THE  OVERSIGHT  OF  STATE 

MEDICAID  FRAUD  CONTROL  UNITS 

Richard P. Kusserow 
INSPECTOR  GENERAL 
AUGUST  1988 
OAI-01-87-00015  TABLE  OF CONTENTS 

TRANSMllTAL  MEMORANDUM 
EXECUTIVE  SUMMARY 
INTRODUCTION  ..................................................................................................... 1 

Background ......................................................................................................  1 

The 01 Oversight of the MFCUs .......................................................................  1 

Purpose and Objectives .....................................................................................  2 

Scope ...............................................................................................................  2 

PERFORMANCE  INDICATORS  .............................................................................. 4 

Performance Indicators in Perspective ..............................................................  4 

Performance Indicators for MFCUs ..................................................................  4 

Recommendations ............................................................................................  6 

MINIMUM  STAFFING  REQUIREMENTS  ........................................**................~.....  12 

Discussion ........................................................................................................  12 

Recommendation  .............................................................................................  14 

ADDENDUM  .*...........*.............................................................................................  17 

Requirements for Full-Time  and Part-Time  Employees .....................................  17 

Expanding MFCU  Fraud Detection Authority  ...................................................  18 

APPENDICES  ......................................................................................................... 20 

Appendix  1.......................................................................................................  20 

Appendix 2 .......................................................................................................  21 

Appendix 3 .......................................................................................................  22 
 cl,-<  - ,rT>;kA*,., ,<;.., .( 
DEP.ART.MENT  OF HE.4LTH  &  HL1  4N  %ER\I(E\ 
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Memorandum 
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Dalr 
Fro  Assistant  Inspector  General 
for  Analysis  and  Inspections 
OAI  Final  Report:  "The  Oversight  of  State  Medicaid  Fraud 
Subjecl 	
Control  Units,"  OAI-01-87-00015 
Larry  D.  Morey
TO 
Assistant  Inspector  General 
for  Investigations 
Attached  is  our  final  inspection  report  on  the  oversight  of 

State  Medicaid  Fraud  Control  Units  (MFCUs).  It  includes,  in 

appendix  3,  the  comments  of  the  National  Association  of  MFCUs 

to  our  draft  report  and  our  response  to  their  comments  and 

those  of  many  individual  State  MFCUs. 

In  the  final  report,  we  retain  and,  indeed,  reinforce  our 

recommendations  concerning  the  establishment  of  outcome-

oriented  performance  indicators.  Performance  indicators  are 

a  valid  and  important  management  tool,  being  used  with 

increasing  success  in  many  fields.  Although  there  are  some 

particular  sensitivities  involving  their  use  in  the  law 

enforcement  field,  we  strongly  believe  they  can  be 

effectively  adapted  by  01  and  individual  MFCUs themselves. 

We offer  a  number  of  specific  recommendations  addressing  how 

this  might  be  accomplished. 

In  view  of  the  National  Association  of  MCFU1s  opposition  to 

performance  indicators,  it  is  important  to  stress  that 

Federal  funding  to  the  States  for  the  establishment  and 

operation  of  MFCUs is  not  an  entitlement  program.  It  is  a 

grant  program  initiated  by  Congress  to  contribute  to  the 

elimination  of  fraud  in  State  Medicaid  programs.  The  Office 

of  Investigations  (01),  as  the  Federal  entity  responsible  for 

the  oversight  of  the  MFCUs,  must  assure  that  MFCUs are 

advancing  this  congressional  purpose.  In  carrying  out  this 

oversight  responsibility,  it  is  quite  legitimate  for  01  to 

rely  upon  performance  indicators  in  concert  with  other  review 

mechanisms. 

As  we  note  in  appendix  3,  it  is  also  important  to  recognize

that  the  development  of  performance  indicators  is  in  accord 

with  recent  congressional  history,  as  reflected  in  the  Health 

Care  Quality  Improvement  Act  of  1986  (P.L.  99-660)  and  the 

Medicare  and  Medicaid  Patient  and  Program  Protection  Act  of 

1987  (P.L.  100-93).  These  acts  call  for  State  licensing

authorities  and  certain  other  entities  to  report  to  the 
 Page  2  - Larry  D.  Morey 

Secretary  or  his  designee  any  adverse  actions  they  take 

against  health  care  practitioners.  Moreover,  the  reports 

must  be  timely  and  include  specific  information  on  the 

actions  taken  and  the  practitioners  involved. 

Our  second  major  area  of  recommendations  concerns  minimum 

staffing  levels  of  MFCUs.  Here,  in  response  to  concerns 

raised  by  MFCUs,  we  changed  our  recommended  minimum  from  10 

professional  positions  to  7  to  10.  Although  we  still  feel 

that  in  nearly  all  cases  it  is  important  to  establish  a 

minimum  of  10,  we  recognize  that  there  are  States  where  a 

lesser  level  might  be  more  appropriate  for  a  particular

period  of  time.  Accordingly,  we  lowered  our  recommended 

minimum  to  a  range  of  7  to  10.  The  01,  we  believe,  is  best 

suited  to  determine  the  actual  number. 

In  accord  with  this  change,  we  have  also  removed  our 

suggestion  that  waivers  be  allowed,  and  instead  have  urged

that  MFCUs with  less  professional  staff  than  the  newly

established  minimum  be  allowed  a  phase-in  period  to  reach 

that  minimum.  We think  that  such  an  approach  will  allow  for 

more  equitable  and  simpler  administration. 

We appreciate  the  assistance  that  you  and  your  staff  provided 

us  in  conducting  this  study.  We also  appreciate  the 

cooperation  extended  by  the  MFCU representatives  with  whom  we 

spoke.  If  you  have  any  questions,  please  let  us  know. 
 EXECUTIVE  SUMMARY 

PURPOSE  AND  OBJECTIVES 
This inspection was conducted to help the Of&e  of Investigations (01) within  the Office 
of Inspector General (OIG)  strengthen its oversight of State Medicaid Fraud Control 
Units (MFCUs).  It had two major objectives: (1)to determine to what extent and in 
what manner 01 might rely upon performance indicators as a way of determining  the ef
fectiveness of MFCUs  and (2) to assessto what extent and in what manner 01 might rely 
upon minimum  staffing requirements and/or ratios as a measure of effectiveness. 
The inspection was based primarily  on three lines of inquiry:  (1) discussionswith repre
sentatives of 01, the 37 current State MFCUs, and the National Association of Medicaid 
Fraud Control  Units;  (2) a review of data that MFCUs submit to 01; and (3) a review of 
various reports concerning MFCUs. 
FINDINGS 
The MFCU  directors expressedstrong general support for performance indicators: 
l 	
35 of the 37 directors (95 percent) agreed that performance indicators could be a 
useful means of oversight of the operations of State MFCUs. 
At the same time, they raised a number of concerns about how 01 might use or 
l 	
misuse performance indicators when making judgments about individual  MFCUs. 
In this regard they stressed: 
the differencesthat exkt in the authorities and working conditions of MFCUs, 
the dfferences in the complexity of merent  typesof cases, and 
the distortions that indicators can causein MFCUperfomtQnce. 
Only 16 of the 37 MFCU  directors (43 percent) reported they use performance 
l 	
indicators in their own offices.  Among them, most tended to focus on process 
elements, such as casesopened, worked, or cleared. 
Of the 37 directors, 27 (73 percent) felt that the minimum  requirement  of 3 
l 	
professional staff was too low for an MFCU  to carry out its responsibilities  in an 
effective and efficient  manner.  They emphasized that an MFCU  operating at this 
minimum  level would be too limited  in the type of casesit could handle, vulnerable  to major disruption if a single staff member left, and probably would not be able to 
generate enough casesto keep an attorney busy. 
There is substantial variation in the averageprofessional staff size of MFCUs. 
l 	
From  1984through 1986,the range was from 4.7 to 251.8. During  that time,  12 had 
an averageprofessional staff of 9 or less and 18 had an average of 10 or more. 
Currently,  16MFCUs have 9 or fewer professional staff. 
RECOMMENDATIONS 
The 01 should incorporate the use of performance indicators aspart of its oversight 
l 	
of MFCUs.  Toward this end, it should amend the MFCU  regulations at 42 C.F.R., 
section 1002,315(d) to allow for performance indicators to serve as a factor in 
considering an MFCUs reapplication  for certification. 
In this regard, 01 should: 
l 
introduce performance indicators on a gradual bak, 
strivefor consensuson what indicators should be used, 
useexistingdata sourcesto developindicators, 
- focus  on performance over a 2- or 3-year period, and 
avoid an over-reliance on indicators. 
As a start, 01, through policy issuancesto the MFCUs, should establish the 
l 	
following  set of performance indicators: 
indictments per professional staff, 
indictments per $100 million  Medicaid expenditure, 
convictionsper professional staff, 
convictionsper $I 00 million  Medicaid expenditure, 
dollar judgments per professional stafi  and 
dollar ju&ments  per $100 million  of Medicaid expenditure. 
ii  After  1 or 2 years of experience in using performance indicators, 01, in consultation 
0 	
with the MFCUs, should develop some outcome-oriented  standards that could 
serve as an important  reference point in recertification  reviews. 
The 01 should increase the minimum  staffing requirement  from 3 professional 
l 	
positions to 7 to 10 professional positions.  It should amend the MFCU  regulations 
at 42 C.F.R. Section 1002.313to stipulate that the total complement  of staff must 
include at least 7 to 10 professionals trained as attorneys, auditors, or investigators. 
In so doing, it should allow for a phase-in period for existing MFCUs with less than 
7 to 10 professional staff. 
The National  Association of Medical Fraud Control Units and many individual  MFCUs 
submitted comments reflecting  concerns about our recommendations.  Their  comments 
and our reaction to them appear in appendix 3. 
. . . 
111  INTRODUCTION 

