Testimony before the House Energy and Commerce Committee
Subcommittee on Health
U.S. House of Representatives
"Health Care Reform:
Opportunities to Address Waste,
Fraud and Abuse"
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Testimony of Daniel R. Levinson
Inspector General
June 25, 2009
9:30 a.m.
2123 Rayburn House Office Building
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Daniel R. Levinson, Inspector General
Department of Health and Human Services of:
Testimony 
Daniel R. Levinson
Inspector General
Health and Human Services
Office ofInspector General, u.s. Department of 
COMBATING FRAUD, WASTE, AND ABUSE IN FEDERAL HEALTH CARE
PROGRAMS
INTRODUCTION
Good morning Chairman Pallone, Ranking Member Deal, and distinguished members of the
Health and
Subcommittee. I am Daniel Levinson, Inspector General of  the U.S. Department of 
Human Services (HHS). In the context of current discussions about health care reform, it is
critical that the Governent pursue a comprehensive strategy to combat fraud, waste, and abuse
to ensure that Federal health care programs remain solvent and best serve the needs of
beneficiaries. I thank you for the opportnity to discuss the Office ofInspector General's (OIG)
work in this area.
OIG has devoted considerable resources toward fighting fraud, waste, and abuse involving
HHS's Federal health care programs. We have performed evaluations, investigations, and audits
on a wide variety of issues, including fraudulent activity by health care providers; excessive
payments for medical services, equipment, and prescription drugs; and financial conflicts of
interests within the institutions charged with protecting the health of the American public.
Through this work, we have helped identify and recover bilions of dollars in fraudulent, abusive,
or wasteful payments and also raised awareness of these critical issues among policy makers,
governent agencies, and the health care community at large. We have recommended
improvements to program safeguards and payment methodologies to prevent fraud, waste, and
abuse and to ensure health care quality and beneficiary safety. We have also reached out to the
health care community to promote compliance. Moving forward, OIG is committed to building
on our successes and achieving even greater results in protecting the integrty of governent
health care programs and the health and welfare of people served by them.
In my testimony this morning, I wil begin by describing OIG's unique role in combating fraud,
waste, and abuse in Medicare and Medicaid. I then wil provide an overview of vulnerabilities in
these programs and discuss current initiatives that expand our efforts to identify, investigate, and
prosecute health care fraud. Finally, I wil discuss OIG's "Five Principles" strategy for
combating fraud, waste, and abuse, which we believe are applicable to any health care program.
OIG's ROLE AND PARTNERS IN COMBATING FRAUD, WASTE, AND ABUSE
OIG is an independent, nonpartisan agency committed to protecting the integrty ofthe more
the
than 300 programs administered by HHS. OIG's mandate is to protect the integrty of 
those programs.
programs ofHHS, as well as the health and welfare of  the beneficiaries of 
Thans to the work of our 1,500 employees and our law enforcement partners, from FY 2006
through fiscal year (FY) 2008, OIG's investigative receivables averaged $2 bilion per year and
Testimony before the House Committee on Energy and Commerce, Subcommittee on Health
1
June 25, 2009 our audit disallowances resulting from Medicare and Medicaid oversight averaged $1 bilion per
year. The result was a Medicare- and Medicaid-specific return on investment of $17 to $ 1 for
OIG oversight. In addition, in FY 2008, implemented OIG recommendations resulted in $16
bilion in savings and funds put to better use.
Further, as reflected in OIG's Semiannual Report to Congress released earlier this month, OIG's
October 2008 through March 2009 include $274.8 milion
expected recoveries for the period of 
in audit disallowances and $2.2 bilion in investigative receivables, which includes nearly $552
Medicaid
milion in non-HHS receivables resulting from OIG work (e.g., the States' share of 
restitution).
It comes as no surprise that the large Federal Governent expenditures on health care programs
attract individuals and entities seeking to exploit the health care system for their own financial
gain. The National Health Care Anti-Fraud Association estimates conservatively that at least 3
fraud. In FY 2009, Medicare is expected to cover an
percent of  health care spending is lost to 
estimated 45.5 millon beneficiaries at a total cost of$486 bilion to the Federal Governent and
Medicaid is expected to cover an estimated 51 milion beneficiaries and cost the Federal
health care providers and suppliers
Governent over $217 bilion. Though the vast majority of 
are honest and well intended, even a small percentage of providers and suppliers intent on
defrauding the programs can have significant detrimental effects. Although it is not possible to
fraud in Medicare and Medicaid, virtally everyhere we look
measure precisely the extent of 
OIG continues to find fraud, waste, and abuse in these programs. Therefore, OIG works closely
with HHS officials, the Department of Justice (DOJ), other agencies in the Executive Branch,
Congress, and States to bring about systemic changes in program operations, successful
prosecutions, negotiated settlements, and recovery of funds.
