This semiannual report and other OIG materials may be 
accessed on the Internet at http://oig.hhs.gov   Message from the Inspector General 
The recent corporate accounting scandals have demonstrated the need for increased 
corporate responsibility and accountability when dealing with stockholder funds.  The Federal 
Government must hold itself to an even higher standard when overseeing federal funds.  Here in 
the Office of Inspector General, we are committed to ensuring the strict accounting of taxpayer 
dollars. 
The work of OIG over the past few months has illustrated numerous areas where 
potential financial vulnerabilities exist.  One area of concern is the accuracy of data reported 
by pharmaceutical companies and the impact those data have on the amount the government 
pays in reimbursement for those drugs resulting in the loss of millions of dollars from Medicare 
and Medicaid each year. In the coming months we will issue final guidance for pharmaceutical 
manufacturers on compliance with federal fraud and abuse laws. Additionally, we will issue 
reports on state efforts to control prescription drug costs and the use of drug rebates in the 
Medicaid program. 
We will also continue to be vigilant in examining the payments made to providers 
to ensure they are accurate and necessary.  This will be done by assessing the accuracy and 
appropriateness of the processes used to make these payments as well as the extent to which 
other factors, such as medical necessity or coverage issues, impact payments. At the same time 
we will continue to aggressively pursue providers who file false claims or make false statements 
resulting in losses to the Medicare and Medicaid programs. 
However, the work of this office is not limited to just the financial viability of the Federal 
health care programs. Our work on child support enforcement resulted in recoveries to children 
of over $6.4 million in FY 2002.  In addition, an enforcement initiative led by the OIG resulted 
in 70 arrests of parents who had repeatedly failed to honor their child support obligations and the 
return of long overdue monies to those children. 
Over the coming months, our office will continue to work to ensure the financial integrity 
of all the programs within the Department of Health and Human Services. We look forward to 
working with the provider community to ensure the viability and integrity of the federal health 
care programs for years to come. 
Janet Rehnquist 
Inspector General  iv
   Highlights 
Summary Statistical Accomplishments 
For Fiscal Year 2002, OIG reported savings of over $21 billion 
comprised of over $19.9 billion in implemented recommendations and other 
actions to put funds to better use, $426 million in audit disallowances, and 
$1.49 billion in investigative receivables. (Details pp. 45, 48, and 53.)
In addition, for this Fiscal Year OIG reported exclusions of 3,448 
individuals and entities for fraud or abuse of the federal health care programs 
and/or their beneficiaries, 517 convictions of individuals or entities that 
engaged in crimes against departmental programs, and 236 civil actions. 
(Details pp. 15 and 48.) 
Bioterrorism Preparedness 
The OIG has continued its initiative to assess the security of a 
number of departmental assets against terrorist threats along with the 
readiness and capacity of responders at all government levels to protect 
the public health in case of a bioterrorist attack. Included in this initiative
are reviews of the activities and programs of several departmental 
operating divisions, including CDC, NIH, and FDA.  (Details p. 28.)
Child Support Enforcement 
During this period, one of the innovative ways OIG approached 
child support enforcement included a 2-day sweep in which 70 of the 
nations most wanted deadbeat parents in 29 states were arrested. This
effort represented the single largest joint OIG and Office of Child Support 
Enforcement crackdown on child support defaulters. (Details p. 37.)
Prescription Drugs 
The government settled its third case with a major retail pharmacy 
chain related to claims for partially filled prescriptions. In a model of multi-
government cooperation, the Federal Government and 18 states entered 
into settlement agreements with Eckerd Corporation to resolve the com-
panys liability for billing federal health care programs for full prescriptions
when it dispensed only a portion of the medications prescribed.  The OIG
investigated a variety of other schemes and identified cases of fraud in the
use, distribution, or billing for prescription drugs.  (Details p. 20.)
v
  Medicare Contractor Settlement 
In the second largest health care fraud settlement to date involving 
a Medicare carrier, General American Life Insurance Company, Inc., agreed 
to pay the government $76 million. The settlement resolved allegations 
that the former Medicare carrier engaged in improper claims handling and 
quality assurance reporting practices in order to maintain a high perfor-
mance ranking.  (Details p. 24.) 
Capped Rental Payments 
The OIG recommended that CMS eliminate the maintenance 
agreement payment for rental equipment and, instead, pay only for repairs 
when neededa change resulting in approximately $100 million being 
saved each year by Medicare and its beneficiaries.  (Details p. 12.) 
Aid to Families With Dependent Children Overpayments 
As part of a nationwide initiative, OIG found that several states 
and localities had not remitted to the Federal Government its proportionate 
share of Aid to Families with Dependent Children overpayments. Refunds 
totaling $88.8 million were recommended during this reporting period. 
(Details p. 35.) 
Ambulance Services 
American Medical Response, Inc., the nations largest ambulance 
provider, agreed to pay the government $20 million to resolve civil claims 
alleging improper Medicare billings.  The federal civil charges involved 
claims submitted to Medicare for nonemergency ambulance transports 
provided in Massachusetts. (Details p. 23.) 
Recruiting and Retaining Foster Parents 
An OIG study on efforts to recruit and retain foster parents found 
that, while the number of children entering foster care is increasing, the 
number of available foster parents is decreasing. More could be done to 
effectively use current foster parents for recruiting, as they themselves 
may be the most effective recruitment tool. (Details p. 34.) 
Clinical Trial Web Sites 
At OIGs recommendation, the FDA and the Office for Human 
Research Projects agreed to provide guidance and facilitate the adoption 
of standards and encourage review of clinical trial web sites as a result of 
a study which showed that these sites, although in need of improvements, 
are emerging as an important recruitment strategy and show promise as a 
means of fostering informed consent. (Details p. 28.) 
vi
  Table  of  Contents
 
Centers for Medicare and Medicaid Services ................................. 1
 
PhysicianI ncentiveP  lan  ................................................. 2
 
Nonphysician Surgery Staff ............................................... 2
 
IncorrectlyR  eportedH  ospitalT  ransfers  ..................................... 2
 
ImproperlyR  eporteda ndP  aidD  ischarges  ................................... 3
 
Ambulancea ndR  adiologyS  ervices  ........................................ 3
 
AdjustedC  ommunityR  ateP  roposals  ....................................... 4
 
ManagedC  areA  dditionalB  enefits  ......................................... 4
 
Dually Eligible Beneficiaries With Institutional Status .......................... 5
 
Pensiona ndP  ost-RetirementB  enefits ....................................... 5
 
CarrierA  dministrativeC  osts .............................................. 6
 
DeportedB  eneficiaries ................................................... 6
 
Paymentsf orN  ailD  ebridement ............................................ 6
 
Prescription Drug Benefits ................................................ 7
 
Medicare Payments for Prescription Drugs ................................... 7
 
Medicaid Payments for Prescription Drugs ................................... 8
 
School-Based Health Services ............................................. 9 
 
MentalH  ealthS  ervices  .................................................. 9
 
Residents of Institutions for Mental Diseases  ................................ 10
 
Disproportionate Share Hospital Payments .................................. 11
 
CappedR  entalE  quipment ............................................... 12
 
Outreach ............................................................. 12
 
Industry Guidance ............................................... 12
 
Compliance Activities ............................................ 13
 
ProviderS  elf-DisclosureP  rotocol  .................................. 13
 
Federala ndS  tateP  artnership: J ointA  uditso fM  edicaid  ....................... 14
 
OIGA  dministrativeS  anctions ............................................ 15
 
ProgramE  xclusions  ............................................. 15
 
CivilM  onetaryP  enaltiesL  aw...................................... 16
 
CivilP  enaltiesf orP  atientD  umping ................................. 16
 
Criminala ndC  ivilE  nforcement  .......................................... 17
 
MentalH  ealthS  ervices ........................................... 18
 
Hospitals ...................................................... 18
 
NursingH  omes ................................................. 19
 
Prescription Drugs  .............................................. 20
 
DurableM  edicalE  quipmentS  uppliers ............................... 21
 
HomeH  ealth ................................................... 22
 
Laboratories  ................................................... 22
 
AmbulanceS  uppliers  ............................................ 23
 
vii  Contractors  .................................................... 23
 
Practitioners  ................................................... 24
 
Kickbacks  ..................................................... 25
 
MedicaidF  raudC  ontrolU  nits ............................................ 26
 
PublicH  ealthA  gencies.  ................................................ 27
 
BioterrorismP  reparedness ............................................... 28
 
RyanW  hiteC  laims  .................................................... 28
 
ClinicalT  rialW  ebS  ites  ................................................ 28
 
FDAF  irearms  ........................................................ 29
 
Exclusionsf orH  ealthE  ducationA  ssistanceL  oanD  efaults  ..................... 30
 
Misuse of Public Health Grant Funds  ...................................... 31
 
FY 2001 Financial Statement Audits ....................................... 31
 
Administrationsf orC  hildrena ndF  amiliesa ndo nA  ging  ..................... 33
 
Recruitinga ndR  etainingF  osterP  arents  .................................... 34
 
PromotingS  afea ndS  tableF  amiliesP  rogram ................................ 34
 
WorkingW  ithH  ard-to-EmployT  ANFR  ecipients  ............................ 35
 
Refunding AFDC Overpayments .......................................... 35
 
Child Support Enforcement .............................................. 36
 
TaskF  orces .................................................... 36
 
Intensive Child Support Operation .................................. 37
 
AdditionalE  nforcement  .......................................... 38
 
InsuranceI nterceptP  rogram  ............................................. 39
 
Community Services Economic Development Grant  .......................... 39
 
Misuse of ACF Grant Funds  ............................................. 40
 
FY 2001 Financial Statement Audit: Administration on Aging .................. 40
 
General Oversight ..................................................... 41
 
ResultsA  ct  .......................................................... 42
 
FY 2001 Financial Statement Audit: Program Support Center  .................. 43
 
NonfederalA  udits  ..................................................... 43
 
ResolvingR  ecommendations ............................................. 44
 
Table1 : R  eportsW  ithQ  uestionedC  osts ............................. 45
 
Table 2: Funds Recommended to Be Put to Better Use .................. 46
 
Legislativea ndR  egulatoryR  eviewa ndD  evelopment  ......................... 47
 
ReviewF  unctions ............................................... 47
 
DevelopmentF  unctions  .......................................... 47
 
Employee Fraud and Misconduct  ......................................... 48
 
Investigative Prosecutions ............................................... 48
 
ProgramF  raudC  ivilR  emediesA  ct ........................................ 49
 
viii  Appendices ........................................................... 51 
Appendix A:	  Savings Achieved Through Policy and Procedural Changes 
 