BACKGROUND 
In 1977,when Medicaid had grown to become a $17 billion  program (Federal/State ex
penditures), the Inspector General for the Department  of Health  and Human Services es
timated that at least $653 million  of that amount was improperly  paid because of 
fraudulent  or abusive practices. An increased awarenessof this situation, which 
threatened the integrity  of the program, contributed  to the passagein October  1977 of 
the Medicare-Medicaid  Anti-Fraud  and Abuse Amendments  to the Social Security Act. 
This legislation  currently authorizes the Federal Government to fund 90 percent of the 
start-up cost and 75 percent of the ongoing cost of a State Medicaid  Fraud Control  Unit 
(MFCU).  It stated that the responsibility  of such a unit is to conduct a statewide program 
for investigating and prosecuting (or referring for prosecution) violations  of all ap
plicable State laws pertaining  to fraud in the administration  of the Medicaid program or 
the provision of Medicaid-funded  services. 
There are currently 37 State Medicaid Fraud Control  Units.  In Calendar Year 1986,the 
units were responsible for the expenditure of $50.6 million.  They accounted for 405 con
victions, 611 indictments, and $8,460,522collected in fines, restitutions,  and overpay
ments. 
Prior to 1979,the Health  Care Financing Administration  bore  responsibility  for Federal 
oversight of the MFCUs.  However, beginning in 1979,the Administrations  awarenessof 
congressional intent to strengthen and centralize fraud and abuse deterrence efforts led 
to the transfer of MFCU  oversight from HCFA  to the Office of Inspector General. 
Within  the Office of Inspector General, the Office of Investigations (01) is the operating 
component for the ongoing oversight of MFCU  activities and performance. 
The 01 Oversight of the MFCUs:  The 01s responsibilities,  as stated in 42 C.F.R. Section 
1002.315include reviewing applications for both initial  certification  and annual recer
tification.  For initial  certification  an MFCU  must meet a number of basic requirements 
concerning organization, location, relationships with the Medicaid  State agency,unit 
duties and responsibilities,  and staffing. 
For recertification,  the MFCU  must submit a reapplication  which includes an annual 
report.  This report provides data on investigations, outcomes, complaints, recovery ac
tions, projections for the succeeding 12 months, unit costs,and a narrative of the units 
performance.  In deciding upon recertification,  01 must give special attention  to 
whether the unit has used its resources effectively in investigating casesof possible fraud, 
in preparing casesfor prosecution, in prosecuting casesor cooperating with the prosecut
ing authorities.  The 01s determination  of whether or not an MFCUs  resources are 
being used effectively is made by reviewing various materials such as the reapplication  and the annual and quarterly reports submitted by an MFCU,  and periodically  by con
ducting an on-site visit.  At this point, however, no specific standards or performance in
dicators have been developed asa basis for determining  an MFCUs  effectiveness. 
The 01 increasingly has been interested in helping MFCUs improve their overall produc
tivity.  To this end, it has been suggestedthat less attention be devoted to process factors, 
such as casesopened and closed, and more to outcome factors, such as convictions, funds 
recovered, and contributions  to successfulcivil monetary penalty (CMP)  and sanction 
cases. 
PURPOSE  AND  OBJECTIVES 
The Office of Analysis and Inspections within  the Office of Inspector General has been 
asked by the Inspector General to conduct a brief inquiry  to assistthe Office of Investiga
tions in determining  the directions it might take in strengthening its oversight of MFCUs. 
The Inspector General is particularly  interested in Federal oversight concerning the over-
all productivity  of the MFCUs and their appropriate staffing levels. 
After  some discussion, we decided that the primary objectives of this inspection would be 
twofold:  (1) to determine to what extent and in what manner 01 might rely upon perfor
mance indicators as a way of determining  the effectiveness of MFCUs, and (2) to assess 
to what extent and in what manner 01 might rely upon minimum  staffing requirements 
and/or ratios as a measure of effectiveness. We zeroed in on these objectives becausewe 
felt their achievement could have an important  bearing on the  effectiveness of 01s over-
sight of MFCUs. 
SCOPE 
The inspection was based primarily  on three modes of inquiry  conducted simultaneously. 
The first involved a series of discussionswith representatives of 01, the 37 current State 
Medicaid  Fraud Control  Units, the National Association of Medicaid Fraud Control 
Units, and 6 offices of the U.S. Attorney.  In all casesbut one, the representatives of the 
State units were their directors.  (In forthcoming  references, we will  refer to these discus
sions as those held with the MFCU  directors.)  The discussionswith the offices of the 
U.S. Attorney  were brief ones and focused on their perspectives and experiences concem
ing minimum  staffing levels. Those offices were selected at random. 
The second mode concerned a careful review of the data that MFCUs submit to 01.  The 
primary  aim here was to identify  the type of performance indicators that might be 
developed from available data and to determine the appropriateness of the data for that 
purpose. 
Finally, the third mode centered around the review of a wide array of written  materials 
concerning MFCUs.  These included the pertinent  regulations; a GAO  fact sheet, 
of 
Medicaid- Results Certified Fraud Control Units; draft and final recertification  review 
2 
 reports for MFCUs;  congressional documents pertaining  to fraud and abuse legislation; 
and research materials  concerning the use of performance indicators.  PERFORMANCE  INDICATORS 
PERFORMANCE  INDICATORS  IN PERSPECTNE 
In recent years, managers of both public and private organizations have indicated increas
ing interest in performance indicators (or measures). Many of them have come to view 
indicators as analytical devices that can be useful in improving productivity.  They find 
that the development of indicators can help their organizations focus their energies on 
significant performance issuesand can alert management to existing or emerging 
problems. 
Performance indicators can focus on either processor outcome functions, or some com
bination  of the two.  What is best will  depend on the particular  setting and the objectives 
of  management.  If efficiency concerns are paramount, process indicators alone may be 
sufficient.  If effectiveness and overall productivity  are of concern, then outcome in
dicators are of greater importance. 
Whatever the particular  items being measured, performance indicators tend to be most 
helpful  if they are analyzed in a comparative perspective. Thus, indicators can be used to 
compare the performance of similar types of agencies,of one agency over a period of 
time, or of an agency against some previously established standards. 
In this way, performance indicators can provide valuable clues about how well an or
ganization is doing and can signal possible problems.  They can also help managers ask 
better questions about performance.  If, however, they are used in too restrictive or rigid 
a manner, without  appreciation of the complexities that can affect performance, they can 
be detrimental  to organizational  productivity.  Managers who have used them successful
ly have found that a balanced approach works best; performance indicators should guide 
but not necessarily dictate decision making. 
PERFORMANCE  INDICATORS  FOR  MFCUs 
We asked the State MFCU  directors if they felt that performance indicators could be a 
useful means of oversight of the operations of the MFCUs.  The response was over
whelmingly  positive.  Of the 37 we asked, 35 said yes. 
In their elaborations, it was clear that the directors were not necessarily thinking  of in
dicators in the same way. Some discussedthem primarily  in terms of process characteris
tics; others more in terms of outcome factors. But the sentiment was strongly positive:  if 
used properly, performance indicators could serve asa legitimate  vehicle of managerial 
oversight for 01. 
For example, one director said: It is a useful way to gauge the effectiveness of different 
units.  If one unit is significantly better, they [01] could find out why and make recom-
4 
 mendations to other units. Another  noted:  Its a good beginning point to get into what 
a problem  might be. Still another said: In general, it makes sense. 01 has to know 
what its getting for its money. 
While expressing support in general terms, however, most directors were quick to point 
out some reservations and limitations.  In some cases,in fact, these qualifications 
substantially watered down the initial  expressionsof support.  Most of their concerns in
volved how 01 might use or misuse performance indicators in making judgments about 
individual  MFCUs.  The directors tended to be wary of 01s using them in so rigid a man
ner that they might lead to an inaccurate picture of an MFCUs  actual performance. 
The most frequent concernsvoiced by the directors were of three major types. The first 
concerned the substantial differences that exist among the MFCUs, particularly  with 
respect to their authorities and working  conditions.  Many, for instance, noted that it 
would be unfair to compare convictions between an MFCU  that has prosecuting 
authority  and one that does not. 
The second involved the differences in types of cases. Many noted that casesinvolving 
certain types of providers, such as clinics, nursing homes, or hospitals, tend to require 
much more time and resources than do others--for instance, those involving pharmacies 
or individual  physicians. Similarly,  others distinguished between fraud and personal 
abuse cases. One director noted that up to 40 percent of his units time tends to be spent 
on physical abuse cases. 
The third set of concerns had to do with the distortions that could be generated by the ap
plication  of performance indicators.  Thus, activities that are not readily quantified,  such 
asthose that lead to State legislative or regulatory changesor that serve to deter fraud, 
could be down played in favor of the ones being scrutinized by 01.  Thus, one director 
warned:  Its easyto get convictions if thats what you want.  You get the defendant to 
plead guilty to a misdemeanor charge, and you focus on casesinvolving pharmacies and 
individual  providers. 
Given these concerns, it is not surprising that the State directors do not tend to rely heavi
ly on performance indicators in managing their own units.  Of the 37 interviewed, only 16 
(43 percent) reported that they tend to use them as a managerial tool.  And of those 16, 
most tend to focus on processelements, such as casedevelopment time or casesopened, 
worked, or cleared. 
This is not meant to imply that the directors are unconcerned about outcome elements. 
They noted that by using a variety of mechanisms, such asregular staff meetings and 
employee performance evaluations, they are able to stay on top of outcomes and factors 
aiding or hindering  them.  Many added that their units are small enough that they do not 
need formal systemsfor measuring outcomes; some noted that if their staffs were to in
creasesignificantly, they would become more interested in such systems.  RECOMMENDATIONS 
1. 	 The 01 should incorporate the useof performance indicators aspart of its oversightof 
MFCUs.  Toward this end, it should amend the MFCU regulations at 42 C.F.R. Sec
tion 1002.315(d) to allow forpeflonnance  indicators to serve as a factor  in considering 
a units reapplication for  certijkation. 
The 01 has the responsibility  for the Department  to ensure that MFCUs  are using their 
resources effectively.  If it is to carry out that responsibility  in an effective and equitable 
manner, it must identify  some specific outcome-oriented  factors that are associatedwith 
effective MFCU  performance.  Then, and of no less importance, it must use these factors 
as significant and consistent reference points in its reviews concerning the recertification 
of MFCUs.  It is in this context that we urge the adoption of performance indicators. 
2. 	 As it incorporatespegormance indicators into its reviewprocesses,01 should take 
care&l account of the substantial experiencethat existsin this area in government and 
private industry and in particular  of the specific concernsraked by MFCU directors. 
In this regard, we recommend thefollowing  to 01 as it pursues implementation: 
Introduce performance indicators on a gradual basis. 
l 
The 01, we feel, should move immediately  to incorporate the use of performance in
dicators.  But it is extremely important  that 01 start with only a few indicators that are 
clearly and strongly linked with the mission of MFCUs.  This will  allow both 01 and the 
MFCUs to adjust to the new mechanism and to develop experience-based insights on 
how it might be improved. 
Strive for consensuson what indicators should be used. 
0 
The use of performance indicators will  be much more successfulif they are perceived by 
both 01 and MFCUs  to be relevant and fair measures of outcome.  The 01 should 
regularly consult with the MFCUs about what specific ratios might be employed as in
dicators and about what if any adaptations should be made in existing indicators. 
Use existing data sources to develop indicators. 
l 
In developing indicators, 01 should be wary of any temptation  to add to the data-report
ing requirements imposed on MFCUs.  Although  at a later time some additions may be 
desirable, indicators at the outset should be based on existing data sources. This ap
proach will  make the transition  to the new mechanism easier, and since substantial data 
on performance are now submitted regularly, there should be no problem  in developing 
useful indicators. 
Focus on performance over a 2- or 3-year period. 
0 
6 
 Given the complexity and duration of many fraud cases,a single year as a frame of 
reference is probably too short a time to serve as a reliable indicator  of performance.  So 
many distortions could arise that the value of the indicator  as a basis for comparison 
would be undermined.  Two or 3 years would provide more valuable data. For that 
reason, 01 might also find it desirable to seek a regulatory change that would extend the 
recertification  period from 1 to 2 years. 
Avoid an over-reliance on indicators. 
a 
Remember that they are just indicators after all.  Used properly, they can help 01 ask bet
ter, more strategic questions aspart of its oversight. They can help 01 gain a more ac
curate determination  of which units are performing  well above the norm and which well 
below, and why. They can &o  help 01 determine which States are gaining ground com
pared with their past performance, and which are falling behind, and why.  Yet, even at 
best, these indicators will  not provide a complete picture of an MFCUs  performance. 
Also needed are careful on-site observations and reviews of an MFCUs reports and reap
plication  materials. Each MFCU is different.  Each has certain circumstances that affect 
its performance.  The 01s mersight  must be sufficiently  fine-tuned  that it takes account 
of these circumstances in making recertification  decisions. 
At the same time, of coursq 01 has a responsibility  to the Department  and Congress to 
keep them apprised of how well the MFCUs are doing in eliminating  fraud in State 
Medicaid programs.  If a particular MFCU  is achieving comparatively poor results, 01 
must be concerned, even if those results are attributable  to larger State-imposed con
straints rather than to any failings of the MFCU  itself.  Thus, in a very real sense,01 is 
reviewing a States performance aswell as that of the MFCU  in effectively controlling 
fraud.  Performance indicators can help 01 maintain an overall perspective and account-
ability. 
3. 	 As a start, Ol, throughpolicy issuancesto the MFCUs, should establish thefollowing 
set of performance inckators: 
indictments per professional staff, 
0 
indictments per $100 million  Medicaid expenditure, 
0 
convictions per professional St& 
0 
convictions per $100 million  Medicaid expenditure, 
l 
dollar judgments per professional staff, and 
l 
dollar judgments per $100 million  Medicaid expenditure. 
l 
7 
 Each of those ratios addressesbasic outcome factors that are of interest to managers, 

