. 
The Section continued to litigate United States v. Florida (S.D. Fla. 2013), a case in which the 
United States alleges, among other things, that the State of Florida administers its Medicaid 
service system for children with significant medical needs in violation of the ADA and Olmstead 
by unnecessarily segregating them in nursing facilities, when they could, and want to, be served 
at home or in other community-based settings 
The Section also continued to monitor the implementation of its eight-year settlement agreement 
with the State of North Carolina, pursuant to which the State is providing opportunities to 
individuals with mental illness in adult care homes to transition to less costly, integrated service 
settings. To date, more than 850 individuals have moved from institutions to community-based 
settings, while 650 of those individuals continue to live and receive services in the 
community.  The agreement obligates the State to serve 3,000 individuals in community-based 
settings by July 1, 2020.  Over 5,000 people are receiving Assertive Community Treatment 
services, and over 700 are receiving Supported Employment services.   
It also continued to monitor its settlement agreements with the State of Rhode Island and the City 
of Providence, addressing the unnecessary segregation of individuals with disabilities in 
sheltered workshop and facility-based day programs.  Under the agreements, the State will 
provide supported employment placements to roughly 2,000 individuals with intellectual and 
developmental disabilities by 2024, and roughly 3,400 individuals will benefit from systemic 
changes to the States employment and day service systems.   
 
  81  The Section also monitored its settlement agreement with the State of New York and private 
plaintiffs regarding New Yorks mental health service system, in United States v. New York 
(E.D.N.Y. 2013).  The agreement benefits at least 2,500 people and remedies discrimination by 
the State in the administration of its mental health service system and ensures that individuals 
with mental illness who reside in 23 large adult homes in New York City receive services in the 
most integrated setting appropriate to their needs consistent with the ADA and Olmstead.  Under 
the agreement, such individuals will have the opportunity to live and receive services in the 
community such that they are able to live, work, and participate fully in community life. To date, 
more than 330 people have moved into the community.  Another 1,500 people have expressed 
interest in and are working toward living and receiving services in the community.   
 
The Section filed two statements of interest in litigation raising issues of needless segregation in 
Florida and Ohio.  These briefs have addressed issues relating to the unnecessary 
institutionalization of individuals in state-run and private institutions.  
   
Educational Opportunities Section 
 
The Educational Opportunities Section (EOS) has participated in the HCFAC Program for the 
past three years.  The Section has carefully analyzed the legal issues related to unnecessary 
segregation in the context of K-12 schools. 
 
After completing the first-ever statewide investigation of a State education system for violation 
of Title II of the ADA based upon unnecessary segregation, the Section issued a Letter of 
Findings (LOF) on July 15, 2015 against the Georgia Network of Educational and Therapeutic 
Services (GNETS) program.  GNETS provides segregated educational services for 
approximately 5,000 Georgia students with emotional and behavioral disabilities.  During FY 
2016, the Department unsuccessfully sought to resolve the LOF with the State during months-
long settlement discussions.  On August 29, 2016, DOJ filed suit against the State for 
unnecessarily segregating students with disabilities in isolated GNETS programs at GNETS 
Centers throughout the State rather than providing community-based behavioral health services 
for these children.   
 
The Section also coordinated with advocates around the country to review complaints of similar 
segregation on the basis of disability and, in particular, has developed an investigation plan for 
pursuing unnecessary segregation in State foster care systems.  As part of that investigation, the 
Section is investigating the role of childhood trauma in segregated placements and the harms to 
children with disabilities, in particular, from trauma related treatment before and during 
segregation in school.   
 
The Section also filed a successful statement of interest in litigation raising issues related to 
segregation of children with disabilities by a school district in New York State, which the court 
referenced in a favorable ruling issued in spring 2016.  EOS also coordinated with other agencies 
on a similar argument in a Sixth Circuit amicus brief supporting strong enforcement of the 
Protection and Advocacy for Individuals with Mental Illness Act, the Developmental Disabilities 
Assistance and Bill of Rights Act, and the Protection of Individual Rights Act (the P&A Acts). 
These briefs addressed issues relating to the unnecessary institutionalization of children in state-
   
run and private, state-funded institutions.  
 