ResultingF  romA  udits,I nvestigationsa ndI nspections ............ 53
 
Appendix B:	  Unimplemented Office of Inspector General Recommendations 
 
to Put Funds to Better Use .................................. 57
 
Appendix C:	  Unimplemented Office of Inspector General Program and 
 
ManagementI mprovementR  ecommendations  .................. 65
 
AppendixD  :  Notest oT  ables1  a nd2   .................................... 71
 
Appendix E:	  Reporting Requirements of the Inspector General Act of 1978, 
 
asA  mended  ............................................. 81
 
Appendix F:  Summary of Sanction Authorities  ............................ 83
 
Appendix G:	  Status of Public Proposals for New and Modified Safe Harbors
 
to the Anti-Kickback Statute Pursuant to Section 205 of the Health
 
Insurance Portability and Accountability Act of 1996 ............. 8 5
 
Appendix H:  Performance Measure Reports ............................... 91
 
Please Note: Figures throughout the text have been 
rounded for reporting purposes. 
ix
  x
  Centers for Medicare 
and Medicaid Services 
The Centers for Medicare and Medicaid Services (CMS) administers 
the Medicare and Medicaid programs. Financed by the Federal Hospital 
Insurance Trust Fund, Medicare Part A provides hospital and other insti-
tutional insurance for persons aged 65 or older and for certain disabled 
persons. Medicare Part B (Supplementary Medical Insurance) is an optional 
program which covers most of the costs of medically necessary physician 
and other services and is financed by participants and general revenues. 
The Medicaid program provides grants to states for medical care 
for qualifying people with low incomes.  State expenditures for medical 
assistance are matched by the Federal Government using a formula that 
measures per capita income in each state relative to the national average. 
The State Childrens Health Insurance Program (SCHIP), created under 
the new title XXI of the Social Security Act, expands health coverage to 
uninsured children whose families earn too much for Medicaid, but too 
little to afford private coverage. 
The Office of Inspector General (OIG) continues to devote significant 
resources to investigating and monitoring the Medicare and Medicaid pro-
grams.  These activities have helped ensure the cost-effective delivery of 
health care; improved the quality of health care; and reduced the potential 
for fraud, waste, and abuse.  In addition, these efforts have often led to 
criminal, civil, and/or administrative actions against perpetrators of fraud 
and abuse. 
The OIG also reports on the audits of CMS financial statements 
which presently account for more than 82 percent of Department of Health 
and Human Services (HHS) outlays.  In addition to issuing an opinion on 
the statements, auditors assess compliance with Medicare laws and 
regulations and the adequacy of internal controls. 
1
  Centers for Medicare and Medicaid Services 
PHYSICIAN INCENTIVE PLAN 
Medicare+Choice organizations are prohibited from linking physician 
incentives to reducing or limiting necessary medical services to specific Medicare 
patients.  They are also required to report all of their physician incentive plan 
arrangements to CMS annually.  The OIG found that the data CMS collects on 
physician incentive plans do not detect whether these plans restrict access to 
needed services.  Furthermore, this information is incomplete, unreliable and 
inconsistent.  Medicare+Choice organizations indicate that the reporting process 
is burdensome and costly. 
The OIG recommends that CMS replace the current reporting system with 
a less burdensome and more effective approach.  The CMS has agreed to modify 
the reporting requirements. (OEI-05-00-00010) 
NONPHYSICIAN SURGERY STAFF 
Acting on a request from CMS, OIG found that Medicare pays surgeons or 
hospitals for nonphysician clinical staff involved in cardiothoracic surgery, even 
though surgeons do not re-
Sample reasons cardiothoracic surgeons use personal staff 
ceive additional payments for 
some of the staff they bring to 
Reason  Percent*  the hospital. Recognizing 
this, some hospitals and 
  Hospital lacking staff to assist  75.1 
cardiothoracic surgeons have 
  Personal staff is efficient and 
appropriately trained in surgical  entered into arrangements 
technique  73  whereby hospitals provide 
  Hospital staff does not have right skills  57  some compensation to those 
  Hospital does not have staff for preoperative 
surgeons who bring their own 
and postoperative care  34.6 
staff. 
  Personal preference  30.4 
The CMS concurred 
*Surgeons may have cited more than one reason.  with the findings, as they 
affirmed CMS decision to exclude the costs of physicians clinical staff used in the 
facility setting from Medicares practice cost calculations.  (OEI-09-01-00130) 
INCORRECTLY REPORTED HOSPITAL TRANSFERS 
Medicare paid 1,610 hospitals an additional $6.8 million because the 
hospitals reported patients as having left against medical advice (called LAMA 
2  Centers for Medicare and Medicaid Services 
discharges), when, in actuality, the patients were admitted to another hospital on 
the same day. This problem occurred primarily because LAMA discharges are 
not included in the computerized system edits designed to detect same-day 
discharge and admission to another hospital. 
The OIG, in addition to recommending the recovery of overpayments, 
recommended that CMS review the instructions for correct hospital coding of 
patient discharges and develop adequate internal controls and monitoring safe-
guards to detect and address transfers reported as LAMA discharges. The CMS 
generally concurred. (A-06-99-00045) 
IMPROPERLY REPORTED AND PAID DISCHARGES 
The objective of this review was to determine whether hospitals that ceased 
to exist after consolidation with another hospital improperly submitted claims for 
prospective payment system discharges. Medicare regulations require that such 
payments be made to the legal owner on the date of discharge.  The review re-
vealed that 15 hospitals that ceased to exist after consolidation were improperly 
paid $8 million for 1,118 prospective payment system discharges. These claims 
were submitted and paid because neither the fiscal intermediaries nor the hospitals 
had a clear understanding of Medicare payment rules on hospital consolidations. 
The Department of Justice has reached settlements and fiscal intermediaries have 
begun collecting the overpayments. 
The OIG recommended, among other things, that CMS determine whether 
instructions should be revised to clarify claim filing and cost reporting after 
consolidations. The CMS fully concurred. (A-06-00-00044) 
AMBULANCE AND RADIOLOGY SERVICES 
Sample Results 
80
This review found that Medicare 
70 
potentially overpaid $51 million for Medicare 
60 
Part B ambulance and radiology services  50 
40
provided to inpatients in prospective payment 
30
 
system hospitals. These services should not 
20
 
have been paid separately because they were  10
 
included in the hospitals diagnosis-related  0
 
group payment. Instead, the ambulance or  Ambulance  Radiology
 
radiology provider should have billed the 
O Claims Supported
 
hospital for the services.  Neither CMS nor its carriers  O Claims Potentially Overpaid
 
had adequate controls to detect and prevent these payments. 

3
  Centers for Medicare and Medicaid Services 
The CMS generally concurred with OIGs recommendations and stated 
that mechanisms were already in place to identify and follow up with carriers that 
process a disproportionate share of questionable claims.  (A-01-01-00502) 
ADJUSTED COMMUNITY RATE PROPOSALS 
This report summarizes the results of OIGs reviews of 186 adjusted 
community rate proposals submitted by 55 Medicare+Choice (M+C) organizations 
for contract year 2000.  The reviews were requested by CMS and required by 
statute. 
As outlined in CMS regulations, the contract year 2000 proposals were 
to be prepared using a new methodology intended to more accurately represent 
the actual costs of Medicare benefit packages. The OIG found, however, that 
49 percent of the proposals reviewed had not been prepared in accordance with 
CMS instructions and that 66 percent contained errors. In addition, 36 percent of 
the proposals overstated the beneficiary premium/cost-sharing amounts and/or did 
not provide for additional benefits. The CMS generally concurred with OIGs 
recommendations to improve the preparation and accuracy of future adjusted 
community rate proposals. (A-09-01-00051) 
MANAGED CARE ADDITIONAL BENEFITS 
Through adjusted community rate proposals, M+C organizations present 
to CMS their estimates of the funds needed to cover the costs of providing the 
Medicare package of covered services to enrollees. The proposals may also in-
clude estimates of additional benefits, such as prescription drugs and eyeglasses, 
that the organizations plan to offer to Medicare enrollees. The objective of the 
following audits was to assess whether additional benefits were available to 
Medicare beneficiaries at reasonable costs and as advertised and whether these 
benefits were both credible and properly valued for calendar year (CY) 2000. 
In one report, OIG found that an M+C 
Two Southwestern MCOs 
organization provided additional benefits as
proposed in its CY 2000 proposal and as 
advertised in its marketing brochures. The 
organization also provided prescription drugs to Medicare enrollees at 
reduced rates by taking advantage of negotiated discounts. However, the 
review disclosed problems with the prescription drug benefit component 
of the proposal that impacted both the Medicare beneficiaries enrolled in 
the plan and the organization itself. The company no longer participates 
in the M+C program.  (A-06-00-00073) 
4
  Centers for Medicare and Medicaid Services 
Reviewing a second M+C organization, OIG found that, with the exception 
of chiropractic care services, additional benefits estimated in the CY 2000 
proposal were available to beneficiaries at the levels and copayments priced 
in the proposal. Over $107,000 was estimated for chiropractic services 
that were not supported or offered to members. In agreement with OIG 
recommendations, the company revised, among other things, its proposal 
preparation and pricing methodology to ensure that only additional 
benefits available to beneficiaries are included. (A-06-01-00064) 
DUALLY ELIGIBLE BENEFICIARIES 
WITH INSTITUTIONAL STATUS 
Medicare provides enhanced payments to managed care organizations for 
the medical care of dually eligible Medicare and Medicaid beneficiaries and for 
beneficiaries residing in nursing homes. This report points out a disparity between 
the payments and the cost of medical care for those dually eligible beneficiaries 
who resided in nursing homes. Some organizations were significantly overpaid, 
while others were significantly underpaid.  This disparity may have weakened 
CMS ability to provide managed care options to beneficiaries. For example, 
underpayments could reduce the number of managed care organizations willing or 
able to remain in the Medicare program, and those remaining could be forced to 
target only healthier beneficiaries for enrollment. 
To address this situation, CMS is phasing in a risk adjustment payment 
methodology, based on the beneficiarys health status, over an 8-year period 
(2000 through 2007).  The OIG recommended that CMS consider the results of 
OIGs work and seek legislation to accelerate the phase-in of the risk adjustment 
factors. The CMS generally did not concur.  (A-05-00-00015) 
PENSION AND POST-RETIREMENT BENEFITS 
In related reports, OIG reviewed records of an insurance company that 
functioned as a Medicare contractor until its contract was terminated in 2000. 
The company was allowed to claim Medicare reimbursement for its Medicare 
employees pension and post-retirement benefit costs. 
Regulations and the Medicare contract provide that pension gains that 
occur when a Medicare segment of a pension plan closes should be credited to the 
Medicare program. Accordingly, OIG recommended that the company remit about 
$20.2 million in excess pension assets to the Medicare program.  Regulations also 
provide that, to be allowable, post-retirement benefit costs must be funded by the 
time set for filing the federal income tax return.  The costs assigned to the current 
5
  Centers for Medicare and Medicaid Services 
year, but not funded by the tax return time, are not allowable in any subsequent
 
year. Since the companys $3.1 million post-retirement claim was based on un-
 
funded costs, OIG recommended that it withdraw its claim. The company did not
 
agree with the recommendations in either report. 
 