legislators, and the public.  Each can be developed from data regularly available to 01. 

In sum they do not offer a definitive  assessmentof any particular  MFCUs  overall perfor

mance, but, especially if aggregated over a 2- or 3-year period, they can provide a good 

overview of performance and serve as a useful guide to more detailed analysis of a par

ticular MFCUs  operations.  That analysis can also addressother elements of perfor

mance not directly reflected in the numerical indicators. 

Why these particular  ratios ? We selected them after carefully considering the responses 

of the MFCU  directors and reviewing the extent and type of data available to 01.  With 

respect to numerators, indictments and convictions were two obvious selections, for they 

provide tangible indicators of an MFCUs  impact in addressing Medicaid  fraud. 

Understandably, those associatedwith MFCUs that do not have prosecuting authority 

are wary of being held accountable for actions that are beyond their scopes. They tend to 

prefer an accounting based on investigations referred rather than on indictments  or con

victions.  This is a reasonable concern and should be considered by 01 when reviewing 

those particular  MFCUs.  But from a broader perspective, 01 and the Department  still 

have a compelling  interest in reviewing a States overall performance in bringing in indict

ments and convictions and should therefore maintain a continuing focus on the results 

being attained in those areas. 

Financial penalties can also serve as the culmination  of an MFCUs work on a particular 

caseand thus is an indication  of impact that warrants close review.  We therefore 

selected dollar judgments as a third numerator.  By dollar judgments, we are referring  to 

four categories of data that MFCUs regularly report to 01:  fines imposed, restitutions  or

dered, Medicaid program overpayment judgments, and other receivables judgments.  At 

first we considered a numerator based on dollars actually collected, but we decided that 

judgments are sufficiently  outcome-oriented  and provide a better near-term indicator  of 

an MFCUs  successin the area of financial penalties. 

With respect to the denominators, we chose professional staff  (attorneys, investigators, 

and auditors) as one becauseit appears to be a reasonable indicator  of the level of an 

MFCUs  effort and because most of the MFCU  directors were favorable to it.  Especially 

notable was the fact that about two-thirds of the directors felt that performance in

dicators using indictments  and convictions per professional staff were worth serious con

sideration. 

Our second denominator,  Medicaid expenditures, was a more difficult  selection.  Our 

aim here was to choose an item that would serve asa reasonable overall indicator  of the 

scope of the  Medicaid fraud and abuse existing in a State. Otherwise, if review is limited 

to indictments, convictions, and dollar judgmentsperprofmional  stafl, an MFCU  with a 

comparatively small staff but located in a State with a sizable Medicaid program could ap