  82  APPENDIX 
 
Federal Bureau of Investigation 
 
In FY 2016, the FBI was allocated $130.3 million in funding from HIPAA and $6.0 million from 
DOJs HCFAC funds to support the facilitation, coordination and accomplishment of the goals of 
the HCFAC Program.  This yearly appropriation was used to support 814 positions (486 Agent, 
328 Support). 
 
In FY 2016, the FBI initiated 624 new Health Care Fraud (HCF) investigations and had 2,822 
pending investigations.  Investigative efforts produced 637 criminal HCF convictions and 892 
indictments and informations.  In addition, investigative efforts resulted in over 555 operational 
disruptions of criminal fraud organizations and the dismantlement of the criminal hierarchy of 
more than 128 HCF criminal enterprises.  
 
The FBI is the primary investigative agency involved in the fight against HCF that has 
jurisdiction over both federal and private insurance programs.  HCF investigations are 
considered a high priority within the FBIs Complex Financial Crime Program.  Each of the 56 
FBI field offices had personnel assigned specifically to investigate HCF matters.  
 
The FBI seeks to approach the HCF crime problem in a threat-based and intelligence-driven 
manner.  The approach employs the prioritization of enforcement efforts, at both the national and 
field office levels, to ensure limited resources are focused on the most significant entities 
committing health care fraud and abuse.  As part of the process, the FBI gathers relevant data 
and information to understand the impact of the crime problem and to identify intelligence gaps, 
or areas which require additional research and analysis.  The need and availability of resources to 
support mitigation efforts, including enforcement and intelligence related activities, are also 
factored into the analysis.  The process is constantly on-going and requires collaboration not only 
between FBI components, but also with our public and private partners.  
 
As part of our collaboration efforts, the FBI maintains investigative and intelligence sharing 
partnerships with government agencies such as other DOJ components, HHS-OIG, state 
Medicaid Fraud Control Units, and other enforcement and regulatory agencies.  On the private 
side, the FBI conducts significant information sharing and coordination efforts with private 
insurance partners, such as the National Health Care Anti-Fraud Association, the National 
Insurance Crime Bureau, and private insurance investigative units.  The FBI is also actively 
involved in the Healthcare Fraud Prevention Partnership, an effort to exchange facts and 
information between the public and private sectors in order to reduce the prevalence of HCF.  
 
As a result of the collaboration and review process, the FBI has designated criminal enterprises 
and other crime groups, corporate-level fraud and abuse, and public safety issues as the priority 
HCF threat areas of focus.  Each field office conducts a similar analysis to determine their areas 
of focus and the actions they will take to mitigate the associated threat. 
 
FBI field offices throughout the U.S. proactively address the HCF threat through joint 
investigative efforts; intelligence collection, sharing, and analysis; and the utilization of 
 
  83  advanced and sophisticated investigative techniques.  Each FBI field office is involved in a HCF 
Task Force and/or working group.  Members of the groups include US Attorneys Office and 
HHS-OIG personnel, and in many cases also include other federal, state, local, and private 
insurance personnel.  Based on information sharing and coordination, additional cases are vetted 
and identified for investigation.  These activities seek to identify and pursue investigations 
against the most egregious offenders involved in health care fraud and abuse.  
 
The FBIs Health Care Fraud Unit (HCFU) oversees program efforts, including providing 
guidance to field offices, to ensure the threat is mitigated in an effective and efficient manner. In 
support of joint agency activities and general threat mitigation efforts the HCFU has 
promulgated four initiatives, including the Health Care Fraud Prevention and Enforcement 
Action Team (HEAT), Large Scale Conspiracies, Major Provider Fraud, and Prescription Drug 
Initiatives.  
 
