Testimony of:  
Lewis Morris 
Chief Counsel to the Inspector General  
U.S. Department of Health & Human Services 
__________________________________________________________________ 
 
Good afternoon Chairmen Camp and Boustany, Ranking Members Levin and Lewis, and other 
distinguished Members of the Subcommittee.  I am Lewis Morris, Chief Counsel to the Inspector 
General for the U.S. Department of Health & Human Services (HHS or the Department).  Thank 
you for the opportunity to testify about the progress the Office of Inspector General (OIG) and its 
partners are making to combat fraud, waste, and abuse in the Federal health care programs.  
  
My testimony describes OIGs unique role in protecting the integrity of the Medicare and 
Medicaid programs; provides an overview of the nature and scope of health care fraud, waste, 
and abuse; and highlights three ongoing initiatives aimed at strengthening the integrity of these 
crucial programs.  The three initiatives involve targeting fraud hot spots with Medicare Fraud 
Strike Force teams, strengthening our ability to protect the Federal health care programs from 
untrustworthy providers, and enhancing our collaboration with the private sector, including 
health care providers, insurers, and the public.   
 
Our program integrity efforts, which are funded primarily through the Health Care Fraud and 
Abuse Control (HCFAC) Program, represent a prudent investment of taxpayer dollars.  Over the 
past 3 years, for every $1 spent on the HCFAC Program, an average of $6.80 has been returned 
to the Government.  Thats an almost seven-to-one return on every dollar invested in HCFAC. 
 
The Office of Inspector General Is Committed to Protecting HHS Programs and 
Beneficiaries 
 
OIG is an independent, nonpartisan agency within HHS.  Our mission is to protect the integrity 
of more than 300 programs administered by the Department and the citizens served by those 
programs.  Approximately 80 percent of OIGs resources are dedicated to promoting the 
efficiency and effectiveness of the Medicare and Medicaid programs and protecting these 
programs and their beneficiaries from fraud and abuse.  OIG investigates suspected fraud and 
refers cases to the Department of Justice (DOJ) for criminal and civil actions.  We impose 
administrative remedies, such as monetary penalties or exclusion from participation in Federal 
health care programs.  We also evaluate and audit programs and providers and make life-saving 
and cost-saving recommendations to the Department on a wide variety of issues, including 
quality of care; recovery of improper payments; and reducing excessive payments for medical 
services, equipment, and prescription drugs. 
 
Through this work, OIG helps to identify and recover billions of dollars in fraudulent, abusive, or 
wasteful payments and also raise awareness of these critical issues among policymakers, 
Government agencies, and the health care community at large.  We engage the health care 
community and promote compliance with program rules and requirements.  OIG has a strong 
track record of building on our successes, employing all oversight and enforcement tools 
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House Committee on Ways and Means, Subcommittee on Oversight 
March 2, 2011    available to us, and maximizing our impact in protecting the integrity of Government health care 
programs and the health and welfare of people served by them. 
 
Health Care Fraud, Waste, and Abuse Are Serious Problems Requiring Sustained 
Commitment To Fight Them 
 
Fraud, waste, and abuse in the health care system cost taxpayers billions of dollars each year and 
put beneficiaries health and welfare at risk.  The impact of these losses and risks is magnified by 
the growing number of people served by these programs and the increased strain on Federal and 
State budgets.   
 
Although there is no precise measure of health care fraud, we know that it is a serious problem 
that demands an aggressive response.  OIG has been leading the fight against health care fraud, 
waste, and abuse for more than 30 years.  Since the inception of the HCFAC Program in 1997, 
audits and investigations under the Program  have returned to the Federal Government $18 
billion in fraudulent or misspent funds.  Over the past fiscal year (FY) alone, OIG has opened 
more than 1,700 health care fraud investigations.  Additionally, OIGs enforcement efforts have 
resulted in more than 900 criminal and civil actions and over $3 billion in expected investigative 
recoveries in FY 2010.  The small number of providers who are intent on abusing the system can 
cost taxpayers billions of dollars. 
 