pear to have a much greater impact than is actually the case. 
 Along the same lines, we initially  considered total number of Medicaid providers or 
Medicaid recipients as a denominator.  But neither received majority  support among the 
MFCU  directors, and in both cases,it appeared there would be some problems in obtain
ing timely and accurate data. 
Finally, on the basis of suggestionsoffered by some MFCU  directors, we chose total 
Medicaid expenditures per State as a denominator  (or more precisely, total Medicaid  ex
penditures presented in increments of $100 million).  By that, we mean total Federal and 
State Medicaid dollars (program and administrative)  expended in a State during a calen
dar year. Such data can be readily obtained and serve as a reasonable proxy for the scope 
of the job facing an MFCU.  Generally speaking, the incidence of Medicaid fraud and 
abuse in those Stateswith comparatively high Medicaid expenditures is likely  to be 
higher than those with lower expenditures. 
For each of the six performance indicators identified,  01 might find it useful to make cer
tain distinctions when using them for comparative purposes. It might, for instance, wish 
to distinguish those MFCUs having prosecuting authority from those that do not.  Similar
ly, it might find it useful to distinguish indictments, convictions, and dollar judgments by 
type of providers (since casesconcerning some types tend to take longer than those for 
others).  Making the latter distinction will  add somewhat to the complexity of the data 
gathering and presentation, but it may well be worthwhile.  If 01 chose at the outset not 
to incorporate this distinction  into the compiled performance indicator  data, it should 
pay careful attention  during its recertification  reviews to the types of Medicaid providers 
that are being indicted, convicted, and/or financially penalized.  Such information  can 
help explain the performance statistics. 
FisuPe  1 
NUMBER  OF  INDICTMENTS  hND  CONUICTIONS  PER 
PROFESSIONRL  STAFF,  BY  STATE,  1984-1986 
NUUBER  . 
NUMBER 
7. 
CONU I CT I ONS  PER 
6.  PROFESSIONAL  STAFF 
5. 
4. 
LT@IE 
source:  Quarterly  Statistical  Sunnarv 
peportr  submitted  bu  MFCUs  to  Offioe 
of  Investigations  Figure 1 provides an illustration  of the potential  usefulnessof performance related data. 
It presents data for a 3-year period (1984-1986) for two of the performance indicators 
listed above: indictments per professional staff and convictions per professional staff. 
The 30 MFCUs functioning  throughout the period are represented. What is most strik
ing in the figure is the wide distribution  in performance, ranging from one MFCU  that 
averaged 7.03 indictments and 5.41 convictions per professional staff to another that 
averaged .83 and .41, respectively, for the two indicators.  For those well above or well 
below the averagesfor the 3 years, the logical question for 01 and the MFCUs  to ask is: 
why?  Are there unique factors beyond the control of the MFCUs that explain the sub
stantial variance? Or are there certain factors attributable  to the MFCUs that account 
for the high or low performance? 
Figure  2 
NUMBER  OF  INDICTMENTS  fiND  CONVICTIONS  PER  $100  H 
OF  MEDICAID  EXPENDIIURES,BY  SIAfE,L984-1986 
NUMBER 
24 
INDICTMENTS  PER 
21 
SlOO  MILLION 
f 
NUMBER 
- i[L  &:lit:!::NpER 
~Nm~n~~6~O~NmCH~~Q~O~Nm~n~~6~o 
I~~~~~~~~~NNNNNNNNNNm 
STATE 
source:  Qualrterly  Statistical  Summary  xwports 
submitted  by  MFCUr  to  01  and  Mmdioaid  FinanoiaI 
Management  Report.  FY  1985 
Similarly,  one can note the extent of the spread between indictments and convictions in a 
particular  caseand pose questions about why certain Statesdeviate sharply from the 
norm.  This sort of representation and questioning can, of course, be directed to the 
trends in any MFCUs performance over time.  The insights that emerge would be useful 
to 01 in conducting its oversight, but probably even more useful to the MFCUs  as they as
sesstheir own performance and seek ways to improve. Figure 2 presents two other perfor
mance indicators:  indictments per $100 million  of Medicaid expenditure and convictions 
per $100 million  of Medicaid expenditure.  These data add valuable perspective to the set 
in figure 1. Compared with that data figure 2 shows that MFCUs that appear astop per-
formers when professional staff size is the frame of reference do not necessarily enjoy the 
10 
 same status when overall Medicaid expenditures are considered and vice versa. Again, 
questions arise the answersto which can provide a better overall understanding of perfor
mance. 
Finally, appendices 1 and 2 present data concerning the two remaining performance in
dicators:  dollar judgments per professional staff and dollar judgments per $100 million 
Medicaid  expenditure. 
4. 	 Afier  1 or 2 years of experimce in usingperformance indicator,  Ol, in consultation 
with the MFCUs, should dkvelopsome outcome-oriented standards that could serveas 
an important referencepoint in recerfificatin  reviews. 
It is vital that 01 view performance indicators in a developmental sense. That is, 01 must 
take care to learn from its experience in using indicators and make adaptations in the sys
tem as necessary. Responsivenessto feedback is especially important  during the first 
year or two when the new approach is being put into place. 
After  that initial  period, 01, with the participation  of MFCUs, should define and estab
lish some performance-based standards. These should focus on key desired outcomes as
sociated with MFCU  activities and might be defined in terms of comparative rankings. 
For instance, a standard might be set that over a 2-year period each MFCUs performance 
should fall within  a certain percentage of the national average or mean on a given in
dicator.  An MFCU  falling below the standard would be required to develop a corrective 
action plan, unless it had some compelling explanation to account for the aberration.  If, 
after a designated period of time, performance did not improve, 01 should take that 
seriously into account when making a recertification  decision.  In those instances when 
MFCUs performed  well above the established standards, 01 could determine if some of 
their practices might be adopted by other MFCUs.  Then 01 might offer technical assis
tance and information  to encouragewidespread implementation  of the successfulprac
tices. 
11 
 MINIMUM  STAFFING  REQUIREMENTS 
DISCUSSION 
Current MFCU  regulations at 42 C.F.R. Section 1002.313(a)require that a unit employ 
sufficient professional, administrative,  and support staff to carry out its duties and respon
sibilities  in an effective and efficient  manner.  In addition, they specify that the staff must 
include: 
1. 	 One or more attorneys experienced in the investigation or prosecution of civil 
fraud or criminal  cases... 
2.  One or more experienced auditors... 
3. 	 A senior investigator with substantial experience in commercial or financial inves
tigation... 
These regulatory requirements were promulgated in 1978 at the inception  of the 
Medicaid fraud control program and were established without  the benefit of an oppor
tunity to review the actual operations of MFCUs to determine more precisely their mini-
mum staffing needs. However, the MFCUs have now been in operation for nearly a 
decade, and in recent years the 01 staff has expressedthe concern that the current mini-
mum requirement  of three professional staff may be inadequate to effectively and effi
ciently carry out the current responsibilities  of an MFCU,  even one in a small State. 
Given these concerns, we were asked to determine if there was sufficient rationale to in
creasethe minimum  and, if so, what the ratio of professionals should be. 
We asked the MFCU  directors if the current minimum  staffing requirements were ade
quate to assurethat MFCUs carry out their responsibilities in an effective and efficient 
manner.  The response was overwhelming negative, with 27 of the 37 (73 percent) 
answering no.  Collectively,  the directors offered several persuasivereasonswhy the 
three professional staff minimum  was too low. 
One reason concerned unit stability.  The directors felt that a unit with only three profes
sional staff would be vulnerable to major disruption  if a single staff member left.  For ex-
ample, a unit with only one auditor, investigator or attorney would be left operationally 
immobile  if any one of these professionals resigned, took extended leave or was other-
wise absent from the unit.  Such a unit would, at least temporarily,  be unable to conduct 
audits, or investigations or would lack legal guidance and advice. In such an instance, the 
unit could not effectively carry out its duties and responsibilities. 
Also, the directors noted that one auditor and investigator probably could not generate 
enough casesto keep an attorney busy. They generally felt that at least four investigators 
or auditors were needed to keep one attorney fully engaged. 
12 
 While the situation is not directly comparable, we noted in reviewing the activities of 
U.S. Attorney  offices that in Fiscal Year 1984the average caseload of an Assistant U.S. 
Attorney  was 130, a level of activity well beyond what an MFCU  with one attorney, one 
auditor and one investigator could hope to sustain. Moreover, during discussionswith 