Collaboration and innovation are essential in the fight against fraud. On May 20, 2009, HHS
Secretary Kathleen Sebelius and Attorney General Eric Holder announced a new initiative to
marshal significant resources across the Governent to prevent health care waste, fraud, and
abuse; crack down on fraud perpetrators; and enhance existing partnerships between HHS and
DOJ to reduce fraud and recover taxpayer dollars. To further this effort, the Secretary and
Attorney General created the Health Care Fraud Prevention and Enforcement Action Team
leadership from both departments. Among
(HEAT) joint task force consisting of senior level 
other activities, HEAT is building on the successful OIG-DOJ Medicare Fraud Strike Force
later, by expanding Strike Forces to other
initiated in south Florida, discussed in greater detail 
metropolitan areas across the country. These Strike Forces use advanced data analysis
techniques to identify criminals operating as health care providers and detect emerging or
migrating fraud schemes. HEAT is also focusing on prevention strategies to combat health care
fraud. For example, HEAT wil expand a Centers for Medicare and Medicaid Services (CMS)
demonstration project in south Florida that uses site visits to potential durable medical equipment
(DME) suppliers to ensure that applicants are legitimate businesses, not criminals. HEAT also
plans to enlist health care providers in the fight against fraud by increasing training about
biling
program requirements and effective compliance measures that help ensure integrty of 
practices.
the Governent's enforcement efforts; OIG also works
Strike Force activities are one part of 
with our law enforcement partners to pursue other criminal cases as well as civil and
Testimony before the House Committee on Energy and Commerce, Subcommittee on Health 2
June 25, 2009 administrative cases. In FY 2008, OIG investigations resulted in 455 criminal actions against
individuals or entities that engaged in crimes against departental programs and 337 civil and
administrative actions, which included False Claims Act and unjust enrchment lawsuits filed in
Federal district court, Civil Monetary Penalties Law settlements, and administrative recoveries'
related to provider self-disclosure matters. Also in FY 2008, OIG excluded from the Federal
health care programs 3,129 individuals and entities for fraud or abuse that affected Federal health
care programs and/or beneficiares.
The collaborative antifraud efforts of HHS and DOJ are rooted in the Health Insurance
Portability and Accountability Act of 1996, P. L. No. 104-191 (HIPAA), which directed the
joint Health
Secretary ofHHS, acting through OIG and the Attorney General, to promulgate a 
Care Fraud and Abuse Control (HCF AC) Program. The HCF AC Program and Guidelines went
into effect on January 1, 1997. HIP AA requires HHS and DOJ to report annually to Congress on
HCF AC Program results and accomplishments. HCF AC activities are supported by a dedicated
funding stream within the Hospital Insurance Trust Fund.
In its 11 th year of operation, the HCF AC continues to demonstrate the success of a collaborative
approach to identify and prosecute health care fraud, prevent future fraud and abuse, and protect
Medicare and Medicaid beneficiaries. Since its inception, HCF AC activities have returned over
$11.2 bilion to the Medicare Trust Fund. As I wil discuss, the Goverent's efforts to address
DME and infusion fraud in south Florida ilustrate the benefits of a collaborative approach.
Although I wil highlight efforts focused on DME and infusion fraud in particular geographic hot
health care providers and suppliers and
spots, fraud, waste, and abuse occur among all types of 
can affect all types of services covered by Medicare and Medicaid in all geographic areas.
VULNERABILITIES IN FEDERAL HEALTH CARE PROGRAS
Strike Force Activities Have Uncovered Numerous Program Vulnerabilties
OIG and our law enforcement partners are focusing antifraud efforts in geographic areas at high
risk for Medicare fraud. In 2007, OIG and DOJ launched a Strike Force effort in south Florida
of
consisting of  staff  from OIG, DOJ, the U.S. Attorney's Office for the Southern District 
Florida, the Federal Bureau ofInvestigation (FBI), and CMS to identify, investigate, and
Medicare fraud. Building on the
prosecute DME suppliers and infusion clinics suspected of 
success in south Florida, the Strike Force was expanded to Los Angeles in March 2008 and to
Houston and Detroit in May 2009 in connection with the HEAT initiative.
The Strike Force model has proven highly successfuL. To date, the south Florida Strike Force
has opened 161 cases, convicted 151 of its targets, and secured $187 milion in criminal fines
. and civil recoveries. In addition to prosecuting criminals and recovering funds for the Medicare
Trust Fund, the south Florida Strike Force has had a powerful sentinel effect. Medicare claims
the Strike Force (March 1,2007, to February 29,
data show that during the first 12 months of 
2008), claim amounts submitted for DME in south Florida decreased by 63 percent to just over
$1 bilion from nearly $2.76 bilion during the preceding 12 months.