(A-07-02-03007, A-07-01-00125)
 
CARRIER ADMINISTRATIVE COSTS 
The purpose of this review, performed by a CPA firm with OIG oversight, 
was to determine whether administrative costs claimed by an insurance company 
to administer Medicare Part B from October 1, 1993, through December 31, 1999, 
were reasonable, allocable, and allowable.  The report recommended for disallow-
ance about $42.8 million of administrative costs and identified material internal 
control weaknesses in the areas of indirect costs, fringe benefits, miscellaneous 
costs, and termination costs. The company did not agree with the findings and 
recommendations. (A-07-01-02086) 
DEPORTED BENEFICIARIES 
Based on a review requested by the Senate Finance Committee, this report 
points out that the Medicare program is vulnerable to improper payments for 
services rendered to deported beneficiaries. Of an identified 1,072 deported 
Medicare beneficiaries, 49 had improper payments totaling $837,000 made on 
their behalf during 1998 and 1999.  These payments occurred because CMS did 
not use deportation information in its main database of Medicare enrollment data 
for processing payments to fee-for-service or managed care providers. 
In addition to recommending financial adjustments, OIG recommended 
that CMS use the deportation information already in its possession to preclude 
such improper payments. The CMS generally concurred. (A-04-01-05004) 
PAYMENTS FOR NAIL DEBRIDEMENT 
Medicare paid approximately $97 million for inappropriate nail debridement 
and related podiatry services in Calendar Year (CY) 2000. About 23 percent of 
nail debridement claims OIG reviewed were not supported by medical documen-
tation, and OIG estimated that Medicare paid $51 million for such inappropriate 
claims.  Additionally, Medicare erroneously paid for related podiatry services 
normally associated with nail debridement claims.  Since about 23 percent of 
claims for nail debridement services were not medically supported, any payments 
6
  Centers for Medicare and Medicaid Services 
for services related to those claims were inappropriate. The OIG estimated that, 
for CY 2000, Medicare paid about $46 million for such related services. Finally, 
36 percent of Medicare beneficiaries reported they did not receive nail debride-
ment services paid for by Medicare. 
The OIG recommended that Medicare carriers closely scrutinize, through 
focused medical reviews, all claims for nail debridement services and that CMS 
regional offices and carriers should also educate podiatrists on Medicare policy 
for payment of these claims.  The CMS agreed. (OEI-04-99-00460) 
PRESCRIPTION DRUG BENEFITS 
This report addresses information made available to Medicare beneficiaries 
to enable them to compare prescription drug benefits among Medicare+Choice 
plans in which they may enroll. The OIG found that the information that the 
plans provide to beneficiaries about certain elements of the drug benefits is 
incomplete, inconsistent and confusing. 
The CMS concurred with OIGs recommendations to enhance and validate 
the drug limit information currently collected in the Plan Benefit Package database 
and provide beneficiaries with education regarding drug benefits. 
(OEI-03-00-00430) 
MEDICARE PAYMENTS FOR PRESCRIPTION DRUGS 
In these companion reports addressing Medicare payments for prescription 
drugs, OIG compared the amount Medicare reimburses for two inhalation drugs 
ipratropium bromide and albuterolto prices available to the Department of 
Veterans Affairs (VA) and acquisition costs for suppliers. The OIG found that 
Medicare and its beneficiaries would save over $500 million annually ($279 for 
Comparison of Medicare Reimbursement to VA Prices 
Pricing Source  Median  Cost of Typical  Monthly Medicare  Potential Annual 
for  Price  Individual  Beneficiary  Medicare and 
Ipratropium  per mg  Monthly Usage  Coinsurance Based  Beneficiary 
Bromide  (50mg)  on Source Price  Savings 
Medicare  $3.34  $167.00  $33.40  N/A 
VA  $0.66  $33.00  $6.60  $278,854,770 
ipratropium bromide; $264 for albuterol) if these drugs were reimbursed at the 
median prices paid by VA. Additional savings between $223-$262 million 
7  Centers for Medicare and Medicaid Services 
(ipratropium bromide) and between $226-$245 million (albuterol) annually were 
estimated if the drugs were reimbursed at prices available to suppliers. 
The OIG offered several recommendations for reducing the excessive 
reimbursement, among them authorization of a commission to set payment rates 
and calculating national estimated acquisition costs based on the reported average 
manufacturer prices. The CMS agreed and anticipates working with Congress 
and OIG to revise the payment system.  (OEI-03-01-00410, OEI-03-01-00411) 
MEDICAID PAYMENTS FOR PRESCRIPTION DRUGS 
This report points out that Medicaid could save significant dollars in 
reimbursement to pharmacies for generic prescription drugs.  Most states use 
average wholesale price (AWP), minus a percentage discount, as a basis for re-
imbursing pharmacies for drug prescriptions. In 1999, this discount averaged 
about 10 percent nationally, which OIG believes is not sufficient to ensure that 
reasonable prices are paid. Based on pricing information from pharmacies in 
eight states, OIG estimated that the actual acquisition cost, nationwide, for 
generic drugs averaged about 66 percent below AWP. For the 200 generic drugs 
with the greatest amount of Medicaid reimbursement in 1999, OIG calculated that 
as much as $470 million could have been saved if reimbursement had been based 
on the 66-percent average discount. This savings calculation was limited to 
ingredient acquisition costs and did not address other costs, such as dispensing 
fees. 
The OIG recommended that CMS encourage the states to bring pharmacy 
reimbursement for generic drugs more in line with their actual acquisition costs. 
The CMS concurred and planned to strongly encourage states to review their 
estimates of acquisition costs and to follow up on state actions.  (A-06-01-00053) 
Another report followed up on previous work concerning the discounts 
below AWP commonly available to pharmacy purchasers of brand name and 
generic drugs. It provides extended analyses of the discounts available for single-
source drugs, all drugs without federal upper limits (FUL), multiple-source drugs 
without FULs, and multiple-source drugs with FULs. The analyses found a wide 
range of discounts below AWP for pharmacy purchases depending on the category 
of drug. The current method for reimbursing for brand name drugs and those 
non-FUL generic drugs that use a single percentage discount did not adequately 
consider the large fluctuations in actual discounts between brand name and 
generic drugs noted during OIGs additional analyses. 
If state Medicaid programs continue to use a reimbursement system based 
on AWP, OIG recommended that CMS encourage states to consider adopting a 
four-tiered payment system to bring pharmacy reimbursement more in line with 
actual drug acquisition costs. The four tiers would cover single-source innovator 
8
  Centers for Medicare and Medicaid Services 
drugs, multiple-source innovator drugs without FULs, multiple-source nonin-
novator drugs without FULs, and FUL drugs.  The CMS agreed with the 
recommendations. (A-06-02-00041) 
SCHOOL-BASED HEALTH SERVICES 
The objective of this review was to determine whether expenditures for 
school-based health claims for the period July 1, 1999, through June 30, 2000, 
were reasonable, allowable, and adequately supported. 
The OIG found that the state did not properly 
Washington 
implement and monitor the school-based health service 
administrative match program.  As a result, the state 
claimed $527,000 for unallowable overhead costs, used non-Medicaid 
program data for cost allocation, and allowed invalid time studies to be 
used for federal funding claims.  In addition to recommending financial 
adjustment, OIG made several recommendations concerning program 
oversight. The state generally concurred. (A-10-01-00011) 
Because Oregon did not properly implement and 
Oregon 
monitor the school-based health services program, the 
state claimed unallowable expenditures for three 
educational providers and established certain reimbursement rates and rate 
increases that were not in accordance with federal regulations.  Based on a 
statistical sample, OIG estimated that the federal overpayment for the 
three sampled educational providers was at least $167,000. The financial 
effect of the unsupported reimbursement rates cannot be determined until 
the state performs additional analyses. The state concurred with the 
findings and recommendations. (A-10-01-00006) 
MENTAL HEALTH SERVICES 
In this report, OIG found that some Medicare carriers did not have local 
medical review policies for one or more of the mental health services reviewed. 
When policies were in place, they did not always provide comprehensive and 
consistent coverage criteria. In addition, documentation requirements for therapy 
and pharmacologic management were not comprehensive and consistent. 
The OIG recommended that CMS require carriers to strengthen vague or 
incomplete sections of their local policies for mental health services and ensure 
that policies adequately address all of the elements specified in the local medical 
review policy format.  The CMS concurred. (OEI-03-99-00132) 
9
  Centers for Medicare and Medicaid Services 
RESIDENTS OF INSTITUTIONS 
FOR MENTAL DISEASES 
The objective of these reviews was to determine if controls were in place 
to preclude states from claiming federal Medicaid funding for 21 to 64 year old 
residents of psychiatric hospitals that are institutions for mental diseases.  Such 
funding is not permitted, even if the residents are temporarily released to acute 
care hospitals for medical treatment. The OIG found that controls were not adequate 
to preclude most of the states examined from making inappropriate claims and 
recommended, in general, that the states strengthen such controls. The reports 
also called for financial adjustments. 
This review found that from July 1, 1997, through 
California  February 28, 2001, the state claimed about $551,000 in 
unallowable funds for residents who were temporarily 
released to acute care hospitals.  State officials dis-
agreed with the findings and recommendations. (A-09-01-00055) 
This review indicated that the state generally had adequate 
Florida 
controls to prevent improper claims.  The OIG reviewed 
about 3,800 claims totaling about $19.8 million in 
Medicaid payments and found only 47 inappropriate claims for acute 
inpatient hospital care. These claims represented $79,000 in federal funds. 
A separate review noted about $71,000 in improper claims for medical and 
ancillary services. The state did not agree with OIGs recommendations 
for federal financial adjustments. (A-04-01-02003, A-04-01-02008) 
The OIG estimated that the state improperly claimed 
New York  $113,000 during the July 1, 1997, through September 30, 
2000, audit period.  Of this amount, $75,000 was for 
medical and ancillary claims, $37,000 was for inpatient 
claims, and $1,000 was for an improper inpatient psychiatric hospital 
claim. The state generally agreed with the recommendations. 