representatives of a number of these offices, we heard substantial confirmation  for the 
observation that more than two full-time  equivalents worth of an investigators and/or 
auditors time was necessaryto assurea steady flow in the pipeline  of casesfor the Assis
tant U.S. Attorneys.  Accordingly, we conclude that in most instances an MFCU  staff 
which includes only one auditor and one investigator could not generate enough caseac
tivity to efficiently  utilize  the staEattomeys services. 
Finally, the directors noted that a unit operating at the three staff minimum  would be 
limited  in the type and complexity of casesit could handle.  For example, one director 
noted that:  A single nursing home casecan eat up to 500 hours of an auditors time 
Thus a higher minimum  number of auditors and investigators would be needed to allow 
an MFCU  to effectively investigate certain complex casessuch as nursing home cases. 
Moreover, interviews with the 01 staff persons who administer the Medicaid  fraud con
trol program indicate that higher minimum  staffing levels will  be needed to allow smaller 
MFCUs to effectively carry out the responsibilities contemplated by 01.  01 is pursuing 
policies to expand the investigatory responsibilities  of MFCUs.  For example, a 
regulatory change is contemplated which would authorize MFCUs to engage in sophisti
cated computer screening activities to identify  fraudulent provider claims (see Adden
dum).  And 01 is currently encouraging MFCUs to establish telephone hotlines to 
encourage concerned persons to directly report suspected casesof Medicaid  fraud and 
abuse. These new activities should increase caseactivity and generate an additional 
workload which a smaller MFCU, as currently staffed, may be unable to meet. 
The survey of directors provided no consensusasto the appropriate minimum  staff size 
or whether we should specify a ratio of auditors to investigators to attorneys. The direc
tors gave answersranging from 4 to 10 regarding staff size; but 20 of the 37 directors felt 
that no ratio of professionals should be specified. 
Currently,  the professional staff sizesof MFCUs vary widely.  For those operating during 
the 1984-1986period, the range M  from an average of 4.7 to 251.8. During  that period, 
12 MFCUs  had an averageprofessional staff size of 9 or less and 18 had a professional 
staff size of 10 or more.  Currently, 16 MFCUs have a staff of 9 or less. Of the 37 direc
tors we contacted, 24 stated their current staff size was adequate. 
In this context, it is also pertinent to note that the 1977legislation establishing MFCUs 
stipulated that during any year Federal financial payments in support of an MFCU  could 
be as much as 1 percent of the Statestotal Medicaid expenditures.  This meant that in 
calendar year 1978,when Federal-State Medicaid expenditures were about $19 billion, 
aggregate MFCU  expenditures could have been ashigh as $190 million.  Similarly  in 
13 
 Calendar Year 1985,when Federal-State Medicaid expenditures had grown to about $40 
billion,  total MFCU  expenditures could have reached about $400 million. 
Fisusc  3 
MFCU  EXPENDITURES  CLS A  PERCENTACE  OF  THE 
CINNUlL  ONE  PERCENT  NhXIHUM  PAYMENT,  CY  1985 
% of  raxinun  cap 
STATE 
Source  :  Qua~tesly  Statistical  Sunnary  Reports 
submitted  by  MFCUr  to  OX  and  Hedioaid  Financial 
Nanagcnent  Report,  Fy  1985 
In practice, however, MFCU  expenditures have been far below these maximum levels. 
In fact, in 1985,the $47.5 million  in MFCU  expenditures accounted for only 25 percent 
of the 1978maximum and 13percent of the 1985maximum.  Moreover, as figure 3 il
lustrates, none of the MFCUs in 1985achieved a level of expenditure that exceeded 50 
percent of its 1 percent limit.  The highest was at 42 percent of the cap. Most were well 
below 20 percent. 
Thus, although Congress did not necessarily intend that each MFCU  spend at its maxi-
mum level, it is clear that MFCUs are operating at a level far lessthan Congresswas 
prepared to spend to support them.  In a report accompanying the 1977legislation, the 
House Committee  on Interstate and Foreign Commerce clearly and strongly expressed 
its concern that sufficient efforts have not been made to date to identity  and prosecute 
casesof Medicaid fraud in a number of States and expressedits expectation that the 
MFCU  legislation would lead to more vigorous State activity to assurethat those engag
ing in criminal  activities are identified  and prosecuted. 
RECOMMENDATION 
The 01 should increasethe minimum  sta#ing requirementfrom 3professionalpositions to 7 
to 1Oprofesionalpositions.  Toward this erzd,it should amend the MFCU rq$ations  at 42 
C.F.R Section 1002.313to stipulate that the total complement ofprofessionaIstajj!must  in
clude at least 7 to IOprofesionals  trained as attorneys,Auditors, or investigators. 
We conclude that the minimum  staffing requirements should be increased from 3 profes
sional positions to 7 to 10 professionals. We arrived at this range based on several con
siderations. 
14 
 First, the need to maintain unit stability requires that each MFCU  have at least two 
auditors, two investigators and two attorneys for a total of six professional positions.  As 
noted, earlier, MFCUs with only one auditor, one investigator or one  attorney are vul
nerable to disruption  by the resignation or absenceof one professional staff person. Re
quiring an additional  auditor, investigator and attorney would enhance stability because, 
in the event of the absenceof one of them, the unit would still have in-house accessto 
audit, investigative and legal servicesand could continue to carry out its investigative and 
prosecutorial responsibilities  effectively. 
In addition to the six staff positions needed to maintain unit stability, four additional 
auditor/investigator  positions would be needed to keep the two attorneys fully utilized. 
According  to many MFCU  directors, at least four auditors/investigators are needed to 
keep an attorney busy. Thus it would seem that an MFCU  staff with two attorneys would 
require at least eight auditors/ investigators to keep an attorney busy. This suggestsa 
minimum  professional staff of 10 persons. This staff should be composed of at least two 
auditors, two investigators and two attorneys with four other professional positions which 
the affected MFCUs should be given discretion to fill with persons trained as auditors, in
vestigators, or attorneys. 
We realize that determining  the ideal minimum  staff is complicated by the fact that some 
MFCUs vary in operation, particularly with respect to prosecutorial  authority.  (Some 
MFCUs actually prosecute caseswhile others merely refer casesfor prosecution to the 
State Attorney  General or other State prosecutorial authority.)  In recognition  of this 
variability,  we suggestthat 01 consider developing a mandated minimum  in the range of 
7 to 10 professional positions.  Moreover, we suggestthat for those MFCUs under the 
minimum  staffing level established, 01 allow them a phase-in period to reach the mini-
mum level. 
We believe that the proposed minimum  staffing level would not only enhance stability 
and attorney utilization  with respect to the smaller MFCUs, but would also allow them to 
conduct the more complex type of investigations and carry out the broader fraud detec
tion activities which 01 is encouraging MFCUs to undertake. 
In proposing this higher minimum  level, we do not intend to imply that it is necessarily a 
sufficient level of staffing, even for an MFCU  in a State with a comparatively small 
Medicaid budget.  It is merely a minimally  acceptable level, below which, we feel, an 
MFCU  may not be able to effectively and efficiently  carry out its duties and respon
sibilities. 
By increasing the minimum  staffing requirement,  the Federal Government, at relatively 
little  extra cost, would substantially increase the potential  effectiveness of some of the 
small MFCUs.  This would apply most directly to the 16 currently certified  MFCUs 
having 9 or less professional staff members. In this context it is helpful  to recognize that 
from  1984 to 1986,MFCUs with  10or more staff accounted for 87.7 percent (1043 out of 
1189) of all MFCU  convictions. 
15 
 With more staff, a number of MFCUs would also be in better position to take advantage 
of some of the opportunities  afforded by the recently enacted Medicare and Medicaid 
Patient and Program Protection Act of 1987 (P.L. 100-93). These include a provision al
lowing for MFCUs  to receive (1) a pro-rated portion  of civil monetary penalties imposed 
by the Office of Inspector General and (2) information,  through a national clearinghouse, 
on disciplinary actions taken by State licensing authorities against health care prac
titioners  and providers. 
Finally, notwithstanding  the need for a higher minimum  staffing level, we reiterate the 
importance of OIG also focusing on the measurement of outcomes. In general, it should 
allow the MFCUs  considerable flexibility  in how they go about tkr  work, but hold them 
clearly accountable for the results. The establishment and intelligent  use of performance 
indicators would be important  steps in that direction. 
16 
 ADDENDUM 
As an addendum to this report, we include discussionsand recommendations on two ad