Testimony before the House Committee on Energy and Commerce, Subcommittee on Health 3
June 25, 2009 In March 2008, DOJ and OIG established a second Strike Force in Los Angeles. Since
operations began, the Los Angeles Strike Force has opened 48 cases and is targeting individuals
and organizations that have submitted fraudulent claims to the Medicare program. The schemes
include false claims for wheelchairs, orthotics, and other DME that was medically unnecessary
and/or was not provided to the beneficiaries identified in claims.
Medcore Group LLC (Medcore) and
The recent Strike Force investigation and prosecution of 
M&P Group of South Florida (M&P) ilustrate key vulnerabilities in the Medicare program.
Medcore and M&P operated as Miami-based HIV clinics from approximately 2004 through
2006, biled approximately $5.3 milion to the Medicare program, and received payments of
more $2.5 millon. From their inception, Medcore and M&P were set up as criminal enterprises
The scheme was to submit claims for medically unnecessary HIV
designed to defraud Medicare. 
infusion and injection treatments. The three owners of Medcore and M&P included a former gas
station attendant, a trained cosmetologist, and an individual currently incarcerated for Medicare
fraud involving a separate DME company he operated from 2001 to 2003. None had a medical
background.
Medcore's owners, Tony Marrero, testified that the scheme was so profitable so
At trial, one of 
quickly that he became concerned about getting caught and decided to set up a second fraudulent
his wife. M&P was located in the same building as Medcore, had
clinic, M&P, in the name of 
the same employees, submitted claims under the Medicare provider number of the same
physician, and submitted claims on behalf of six of the same patients. In fact, the same physician
was associated with other Miami-area infusion clinics, which biled Medicare for more than
$60 milion between 2004 and the end of2005.
Mr. Marerro also testified at trial that he had an arrangement with a pharmaceutical wholesale
company to buy invoices that showed the purchase oflarge amounts of medications, when only
small amounts were actually purchased. One ofthe medical assistants testified that she
manipulated the patients' blood samples to ensure that laboratory results would appear to support
the Medicare claims.
Like many infusion fraud schemes, Medcore and M&P gained the cooperation of patients by
up to $200 per visit. Four patients testified that they took kickbacks
giving them kickbacks of 
and never received any medication at the clinics. One patient testified that he used his payments
from the clinics to support his cocaine addiction. Another patient testified that he did not have
HIV, even though the clinics' documents showed that he was being infused with medication to
treat HIV. By the patients' own admission, they had been receiving kickbacks from numerous
Miami clinics for many years. On March 17,2009, a Federal jury in Miami convicted two
physicians and two medical assistants who worked for Medcore and M&P in connection with the
fraud scheme. The Governent obtained 6 pleas before trial, resulting in 10 convictions in total.
OIG's fraud-fighting efforts in south Florida also draw on the expertise of our auditors and
evaluators. For example, OIG identified weaknesses in Medicare's supplier enrollment process
and its supplier oversight activities. In 2006, OIG conducted unannounced site visits to
1,581 DME suppliers in south Florida and found that 31 percent, i.e., 491 suppliers, did not
maintain physical facilities or were not open and staffed during business hours, contrary to
Testimony before the House Committee on Energy and Commerce, Subcommittee on Health 4
June 25,2009 Medicare requirements. The 491 suppliers were referred to CMS so that CMS could consider
revoking their biling privileges, which it subsequently did. Biling privileges were reinstated by
the 243 suppliers who appealed. Subsequently, 74 percent ofthe
hearing offcers for 222 of 
whose billng privileges were reinstated by hearing officers (165 of222) had their
suppliers 
privileges revoked again or inactivated by CMS. Between April and September 2007, the U.S.
Attorney's Office indicted 18 individuals connected to 15 of the 222 reinstated suppliers. As of
April 2008, 10 of the 18 individuals had been convicted, sentenced to jail terms, and ordered to
pay restitution. Six of the eight remaining individuals have since been sentenced to jail terms
the eight individuals are currently fugitives. OIG's work
and ordered to pay restitution. Two of 
demonstrates how important it is to strengthen the enrollment screening process and improve
program safeguards.
As a further result of OIG' s work in south Florida, our analysis of Medicare biling patterns for
inhalation drugs used with DME has uncovered evidence of abusive biling. Despite CMS's
efforts to address inappropriate payments, problems persist. For example, in 2007, Medicare
paid almost $143 milion for inhalation drugs in Miami-Dade County alone-an amount 20
times greater than the amount paid in Cook County, Ilinois, the county (outside south Florida)
with the next highest total payments. However, according to Medicare enrollment data, Cook
County is home to almost twice as many Medicare beneficiaries as Miami-Dade County.