In the fight against health care fraud, we work closely with DOJ; our Federal, State, and local 
law enforcement partners; and our colleagues at the Centers for Medicare & Medicaid Services 
(CMS) and the Food and Drug Administration (FDA).  OIG conducts joint investigations with 
law enforcement agencies where there is concurrent jurisdiction and where sharing expertise or 
authority will lead to the best results possible.  Additionally, commercial and private insurance 
entities and trade associations, such as the National Health Care Anti-Fraud Association 
(NHCAA), play pivotal roles in the identification and prevention of health care fraud.   
 
Health care fraud schemes commonly include purposely billing for services that were not 
provided or were not medically necessary, billing for a higher level of service than what was 
provided, misreporting costs or other data to increase payments, paying kickbacks, illegally 
marketing products, and/or stealing providers or beneficiaries identities.  The perpetrators of 
these schemes range from street criminals, who believe it is safer and more profitable to steal 
from Medicare than to traffic in illegal drugs, to Fortune 500 companies that pay kickbacks to 
physicians in return for referrals.   
 
Many OIG investigations target fraud committed by criminals who masquerade as bona fide 
Medicare providers and suppliers but who do not provide legitimate services or products.  The 
rampant fraud among durable medical equipment (DME) suppliers in south Florida is a prime 
example.  In these cases, OIG investigators have found that criminals set up sham DME 
storefronts to masquerade as legitimate providers; fraudulently bill Medicare for millions of 
dollars; and then close up shop, only to reopen in a new location under a new name and continue 
the fraud.  The criminals often pay kickbacks to physicians, nurses, and even patients to recruit 
them as participants in the fraud schemes.     
 
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House Committee on Ways and Means, Subcommittee on Oversight 
March 2, 2011    The Medicare program is increasingly being infiltrated by violent and organized criminal 
networks.  For example, the Government recently charged 73 defendants with various health care 
fraud-related crimes involving more than $163 million in fraudulent billings.  According to the 
indictments, the Armenian-American organized crime ring behind the scheme was the Mirzoyan-
Terdjanian Organization, which has allegedly used violence and threats of violence to ensure 
payments to its leadership.   
 
In this crime scheme, criminals allegedly stole the identities of thousands of Medicare 
beneficiaries from around the country, as well as the identities of doctors who were usually 
licensed to practice in more than one State.  Other members of the syndicate allegedly leased 
office space, opened fraudulent clinics, and opened bank accounts to receive Medicare funds
often in the name of the doctor whose identity they had stolen.  Upon becoming approved 
Medicare providers, the crooks allegedly billed Medicare for services never provided, using the 
stolen beneficiary information.  The funds received from Medicare were quickly withdrawn and 
laundered; sometimes sent overseas.  Although Medicare identified and shut down some of the 
phony clinics, members of the criminal enterprise simply opened up more fraudulent clinics, 
usually in another State.  The investigation uncovered at least 118 phony clinics in 25 States. 
 
Health care fraud is not limited to blatant fraud by career criminals and sham providers.  Major 
corporations, such as pharmaceutical and medical device manufacturers, and institutions, such as 
hospitals and nursing facilities, have also committed fraud, sometimes on a grand scale.  For 
example, in August 2010, Allergan, Inc., agreed to plead guilty to misdemeanor misbranding and 
paid $600 million (including a $375 million criminal fine and forfeiture and a $225 million civil 
settlement) to resolve criminal and civil liability arising from the companys promotion of 
Botox.  The company illegally marketed the drug for indications that, during the relevant time 
periods, had not been approved as safe and effective by FDA, including headache, pain, 
spasticity, and juvenile cerebral palsy.  In addition, the settlement resolved allegations that 
Allergan misled doctors about the safety and efficacy of Botox, instructed doctors to miscode 
claims to ensure payment by Government health care programs, and paid kickbacks to doctors.    
 