ditional  matters that were not technically part of the inspection but which are very much 

related to the oversight of MFCUs.  The comments and recommendations emerge from 

the experiences of the OIG in conducting oversight of the MFCUs and in various ways 

tend to be reinforced by the most recent OAI  inspection.  Because both of the recormnen

dations set forth will  call for changesin the regulations governing MFCUs, we felt it best 

to include them here so that they would be considered along with the proposed 

regulatory changesconcerning performance indicators and minimum  staffing levels. 

REQUIREMENTS  FOR  FULL-TIME  AND  PART-TIME  EMPLOYEES 
The current regulations require that the professional staff of an MFCU  be full-time 
employees. (See 42 C.F.R. Section 1002.301and 1002.319(e)(4).) This requirement 
reflects Congress intent that MFCUs bring together a specialized expertise in Medicaid 
fraud by developing a team of lawyers, investigators and auditors.  Hiring  temporary or 
part-time  staff does not contribute  to developing a team with such specialized expertise. 
The Department  has concluded that this congressional intent can only be achieved if the 
MFCU  hires full-time,  long-term professional staff.  (See 43 C.F.R. 32078-9, July 24, 
1978 and Fraud Control  Memorandum  No. 79, May 4,1979). 
The current regulations pose severalproblems.  They are unclear as to when an MFCU 
can hire part-time,  as opposed to f&time,  employees. In fact, the regulations provide 
no expressauthority for MFCUs to hire any part-time  employees. However, through 
policy transmittals and responsesto individual queries, 01 has interpreted  the regulations 
to authorize MFCUs to hire short-term or part-time  employees in non-professional posi
tions (i.e., clerical, administrative  and support positions).  (See Fraud Control  Memoran
dum No. 79, supra). 
Moreover, the regulations are unclear asto the requirements of a full-time  employee.  In 
response to individual  queries, 01 interprets the regulations to require that a full-time 
employee work exclusively on Medicaid fraud control matters and work under the 
direct supervision of the unit.  However, this administrative  interpretation  is not ex
pressly reflected in the regulations. 
The lack of clarity regarding the requirements of full-time  employees and the MFCUs 
authority  to hire part-time  employees has resulted in confusion in interpreting  the 
Medicaid fraud control regulations.  This confusion is reflected in the fact that questions 
concerning these areas have been frequently raised by various MFCUs in their contracts 
with 01 staff. 
17 
 Recommendation 
The Depmtment should amend the regulations to specify that a full-time employeemust 
work exclusivelyon Medicaid fraud control matters and must work directly under the super
vhion of the unit.  The Department should also amend the regulatbns to expresslyauthorize 
MFCUs to hire part-time non-professional St@. 
This recommendation would eliminate  the current confusion regarding full-time  and 
part-time  MFCU  employees, obviate the need for 01 to respond to frequent MFCU 
queries on these matters and thus enhance 01s administration  of the program.  The 
recommendation would not implement  new policies; it would merely require 01 to for
mally publicize its current policy in this area by issuing a formal regulation. 
EXPANDING  MFCU  FRAUD  DETECTION  AUTHORITY 
The program regulations are unnecessarily restrictive and confusing as to the extent 
MFCUs can engage in fraud detection activities.  The regulations at 42 C.F.R Section 
1002.319(e)(2) provide that Federal Financial Payment (FFP) is not available for expen
ditures attributable  to: 
(2) Efforts to identify  situations in which a question for fraud may exist, including 
the screening of claims, analysis of patterns of practice, or routine verification  with 
recipients of whether servicesbilled by providers were actuahy received . . .I 
The literal  language of this paragraph seemingly prohibits  FFP for unit detection ac
tivities, and this has resulted in confusion among units as to the extent to which they can 
receive FFP for detection activities.  But 01 has interpreted  this paragraph to prohibit 
FFP only for the routine program monitoring  activities which are normally  the respon
sibility  of the Medicaid agency (such asroutine screening, routine desk review of patterns 
of practice of providers flagged by screens,routine Explanation of Benefits mailings, 
etc.).  (See,Division  of State Fraud Control, Circular No. 5). According to the 01 inter
pretation, this provision allows FFP for sophisticated detection activities, such asunder-
cover operations.  However, 01 has not amended the regulations to clearly reflect this 
interpretation. 
Moreover, discussionswith 01 staff indicates that it would be desirable to expand MFCU 
detection authority by allowing MFCUs to engagein screening activities which may ar
guably overlap with Medicaid agency fraud detection responsibilities.  This expanded 
detection authority would make it possible for MFCUs to generate additional  fraud cases 
and would be particularly  helpful  in Stateswhere the Medicaid agencymakes an inade
quate number of fraud referrals to the MFCU.  The MFCU  could compensate for this 
shortfall by, for example, using computers to screen Medicaid provider claims and 
analyze billing  patterns to identify  casesof fraud. 
18 
 Recommendation 

The 01 should consider developinga regukztoryproposal to (I)  clans  that MFCUs can 

engagein sophisticated detection activities and (2) authorize MFCUs to engagein fraud 

detection screeningactivities. 