(A-02-01-01006) 
Another review found that, for the same period, New York improperly 
claimed $84,000 in federal funds for medical and ancillary services 
provided to residents of state-operated psychiatric hospitals. The state 
did not agree with a portion of the recommended financial adjustment. 
(A-02-01-01014) 
This review found that for the period September 1, 1997, 
Texas 
through August 31, 2000, federal funds totaling $463,000 
were improperly claimed for medical and ancillary 
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services. The OIG recommended financial adjustments. The state has 
taken action to address the recommendations. (A-06-01-00054) 
Although it was state policy not to claim federal funds 
New Jersey  for medical and ancillary services provided outside 
psychiatric hospitals, OIG found that for the period 
July 1, 1997, through June 30, 2001, the state im-
properly claimed about $332,000 for such services. 
Another review found that, for the same period, the state improperly 
claimed $191,000 of federal funds for patients who were temporarily 
released to acute care hospitals. State officials agreed with recommen-
dations of both reports. (A-02-01-01008, A-02-00-01027) 
DISPROPORTIONATE SHARE 
HOSPITAL PAYMENTS 
Medicaid provides that states may make additional payments, called 
disproportionate share hospital (DSH) payments, to hospitals for the uncompen-
sated costs of serving disproportionate numbers of low-income patients with 
special needs. The Omnibus Budget Reconciliation Act of 1993 mandates that 
these payments not exceed the individual hospitals uncompensated costs. 
The OIG found that the state made DSH payments to 
California 
one hospital that exceeded its hospital-specific limit by 
$38.7 million. The limit was overstated because the 
state: 1) calculated the limit using projected amounts instead of actual in-
curred expenses and payments, 2) did not limit total operating expenses to 
amounts that would have been allowable under Medicare cost reimburse-
ment principles, 3) included bad debts as an additional operating expense, 
and 4) double-counted charges for county mental health/substance abuse 
services and included charges for services provided to inmates and county 
employees. (A-09-01-00098) 
California made DSH payments to another hospital that exceeded its 
hospital-specific limit by $15.9 million. The limit was overstated because 
the state:  1) calculated the limit using projected amounts instead of actual 
incurred expenses and payments; 2) did not limit total operating expenses 
to amounts that would have been allowable under Medicare cost reimburse-
ment principles; 3) included bad debts as an additional operating expense; 
4) double-counted charges for Medicaid managed care, county health 
plans, and county mental health/substance abuse services and included 
charges for services provided to inmates; and 5) reduced uninsured cash 
payments by allowances for insured patients. (A-09-01-00085) 
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Both reports made several recommendations, including those for financial 
adjustments. The state generally disagreed with the findings and 
recommendations. 
The OIG found that DSH amounts claimed were 
Missouri 
overstated by $36.2 million because the state included 
nonhospital (community mental health center) costs in its 
DSH calculations. The OIG recommended that the state return the over-
payments to the Federal Government, identify and refund similar excessive 
claims from subsequent years, and implement procedures and controls to 
prevent similar claims.  The state did not concur. (A-07-01-02093) 
In another report, OIG pointed out that DSH costs claimed on behalf of 
state mental hospitals were overstated by $1.3 million due to a clerical 
error. The OIG made several recommendations in addition to one for 
financial adjustment. The state concurred in part. (A-07-01-02089) 
CAPPED RENTAL EQUIPMENT 
The OIGs detailed 5-year analysis, which involved tracking more than 
3,500 pieces of capped rental equipment for beneficiaries who decided to rent or 
purchase the equipment in 1996, demonstrated that Medicare paid substantially 
more for maintenance on rented equipment than repairs on purchased equipment. 
Furthermore, an additional analysis of supplier documentation for more than 250 
maintenance services from June 2000 found only 9 percent of the capped rental 
equipment actually received any maintenance and servicing. 
For these reasons, OIG recommended that CMS eliminate the semiannual 
maintenance payment for rental equipment and, instead, pay only for repairs when 
needed. This change would result in approximately $100 million being saved 
each year by Medicare and its beneficiaries.  The CMS agreed with the recom-
mendation and stated that they will consider a legislative initiative to eliminate 
the 15-month rental option all together. (OEI-03-00-00410) 
OUTREACH 
Industry Guidance 
The OIG has continued to issue advisory opinions, special fraud alerts, 
special advisory bulletins and other guidance as part of its ongoing effort to pro-
mote the highest level of ethical and lawful conduct by the health care industry. 
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  Centers for Medicare and Medicaid Services 
For the period from April 1, 2002, through September 30, 2002, OIG accepted 29 
advisory opinion requests and issued 15 advisory opinions. 
Compliance Activities 
Because the great majority of providers are honest and wish to avoid fraud 
and abuse issues, OIG is actively working with the private sector to develop 
methods to prevent the submission of improper claims and inappropriate conduct. 
The OIG has already initiated significant outreach efforts with the private sector 
to encourage these compliance endeavors. The OIGs compliance program guide-
lines are available on the Internet at http://oig.hhs.gov in the Compliance Tools 
and Fraud Detection & Prevention sections. 
The OIG has developed and released nine compliance program guidances 
for:  clinical laboratories, hospitals, home health agencies, third-party billing 
companies, durable medical equipment, prosthetics and orthotics suppliers, 
hospices, Medicare+Choice organizations that offer coordinated care plans, 
nursing homes, and individual and small group physician practices.  The OIG 
is currently working on compliance guidance for ambulance service providers 
and the pharmaceutical industry, as well as a revised guidance for the hospital 
industry. 
Provider Self-Disclosure Protocol 
In keeping with a longstanding commitment to assist providers and suppliers 
in detecting and preventing fraudulent and abusive practices, OIG issued a set of 
comprehensive guidelines for voluntary self-disclosures, titled Provider Self-
Disclosure Protocol, available on the Internet at http://oig.hhs.gov in the 
Compliance Tools section. In addition, it can be found in 63 Federal Register 
58,399 (October 30, 1998). 
Essentially, the Protocol guides providers and suppliers through the 
process of structuring a disclosure to OIG of matters uncovered that are believed 
to constitute potential violations of federal laws (as opposed to innocent mistakes 
that may have resulted in overpayments). Pursuant to the Protocol, an appropriate 
submission would include a thorough internal investigation as to the nature and 
cause of the matters uncovered and a reliable assessment of their economic impact 
(e.g., an estimate of the losses to the federal health care programs). The OIG 
evaluates each submission to determine the appropriate course of action. To date, 
OIG has received 160 submissions. Self-disclosure cases have resulted in 32 
recoveries and 18 settlements collectively totaling over $49.7 million. Two 
examples follow: 
'	  DelawareBeebe Medical Center voluntarily paid Medicare $1.9 million 
to resolve its administrative liability for excess Medicare funds received 
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during Fiscal Year 2001. These funds were received as a result of inac-
curate wage index information unintentionally submitted in their 1997 
Medicare cost report. 
'	  FloridaFlorida Medical Quality Assurance, Inc., (FMQAI) and its 
parent company, Alabama Quality Assurance Foundation (AQAF), agreed 
to pay $839,000 to resolve their civil and administrative liability for the 
submis-sion of false Medicare claims between 1996 and 1998. While 
performing work in Florida under both Medicare and Medicaid contracts, 
FMQAI sought reimbursement from CMS under the Medicare contract for 
time and expenses actually expended for the Medicaid contract. After 
learning of the misallocations, FMQAI and AQAF self-disclosed the 
matter to OIG and instituted a compliance program. 
FEDERAL AND STATE PARTNERSHIP: 
JOINT AUDITS OF MEDICAID 
One of OIGs major initiatives has been to work more closely with state 
auditors in reviewing the Medicaid program.  The Partnership Plan was developed 
to foster these joint reviews and provide broader coverage of the Medicaid pro-
gram.  The partnership approach has been an overwhelming success in ensuring 
more effective use of scarce audit resources by both the federal and the state audit 
sectors. To date, partnerships have been developed in 25 states.  Reports issued 
to date have resulted in identifying over $254 million in federal and state savings 
and have led to joint recommendations for savings at the federal and state levels, 
as well as improvements in internal controls and computer system operations. 
This joint review, covering the 4-year period ended 
New York 
December 31, 2000, identified over 7,800 school and 
preschool claims totaling $3.4 million in which school 
districts and counties billed for services that might have 
duplicated claims by Article 28 facilities (such as hospitals and public 
health centers). School officials confirmed that approximately $1.2 million 
in claims were duplicated and said that these billings occurred because of 
school district billing errors.  Inadequate payment system controls also 
contributed to the problem.  The state agreed with the recommendations 
for financial adjustments and procedural corrections.  (A-02-02-01006) 
A second audit found that the state had not maximized Medicaid drug 
rebate program revenues owed to Medicaid, had not properly tracked or 
pursued rebate revenues, and had essentially relied on drug manufacturers 
to remit the rebates they owed.  As a result, approximately $14 million to 
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  Centers for Medicare and Medicaid Services 
$20 million that should have been recouped during the audit period was 
not.  The report also concluded that the accounting system used for the 
drug rebate program had serious limitations. Again, the state agreed with 
the recommendations for financial adjustments and procedural improve-
ments. (A-02-02-01009) 
The objective of this partnership review was to develop 
Illinois 
and validate a method for identifying practitioners who 
submitted claims for more time than is feasible in a 
single day. The time-dependent billing routine identified physicians who 
billed for one or more 12-hour days during a 2-year period.  Two alternate 