Despite OIGs successes, there is more to be done.  Those intent on breaking the law are 
becoming more sophisticated and the schemes are becoming more difficult to detect.  Some 
fraud schemes are viral, i.e., schemes are replicated rapidly within geographic and ethnic 
communities.  Health care fraud also migratesas law enforcement cracks down on a particular 
scheme, the criminals may shift the scheme (e.g., suppliers fraudulently billing for DME have 
shifted to fraudulent billing for home health services) or relocate to a new geographic area in 
response to our enforcement efforts.  To combat this fraud, the Governments response must be 
swift, agile, and well-organized. 
 
Medicare Fraud Strike Forces Are a Proven Success in Fighting Fraud in Hot Spots 
 
On May 20, 2009, the HHS Secretary and the Attorney General announced the creation of the 
Health Care Fraud Prevention and Enforcement Action Team (HEAT).  This initiative marshals 
significant resources across the Government to prevent health care waste, fraud, and abuse; crack 
down on fraud perpetrators; and enhance existing partnerships between HHS and DOJ.  
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House Committee on Ways and Means, Subcommittee on Oversight 
March 2, 2011    Medicare Fraud Strike Forces are an essential component of HEAT and have achieved 
impressive enforcement results.  Strike Forces are designed to identify, investigate, and 
prosecute fraud quickly.  Strike Force teams are composed of dedicated DOJ prosecutors and 
Special Agents from OIG; the Federal Bureau of Investigation (FBI); and, in some cases, State 
and local law enforcement agencies.  These on the ground enforcement teams are supported by 
data analysts and program experts.  This coordination and collaboration has accelerated the 
Governments response to criminal fraud, decreasing by roughly half the average time from an 
investigations start to the cases prosecution. 
 
Strike Forces use data analysis and a collaborative approach to focus enforcement resources in 
geographic areas at high risk for fraud.  Strike Force cases are data driven to pinpoint fraud hot 
spots through the identification of unusual billing patterns as they occur.  To support this 
approach, OIG established a team of data experts composed of OIG special agents, statisticians, 
programmers, and auditors.  Together, the team brings a wealth of experience in utilizing data 
analysis tools combined with criminal intelligence gathered directly from special agents in the 
field to identify more quickly health care fraud schemes and trends.  To expand the coalition of 
data experts focused on this effort, OIG has garnered the support and participation of our law 
enforcement partners at DOJ and FBI.   
 
OIG and DOJ first launched their Strike Force efforts in 2007 in south Florida to identify, 
investigate, and prosecute DME suppliers and infusion clinics suspected of Medicare fraud. 
Building on the success in Miami, the Strike Force has been expanded to eight additional 
locationsLos Angeles; Detroit; Houston; Brooklyn; Baton Rouge; Tampa; and, most recently, 
Dallas and Chicago.   
 
The Strike Force model has proven highly successful.  The majority of subjects in Strike Force 
cases are engaging in 100-percent fraud, i.e., not providing any legitimate services to 
beneficiaries.  Since their inception in 2007, Strike Force operations in 9cities have charged 
almost 1,000 individuals for fraud schemes involving more than $2.3 billion in claims.   
 
Just last month, HEAT Strike Forces engaged in the largest Federal health care fraud takedown 
in history.  Teams across the country charged over 100 defendants in 9 cities, including doctors, 
nurses, health care company owners, and executives for their alleged participation in Medicare 
fraud schemes involving more than $225 million in false billing.  The defendants charged as a 
part of the operation are accused of various health-care-related crimes ranging from violating the 
anti-kickback statute to money laundering to aggravated identity theft.  More than 300 OIG 
special agents participated in partnership with other Federal and State agencies, including fellow 
Offices of Inspector General.   
 