This expanded fraud detection authority would allow MFCUs to generate additional 

fraud casesand increase the number of fraud convictions. This recommendation  would 

also give MFCUs more control over their overall caseload and make them less depend

ent on Medicaid  State agency casereferrals. This should enhance the effectiveness of 

some MFCUs especially those experiencing inadequate Medicaid agency casereferrals. 

Even with such a change, however, we recognize that it is important  for Medicaid  State 

agencies to play an active part in referring casesof potential  provider fraud to the 

MFCUs.  In our discussion with MFCU  directors, a number of them expressedconcern 

that they were not receiving sufficient referrals of this kind.  Accordingly,  we have in

cluded in the Office of Analysis and Inspection workplan  for FY  1988 an inspection ad-

dressing the effectiveness of the State Medicaid agency referrals of potential  provider 

fraud casesto the MFCUs.  The inspection is now in the data gathering phase and is ex

pected to be completed in early 

FY  1989. 

19 
 APPENDIX  1 
DOLLRJRU DWENTPSE RPROFEIOSNSClL 
STCIFBFY,S  TATE1, 984-1986
DOLLfiRS 
750,000  -
700,000  -
650,000  -
600,000  -
550,000  -
500,000  -
450.000  -
400,000  -
350,000  -
300,000  -
250,000  -
200,000  -
150,000  -
100,000  -
50,000  -
Source  :  Quarterly  Statistical  Summary 
reports  submitted  by  HFCUs  to  Office 
of  Inuestigations 
20  DOLLRJRU DGEMEPNETR$S1 00MILLIONOF 
MEDICREIDX PENDITURESST,ABTYE 1,984-1986 
DOLLARS 
850,000  -
000,000  -
750,000  -
700,000  -
650,000  -
600.000  -
550,000  -
500,000  -
450,000  -
400,000  -
350,000  -
300.000  -
250,000  -
200,000  -
150,000  -
100.000  -
50.000 
0  EdlBlIl 
Source  :  Quarterly  Statistical  Sumnavy  rwports 
submitted  by  MFCUs  to  01  and  Medicaid  Financial 
Hanagenent  Report,  FY  1985 
21  APPENDIX  3 

COMMENTS  ON  OIG  DRAFT  REPORT  AND  OIG  RESPONSE  TO  COMMENTS 
We received comments on the draft report from the president of the National Associa
tion of Medicaid Fraud Control  Units (MFCUs),  who is also the director of the 
Washington State MFCU,  and from representatives of 19 other MFCUs.  Most of these 
comments focused on our recommendations calling for the use of performance indicators 
and expressedsubstantial reservations about these recommendations.  The comments on 
our recommendation  calling for a minimum  staffing level of 10 were fewer and less in-
depth, but here too, there were some fundamental concerns expressed. 
The main concerns of the individual  MFCUs are reflected in the comments of the Nation
al Association of the MFCUs.  Indeed, a number of the MFCUs specifically endorsed the 
National  Associations comments.  Because of that we present below, in full, the National 
Associations comments. We follow  that with our response to MFCU  concerns, first with 
respect to performance indicators and then rninimtrrn staffing levels. We close with a 
brief note concerning one of the recommendations presented in our Addendum. 
NATIONAL  ASSOCIATION  OF  MFCUs  COMMENTS 
Performance Indicators 
A.  Analysis 
The use of statistical output ratios such asindictments, convictions, funds recovered per 
employee and size of State Medicaid Programs to evaluate the performance of a law 
enforcement agencywould be inappropriate.  The draft report is incorrect in stating that 
the Units would concur in using such ratios asperformance indicators.  And as the report 
correctly details (on page 5), the Unit  Directors made it clear that they consider that any 
use of such ratios to compare Units by the Office of Inspector General would be par
ticularly  inappropriate. 
Since the inception of the Fraud Unit  Program, the Fraud Units, prosecutors, and attor
neys general have consistently opposed attempts to base the evaluation of the Units upon 
such numerical criteria.  In the first year of the Program, HHS attempted to organize the 
evaluation of the Fraud Unit  Program with the same quantitative methods criteria that it 
usesto evaluate the performance of its social service programs.  A lengthy debate fol
lowed that led to formal  HHS recognition that the statistical output norms HHS applies 
to social service program administration  could not, and should not, be applied to 
prosecutorial  activity.  The result was the transfer of oversight activity from HCFA  to 
OIG  to facilitate  evaluation of the Units on a qualitative basis by personnel with training 
and experience in white collar crime prosecution, and who would, presumably, be able to 
understand and individually  evaluate prosecutorial decision-making.  As the attached let-
22 
 ter of former Inspector General Thomas Morris observes,the use of quantitative, cost ef
fectiveness measures, to evaluate criminal investigations and prosecutions is inap
propriate  and does not give a valid picture of Unit  accomplishments. 
Prosecutorial activity does not lend itself to standardized measurement, review and com
parison.  States have substantively and procedurally distinct legal and penal systems. 
These individual  differences effect the ability to prosecute white collar crime from State 
to State. Some State laws restrict plea bargaining while others control the exercise of 
prosecutorial  discretion on disposition and sentencing matters.  Even more basic is the 
problem  of comparing cases. Each is different and the handling of each must be assessed 
in the context of its unique set of facts and circumstances. Some casesinclude confes
sions, making possible a swift resolution.  Others such asnursing home, hospital and 
HMO  cases,span multiple  cost years with thousands of questioned documents which may 
require years of investigation and months of trial.  An exceptional number of variables ef
fects the number of casesa MFCU  receivesand, or, develops on its own, and how those 
casesare resolved. They make any strictly numerical comparisons of the outcome of 
criminal  investigations and prosecutions subject to so many qualifications  as to be virtual
ly meaningless and their use without  such qualifications inaccurate, arbitrary, and unfair. 
An exclusive focus on the indictment,  prosecution and monetary recovery ratios of the 
Fraud Units would inevitable result in the creation of de facto prosecution quotas. 
Prosecution quotas in any form raise obvious constitutional  and serious ethical 
problems for both OIG  and the Fraud Units  Prosecutors are sworn to do justice, accord
ing to their independent and impartial  judgment.  The impartial  application  of that judg
ment would be seriously compromised if Fraud Unit  prosecutors are influenced by a 
need to meet an indictment  quota. This problem has long been a major concern of the 
criminal  bar and legal profession.  The authoritative American  Bar Association Standard 
Relating to the Prosecution and DefenseFunction states as follows: 
S 3.9 (c)  In making the decision to prosecute, the prosecutor should give no 
weight to the personal or political  advantagesor disadvantageswhich might 
be involved or to a desire to enhance his record of convictions. 
Commentary to S 3.9 (c) The prosecutor should avoid measuring his record 
by the (conviction rate) of his office.  He should never allow the decision to 
proceed in a particular  caseto be influenced by his desire to inflate his record 
of successin obtaining convictions. Nor should he hesitate to reduce the 
charge or decline a prosecution becauseof such considerations. 
Clearly, to use the number of criminal  indictments, convictions, and monetary judgments 
as Fraud Unit  performance indicators, would directly conflict with these recognized 
standards for preserving prosecutorial integr&y. The Office of Inspector General has a 
clear duty to avoid creating a system of performance evaluation that encouragesunethi
cal acts by prosecutors.  Simply stated, a State prosecutors exercise of discretion in deter-
23 
 mining who to indict/prosecute should not and must not be influenced by a fiscal need to 
achieve arbitrarily  set Federal prosecution quotas. 
The ultimate  purpose of the Medicaid Fraud Control  Unit  Program is to deter Medicaid 
fraud and patient abuse. These goals are achieved in numerous ways, none of which are 
accurately accessedby simply looking at raw output data. Examples:  many investigations 
necessarily do not produce prosecutions, though they may ultimately  play a significant 
role in preventing fraud; patient abuse investigations are a statutory responsibility  of the 
Fraud Units, though again, they produce few indictments and virtually  no financial 
recovery; the Units are charged with oversight of the administration  of the program, 
which they discharge by regularly developing program recommendations which assist 
their various Statesin eliminating  opportunities  to commit fraud; the Units aggressively 
document civil recovery opportunities  and report the same to single State agencies for 
recovery; the Units take similar action with respect to conduct that can be sanctioned by 
professional licensing boards. All  of these activities are federally required and en
couraged. Yet the proposed performance indicators would not only ignore these impor
tant functions, but would actually penalize the Units for devoting sufficient time and 
effort to these responsibilities. 
Imposition  of conviction oriented comparisons could also result in Units actually reduc
ing staff to increase the ratio of convictions per professional, a result which does not fur
ther the stated goal of detecting, prosecuting, and deterring fraud.  The Attorneys 
General and State prosecutors must be relied upon and supported in their use of resour
cesto best accomplish these goals. A viable and credible Fraud Unit  which aggressively 
investigates and prosecutes Medicaid fraud and patient abusewill  command respect 
within  the States law enforcement community, from the States Medicaid Program and 
from Medicaid providers.  A quota systemwould work against recognized methods of ac
complishing these goals while reducing the reputation  of the Units to the status of boun
ty hunters. 
B.  Recommendations 
As previously stated, the Units recognize the partnership of interest which exists between 
Congress, the Office of Inspector General, and the Medicaid Fraud Control Units.  We 
share the common goal of achieving the congressional intent of identifying,  investigating, 
and prosecuting Medicaid Fraud, related crimes, and crimes of patient abuse. Coopera
tion between MFCUs and OIG is essential if the MFCUs are to provide credible and ef
fective law enforcement and the Office of Inspector General is to provide credible and 
effective oversight. 
Oversight of the Medicaid Fraud Control Units would be greatly improved if the Office 
of Inspector General would return to its former practice of using law enforcement profes
sionals with senior experience in white collar crime investigations, prosecutions, and 
management of law enforcement agencies,to conduct its Fraud Unit  evaluations. Only 
24 
 through the use of such experienced staff can the Office of Inspector General adequately 
assessthe vast array of variables that must be considered when analyzing a Units perfor
mance. Analysis of Unit  performance should be based on the separate consideration of 
what that Unit  has accomplished in the context of its existing circumstanes. 
Medicaid Fraud Control  Units are one of the very few enforcement agencieswhich 
handle casesfrom virtual  inception to ultimate  appellate review.  Unlike  a typical 
prosecutors office, where criminal  activity presents itself, MFCUs  are uniquely depend
ent upon the consistent flow of referrals from single State agenciesto maintain levels of 
investigations and prosecutions.  Many different approaches have been instituted  by 
Units to generate investigative leads (pro-active shopping, multi-agency task forces, tar
geting, etc.).  Individual  State Medicaid program referrals and regulatory inadequacies 
must be analyzed and taken into consideration when reviewing Fraud Unit  performance. 
Contrary to the premise taken in this study, if Units have production  problems, the only 
meaningful  analysis is of caseflow, investigative effectiveness, and investigation manage
ment.  Fraud Units operate in a criminal justice systemwhich measures all outcomes by 
the process followed.  The proper measure of Unit performance would therefore be a 
meaningful  analysis of their management of the investigative process. An important  role 
of the Inspector General recertification  processshould be to determine if the Unit  is a vi
able and active law enforcement entity with respect to the particular  State and program it 
polices.  To this end, an analysis of a particular Units function should be qualitative  and 
particularized,  rather than based on a necessarilyfutile  exercise in trying to do standard 
comparisons of dissimilar and non-comparable circumstances. Effective oversight by the 
Office of Inspector General also requires analysisand resolution of problems wherever 
they exist, not just with MFCUs.  For example, to cite a Unit  for failing to achieve perfor
mance goals (quotas) where an independent analysiswould have revealed the problem 
existswith the quantity or quality of referrals from the single State agencywould result in 
a Unit  being unfairly  sanctioned, a problem unresolved, and an oversight responsibility 
unfulfilled. 
Minimum  Staffing Requirements 
It is our understanding that the Office of Inspector General would not seek to retroactive
ly apply any minimum  staff requirements to existing certified  Units.  It should be recog
nized that some States have very small Medicaid Programs with a resulting low number 
of investigative referrals.  Within  this context, many of the smaller Units have been suc
cessful in establishing a meaningful law enforcement presence to include orderly 
investigations and prosecutions.  The Association believes that five professionals as op
posed to the studys recommended 10would be the appropriate minimum  staff require
ment.  Again, the realities of each States circumstances are of critical importance in 
analyzing staff levels. 
25 
 Conclusion 
State MFCUs  are staffed by highly motivated professionals who daily endeavor to suc
cessfully discharge their responsibilities.  While some Units may have production 
problems, simplistic attempts to analyze those problems by using standardized output 
statistics will  improperly  and unethically invade the province of prosecutorial discretion 
by establishing an evaluation processbased on quotas, and so distort the complex vari
ables of prosecutorial activities asto be essentially meaningless. These proposed in
dicators will  not help the Units in analyzing their own productivity,  will  result in 
inappropriate  criteria being used to make prosecutorial decisions, and will  not provide a 
measure of a Units successin deterring fraud.  Overall, they provide no way to assessthe 
total positive impact the Units have in their State. We are not opposed to performance 
evaluation, indeed aswe have often observed, we regard it as an important  tool for 
strengthening the Fraud Unit  Program.  But first, the methods chosen to conduct such 
evaluations must accurately measure Unit  performance. 
Representatives of the Association would be pleased to meet you and/or any appropriate 
staff to further pursue this issue. 
OAI  RESPONSE 
Performance Indicators 
At the outset we must note that the Federal funding to States for the established and 
operation of MFCUs is not an entitlement  program.  It is a great program intended by 
Congress to contribute to the elimination  of fraud in State Medicaid program.  The 
Department,  and 01 in particular,  are responsible for assuring that this congressional pur
pose is being advanced. 
We must also note that the development of performance indicators as an element of 
Federal oversight is in accord with recent congressional history, as reflected in the Health 
Care Quality Improvement  Act of 1986 (P.L. 99-660) and the Medicare and Medicaid 
Patient and Program Protection Act of 1987 (P.L  100-93). These acts require that State 
licensing authorities, medical malpractice insurers, and certain health care entities 
report to the Secretary or his designee any adverse actions they take against health care 
practitioners.  Moreover, they are required to make these reports on a timely basis and to 
include specific information  on the actions taken against the practioners. 
The concerns put forth by MFCUs appear to rest asmuch or even more in apprehension 
about how outcome-oriented  performance indicators would be used as an oversight tool 
than in the idea of such indicators in themselves. We can understand their apprehension. 
If implemented  in a hasty, ill-considered  manner, performance indicators could, indeed, 
be counterproductive.  It is for that reason that we stressedthat in adapting performance 
indicators, the Office of Investigations (01) should: 
26 
 introduce them on a gradual basis; 