payees billed for physician psychotherapy services, which were not pro-
vided by the physicians and thus not reimbursable by Medicaid. The 
report recommended the state recover unallowable payments to these 
payees totaling almost $7.6 million (federal share: $3.8 million). The 
state concurred with the findings and recommendation. (A-05-01-00068) 
OIG ADMINISTRATIVE SANCTIONS 
During this reporting period, OIG administered 2,212 sanctions, in the 
form of program exclusions or civil actions, on individuals and entities for alleged 
fraud or abuse or other activities that posed a risk to federal health care programs 
and/or their beneficiaries.  These sanction authorities can be found in Appendix F. 
Program Exclusions 
During this reporting period, OIG excluded 2, 082 individuals and entities 
from participating in the Medicare and Medicaid programs, or other federally 
sponsored health care programs, most as a result of convictions for crimes relating 
to Medicare or Medicare, for patient abuse or neglect, or as a result of licensure 
revocation. These included the following: 
'	  IllinoisA former hospital vice president and a physician were excluded 
for a minimum period of 25 years for their parts in an elaborate scheme to 
defraud Medicare, Medicaid and private health care programs. The scheme 
involved the unnecessary hospitalization of hundreds of patients, the 
payment of kickbacks, and the filing of false claims and fraudulent cost 
reports.  Both were ordered to pay $5 million in restitution and sentenced 
to lengthy periods of incarceration. 
'	  IndianaA podiatrist was excluded for a minimum period of 25 years, 
sentenced to 60 months incarceration and ordered to pay $2.7 million in 
restitution for defrauding the Medicare, Medicaid and TRICARE 
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programs through a scheme that lasted from 1993 until 1997. A repeat 
offender, the podiatrist was also excluded during the period of 1994 
through 1996 for defaulting on his health education assistance loan. 
'	  WisconsinThe former owner of a transportation company that provided 
specialized services to Medicaid beneficiaries was excluded for 25 years, 
sentenced to over 3 years incarceration and ordered to pay more than $1.6 
million in restitution.  Through his company, the owner improperly billed 
for multiple round trips on a daily basis and for services provided to 
hospitalized, dead, or relocated beneficiaries. 
'	  CaliforniaA medical supply owner/operator was excluded for 15 years 
after she was convicted of health care fraud and aiding and abetting.  As a 
result of her scheme, committed over a period of two and a half years, the 
subject was ordered to pay approximately $894,000 in restitution. 
A family physician was excluded for 10 years after he was convicted of 
sexual battery and sexual exploitation of his patients. This conviction also 
resulted in the revocation of his physician and surgeons license. 
'	  MissouriThe chief financial officer of a managed care organization was 
excluded for 20 years based on his conviction for carrying out a scheme to 
obtain money by false pretenses from a health care program.  He created a 
fictitious company, then submitted false invoices to his employer for pay-
ment. He was ordered to pay approximately $729,000 in restitution and 
sentenced to 6 years in jail. 
Civil Monetary Penalties Law 
The Civil Monetary Penalties Law (CMPL) authorizes OIG to impose 
administrative penalties and assessments against a person who submits claims to 
a federal health care program that the person knows or should know is false or 
fraudulent. Civil monetary penalties and assessments may also be levied for other 
conduct proscribed by statute.  During this reporting period, OIG collected 
$604,500 in civil monetary penalties and assessments under the CMPL and other 
authorities, including the CMPL provision for patient dumping, discussed below, 
and the CMPL provision for kickbacks, discussed further in the Criminal and 
Civil Enforcement section. 
Civil Penalties for Patient Dumping 
Between April 1, 2002, and September 30, 2002, OIG collected civil 
monetary penalties of approximately $501,000 from 22 hospitals and physicians 
under the Emergency Medical Treatment and Labor Act, a statute designed to 
ensure patient access to appropriate emergency medical services. The following 
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are examples of the alleged violations involved in the patient anti-dumping statute 
settlements from this reporting period: 
'	  NevadaLake Mead Medical Center paid $64,000 to resolve allegations 
that four patients did not receive appropriate medical screening examin-
ations. In one incident, a 10-month-old infant was denied examination 
and treatment because he did not have insurance and his parents could not 
afford the deposit requested by the hospital. 
'	  ArizonaEl Dorado Hospital paid $34,000 to resolve allegations that it 
failed to provide an appropriate medical screening examination and proper 
stabilizing treatment to an individual who was brought to the emergency 
room with severe symptoms.  Without obtaining a definitive diagnosis, the 
hospital discharged the patient, who was rushed the next morning to 
another hospital where he died. 
Kingman Regional Medical Center agreed to pay $35,000 to resolve 
allegations that it did not properly screen, treat or transfer six patients. 
'	  FloridaUniversity Hospital and Medical Center agreed to pay $20,000 
to resolve allegations that it had failed to appropriately screen or stabilize 
a woman involved in a motor vehicle accident. The patient had sustained 
damage to her liver during the accident, but was transferred to another 
hospital after only seven minutes of assessment. 
Florida Medical Center agreed to pay $35,000 to resolve allegations that, 
based on its failure to accept the patients insurance, it refused to provide 
an appropriate medical screening examination to an individual who pre-
ented to its emergency department. 
Criminal and Civil Enforcement 
One of the most common types of fraud perpetrated against Medicare, 
Medicaid and other federal health care programs involves the filing of false 
claims or statements. Such false claims may be pursued under the civil False 
Claims Act and, in appropriate cases, may also be prosecuted under federal and 
state criminal statutes. Enforcement authorities can be found in Appendix F.  The 
successful resolution of these matters often reflects the combined investigative 
efforts and resources of OIG, the FBI and other law enforcement agencies. 
One of OIGs responsibilities is to assist the Department of Justice (DOJ) 
in bringing (and settling) cases under the civil False Claims Act. Many providers 
elect to settle their cases prior to litigation. As part of the resolution of these cases, 
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providers often agree to put in place compliance measures to avoid exclusions and 
to continue to participate in the Medicare program.  The integrity programs estab-
lished by these agreements are designed to prevent a recurrence of the fraudulent 
activities that gave rise to the case at issue. 
In the six months ending September 30, 2002, the government recouped 
more than $369 million through False Claims Act civil settlements related to the 
Medicare and Medicaid programs. Some of these successful settlements, as well 
as notable criminal enforcement actions, are described below.  Summaries are 
organized by sector of the health care industry involved or by the nature of the 
offense. 
Mental Health Services 
'	  California The State of California and the County of Los Angeles 
(County) agreed to pay $73.3 million to resolve their civil liability under 
the False Claims Act and Civil Monetary Penalties Law for submitting 
claims for services provided to minors who were not Medicaid eligible. 
In addition, the County allegedly sought and received assistance from the 
state in avoiding a state audit of the overpayments and in concealing their 
obligation to return these funds. 
'	  PennsylvaniaNorthwestern Human Services, Inc., (NHS), a provider of 
mental health services, agreed to pay $7.8 million and to enter into a 5-year 
corporate integrity agreement to resolve its civil liability for submitting 
false claims.  From 1995 through 1999, NHS allegedly engaged in a 
pattern of fraudulent billing for partial hospitalization program services 
that were not rendered, not medically necessary, or not covered by the 
rules governing reimbursement for such services. 
'	  New YorkA psychologist was sentenced to 6 months incarceration and 
ordered to pay $300,000 in restitution and a $30,000 fine for health care 
fraud. Advising patients that he needed to speak with families in order to 
enhance therapy, he then obtained and used family members names and 
insurance information to bill Medicare and private insurance companies 
for services not performed. 
Hospitals 
'	  Through separate settlement agreements, Tenet Healthcare Corporation 
(Tenet) agreed to pay a total of $55.8 million to resolve its liability under 
the False Claims Act and the Civil Monetary Penalties Law. The combined 
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  Centers for Medicare and Medicaid Services 
amount includes a $9.8 million settlement with Brotman Medical Center, a 
Tenet subsidiary that allegedly submitted false claims for rehabilitation 
services; a $29 million settlement with Palmetto General Hospital, a facility 
that allegedly inflated billings; and a $17 million settlement reached on 
behalf of 139 hospitals, currently or formerly operated by Tenet, for alleged 
improper billing of hospital outpatient laboratory services to federal health 
care programs. 
'	  Medical College of Wisconsin (MCW) agreed to pay $8.9 million for 
allegedly submitting false claims to Medicare over a 6-year period. Audit 
results indicated that MCW did not have sufficient evidence to show that 
teaching physicians were personally and identifiably involved in the per-
formance of services rendered by interns or residents and claims were not 
in compliance with Medicare rules governing coding and reimbursement 
of physician services. 
'	  In California, Catholic Healthcare West (CHW) and several of its 
subsidiaries entered into a settlement agreement and a 5-year corporate 
integrity agreement to resolve their civil liability for allegedly submitting 
false Medicare cost reports. As part of the settlement, CHW agreed to 
pay $8.5 million to settle allegations raised in a qui tam complaint. 
'	  Howard University (Howard) agreed to pay $1.8 million for allegedly 
submitting inappropriate Medicare Part B billings by teaching physicians 
over nearly 2 years. Howard submitted claims without adequate documen-
tation demonstrating that the services were personally and identifiably 
provided by faculty physicians and submitted claims that were not in com-
pliance with the rules governing coding for evaluation and management 
services. As part of the settlement, Howard agreed to enter into a 5-year 
institutional compliance agreement, which incorporates many elements of 
its existing compliance plan. 
'	  University Medical Center of Southern Nevada (UMC) agreed to pay 