Medicare's average per-beneficiary spending on inhalation drugs was five times higher in south
south Florida beneficiaries who
Florida than in the rest of  the country. Further, 75 percent of 
received a particular inhalation drug, budesonide, had Medicare-paid claims that exceeded
Medicare utilization guidelines, compared to 14 percent of  beneficiaries in the rest of  the
country. For 62 percent of south Florida inhalation drug claims, the beneficiaries on these claims
did not have a Medicare-biled office visit or other service in the past 3 years with the physician
who reportedly prescribed the drug. Finally, 10 south Florida physicians were each listed as the
ordering physician on more than $3.3 milion in submitted inhalation drug claims in 2007, or an
average of$12,000 per day.
Similarly, OIG found that CMS has had limited success controlling aberrant biling by infusion
clinics. In the second half of 2006, claims originating in three south Florida counties accounted
for 79 percent ofthe amount submitted to Medicare nationally for drug claims involving
the total amount Medicare paid for services for
HIV/AIDS patients and constituted 37 percent of 
Medicare beneficiares with
beneficiaries with HIV/AIDS. However, only 10 percent of 
HIV/AIDS lived in these three counties.
Other Program Vulnerabilties
As part of its core mission, OIG identifies vulnerabilities that put programs and beneficiaries at
risk and makes recommendations to address these vulnerabilities. OIG reviews have identified
payments for unallowable services, improper coding, and other types of improper payments.
Improper payments range from reimbursement for services not adequately documented and
inadvertent mistakes to payments that result from outright fraud and abuse. We have identified
Medicare, as well as Medicaid.
program integrty risks and vulnerabilities in every part of 
These vulnerabilities affect services ranging from inpatient hospital and skiled nursing services
Testimony before the House Committee on Energy and Commerce, Subcommittee on Health
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June 25, 2009 to outpatient services provided by physicians and other health professionals, to payment for
prescription drugs and medical equipment. Examples include:
Durable Medicare Equipment
work identifying Medicare fraud, waste, and abuse related to
OIG has an extensive body of 
DME. Problems include DME suppliers circumventing enrollment and biling controls, high
payment error rates, kickbacks, and excessive reimbursement rates for certain DME. OIG has
made recommendations to CMS to strengthen program integrty and DME oversight. OIG also
has recommended stronger enrollment safeguards and payment reforms to align Medicare
reimbursement for DME more closely with widely available market prices.
OIG has long identified several types ofDME that are particularly vulnerable to biling abuses.
For example, an investigation of a large wheelchair supplier found that the company had
submitted false claims to Medicare and Medicaid, including claims for power wheelchairs that
beneficiaries did not want, did not need, or could not use. In 2007, the company agreed to pay
$4 milion and relinquish its right to approximately $13 milion in claims initially denied for
payment by CMS. Nationally, in 2004, OIG estimated that Medicare and its beneficiaries paid
$96 milion for claims that did not meet Medicare's coverage criteria for any type of  wheelchair
or scooter and that they overspent an additional $82 milion for claims that could have been
biled using a code for a less expensive mobility device.
In addition, OIG has identified reimbursement rates for certain items and services that are too
high. For example, in 2006, OIG reported that Medicare had allowed, on average, $7,215' for the
rental of an oxygen concentrator that costs approximately $600 to purchase new. Additionally,
beneficiaries incurred, on average, $1,443 in coinsurance charges. We determined that ifhome
oxygen payments were limited to 13 months rather than the current 36 months, Medicare and its
beneficiaries would save $3.2 bilion over 5 years.
Further, in March 2009, OIG reported that Medicare reimbursed suppliers for negative pressure
wound therapy pumps based on a purchase price of more than $17,000, but that suppliers paid,
on average, approximately $3,600 for new models. Negative pressure wound therapy pumps are
a type ofDME used to treat ulcers and other serious wounds. When Medicare first started
covering wound pumps in 2001, it covered only one model, which was manufactured and
by one company. Medicare paid for this pump based on the purchase price as identified
supplied 
by that company. In 2005, Medicare expanded its coverage to include several new pump models
manufactured by other companies. However, Medicare reimburses suppliers for these new
pumps based on the original pump's purchase price, which is more than four times the average
price paid by suppliers.
Home Health/Personal Care Services
In general, OIG has identified fraud, waste, and abuse vulnerabilities in home health and
personal care services similar to those described above for DME.