HEAT is DOJs and HHS Cabinet-level commitment to prevent and prosecute HCF.  HEAT, 
which is jointly led by the Deputy Attorney General and HHS Deputy Secretary, is comprised of 
top level law enforcement agents, prosecutors, attorneys, auditors, evaluators, and other staff 
from DOJ and HHS and their operating divisions, and is dedicated to joint efforts across 
government to both prevent fraud and enforce current anti-fraud laws around the country.  The 
Medicare Fraud Strike Force (Strike Force) teams are a key component of HEAT.  As part of the 
HEAT Initiative, the FBI coordinates with the DOJ and HHS-OIG on all HEAT aspects 
including funding, resource allocation, Strike Force expansion, target identification, training, and 
operations.  The FBI had approximately 101 Agents supporting the nine Strike Forces located in 
Miami, Detroit, Houston (also includes McAllen, Texas), New York City (Brooklyn), Tampa, 
Los Angeles, Chicago, Dallas, and Southern Louisiana (Baton Rouge and New Orleans).  In 
addition to funding agent resources, the FBI funded undercover operation expenses, financial and 
investigative analysis support, offsite and evidence storage locations, operational travel, and 
other investigative costs.  The Strike Forces have effectively investigated and prosecuted 
individuals and entities that do not provide legitimate health care services, but exist solely for the 
purpose of defrauding Medicare and other federal health care programs.  The FBI participated in 
the June 2016 DOJ National Health Care Fraud Takedown resulting in the charging of 301 
subjects, including 61 doctors, nurses and other licensed medical professionals, for their alleged 
participation in health care fraud schemes involving approximately $900 million in false billings. 
The continued support of Medicare Strike Force operations is a top priority for the FBI.  In 
addition, the FBI completes coordination and intelligence sharing with HHS and DOJ 
components on other prevention and enforcement activities, including efforts associated with the 
Large Scale Conspiracies, Major Provider Fraud, and Prescription Drug Initiatives. 
 
The Large Scale Conspiracies Initiative seeks to identify and target criminal enterprises and 
other groups whose schemes result in significant losses to health care benefit programs.  
Intelligence efforts for this initiative include information sharing and analysis of billing data with 
HCF enforcement partners.  Investigative assistance provided to field offices as part of the 
initiative can include support for undercover operations, source identification and support, and 
funding of investigative costs.  Examples of these types of cases were the convictions, following 
a six-week trial, of a physician and three owners of home health agencies in Texas.  Between 
2006 through 2011, the doctor approved and certified in excess of 11,000 Medicare beneficiaries, 
who were not home bound, for home health care services.  The conspiracy resulted in the 
 
  84  submission of nearly $375 million in fraudulent claims.  In Houston, a psychiatrist was sentenced 
to 144 months in prison for her role in a $158 million Medicare fraud scheme involving false 
claims for mental health treatment.  In Miami, a physician was sentenced to 108 months in prison 
for his role in a $30 million health fraud scheme involving home health care and other services 
that were either not medically necessary or never provided.  The FBI is committed to addressing 
this type of crime problem through the disruption, dismantlement and prosecution of those 
involved in criminal enterprises and other organized criminal activities. 
 
The Major Provider Fraud Initiative seeks to identify and target corporate-level groups involved 
in fraud and abuse schemes with significant billing to health care benefit programs.  The related 
schemes are frequently complex, challenging to identify, and can involve conduct that is 
nationwide in scope.  Extensive resources and coordination are frequently required due to the 
complexity and scope of the schemes. Qui tams are a significant intelligence source for these 
types of cases.  These investigations frequently involve pharmaceutical manufacturers, hospital 
corporations, and regional or national medical provider agencies. In addition to the work 
completed at the field office level, and in response to this substantial threat, the FBI has 
established a centralized support team to provide investigative assistance on these cases 
nationwide.  An example of these types of cases includes the investigation of Novartis 
Pharmaceuticals Corporation, which resulted in a $390 million civil settlement to resolve 
allegations they violated the False Claims Act.  The FBI coordinates efforts in these types of 
cases with our law enforcement partners, such as DOJ components, HHS-OIG, and other federal 
agencies. 
 
The Prescription Drug Initiative seeks to identify and target criminal enterprises and other groups 
or individuals engaged in prescription drug schemes, and where appropriate prosecute improper 
prescribing and dispensing practices of controlled substances.  These schemes are a significant 
crime problem and impact public health and safety.  Examples of these types of cases are a 
Philadelphia doctor convicted at trial of running a pill mill and causing a death through illegal 
distribution of controlled substances, including oxycodone, methadone, and amphetamines.  And 
a Kentucky Anesthesiologist was sentenced to 100 months in prison for his role in the unlawful 
distribution of controlled substances, health care fraud, conspiracy and money laundering. 
 