The effectiveness of the Strike Force model is enhanced by our use of several important tools.  
We work closely with CMS to suspend payments to the perpetrators of these schemes and in 
other cases where we have credible allegations of fraud.  For example, during a July 2010 Strike 
Force operation, OIG worked with CMS to initiate payment suspensions and pre-pay edits on 18 
providers and suppliers targeted by the investigation.  The prompt action taken by OIG and CMS 
stopped the potential loss of over $1.3 million in claims submitted by the defendants.  During the 
February Strike Force operations discussed above, OIG and CMS worked to impose payment 
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House Committee on Ways and Means, Subcommittee on Oversight 
March 2, 2011    suspensions that immediately prevented a loss of over a quarter million dollars in claims 
submitted by Strike Force targets.  
 
OIGs work with CMS during these recent Strike Force operations reflects the multi-pronged, 
collaborative approach that is critical to success.  OIG and our law enforcement partners 
investigate and prosecute those who steal from Medicare.  Relying on our work, CMS turns off 
the spigot to prevent dollars from being paid for fraudulent claims.  
 
Better access to, and use of, CMS claims data also is critical to the Strike Force model and for all 
health care fraud detection and enforcement activities.  To be most effective, it is essential that 
law enforcement have access to robust, real time claims datadata that are available as soon 
as claims are submitted to Medicare.  Timely data are also essential to our ability to respond with 
agility as criminals shift their schemes and locations to avoid detection.  We have made 
important strides in obtaining data more quickly and efficiently.  For example, we have obtained 
limited law enforcement access to real-time data, and OIG and DOJ are working with CMS to 
expand this access.  Continued improvements in access to data, as well as creation of more 
robust data sets, are critical to OIGs ability to identify and investigate fraud. 
 
Promoting Program Integrity by Removing Untrustworthy Individuals From the Health 
Care Programs   
 
Once we determine that an individual or entity is engaged in fraud, waste, abuse, or the provision 
of substandard care, OIG can use one of the most powerful tools in our arsenal:  exclusion from 
participating in Federal health care programs.  Program exclusions bolster our fraud-fighting 
efforts by removing from the Federal health care programs those who pose the greatest risk to 
programs and beneficiaries.   
 
There are many grounds for exclusion.  Some are mandatory and imposed for a minimum of 5 
years.  These include a conviction related to the Medicare or Medicaid program and a conviction 
related to patient abuse.  Other exclusions are imposed at OIGs discretion.  There are a 
significant number of grounds for permissive exclusion, including actions based on a sanction 
taken by a State licensing authority or conduct that could trigger False Claims Act liability.   
 
No program payment may be made for any item or service that an excluded person or entity 
furnishes, orders, or prescribes.  This payment prohibition applies regardless of whether the 
excluded person is paid directly by the programs (like a physician) or whether the payment is 
made from the program to another person (such as payments to a hospital for services by its 
employed nurses and other staff or payments to a pharmacy for drugs manufactured by a 
pharmaceutical company).  Those who employ the services of an excluded individual or entity 
for the provision of items or services reimbursable by Medicare or Medicaid may be subject to 
monetary penalties and program exclusion.  Because of its scope and effect, the risk of exclusion 
creates a strong incentive to comply with the programs rules and requirements.  
  
In imposing discretionary exclusions, OIG must weigh the fraud and abuse risks to the programs 
and beneficiaries against the impact on patient access to care if the provider or entity is excluded 
from the Federal health care programs.  Some hospital systems, pharmaceutical manufacturers, 
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House Committee on Ways and Means, Subcommittee on Oversight 
March 2, 2011    and other providers play such a critical role in the care delivery system that they may believe that 
they are too big to fire and thus OIG would never exclude them and thereby risk compromising 
the welfare of our beneficiaries.  We are concerned that the providers that engage in health care 
fraud may consider civil penalties and criminal fines a cost of doing business.  As long as the 
profit from fraud outweighs those costs, abusive corporate behavior is likely to continue.  For 
example, some major pharmaceutical corporations that have been convicted of crimes and paid 
hundreds of millions of dollars in False Claims Act settlements continue to participate in the 
Federal health care programs, in part because of the potential patient harm that could result from 
an exclusion. 
 