Testimony before the House Committee on Energy and Commerce, Subcommittee on Health
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June 25, 2009 In a report released this month, OIG estimated that New York State improperly claimed over
$275 milion in Federal Medicaid reimbursement during our January 1, 2004, through December
31,2006, audit period for personal care services from providers in New York City that did not
meet coverage requirements. These improper payments occurred because the State did not
adequately monitor New York City's personal care services program for compliance with certain
Federal and State requirements. In addition, we identified quality and safety concerns. Cases are
being pursued involving allegations that beneficiaries were physically abused by personal care
aides, and their property was stolen. In addition, we have investigated complaints from
beneficiaries that aides have abandoned them.
Prescription Drugs
work identifying fraud, waste, and abuse related to prescription
OIG has an extensive body of 
drug coverage under Medicaid, Medicare Part B, and Medicare Part D. Fraud concerns include
pharmaceutical companies misreporting pricing information that is used as the basis of
reimbursement and/or Medicaid rebates; ilegal marketing tactics, including kickbacks and off-
label/off-compendium promotion; pharmacies switching drugs to maximize reimbursement; and
drug diversion. OIG also is concerned that Medicaid reimbursement for prescription drugs,
particularly generic drugs, does not accurately reflect drug costs. For Medicare Part D, OIG has
identified vulnerabilities related to sponsors' bids and the resulting payments and premiums to
plan sponsors, as well as deficiencies in Part D integrty safeguards.
Medicaid-specific Services
the same vulnerabilities, including DME, home health,
Medicare and Medicaid share many of 
and prescription drugs. Medicaid-specific vulnerabilities include improper payments for school-
based health services, case management services, and disproportionate share hospital payments.
For example, in 2006, OIG found that a State Medicaid agency claimed Federal Medicaid
funding totaling $86 milion for unallowable targeted case management services. In a series of
reviews in several States, OIG consistently found that schools had not adequately supported their
Medicaid claims for school-based health services and identified almost a bilion dollars in
improper Medicaid payments.
Other Outpatient Services
OIG also continues to identify vulnerabilities related to certain types of services provided by
physicians and other health professionals, including services related to advanced imaging, pain
labs, and transportation services. For example,
management, mental health services, clinical 
OIG found that from 1995 to 2005, advanced imaging paid under the Medicare Physician Fee
Schedule grew more than fourfold, from 1.4 milion to 6.2 milion services. Allowed charges
and utilization rate per beneficiary grew by a similar magnitude, to $3.5 bilion and 163 services
per 1,000 beneficiares. Services provided by independent diagnostic testing facilities (IDTF)
this growth. OIG work has found problems with IDTFs,
accounted for nearly 30 percent of 
including noncompliance with Medicare requirements and biling for services that were not
reasonable and necessary.
Testimony before the House Committee on Energy and Commerce, Subcommittee on Health 7
June 25,2009 Inpatient Services
Expenditures for inpatient services, including those provided by inpatient hospitals and skiled
nursing facilities, account for one-third of all Medicare expenditures. Problems identified by
OIG include hospitals taking advantage of enhanced payments by improperly manipulating
biling; hospitals reporting inaccurate wage data, which affects future Medicare payments;
inpatient facilities that may be gaming prospective payment reimbursement systems by
discharging or transferrng patients to other facilities for financial rather than clinical reasons;
and kickback schemes.
OIG Recommendations
In addition to pursuing those who violate the law, we also alert program administrators and other
departmental officials to problems and offer solutions. These recommendations for corrective
action are found in OIG's audit and evaluation reports, management implication reports resulting
from OIG's investigative work, and other communications. In 2008, implemented OIG
recommendations resulted in an estimated $16 bilion in program savings and fuds put to better
use. In addition, OIG recommendations have resulted in substantial improvements in efficiency,
effectiveness, and quality, as well as fraud prevention, whose impacts are more difficult to
quantify.
To preserve its independence and objectivity, OIG is not authorized to implement or operate the
HHS programs it oversees, nor can OIG compel the Department to implement our
recommendations. However, we take several steps to follow up with program offcials on the
status of OIG recommendations and to encourage actions to address the vulnerabilities that we
have identified. For example, the Principal Deputy Inspector General and I meet regularly with
the CMS Administrator and other senior CMS officials to discuss unimplemented
recommendations and other program integrity concerns. OIG is implementing a new
recommendations management system that wil further enhance our ability to track and follow
up on OIG recommendations.
Unimplemented OIG Recommendations. The
Each year we issue a Compendium of 
Compendium consolidates significant unimplemented monetary and nonmonetary
recommendations addressed to the Department that we expect would, if adopted, result in cost
savings, improved program integrty, and/or greater program efficiencies. These
recommendations require legislative, regulatory, and/or administrative action. While
implementation of monetary recommendations would have fiscal impacts, implementation of
nonmonetary recommendations would improve program operations in other ways. In some
cases, the agency agrees with our recommendations but has not yet fully implemented them; in
others, the agency disagrees with our recommendations.