The FBI actively provides training and guidance on HCF matters and has teamed with the DOJ, 
HHS, and private insurance organizations to provide training in the priority threat areas of HCF.  
Funded training has included innovative methods of employing advanced investigative 
techniques; basic HCF training for FBI Special Agents and professional staff newly assigned to 
investigate HCF; and sessions on new and current HCF trends and issues.  FBI personnel training 
opportunities included sessions offered by the FBI, other government agencies, and the private 
sector.  In FY 2016, more than 229 FBI HCF investigators and analysts received training.  FBI 
personnel also conducted a wide range of training for external audiences, including private 
insurance and regulatory personnel.  
 
Funding received by the FBI is used to pay direct and indirect personnel-related costs associated 
with the 814 funded positions.  Funds not used directly for personnel matters, are used to provide 
operational support for HCF investigations, national initiatives, training, specialized equipment, 
expert witness testimony, and Strike Force operations.   
   
 
  85  Return on Investment Calculation 
 
  The return on investment (ROI) for the HCFAC program is calculated by dividing the total 
monetary results to the Federal government (not including relator payments) by the annual 
appropriation for the HCFAC Account in a given year (not including portions of CMS 
funding dedicated to the Medicare Integrity Program listed in the table on page 86).   
 
  The monetary results include deposits and transfers to the Medicare Part A Trust Fund and 
the Treasury, as well as restitution and compensatory damages to Federal agencies. 
 
  The HCFAC Account is made up of three funding sources: mandatory funding for HHS and 
DOJ, including HHS-OIG, appropriated through Section 1817(k)(3)(A) of the Social Security 
Act; mandatory funding for FBI activities appropriated through Section 1817(k)(3)(B) of the 
Social Security Act; and discretionary funding for the HCFAC Account appropriated through 
the annual Labor-HHS-Education appropriation.   
 
  FBI mandatory HIPAA funding is included in the HCFAC ROI calculations given the 
important role the FBI plays in achieving the monetary results reflected in the HCFAC 
annual report and because that statute states that the funds are for the same purposes as the 
funds provided for HHS and DOJ under the Social Security Act.  However, FBI spending 
and monetary results are not required to be reported per the statute.  Therefore, even though 
the FBI mandatory HIPAA funding is included in the HCFAC ROI calculation, it is not 
reflected in the table on page 7 of this report.   
 
  Only certain portions of discretionary HCFAC Account funding are included in the ROI 
calculation.  All discretionary HCFAC funding for HHS-OIG and DOJ are included in the 
HCFAC report ROI since they spend their discretionary funding on the same types of 
activities that they support with mandatory funding.  Only the portion of CMS Medicare 
discretionary HCFAC funding that supports law enforcement is included in the HCFAC 
report ROI.  The remainder of CMSs HCFAC Medicare discretionary funding supports 
activities in the Medicare Integrity Program (MIP) that are included in the MIP ROI, which 
calculates the impact of the prevention activities supported by the MIP mandatory and 
discretionary funds is calculated separately from the HCFAC ROI and is reported outside of 
the HCFAC report.  Impacts for both the CMS Medicaid and Medicare program integrity 
funding are included in a separate report.  
   
 
  86  Total Health Care Fraud  and Abuse Control Resources 
 
 
The table below sets forth HCFAC funding, by agency, for health care  fraud and abuse control  
activities in FY 2016, including sequester reductions.  The FBI also receives a stipulated amount  
of HIPAA funding for use in support of the Fraud and Abuse Control Program, which is shown 
below.  Separately, CMS receives additional Mandatory Resources under the Medicare Integrity  
Program (section 1817(k)(4) of the Social Security  Act).  The inclusion of  the activities  
supported with these funds is not required in this report, and this information is included for  
informational purposes.  Since 2009, Congress has also appropriated annual amounts to help 
carry out health care fraud and abuse control activities within DOJ and HHS.  Those amounts are  
set forth as Discretionary Resources in the table below and the results of the efforts supported 
with these funds are contained within this report.  
Mandatory Resources1   Fiscal Year 2016  
Office of Inspector General   $187,616,623  
Health and Human Services Wedge2   35,883,926  
Medicare Integrity Program3   866,475,419  
MIP/Medicare (non-add)   799,823,463  
Medi-Medi (non-add)   66,651,955  
Department of  Justice Wedge2   58,579,074  
Federal Bureau of Investigation4   130,303,282  
Subtotal,  Mandatory HCFAC   $1,278,858,324  
Discretionary Resources    
Office of Inspector General   $67,200,000  
CMS Program  Integrity   553,320,000  
Medicare Program Integrity (Non-Add)   468,120,000  
Medicaid Program Integrity (Non-Add)5   67,200,000  
         Senior  Medicare Patrols (ACL Non-Add)6   18,000,000   
Department  of Justice   60,480,000  
Subtotal, Discretionary HCFAC   $681,000,000  
Grand Total, HCFAC   $1,959,858,324  
                                                 