$1.2 million to resolve its potential liability for improper upcoding of 
Medicare claims for inpatient treatment of pneumonia between 1992 and 
1997. As part of the settlement, UMC also agreed to enter into a 3-year 
corporate integrity agreement. 
Nursing Homes 
'	  A North Carolina physician and three physician assistants were ordered 
to pay $200,000 in joint restitution, to serve time in prison and to pay 
individual fines for their roles in a Medicare fraud scheme.  As principal 
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owners of a company that provided medical services to nursing home 
residents, the four knowingly and systematically submitted claims for 
services that were either not rendered or were not billable to Medicare. 
Among the services improperly billed were nursing home visits to deceased 
Medicare beneficiaries, telephone orders given to staff nurses in nursing 
homes, the review and signing of rehabilitation certifications and care 
plans prepared by nursing home staff, and the review and signing of 
consultant pharmacy reviews prepared by the nursing home consultant 
pharmacist. 
'	  In Delaware, the director of operations for a rehabilitation company was 
ordered to pay $52,000 in restitution for conspiracy to commit wire fraud. 
He conspired with the companys president to alter therapy treatment logs 
for Medicare patients in skilled nursing facilities served by his company. 
The two increased the total number of therapy units provided to patients, 
then submitted inflated invoices for reimbursement. 
Prescription Drugs 
'	  FloridaEckerd Corporation agreed to pay the government $5.9 million 
and to enter into a 5-year corporate integrity agreement to resolve the cor-
porations liability for submitting claims for partially filled prescriptions. 
A qui tam alleged that between 1986 and 2000, the chain pharmacy sub-
mitted false claims each time it dispensed only a portion of a prescription 
to beneficiaries, but billed Medicaid, TRICARE and the Federal Employee 
Health Benefits Program for the full amount of the prescription. 
'	  MaineThe twenty-first person was sentenced for his role in leading a 
large-scale OxyContin distribution ring. The man was sentenced to 21 years 
and 10 months in prison and ordered to pay $6,000 in restitution for health 
care fraud, conspiracy to acquire controlled substances by fraud, and con-
spiracy to distribute and possess with intent to distribute controlled sub-
stances. In a related federal case, he was also sentenced to life in prison 
after being found guilty in a separate jury trial of distribution of a con-
trolled substance resulting in death. 
'	  OhioFour individuals were sentenced for participating in a complex 
conspiracy to acquire and distribute OxyContin and other prescription 
drugs. Part of a larger drug trafficking conspiracy, the four misused the 
Medicaid program to fund the majority of prescription drugs involved in 
the scheme.  Among their respective sentences, one Medicaid beneficiary 
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  Centers for Medicare and Medicaid Services 
was sentenced to 12 years in prison and fined $15,000 for aggravated 
trafficking of drugs within the vicinity of a school; another beneficiarywas 
sentenced to over 13 years imprisonment and fined $17,500 for aggravated 
trafficking in drugs and marijuana. 
'	  PennsylvaniaA couple was sentenced to respective terms of 6 months 
and 3 months incarceration and ordered to pay joint restitution of $39,000 
for conspiracy to submit false statements in connection with health care 
matters. From 1998 through 2001, the couple improperly received reim-
bursement for false claims they submitted for prescription medicines. 
'	  MichiganA podiatrist was sentenced to one year and a day confinement 
and ordered to pay $10,000 in fines and $11,000 in restitution for unlawful 
distribution of a controlled substance and health care fraud. The podiatrist 
prescribed Vicodin, a controlled substance, to patients without a preliminary 
examination and for no apparent medicinal purpose. 
'	  New HampshireA man was sentenced to 46 months imprisonment and 
ordered to pay $3,000 in restitution for conspiracy to take and taking Oxy-
Contin through force, violence or intimidation. Over the course of two 
months, the man and his girlfriend robbed three pharmacies and solicited 
prescriptions from several doctors to acquire OxyContin. 
Durable Medical Equipment Suppliers 
'	  MinnesotaMedi Mart, Inc., (Medi Mart) and its affiliated organizations 
agreed to pay the government $6.1 million to resolve their civil liability 
under the qui tam provisions of the False Claims Act for allegedly sub-
mitting false claims to Medicare.  Medi Mart is a durable medical equip 
ment (DME) supplier that furnishes health care supplies directly to nursing 
facility residents and bills on assignment directly to the Medicare program. 
The government alleged that from January 1995 through December 1997, 
Medi Mart routinely and impermissibly waived Medicare copayments. As 
part of the settlement, Medi Mart, through its parent corporation, McKesson 
Red Line HealthCare Corporation, agreed to enter into a 5-year corporate 
integrity agreement with OIG. 
'	  North CarolinaA DME company owner was sentenced to 13 months in 
prison and ordered to pay $200,000 in restitution for mail fraud. From 
January 1999 through April 2000, the owner billed Medicare for power 
motorized wheelchairs when he actually provided beneficiaries with less 
expensive scooters. 
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  Centers for Medicare and Medicaid Services 
Home Health 
'	  LouisianaTwo owners of a home health agency were sentenced to 
7 years incarceration and ordered to pay $7.3 million in restitution for 
conspiracy to embezzle and steal from employee pension plans, health 
care fraud and bankruptcy fraud.  In addition, five related corporations 
were sentenced and held jointly liable for the restitution ordered. The 
owners billed Medicare for unallowable and personal expenses. 
'	  ColoradoA woman was ordered to pay $7,000 in restitution for her role 
in a conspiracy to defraud Medicare. As co-owners of a home health 
agency, the woman and a second individual claimed improper expenses on 
their Medicare cost report, including those related to private business and 
personal expenses. 
Laboratories 
'	  FloridaFour individuals were sentenced to an average length of 
imprisonment of 11 years and ordered jointly to pay a total of $11.7 
million in restitution for conspiracy, fraud and money laundering. The 
four conspired to defraud Medicare and Medicaid by submitting false 
claims for laboratory tests. To carry out their scheme, the group used 
confidential Medicare and Medicaid information to prepare laboratory test 
requisitions for tests not actually performed. Using the requisitions to 
support the corresponding Medicare and Medicaid claims, the four 
fraudulently obtained payments from the programs. 
Gambro Healthcare Laboratory Services, Inc., (Gambro) agreed to pay 
the government $3 million to resolve its liability for submitting improper 
Medicare claims for clinical laboratory testing services provided to end 
stage renal disease patients. Based on a qui tam complaint, the govern-
ment alleged that Gambro billed Medicare for laboratory tests that either 
were not performed, were not ordered by a physician, exceeded the 
frequency prescribed by the ordering physician, or were not medically 
necessary. As part of the settlement, Gambro also agreed to amend a 
corporate integrity agreement already in effect with OIG. 
A lab owner who submitted Medicare claims for unnecessary or unrendered 
services was sentenced to 57 months incarceration for conspiracy to sub-
mit false claims and tax evasion and to 36 months incarceration for intro-
duction of misbranded medical devices. Both terms are to be served 
concurrently with an ongoing term the owner received for trafficking in 
controlled substances. He was also ordered to pay $1.5 million in 
restitution. 
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  Centers for Medicare and Medicaid Services 
'	  MissouriAs the result of a multi-state Medicare fraud investigation, two 
men were sentenced to periods of 23 months and 29 months incarceration, 
respectively. Both men were ordered to pay fines totaling $100,000 and 
restitution of $2 million jointly. The two set up laboratories in seven 
states to test blood samples from Medicare beneficiaries in Florida and 
Puerto Rico. From 1994 to 2000, they caused duplicate claims to be 
submitted. 
Ambulance Suppliers 
'	  American Medical Response, Inc., (AMR), the nations largest ambulance 
provider, agreed to pay $20 million to resolve its civil and administrative 
liability for submitting false claims to Medicare. The qui tam action in-
volved allegations that from 1993 through 1998, AMRs Massachusetts 
subsidiary billed for medically unnecessary services, falsified certificates 
of medical necessity and engaged in other improper billing practices. As 
part of the settlement, AMR entered into a 3-year corporate integrity 
agreement with OIG. 
'	  IllinoisAs part of a joint effort, OIG, the FBI and United States 
Attorneys Office for the Northern District of Illinois entered a consent 
judgment by which Royal Transportation Medi-Car, Inc., (Royal) and its 
owner agreed to pay the government and the State of Illinois $468,000. 
From January 1998 through December 1999, Royal and its owner 
allegedly submitted, or caused to be submitted, improper claims for 
transportation services and billed excessive mileage for these services. 
The Illinois collaboration also secured an order of default judgment totaling 
$443,000 against DNB Transportation (DNB) and its owner. An audit 
conducted by the Illinois Department of Public Aid showed that from June 
1997 through October 1998, DNB allegedly billed Medicaid for attendant 
services when the patients did not require such assistance; used improper 
procedure codes when billing Medicaid; and transported ambulatory 
Medicaid clients. 
Contractors 
'	  MissouriGeneral American Life Insurance Company, Inc., (General 
American), agreed to pay $76 million to settle allegations of misconduct 
from 1988 through 1998 while acting as the Medicare Part B carrier. 
General American allegedly failed to process claims properly, then sub-
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  Centers for Medicare and Medicaid Services 
mitted false information to CMS regarding the accuracy and the timeliness 
with which it handled those claims.  The company also allegedly breached 
its contractual obligations by failing to report errors identified in the quality 
assurance process; concealing its true error rate by deleting claims selected 
for review by CMS; and replacing deleted claim files with files which 
would not significantly affect their error rate and, ultimately, their standing 
within carrier performance rankings. Additionally, General American 
allegedly hid documents, altered other documents and falsified numerous 
reports mandated by CMS. The OIG did not require a corporate integrity 
agreement because General American has ceased to be a Medicare carrier. 