OIG's unimplemented recommendations provide a useful roadmap for focusing efforts to
safeguard and improve the efficiency and effectiveness ofthe HHS programs OIG oversees.
However, it is difficult to draw conclusions about overall savings from these recommendations.
Estimates of potential monetary benefits listed in the Compendium are unique to each
recommendation and are not comparable. These are typically point-in-time estimates and are
often specific to the scope and timing ofOIG's underlying work. When OIG reports
Testimony before the House Committee on Energy and Commerce, Subcommittee on Health 8
June 25, 2009 implemented recommendations and resulting savings in our Semiannual Reports to Congress, we
typically rely on savings estimates produced by the Congressional Budget Offce (CBO) or other
HHS sources. However, with respect to unimplemented recommendations, CBO or other
sources for scoring potential savings frequently are not available. Therefore, OIG may use
findings from our reports or other sources, as available, to estimate potential savings. Several of
our recommendations that we expect would produce savings do not include estimates of those
savings. Notwithstanding the limitations in estimating potential savings, the Compendium is an
important tool for identifying program vulnerabilities and improvements.
ENSURING THE INTEGRITY OF FEDERAL HEALTH CARE PROGRAMS
OIG's Five-Principle Strategy to Combat Health Care Fraud, Waste, and Abuse
For Federal health care programs to best serve beneficiaries and remain solvent for future
generations, the Governent must pursue a comprehensive strategy to prevent, detect and
remediate fraud, waste, and abuse. Based on OIG's extensive experience in combating health
care fraud, waste, and abuse, we have identified the following five principles that we believe
should guide the development of any national health care integrty strategy.
1. Enrollment - Scrutinize individuals and entities that want to participate as providers and
suppliers prior to their enrollment in health care programs.
reasonable and responsive to changes
2. Payment - Establish payment methodologies that are 
in the marketplace.
3. Compliance - Assist health care providers and suppliers in adopting practices that promote
compliance with program requirements, including quality and safety standards.
4. Oversight - Vigilantly monitor programs for evidence of fraud, waste, and abuse.
5. Response - Respond swifty to detected fraud, impose sufficient punishment to deter others,
and promptly remedy program vulnerabilties.
We believe that these principles provide a useful framework for designing and implementing
program benefits and integrty safeguards. Consistent with these principles, OIG offers the
following recommendations to strengthen the integrty of Federal health care programs.
Enrollment
Scrutinize individuals and entities that want to participate as providers and suppliers prior to their
enrollment in health care programs.
Medicare and Medicaid provider enrollment standards and screening should be strengthened,
making participation in Federal health care programs as a provider or supplier a privilege, not a
right. It is more efficient and effective to protect the programs and beneficiaries from
unqualified, fraudulent, or abusive providers and suppliers up front than to try to recover
Testimony before the House Committee on Energy and Commerce, Subcommittee on Health
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June 25, 2009 payments or redress fraud or abuse after it occurs. Greater transparency in the enrollment
process wil help the Governent know with whom it is doing business.
For example, as the Medcore and M&P case described above demonstrates, a lack of effective
screening measures gives dishonest and unethical individuals access to a system they can easily
exploit. Even after Medcore had biled Medicare for $4 milion in fraudulent claims, it was easy
for the clinic's owner to obtain a provider number in his wife's name for a second clinic, M&P,
operating in the same building as Medcore, with the same medical director, employees, and
patients. One of the owners, Mr. Marrero, testified that when he ultimately sold M&P for
fill out paperwork to put
$100,000 in cash, he went to a lawyer's office so the lawyer could 
ownership of the clinic in the name of two nominee owners. The sale was structured as a stock
sale so that the new "owners" would have 90 days to notify Medicare of the change in
time for the fraud to continue under new "ownership." In our
ownership, allowing a window of 
experience, it is too easy for unscrupulous individuals to recruit nominee owners of fraudulent
companies.
Providers and suppliers applying for enrollment in Medicare or Medicaid should be screened
before they are granted biling privileges. Heightened screening measures for high-risk items
and services could include requiring providers to meet accreditation standards, requiring proof of
business integrty or surety bonds, periodic recertification and onsite verification that conditions
of participation have been met, and full disclosure of ownership and control interests. The cost
this screening could be covered by charging application fees. New providers and suppliers
of 
should also be subject to a provisional period during which they are subject to enhanced
oversight, such as prepayment review and payment caps.
Payment
Establish payment methodologies that are reasonable and responsive to changes in the
marketplace.