0 
0  strive for consensuson what indicators should be used; 

0  use existing data sourcesto develop indicators; 

0  focus on performance over a 2- or 3-year period; and 

0  avoid an over-reliance on indicators. 

The last point is at the core of many MFCUs  concerns. We recognized that from our dis
cussionswith them and largely for that reason stated the following  caution on page 7 of 
our report: 
...even at best, these indicators will  not provide a complete picture of an MFCUs 
performance.  Also needed are careful on-site observations and reviews of an 
MFCUs  reports and reapplication  materials.  Each MFCU  is different.  Each has 
certain circumstances that affect its performance.  The 01s oversight must be suffi
ciently fine-tuned  that it takes account of these circumstances in making recertifica
tion decisions. 
Further, the specific indicators we recommended concerning indictments, convictions, 
and dollar judgments were meant only as a start. We intended that 01 and the MFCUs 
examine their appropriateness over time and explore refinements and additions that 
might be made in the years ahead. By no means did we intend, assome MFCUs seem to 
have concluded, that 01 maintain  an exclusive focus on these indicators. 
We hope that this clarification  will  help to make our recommendations somewhat more 
palatable to the MFCUs.  The Florida  MFCUs  response suggeststhat this could be the 
case. It indicated that the use of indictments, convictions and dollar judgments by them
selveswas unacceptable.  But then it added: These three performance indicators may 
have some value if they were combined with other valid indicators.  That is precisely 
what we would like to happen, with 01 and the MFCUs determining jointly  those addi
tional indicators. 
What might also help in this regard is to reinforce our point about the gradual introduc
tion of performance indicators.  We recognize that their use would be a significant depar
ture from past practice and would present particular sensitivities in the law enforcement 
field.  Thus, we suggestthat 01 and the MFCUs regard the first 2 years of their use as a 
phase-in period, with a mutual commitment  to identify  and implement  reasonable in
dicators, addressing outcome and process. 
As we reviewed the MFCU  comments, we identified  four major explanations for why 
quantitative  outcome measureswould be inappropriate  for MFCUs and four general 
recommendations  concerning how 01 might approach its oversight responsibilities. 
Below, we present each of these, in capsule form, and in each caseoffer a brief response. 
27 
 They would result in a de facto quota system. 
0 
Unquestionably,  this was the most frequent and intensely felt concern about the adoption 
of performance indicators.  There were numerous statements about how such an over-
sight tool could lead State prosecutors to become bounty hunters, make them vul
nerable to charges of prejudice by defense counsels,and compromise their ethical 
commitment  to maintain independent and impartial judgment. 
These are serious concerns,which we share. However, we did not call for the estab
lishment of quotas and, in fact, went to considerable length to suggestthat performance 
indicators not be used in that fashion.  We urged that after a l- or 2-year developmental 
period, 01, with the participation  of MFCUs, establish specific performance based stand
ards, not quotas. Those falling below a standard would then be required to develop a cor
rective action plan, UF&XSa compelling reason existed for its sub-standard performance. 
The 01 and MFCUs should discuss,in advance,what kind of reasons might be regarded 
as compelling. 
The key question, it seems,becomes that of whether or not performance indicators, 
despite our intentions, would become a de facto system of quotas. In this context, the 
National Association asserts: 
An exclusive focus on the indictment,  prosecution and recovery ratios of Fraud 
Units would initially  result in the creation of de facto prosecution quotas. 
It could well be correct. However, aswe have indicated, we are not by any means suggest
ing an exclusive focus on these indicators, or, for that matter, any indicators.  We see 
them as one element of oversight to be accompanied by many other elements. In this 
regard, we fully agree with the following  comment by the Hawaii  MFCU: 
If the proposed performance indicators are intended to help unit managers to irn
prove their units performance, there must be a balance between processfactors 
and outcome factors. If there is a breakdown in the process by which casesare 
handled by a unit there may not be a substantial indication  of this breakdown if 
only outcome factors are examined. 
Moreover, with careful implementation  by 01, we do not feel it is inevitable that perfor
mance indicators will turn into de facto quotas. The California  MFCU  expresseda 
similar view: 
With respect to performance indicators, we believe it to be appropriate and useful 
for the agency charged with oversight to utilize  objective criteria in the evaluation 
process. These criteria must be utilized  with judgment which is fundamental to any 
valuative process. Based upon our experience, the availability  of objective criteria 
provides a sound basis to be used in measuring performance.  While the develop-
28 
 ment of a quota system for the Units would be undesirable, I do not feel that the 
utilization  of performance indicators would necessarily result in quotas. 
They would ignore differences in the States legal and penal systems. 
0 
The MFCUs  fear that in using a national set of performance indicators, 01 will  lose sight 
of particular  features of individual  State legal and penal systemsthat have an important 
bearing on outcomes such as indictments, convictions, or dollar judgments.  Some 
MFCUs, they point out, have much more discretion and authority than others.  Some 
State court systemsare much more responsive than others. It would be unfair to ignore 
these differences in reviewing an MFCUs  performance. 
We agree. That is why the ratios we set forth are only indicators and should be accom
panied by thorough on-site review, addressing the particular  environment  of an MFCU. 
At the same time, from a national perspective, it is also pertinent  to focus on the overall 
results of a particular  MFCU.  If over a number of years, an MFCU  is performing  well 
below a national norm, that reality is of relevance to a Federal oversight entity, even if 
the reasons are more State-specific than MFCU-specific.  In a broad sense,the Federal 
financial  support being extended is to the State government, not just to the MFCU. 
They would ignore differences in the type of casesbeing prosecuted. 
0 
Here, again, MFCUs  are concerned that some important  distinctions would not be made. 
Some cases,such as those involving nursing homes, hospitals, or health maintenance or
ganizations, are extremely costly and likely to span a number of years. If 01 were to 
stressquantative measures of success,it would provide a disincentive for these more com
plex cases. Similarly,  patient abuse investigations, which seldom result in indictments  or 
financial recoveries, but yet are of considerable importance, would be discouraged. 
Our response is the same as that noted above. The 01 should not use the indicators in a 
rigid manner and should take those factors into account when assessinga particular 
MFCU.  Here, too, in arraying and reviewing performance data, it might find it helpful  to 
make certain distinctions--for  instance, it might distinguish indictments, convictions, and 
dollar judgments by type of provider and thereby facilitate an analysis of the degree of dif
ficulty in the casesbeing prosecuted. 
They would ignore the MFCUs  dependence on referrals from State 
l 	
Medicaid  agencies. 
MFCUs  are highly dependent on the extent and quality of the casesbeing referred to 
them by the State Medicaid  agencies. All  things considered, where the quantity and 
quality of the referrals are relatively high, the likelihood  of high MFCU  performance is 
enhanced, and vice versa. If 01 failed to take this into account in assessingperformance, 
its oversight, argue the MFCUs, would be faulty. 
29 
 We agree. Moreover, we noted on page 20 of our report, that some MFCUs felt they 
were not getting sufficient referrals and that the OIG should consider a regulatory 
amendment that would clarify the MFCUs  authority to engage in sophisticated detection 
activities and in fraud screening activities.  The Office of Analysis and Inspections in 
Region III  is now conducting an inspection that addressesthe extent and quality of refer
rals from State Medicaid agenciesto MFCUs and will  offer more specific recommenda
tions concerning this matter. 
The 01 should focus its oversight of MFCUs on their overall management of 
0 	
the investigative process. 
The National  Association and many of the individual  MFCUs urged that 01 should key 
its oversight to process elements such as caseflow and investigative effectiveness. 
Through inquiry  of this kind, they suggestedthat 01 would be able to identify  any produc
tion problems and hold MFCUs accountable for their performance. 
We agree that such process considerations should be a vital element of the valuative ef
fort.  Perhaps they should even be the dominant element.  However, we still hold to the 
view that some quantitative  measurements of a set of outcome valuables, such as indict
ments, convictions, and dollars recovered should also play an important  part in the valua
tive effort. 
It is quite reasonable, we believe, for the Congress and Department  to be kept appraised 
of the overall effectiveness of MFCUs, for which Federal financial support is provided. 
It is certainly important  in that regard to assessthe effectiveness of the investigative 
process. But it is also important  to be able to determine the extent to which that process, 
however effective, is contributing  to the broad purpose of eliminating  fraud in the 
Medicaid program. 
In short, the Department  and Congress have a responsibility  to assesshow much and 
what kind of impact the MFCUs are having in the States.  Inevitably, this calls for a 
broad frame of reference, one encompassing not just the MFCUs themselves but the 
State criminal justice systemsaswell. 
The 01 should conduct its oversight of MFCUs on a qualitative basis,using 
0 	
personnel with training and experience in white collar crime. 
The MFCUs  are concerned that the introduction  of some quantitative  outcome measures 
will  lead to a rigid by-the-book approach to evaluation of their performance--one  that 
will  devote insufficient  attention to the complexities of law enforcement. 
We understand this concern. That is why we have underscored in this appendix and 
throughout  the report the need to use outcome measures in a balanced and careful man-
30 
 ner. We agree that qualitative  evaluation is important  and that individuals with expertise 
in white collar crime should be involved in making those evaluations. 
The 01 should conduct its evaluations of MFCUs on a unit-by-unit  basis, 
0 	
recognizing the distinctive features of each unit and its operating 
environment. 
The concern expressedhere is similar to that noted above--that some general measures 
and rules will  be used to assessall MFCUs. 
Once again, our response rests in a call for balance. Clearly, on-site investigation and an 
appreciation for the unique features of that site must be part of the evaluation process. 
Yet it is also reasonable to have some yardsticks for assessingall MFCUs.  It facilitates 
consistency and fairness in the evaluation process. In this context, the following  excerpt 
from the California  MFCUs  comments bear consideration: 
...the development of objective criteria, if properly used, takes the mystery out of 
performance evaluations. Further, the Units ability to document enforcement and 
other activities strengthens, rather than weakens, our integrity.  As each state is 
competing for its share of the state budget, so are we as a National  entity vying for 
continued federal support. To the extent we are able to quantify the process 
through the use of objective data, we strengthen our case. 
The 01 should recognize that the ultimate  goal of MFCUs is to deter 
l 	
Medicaid fraud and patient abuse. 
It seemsreasonable to assume,as a number of the MFCUs do, that the activities of 
MFCUs can have a significant deterrent effect on fraud and patient abuse,even if they 
lead to little  in the way of indictments, convictions, or dollar recoverences. Yet it is also 
reasonable for an oversight agencyto rely upon something more than an assumption in 
assessingthe significance of the deterrent effect in a particular  State. 
Therein  lies a key question.  What are some useful indicators of a deterrent effect?  This 
is a question which 01 and the MFCUs should explore jointly.  If they can identify  some 
such indicators, they should develop and test them, along with those we suggested. Sure
ly if the deterrent effect is to be used as a major justification  for the effectiveness of 
MFCUs, some such effort is essential. Otherwise, how are 01 and other concerned par-
ties to gauge how much significance to attach to deterrence? 
Conclusion 
We continue to feel that 01 should use quantitative outcome measures aspart of its over-
sight of MFCUs.  Moreover, we believe that if 01 develops them with the participation  of 
31 
 the MFCUs and usesthem in a balanced and careful manner, most MFCUs will  be sup
portive of the approach. 
The MFCUs  deepest concerns rest in the rigid application of performance indicators in 
a way that would lead, however, inadvertently, to a system of quotas. At a broad, concep
tual level, however, most MFCUs see some value to the use of indicators in the way we 
suggested. This was clearly suggestedin our telephone discussionswhen about two-
thirds of the MFCU  directors felt that performance indicators using indictments and con
victions per professional staff were worth serious consideration. 
Performance indicators are being used with increasing successin other fields.  In the law 
enforcement field, there are particular  sensitivities, asthe comments pointed out, that 
must be addressed. But aswe have attempted to indicate, they still can serve as an impor
tant part of the oversight process. 
Minimum  Staffhg  Levels 
In our draft report we recommended that the minimum  staffing requirement  for MFCUs 
be increased from 3 to 10professional positions.  This recommendation  did not elicit as 
much reaction as those concerning performance indicators.  But most of those that did 
respond felt it was too high. A number of MFCUs and the National Association sug
gested that five would be a more appropriate minimum. 
Even though we noted that 01 should be authorized to grant a waiver from the minimum 
when special circumstances made it unreasonable or unnecessary,the respondents 
still felt it was excessivefor the smaller States that would be affected.  They noted that 
the States with less than 10 staff were not necessarily lessproductive than the others and 
that in some casesthey might not be able to generate sufficient political  and financial sup-
port at the State level to function at the higher level. 
We gave careful consideration to the concerns expressed. For the reasons stated in the 
report, we still believe that in nearly all casesit is important  to establish a minimum  of 10 
professional staff. However, we do recognize that there are Stateswhere a lesser level 
might be more appropriate for a particular period of time.  Thus, we have lowered our 
recommended minimum  from  10 professional positions to 7 to 10. The 01, we think, is 
best suited to determine the actual number.  In concert with that change,we have 
removed our suggestion that waivers be allowed under special circumstances and instead, 
have urged that MFCUs with lessprofessional staff than the established minimum  be al
lowed a phase-in period to reach that minimum.  We think that such an approach will 
allow for more equitable and simpler administration. 
Final Note 
In our draft report, we recommend that the Department  amend the MFCU  regulation to 
(1) clarify that MFCUs can engagein sophisticated detection activities and to authorize 
32 
 and (2) authorize MFCUs to engagein fraud detection screening activities.  This and 
another recommendation  in the addendum were supported more by the experience of 
the OIG in conducting oversight of the MFCUs than by the inspection itself. 
Because of our limited  data base on the issue and becausethe Region III  Office of 
Analysis and Inspections is conducting an inspection that will  shed further  light on it, we 
have modified  our recommendation  to suggestthat 01 consider developing a regulatory 
proposal concerning the MFCUs  authority to engagein sophisticated detection activities 
and in fraud detection screening activities. 
33