One way to address this problem is to attempt to alter the cost-benefit calculus of the corporate 
executives who run these companies.  By excluding the individuals who are responsible for the 
fraud, either directly or because of their positions of responsibility in the company that engaged 
in fraud, we can influence corporate behavior without putting patient access to care at risk.  For 
example, in 2008, we excluded three former executive officers of the pharmaceutical company 
Purdue Frederick based on their convictions for misbranding of the painkiller OxyContin.  Each 
of the executives was convicted based on his status as a responsible corporate officer.    
 
OIG also has the discretionary authority to exclude certain owners, officers, and managing 
employees of a sanctioned entity (i.e., an entity that has been convicted of certain offenses or 
excluded from participation in the Federal health care programs) even if the executive has not 
been convicted of a crime.  This authority, section 1128(b)(15) of the Social Security Act, allows 
OIG to hold responsible individuals accountable for corporate misconduct.  OIG has used this 
exclusion authority in over 30 cases since it was added to the statute in 1996.  But until recently, 
we had typically applied this exclusion authority to individuals who controlled smaller 
companies, such as pharmacies, billing services, and DME companies, and not to executives of 
large complex organizations like a drug or device manufacturer. 
 
We intend to use this essential fraud-fighting tool in a broader range of circumstances.  For 
example, in addition to excluding the Purdue Frederick executives, we recently excluded an 
owner (and former executive) of Ethex Corporation under our section (b)(15) exclusion 
authority.  Ethex operated manufacturing facilities in St. Louis.  In March of last year, Ethex pled 
guilty to felony criminal charges after it failed to inform FDA about manufacturing problems that 
led to the production of oversized tablets of two prescription drugs.  The owner was excluded for 
a period of 20 years. 
 
We are mindful of our obligation to exercise this authority judiciously, and we do not propose to 
exclude all officers and managing employees of a company that is convicted of a health-care-
related offense.  However, when there is evidence that an executive knew or should have known 
of the underlying criminal misconduct of the organization, OIG will operate with a presumption 
in favor of exclusion of that executive.  We have published guidance on our Web site that sets 
out factors we will consider when evaluating whether a section (b)(15) exclusion should be 
imposed in a particular case.1  This guidance alerts health care providers and executives to the 
standards of ethical conduct and responsibility to which they will be held accountable by OIG.  
Even if we decide exclusion of a major health care entity is not in the best interests of Federal 
1 Available online at http://oig.hhs.gov/fraud/exclusions/files/permissive_excl_under_1128b15_10192010.pdf.   
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House Committee on Ways and Means, Subcommittee on Oversight 
March 2, 2011    health care programs and their beneficiaries, we may decide that executives in positions of 
responsibility at the time of the fraud should no longer hold such positions with entities that do 
business with the programs. 
 
OIG Is Strengthening Collaboration With the Private Sector, Health Care Providers, and 
the Public  
 
We recognize that the Federal health care programs can learn a great deal from how the private 
sector, including private insurers and the finance industry, combats fraud.  OIG has increased its 
efforts both to learn from the private sector and to share information with its private sector 
counterparts.  Collaboration with private health care insurers can be mutually beneficial, and we 
are increasing these efforts through our active participation in the NHCAA.  Through NHCAA 
forums, we build relationships, share information, and learn about new fraud-fighting tools and 
techniques.     
 