We support efforts to pay appropriately for the items and services covered by Federal health care
programs. Medicare and Medicaid payments should be suffcient to ensure access to care
without wasteful overspending. Payment methodologies should also be responsive to changes in
the marketplace, medical practice, and technology. Although CMS has the authority to make
certain adjustments to fee schedules and other payment methodologies, for some changes,
congressional action is needed.
Medicare and Medicaid payment methodologies and
010 has conducted extensive reviews of 
has determined that the programs pay too much for certain items and services. As OIG's reviews
home oxygen equipment and wound therapy pump paymeiits demonstrate, when
of 
reimbursement methodologies do not respond effectively to changes in the marketplace, the
program and its beneficiaries bear the cost. As the experience of south Florida ilustrates,
excessive payments also are a lucrative target for criminals. These criminals can reinvest some
their profit in kickbacks for additional referrals, thus using the program's funds to perpetuate
of 
the fraud scheme.
Testimony before the House Committee on Energy and Commerce, Subcommittee on Health
10
June 25, 2009 All payment methodologies create incentives and fraud risks that should be identified and
addressed. For example, fee-for-service payments create financial incentives to maximize the
number and complexity of services provided, even when such services are not medically
necessary. Conversely, under a fixed, prospective payment system, financial incentives
encourage fewer services and patients may not receive all of the care that they need and for
which the program is paying. In considering any payment structure, it is imperative to identify
the incentives that it creates and associated risks and to implement necessary safeguards to
remediate the negative incentives and reduce fraud risks.
Compliance
Assist health care providers and suppliers in adopting practices that promote compliance with
program requirements.
Federal
Health care providers and suppliers must be our partners in ensuring the integrty of 
health care programs and should adopt internal controls and other measures that promote
compliance and help prevent, detect, and respond to health care fraud, waste, and abuse. To this
Website extensive resources to assist industry stakeholders in
end, OIG has published on its 
understanding the fraud and abuse laws and designing and implementing effective compliance
programs. These resources include sector-specific Compliance Program Guidance that describes
the elements of an effective compliance program and identifies risk areas, advisory opinions, and
fraud alerts and bulletins.
In many sectors of the health care industry, such as hospitals, compliance programs are
widespread and often very sophisticated; other sectors have been slower to adopt internal
compliance practices. Compliance programs not only benefit the Federal health care programs;
they also benefit industry stakeholders by improving their business practices, by fostering early
detection and correction of emerging problems, and by reducing the risk that they wil become
the subject of a whistleblower complaint or fraud prosecution.
States also have begun to recognize the value of compliance systems. For example, New York
now requires providers and suppliers to implement an effective compliance program as a
condition of participation in its Medicaid program. Medicare Part D also requires that
prescription drug plan sponsors have compliance plans that address certain required elements.
Although compliance programs do not guarantee reduced fraud and abuse, they are an important
component of a comprehensive governent-industry partnership to promote program integrty.
We advocate that providers and suppliers be required to adopt compliance programs as a
condition of participating in the Medicare and Medicaid programs. Further, the obligation of
providers and suppliers to repay overpayments they discover through compliance efforts or
otherwise should be made explicit in the statute. There should be no question that providers and
suppliers must return taxpayer dollars they should not have received in the first place.
Testimony before the House Committee on Energy and Commerce, Subcommittee on Health 11
June 25, 2009 Oversight
fraud, waste, and abuse.
Vigilantly monitor the programs for evidence of 
As fraud schemes become more sophisticated and migratory, access to real time data and the use
of advanced data analysis to monitor claims and provider characteristics are critically important.
OIG is using innovative technology to detect and deter fraud, and we continue to develop and
implement cutting edge initiatives to enhance our technology infrastructure and support a data-
driven antifraud approach. More must be done to ensure that agencies governentwide are able
to use 21 st century information technology effectively in the fight against health care fraud.
This data-driven approach should underpin the development of fraud enforcement and
prevention activities. The health care system compiles an enormous amount of data on patients,
health care items and services. However, Federal health care
providers, and the delivery of 
programs often fail to use claims-processing edits and other information technology effectively
to identify improper claims before they are paid and to uncover fraud schemes. For example,
Medicare should not pay a clinic for HIV infusion when the beneficiary has not been diagnosed
with the ilness, pay twice for the same service, or process claims that rely on the provider
identifiers of deceased physicians. Better collection, monitoring, and coordination of data would
allow Medicare and Medicaid to detect these problems earlier and avoid making improper
payments. Moreover, effective use of data would enhance the Governent's abilty to detect and
respond to fraud schemes more quickly.