'	  MontanaThe former controller for a Medicare contractor was sentenced 
to 20 months in prison and ordered to pay $235,000 in restitution for theft 
or embezzlement in connection with health care and tax evasion. Without 
authorization, the controller caused Medicare funds to be transferred to a 
specialized equipment leasing company for the purpose of securing an 
office equipment leasing agreement. 
Practitioners 
'	  An Indiana man was sentenced to 21 months in prison and ordered to pay 
$1.9 million in restitution to persons who suffered injury as a result of his 
role in a conspiracy to defraud insurance carriers and cancer patients. The 
man worked as the business manager for a practitioner and operator of a 
medical center; the two aggressively marketed treatments not approved by 
FDA to terminally ill cancer patients.  The man billed these treatments as 
if the patients received chemotherapy; he also created and submitted false 
documents to insurance companies to support the billings. 
'	  Medical Center Emergency Services, P.C. (MCES) agreed to pay the 
government $1.6 million to resolve qui tam allegations that it employed 
a billing agency that submitted upcoded claims for emergency room 
services to Medicare, Medicaid, TRICARE and the Federal Employee 
Health Benefits Program on MCES behalf. The government further 
alleged that the billing agency routinely upcoded emergency services to 
an unwarranted Level IV service, which requires a detailed examination 
and history and medical decision making of moderate complexity. As part 
of the settlement, MCES agreed to enter into a 5-year corporate integrity 
agreement. 
'	  A New York physician was sentenced to 37 months imprisonment and 
ordered to pay $1.3 million in restitution for health care fraud.  A licensed 
cardiologist, internist and certified acupuncturist, the physician billed for 
24
  Centers for Medicare and Medicaid Services 
nerve block injections when he actually performed acupuncture, a service 
not covered by Medicare or most insurance companies. 
Also in New York, a nephrologist and his wife were sentenced for health 
care fraud and ordered to pay fines of $20,000 and $10,000, respectively. 
Prior to sentencing, the couple also paid restitution of $88,000 each.  From 
1995 through 1998, the couple billed for multiple dialysis evaluations 
when the nephrologist actually only performed single dialysis evaluations. 
Kickbacks 
Individuals and entities that engage in unlawful referral or kickback schemes 
may be subject to criminal penalties under the federal criminal anti-kickback 
statute, civil monetary penalties under OIGs CMPL authority, and/or program 
exclusion under OIGs permissive exclusion authority. Additional statutory 
information can be found in Appendix F. The following are examples of kick-
back enforcement actions during this time period: 
'	  OhioA former CEO and owner of a mental health facility was sentenced 
in connection with his company paying kickbacks to several referral sources. 
The owner was sentenced to one year in prison and ordered to pay $600,000 
in restitution jointly with two other co-defendants. In addition one of the 
referral sources was ordered to pay $12,000 in restitution for his role in 
the conspiracy.  From 1995 through August 1998, the owner and his code-
fendants conspired to violate the anti-kickback statute by paying kick-
backs to various sources to induce them to send out-of-state Medicare 
patients to the facility for treatment and by paying for the transportation of 
Medicare patients to the facility. 
'	  FloridaThe following cases arise from OIGs ongoing investigation of 
kickbacks paid by a Florida clinical laboratory.  To date, OIG has re-
covered approximately $450,000 in civil penalties and damages from 
seven settlements. 
A physician agreed to pay $63,000 to settle his liability under the 
kickback provisions of the CMPL. The physician received kickbacks, 
disguised as monthly payments for space and medical equipment rental, 
from a clinical laboratory in return for his referral of Medicare 
beneficiaries. 
The owner and operator of a Florida mobile diagnostic and respiratory 
care company agreed to pay $25,000 to settle his liability under the 
CMPLs kickback provisions. This provider paid kickbacks disguised as 
space rental payments to several physicians for their referrals. 
25
  Centers for Medicare and Medicaid Services 
MEDICAID FRAUD CONTROL UNITS 
At present, 47 states and the District of Columbia have established 
Medicaid Fraud Control Units (MFCUs) that investigate and prosecute providers 
charged with defrauding the Medicaid program or persons charged with patient 
abuse and neglect. Three statesIdaho, Nebraska and North Dakotahave 
sought and received waivers from the requirement that all states operate MFCUs. 
The OIG annually certifies each MFCU as eligible to receive federal grant funds. 
During FY 2002, OIG provided oversight for and administration of approximately 
$116.9 million in funds to the units. 
'	  MaineAs a result of a joint investigation by OIG, the Maine MFCU and 
the FBI, McGoverns Ambulance Service, Inc., and its owner agreed to 
pay $300,000 to resolve their liability for submitting fraudulent claims to 
Medicare and Medicaid. The allegations included billing transports for 
nonmedical purposes, billing for services not rendered, billing for more 
mileage than was actually traveled and upcoding.  In addition, the defen-
dants were sentenced for health care fraud and other charges and ordered 
to pay $730,000 in restitution.  The company owner also was sentenced to 
over 4 years in jail. 
'	  MarylandAs the result of a joint investigation by OIG and the Maryland 
MFCU, a registered nurse and owner of a dialysis clinic was sentenced 
to 5 years in jail, with all but 18 months suspended, and ordered to pay 
$100,000 in restitution for Medicaid fraud and reckless endangerment. 
His clinic was fined $300,000 for Medicaid fraud. From February 1999 
through August 2001, the nurse failed to administer epogen, a synthetic 
hormone typically administered during dialysis, and falsified epogen 
administration flow sheets. 
'	  WashingtonAs the result of a joint effort among OIG, the Washington 
MFCU and local law enforcement, a certified nursing assistant was 
sentenced after being convicted of a criminal assault violation.  While 
employed by a nursing agency, the assistant assaulted a nursing home 
patient. 
26
  Public Health Agencies 
The activities conducted and supported by HHS public health 
agencies represent this countrys primary defense against acute and 
chronic diseases and disabilities. These programs  provide the foundation 
for the nations efforts in promoting and enhancing the continued good 
health of the American people. These divisions within the departme nt 
include the following: 
National Institutes of Health (NIH) 
Food and Drug Administration (FDA) 
Centers for Disease Control and Prevention (CDC) 
Health Resources and Services Administration (HRSA) 
Indian Health Service (IHS) 
Agency for Toxic Substances and Disease Registry (ATSDR) 
Agency for Healthcare Research and Quality (AHRQ) 
Substance Abuse and Mental Health Services Administration (SAMHSA) 
The OIG continues to examine policies and procedures throughout 
these agencies to determine whether proper controls are in place to guard 
against fraud, waste, and abuse.  These activities include pre-award and 
recipient capability audits. This oversight work has provided valuable 
recommendations to program managers for strengthening the integrity of 
agency policies and procedures. 
27
  Public Health Agencies 
BIOTERRORISM PREPAREDNESS 
The OIG has continued its initiative to assess the security of a number of 
departmental assets against terrorist threats and the readiness and capacity of 
responders at all government levels to protect the public health in case of a bio-
terrorist attack. Included in this initiative are reviews of the activities and programs 
of several departmental operating divisions, including CDC, NIH, and FDA. 
Using Department of Justice standards for physical security and additional criteria 
specifically focused on laboratory security, OIG reviewed the security measures 
in place at a number of the departments laboratories and at certain external labora-
tories that receive departmental funds. These efforts focused on laboratories that 
work with select agents because these substances could potentially be used in a 
bioterrorist attack. Further, OIG is assessing efforts by state and local health 
departments to detect and respond to bioterrorism and by CDC to rapidly deploy 
the National Pharmaceutical Stockpile.  The OIG is also evaluating the integrity 
of CDCs vaccine procurement program and CDCs regulatory oversight of 
facilities that transfer and receive select agents. (Various CINs) 
RYAN WHITE CLAIMS 
At HRSAs request, OIG assessed oversight and administration of Ryan 
White Care Act funds by Indiana and its terminated subgrantee. The OIG identified 
unallowable, unallocable, unapproved, and inadequately supported claims for the 
3-year period ended March 31, 2001.  Increased oversight and involvement by the 
state agency could have prevented or alleviated many of the conditions disclosed 
during the audit. The OIG set aside $5.3 million in inadequately supported costs 
for HRSAs adjudication; recommended that the state refund more than $784,000 
in unallowable, unallocable, and unapproved costs; and recommended timelier 
audits and increased oversight of other subgrantees. State officials partially 
agreed. (A-05-01-00073) 
CLINICAL TRIAL WEB SITES     
In assessing the use of clinical trial web sites in fostering informed consent 
and the role of institutional review boards in overseeing the information on these 
web sites, OIG found that these sites are emerging as an important recruitment 
  Performance measure. Details can be found in Appendix H. 
28
  Public Health Agencies 
strategy and show promise as a means of fostering informed consent. These web 
sites, however, sometimes provide inaccurate information about the clinical trial 
process, exclude key information in trial listings, and fail to disclose policies that 
address the use of personal information collected by the web site. 
Based on these findings, OIG recommended that FDA and the Office for 
Human Research 
Projects jointly pro-
vide guidance to 
Most Internet sites reviewed provided valuable 
institutional review 
general & trial-specific 
boards regarding 
information about clinical trials. 
their responsibility 
Of 22 general clinic trial sites reviewed:  for reviewing web 
sites, facilitate the 
o 21 explain the importance of informed consent  adoption and use of 
o 16 describe the role of IRBs in protecting  voluntary standards 
human rights  for clinical trial web 
o 16 explain the overall purpose of clinical trials 
sites, and encourage 
clinical trial web 
Of 110 trial-specific sites reviewed: 
sites to undergo 
periodic review by 
o  90 provide eligibility criteria 
independent bodies. 
o  80 provide a clear statement of the trials 
Currently, FDA is 
purpose 
assessing the legal 
feasibility of re-
quiring attestations 
of good clinical practice compliance from investigators outside the U.S. when
 