For example, we collaborate to identify fraud trends that target both Medicare and private 
insurers and share information on organized crime and medical identity theft.  OIG agents have 
participated in joint investigations with private insurance companies and, subject to applicable 
legal restrictions, shared field intelligence.  These joint investigative efforts can be very 
effective, and in an effort to replicate their success, OIG has started a public/private best 
practices initiative.  In coordination with DOJ, we are surveying the U.S. Attorneys health care 
fraud working groups, Medicaid Fraud Control Units, and health insurers special investigative 
units to identify where public/private information sharing was most successful.  The survey 
results will be translated into a series of best practices recommendations that promote a culture 
of information sharing between public and private partners working together to combat health 
care fraud. 
 
We also recognize that the vast majority of health care providers are honest and well-intentioned.  
They are valuable partners in ensuring the integrity of Federal health care programs.  OIG 
produces extensive resources to assist industry stakeholders in understanding the fraud and abuse 
laws and designing and implementing effective compliance programs.  OIG also offers a way for 
providers that uncover fraudulent billings or other misconduct within their organizations to self-
disclose the problem and to work with OIG to the resolve the issue, including return of the 
inappropriate payments. 
 
Another example of OIGs commitment to promoting compliance is our HEAT Provider 
Compliance Training Initiative.  The initiative brings together representatives from a variety of 
Government agencies to provide free compliance training to local provider, legal, and 
compliance communities.  The speakers discuss fraud risk areas uncovered by OIGs work and 
share compliance best practices.  This will enable providers to strengthen their own compliance 
efforts and more effectively identify and avoid illegal schemes that may be targeting their 
communities.  The first seminar took place in Houston last month, and we will be going to 
Tampa, Kansas City, Baton Rouge, Denver, and Washington, DC, during the spring of 2011.  
OIG also will provide a Webcast of the seminar for individuals who are unable to attend an in-
person training session. 
 
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House Committee on Ways and Means, Subcommittee on Oversight 
March 2, 2011    In response to requests for more guidance for physicians just beginning the practice of medicine, 
OIG recently published A Roadmap for New Physicians:  Avoiding Medicare and Medicaid 
Fraud and Abuse.2  The Roadmap summarizes the main Federal fraud and abuse laws and 
provides guidance on how physicians should comply with these laws in their relationships with 
payers, vendors, and fellow providers.   
 
We also use the power of the Internet to enlist the public in the fight against health care fraud.  
Our internet site, http://oig.hhs.gov, offers a wealth of information to health care providers and 
patients about ways to reduce the risk of fraud and abuse, including OIG voluntary compliance 
program guidance, fraud alerts, and advisory opinions on the fraud and abuse laws.  OIG also 
offers a guide for patients to avoid becoming the victim of medical identity theft, a growing 
problem which can disrupt lives, damage credit ratings, and waste taxpayer dollars.  We offer 
tips to Medicare beneficiaries and their caregivers on how to avoid medical identity theft and 
where to report misuse of personal information.3   
 
We also have posted OIGs list of the most-wanted health care fraud fugitives, including 
photographs and details on the fugitives and their fraud schemes.4  Our current most wanted list 
includes 10 individuals who have allegedly defrauded taxpayers approximately $136 million.  
We are asking the public to help us bring these fugitives to justice by reporting any information 
about their whereabouts to our Web site or fugitive hotline (1-888-476-4453).   
 
Conclusion  
 
Health care fraud, waste, and abuse cost taxpayers billions of dollars every year and require 
focused attention and commitment to solutions.  Through the dedicated efforts of OIG 
professionals and our collaboration with other stakeholders, we have achieved substantial results 
in the form of recovered funds, enforcement actions, and recommendations to remedy program 
vulnerabilities.  
 
I would be happy to answer any questions.  
2 Available online at http://oig.hhs.gov/fraud/PhysicianEducation/.   
 3   A   v  a  i l a  b  l e    o  n  l i  n  e    a t    h  t t p  : / /  o  i g  . h  h  s  . g  ov/fraud/IDTheft/. 
4 Available online at http://oig.hhs.gov/fugitives/.   
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House Committee on Ways and Means, Subcommittee on Oversight 
March 2, 2011