Needed improvements in program oversight include real-time access to data for law
enforcement; uniform, comprehensive data elements; more timely collection and validation of
data; robust reporting of data by States and others; interoperability of systems; consistent data
extraction methods; and the ability to draw and analyze claims and provider data across
Medicare Parts A, B, C, D, and Medicaid. CMS is building an Integrated Data Repository (IDR)
that wil, when completed, contain a wealth of data across several programs. Although the
system is stil under development, the prospect of such a comprehensive data warehouse holds
considerable promise for detecting and preventing fraud and abuse.
In addition, we advocate the consolidation and expansion of the various provider databases,
including the Health Care Integrty and Protection Data Bank (HIPDB), the National Practitioner
Excluded Individuals/Entities (LEIE). Providing a
Data Bank (NPDB), and OIG's List of 
centralized, comprehensive, and public database of adverse actions and other sanctions --
including a national registry of patient abuse and neglect -- would be an effective means of
preventing providers and suppliers with problem backgrounds from moving from State to State
unnoticed by licensing, governent, and health plan officials.
Testimony before the House Committee on Energy and Commerce, Subcommittee on Health 12
June 25, 2009 Response
Respond swifty to detected fraud, impose suffcient punishment to deter others, and promptly
remedy program vulnerabilities.
Federal health programs, law enforcement is working to accelerate the
To ensure the integrty of 
Governent's response to fraud schemes by reducing the time needed to detect, investigate, and
prosecute fraud. The Governent's Strike Force model has proven highly successful in this
regard, and although resource intensive, is a powerful antifraud tool and represents a tremendous
return on investment. In addition to prosecuting criminals and recovering funds for the Medicare
Trust Fund, the Strike Forces have had a strong sentinel effect, as evidenced by the 63 percent
Strike Force
decrease in DME claims submitted in south Florida over the first 12 months of 
operations there.
Even the best antifraud efforts are ineffective if fraud is not promptly detected and, once
detected, promptly punished and deterred. For example, our investigations have found evidence
of an increase in organized crime in health care. Health care fraud is attractive to organized
crime because the penalties are lower than those for other organized-crime-related offenses (e.g.,
offenses related to ilegal drugs); there are low barrers to entry (e.g., a criminal can easily obtain
a supplier number, gather some beneficiary numbers, and bil the program); schemes are easily
replicated; and detection efforts often are hampered by lack of access to real-time data. We need
to alter the cost-benefit analysis by increasing the risk of swift detection and the certainty of
punishment.
Medicare dollars to criminals who are
In addition, it is currently diffcult to stop the flow of 
under investigation for known health care fraud schemes. An explicit payment suspensJon
the pockets of criminals in cases
authority would enable Medicare to keep taxpayer dollars out of 
where the Governent has credible evidence of fraud. These criminals often take the money and
disappear before the Governent can complete an investigation and prosecute them. An explicit
payment suspension authority is a critical, money-saving tool in these situations.
OIG currently uses a range of administrative sanctions, including civil monetary penalties (CMP)
and program exclusions, as an adjunct to criminal and civil enforcement. However, OIG has
identified a number of enhancements to these administrative authorities that would increase our
abilty to address emerging schemes, such as authorizing CMPs for false provider enrollment
applications and for the ordering or prescribing of items or services by an excluded entity.
Amending the law to align our CMP authorities with the recent False Claims Act amendments
would also be helpfuL.
In addition, in the course of our investigations, audits, and evaluations, OIG often identifies
program vulnerabilities that have been or could be exploited and recommends corrective actions.
Program administrators and policy makers have important roles in responding quickly to address
these vulnerabilities and reduce the risk of future fraud, waste, and abuse.
Testimony before the House Committee on Energy and Commerce, Subcommittee on Health 13
June 25, 2009 CONCLUSION
health care reform, it is an especially important time to consider
In conclusion, in the context of 
how to best safeguard health care programs from fraud, waste, and abuse to protect beneficiaries
and taxpayer dollars. OIG's mission is to protect the integrty ofHHS programs, including the
program beneficiaries. In fulfillng our
Medicare and Medicaid programs, and the well-being of 
mission, OIG has identified tor recovery bilions of dollars lost to fraud, waste, and abuse;
helped remove thousands of fraudulent providers from Federal health care programs; pinpointed
numerous items and services for which the Governent is substantially overpaying; and
recommended actions to better protect programs and beneficiaries. These experiences and
health care reform. It is critical that the
results have applicability to the current discussions of 
Governent pursue a comprehensive strategy to combat fraud, waste, and abuse. We believe
that our "Five Principles" strategy provides the framework to identify new ways to protect the
beneficiaries, and keep Federal health care programs
integrty of  the programs, meet the needs of 
solvent for future generations. We look forward to working with the Committee on these issues,
including providing you with information and technical assistance. This concludes my
testimony, and I would be pleased to answer any questions.
Testimony before the House Committee on Energy and Commerce, Subcommittee on Health 14
June 25, 2009