1  All  mandatory resources are post-sequester. 
 
2  The HHS and DOJ Wedge funds are divided among  multiple agencies  within HHS and DOJ.   Page 7 of this report 
 
includes the allocations of the HHS and DOJ Wedge by agency or activity.
  
3  Medicare Integrity Program (MIP) and Medi-Medi fund  fraud prevention and detection activities  within Medicare 

and Medicaid are not part of this report to Congress.  A  separate report to Congress addresses MIP activities.
  
4  The FBI receives funding annually  to conduct anti-fraud activities authorized by HIPAA.  This funding is included 
 
in the HCFAC  ROI calculation for this report. 
 
5  This does not include the Medicaid Integrity Program authorized in the Deficit Reduction  Act of 2005, which 
 
receives  funding separately from the HCFAC account.
  
6  The Consolidated Appropriations  Act of 2016 requires that the full cost of the Senior Medicare Patrol funding be
  
supported by discretionary HCFAC funds.
  
 
  87 
  Glossary of Terms 
 
The AccountThe Health Care Fraud and Abuse Control Account 
 
ACA  Affordable Care Act 
 
AKS Anti-Kickback Statute  
 
ACLDepartment of Health and Human Services, Administration for Community Living 
 
ASPA  Assistant Secretary for Public Affairs (HHS) 
 
AUSAAssistant United States Attorney 
 
CHIPChildrens Health Insurance Program 
 
CIACorporate Integrity Agreement 
 
CMP  Civil Monetary Penalty 
 
CMPLCivil Monetary Penalties Law 
 
CMSDepartment of Health and Human Services, Centers for Medicare & Medicaid Services    
 
CNCCompromised Number Contractors 
 
CPICenter for Program Integrity 
 
CRIPACivil Rights of Institutionalized Persons Act 
 
CYCalendar Year 
 
D.XX or X.D.XxFederal judicial district of a state, which may include north, south, east, west  
 
DMEDurable Medical Equipment 
 
DOJThe Department of Justice 
 
FEHBPFederal Employee Health Benefits Program 
 
FBIFederal Bureau of Investigation 
 
FCAFalse Claims Act 
 
FDAFood and Drug Administration 
 
 
  88  FFDCAFederal Food, Drug, and Cosmetic Act 
 
FWAFraud, Waste, and Abuse 
 
FYFiscal Year 
 
HCFACHealth Care Fraud and Abuse Control Program or the Program 
 
HEATHealth Care Fraud Prevention & Enforcement Action Team 
 
HFPPHealth care Fraud Prevention Partnership  
 
HHAHome Health Agency 
 
HHSThe Department of Health and Human Services 
 
HHS-OIGThe Department of Health and Human Services - Office of the Inspector General 
 
HIHospital Insurance Trust Fund 
 
HIPAA  The Health Insurance Portability and Accountability Act of 1996, P.L. 104-191 
 
HIVHuman Immunodeficiency Virus 
 
MEDICMedicare Drug Integrity Contractors 
 
MFCUMedicaid Fraud Control Unit 
 
OCGSOrganized Crime and Gang Section 
 
OGCOffice of the General Counsel, Department of Health and Human Services  
 
PERMPayment Error Rate Measurement 
 
PFPPharmaceutical Fraud Pilot Program 
 
The ProgramThe Health Care Fraud and Abuse Control Program 
 
SecretaryThe Secretary of the Department of Health and Human Services 
 
SMPSenior Medicare Patrol 
 
USAOUnited States Attorneys Office 
 
ZPICZone Program Integrity Contractor 
 
 
  89