their data are submitted to the agency as part of an application.  The FDA is also
 
more broadly reviewing its requirements for the acceptance of foreign data in
 
support of submitted applications.
 
(OEI-01-97-00198)
 
FDA FIREARMS 
At the request of the Presidents Council on Integrity and Efficiency, OIG 
reviewed FDA procedures used to account for firearms issued to authorized 
personnel. The OIG concluded that FDA could account for its firearms and that 
its inventory operations had several features supporting accountability. While 
three FDA offices required the use of firearms, detailed inventory and custody 
records were maintained by a central office responsible for property management. 
(A-15-02-20003) 
29
  Public Health Agencies 
EXCLUSIONS FOR HEALTH EDUCATION 
ASSISTANCE LOAN DEFAULTS 
Through the Health Education Assistance Loan (HEAL) program, HRSA 
guarantees commercial loans to students seeking education in health-related fields 
of study. The students are allowed to defer repayment of these loans until after 
they have graduated and begun to earn an income.  Although the Departments 
Program Support Center (PSC) takes all steps that it can to ensure repayment, 
some loan recipients ignore their indebtedness. 
After PSC has exhausted all efforts to secure repayment of these debts, it 
declares the individual in default.  Thereafter, the Social Security Act permits, 
and in some instances mandates, exclusion from Medicare, Medicaid and all 
federal health care programs for nonpayment of these loans. During this 6-month 
period, 28 individuals and related entities were excluded as a result of PSC 
referral of their cases to OIG. 
Individuals who have been excluded as a result of their default may enter 
into settlement agreements whereby the exclusion is stayed while they pay specified 
amounts each month to satisfy their debt. If they default on these settlement 
agreements, they can then be excluded until their entire debt is repaid, and they 
cannot appeal these exclusions. Some health professionals, upon being notified of 
their exclusion, immediately repay their HEAL debts. 
After being excluded for nonpayment of their HEAL debts, a total of 1,711 
individuals have taken advantage of the opportunity to enter into settlement agree-
ments or completely repay their debts. This figure includes the 116 individuals 
who have entered into such a settlement agreement or completely repaid their 
debts during this reporting period. The amount of money being repaid through 
settlement agreements or through complete repayment totals over $120 million. 
Of that amount, nearly $9.4 million is attributable to this reporting period. In the 
following examples, each individual entered into a settlement agreement to repay 
the amount indicated: 
'  A New Jersey Podiatrist$330,000 
'  A Nevada Dentist$188,000 
'  A Pennsylvania Physician$165,000 
'  A Louisiana Osteopath$163,000 
30
  Public Health Agencies 
MISUSE OF PUBLIC HEALTH GRANT FUNDS 
'	  WashingtonThe comptroller for an organization providing counseling 
services was sentenced to 21 months imprisonment and ordered to pay 
restitution of $116,000 for theft from a federally-funded program.  An 
HHS grantee, the organization provided drug, alcohol and mental health 
counseling to adolescents and their families. Between 1996 and 1998, the 
comptroller engaged in an embezzlement scheme that ultimately caused 
the organization to close in 2001. 
'	  New YorkThe owner/operator of a printing company was ordered to pay 
$3,000 in delinquent taxes for tax fraud.  Through his printing company, 
the man participated in a fraud scheme with the owner/operators of a 
company that received an HHS grant from SAMHSA. The owner of the 
printing company created fictitious invoices that inflated both the price 
and quantity of supplies and printing items received by the grantee from 
various vendors; the grantee then submitted these invoices for reimburse-
ment under the SAMHSA contract. 
FY 2001 FINANCIAL STATEMENT AUDITS    
In support of its audit of the consolidated HHS-wide financial statements 
for FY 2001, OIG audited, through contracts with independent public accounting 
firms, the financial statements of the major operating divisions. Agency officials 
are taking corrective actions on most of the recommendations. 
!	  HRSA:  The accounting firm issued an unqualified opinion on the HRSA 
FY 2001 financial statements and noted no material weaknesses. 
(A-17-01-00005) 
!	  IHS:  The accounting firm issued an unqualified opinion on the IHS 
FY 2001 financial statements and noted two repeat material weaknesses: 
1) the preparation and analysis of financial statements and 2) fund balance 
with Treasury transactions, timing of reconciliation procedures, and 
volume of differences. The IHS is commended for obtaining its first 
unqualified opinion on the consolidated statements of net cost, changes in 
net position, and financing and the combined statement of budgetary 
resources. (A-17-01-00006) 
  Performance measure. Details can be found in Appendix H. 
31
  Public Health Agencies 
!	  SAMHSA:  The accounting firm issued an unqualified opinion on the 
SAMHSA financial statements and noted no material weaknesses. 
(A-17-01-00004) 
32
  Administrations for 
Children and Families 
and on Aging 
The Administration for Children and Families (ACF) provides 
direction and funding for programs designed to promote stability, economic 
security, responsibility, and self-support for the nations families.  Some 
of the major programs include Temporary Assistance for Needy Families 
(TANF), Child Support Enforcement, Foster Care, Family Preservation 
and Support, Head Start, and the Child Care and Development Block 
Grant. 
The OIG reviews those programs serving children and families. 
Reports have focused on ways to increase the efficient use of program 
dollars; to more effectively implement programs; to better coordinate 
programs among the Federal Government, and state and local govern-
ments; and to strengthen states financial management practices. 
The Administration on Aging (AoA) awards grants to states for 
establishment of comprehensive community-based systems that assist the 
elderly in maintaining their independence and in remaining in their homes 
as long as possible. Socially and economically disadvantaged elderly and 
low-income minority elderly are targeted for assistance, including sup-
portive services, nutrition services, education and training, low-cost trans-
portation, and health promotion. The OIG has reported opportunities for 
program improvements to target the neediest for services, expand available 
financial resources, upgrade data collection and reporting, and enhance 
program oversight. 
33
  Administrations for Children and Families and on Aging 
RECRUITING AND RETAINING FOSTER PARENTS    
In two related reports examining states efforts to recruit and retain foster 
parents, OIG found that recruitment methods are not focused on finding foster 
parents who are willing and able to care for the most challenging children. At the 
same time, states are underutilizing foster parents themselves as one of their most 
effective recruitment tools; their network of friends and associates might be more 
ready and able to serve as 
Placement Setting  Children in Placement  foster parents than many 
who are recruited through 
Percent of Foster  Number of 
more general methods. 
Children  Foster Children 
Once recruited, retention 
Foster Family Homes  47  274,100  often becomes difficult. 
(Non-Relative) 
Foster parents experience 
Foster Family Homes  26  151,864  limited case-worker support 
(Relative)  and need more help obtain-
ing services for themselves 
Institutions  10  57,590 
and their foster children. 
They desire greater oppor-
Group Homes  8  46,279 
tunities to voice their con-
Pre-Adoptive Homes  4  22,484 
cerns. Poor public percep-
Trial Home Visits  2.7  15,818  tions of foster care and 
(with own families)  cumbersome requirements 
have a negative impact on 
Runaway and  1.4  7.886 
recruitment, and foster 
Homeless Youth 
Shelters  parents are troubled by 
false allegations of abuse. 
Supervised  .9  4,979 
The OIG also found that 
Independent Living 
states are unable to measure 
Facilities 
the success of their recruit-
Total  100  581,000 
ment and retention efforts. 
The ACF agreed with OIGs 
recommendations including, among other things, diligent recruitment and im-
proved public perception of foster care. (OEI07-00-00600, OEI-07-00-00601) 
PROMOTING SAFE AND STABLE FAMILIES PROGRAM 
A five-state review of the Promoting Safe and Stable Families program found 
that states did not use $66.5 million, or 34 percent, of the $197.7 million 
  Performance measure. Details can be found in Appendix H. 
34
  Administrations for Children and Families and on Aging 
available to them in FYs 1994 through 1999.  The unobligated funds could not be 
used by other states because the program statute did not provide reallotment 
authority; however, during the review, ACF proposed legislation to provide 
reallotment authority which was signed into law in December 2001. The ACF 
generally concurred with OIGs recommendations concerning program monitoring 
and grant fund reallotment. (A-06-02-00011) 
WORKING WITH HARD-TO-EMPLOY TANF RECIPIENTS 
This report examines state strategies for working with hard-to-employ (i.e. 
currently on welfare, for purposes of this report) Temporary Assistance for Needy 
Family (TANF) recipients who have at least one significant barrier to employment. 
Eight barriers, such as substance abuse, mental health issues, and physical disabil-
ities, were considered.  Interviews with state officials indicate that states rely on a 
variety of strategies to identify barriers, build service partnerships with appropriate 
agencies and refer recipients to these partnerships. Although states have struc-
tured their TANF policies to provide additional flexibility for recipients with 
barriers, challenges remain with respect to recipients with multiple barriers and 
tracking and evaluating what works for these populations. 
The OIG recommended that ACF encourage states to create and expand 
innovative programs and to strengthen tracking systems of program success. The 
ACF concurs and will continue in its efforts to assist states in dealing with this 
population. (OEI-02-00-00630) 
REFUNDING AFDC OVERPAYMENTS 
States are required to pursue Aid to Families with Dependent Children 
(AFDC) overpayments made before October 1, 1996, and to make appropriate 
refunds to the Federal Government for the amounts collected. Collections of 
overpayments occurring after that date are to be used to offset Temporary 
Assistance for Needy Families expenditures in the year collected. As part of a 
nationwide initiative, these reviews were conducted to determine whether 11 
states, as well as New York City and San Bernardino County, California, properly 
refunded the federal share of AFDC overpayments. 
The OIG found that, generally, systems were in place to identify and 
collect overpayments. However, while Montana refunded more than necessary, 
the other states did not refund to the government its proportionate share. The OIG 
recommended that a total of $88.8 million be returned to the Federal Government. 
New York, Connecticut, Ohio, Utah, Tennessee, Arkansas, Oklahoma, and New 
35
  Administrations for Children and Families and on Aging 
Mexico agreed to refund $68.1 million collectively. California will address the
 
findings at a later date. Asserting that they acted in good faith, Wisconsin,
 
Missouri, and Iowa disagreed with OIGs findings. 
 
(A-01-01-02509; A-02-01-02000; A-04-01-00009; A-05-01-00101; A-05-02-
 
00031; A-06-02-00028; A-06-02-00029; A-06-02-00030; A-07-02-03012; A-07-
 
02-03014; A-08-02-03003; A-08-02-03004; A-09-01-00103)
 
CHILD SUPPORT ENFORCEMENT 
The OIG has made the detection, investigation and prosecution of absent 
parents who fail to pay court-ordered child support a priority. The OIG continues 
to work with the Office of Child Support Enforcement (OCSE), DOJ, U.S. 
Attorneys Offices, U.S. Marshals Service and other federal, state and local 
partners to develop programmatic and operational procedures to expedite the 
collection of child support and to bring to justice those who willfully disregard 
their obligations. 
Since 1995, OIG has opened 1,881 investigations of child support cases 
nationwide, which have resulted in 607 convictions and court-ordered criminal 
restitution and settlements of over $32.9 million. 
Task Forces 
In 1998, OIG and OCSE initiated Project Save Our Children, a criminal 
child support initiative made up of multiagency, multijurisdictional investigative 
task forces. The task forces are designed to identify, investigate and prosecute 
egregious criminal nonsupport cases both on the federal and state levels through 
the coordination of law enforcement, criminal justice and child support office 
resources.  (A table of the task force regions appears on the next page.) 
Central to the task forces are the screening units located in each task force 
region and staffed by analysts and auditors from OIG and OCSE.  The units re-
ceive child support cases from the states, conduct preinvestigative analyses of these 
cases through the use of databases, and then forward the cases to the investigative 
task force units where they are assigned and investigated. The task force approach 
streamlines the process by which the cases best suited for criminal prosecution are 
identified, investigated and brought to fruition. 
At this point, the task force units have received over 5,113 cases from the 
states. As a result of the work of the task forces, 276 federal arrests have been 
executed and 192 individuals sentenced. The total ordered amount of restitution 
related to federal investigations is over $8.9 million. There have been 314 
36
  Administrations for Children and Families and on Aging 
arrests at the state level and 279 convictions or civil adjudications to date, resulting 
in over $10.8 million in restitution being ordered. 
Task Force  Task Force  Task Force 
Regions  Headquarters  States 
Mid-Atlantic  Baltimore, Maryland  Delaware, District of Columbia, 
Maryland, Pennsylvania, Virginia, 
West Virginia 
Midwest  Columbus, Ohio  Illinois, Indiana, Michigan, 
Minnesota, Ohio, Wisconsin 
Northeast  New York, New York  New Jersey, New York, Puerto Rico 
Southeast  Atlanta, Georgia  Alabama, Florida, Georgia, 
Kentucky, Mississippi, North 
Carolina, South Carolina, Tennessee 
Southwest  Dallas, Texas  Arkansas, Louisiana, New Mexico, 
Oklahoma, Texas 
West Coast  Sacramento, California  Arizona, California, Hawaii, Nevada 
New England  Boston, Massachusetts  Connecticut, Maine, Massachusetts, 
New Hampshire, Rhode Island, 
Vermont 
Great Plains  Topeka, Kansas  Iowa, Kansas, Missouri, Nebraska, 
North Dakota, South Dakota 
Rocky Mountains  Denver, Colorado  Colorado, Montana, Utah, Wyoming 
Pacific North  Olympia, Washington  Alaska, Idaho, Oregon, Washington 
Intensive Child Support Operation 
In a unique enforcement operation, OIG and OCSE organized and led the 
single largest crackdown on child support defaulters since initiating Project Save 
Our Children four years ago.  As the result of this two-day, coordinated sweep by 
OIG, the U.S. Marshals Service, and state and local police, 70 of the nations most 
wanted deadbeat parents were arrested at various locations in 29 states, the 
District of Columbia and Puerto Rico. All those arrested were either under federal 
indictment or the subjects of criminal complaints for willful failure to pay court-
ordered child support. In addition to the 70 arrested, authorities continue to 
actively pursue 32 other defaulters for whom arrest warrants or summonses were 
issued as part of the enforcement action. The 102 defaulters collectively owe 
more than $5 million in child support, and many of them fled across state lines 
and switched jobs multiple times to avoid making payments. Individually, their 
overdue obligations range from $7,500 to $297,000, and all of them are at least a 
37
  Administrations for Children and Families and on Aging 
year late in their payments. The defendants were selected for enforcement action 
because they were among the most egregious offenders out of the cases referred 
by state child support enforcement agencies to federal authorities for investigation 
and prosecution. 
Additional Enforcement 
During this period, OIG investigations of child support cases, nationwide, 
resulted in 78 convictions and court-ordered criminal restitution of over $3.3 
million. Examples of the federal arrests, convictions and sentences resulting from 
OIGs enforcement work, both inside and outside the task force regions, include 
the following: 
'	  MississippiA physician was sentenced to one year incarceration, one 
year supervised release and ordered to pay $170,000 in restitution.  The 
physician, who has worked at several hospitals and clinics in Mississippi, 
has five children who reside with two former wives in Illinois. 
'	  South DakotaA man was sentenced to 18 months confinement and 
ordered to pay $126,000 in restitution and to remain current in his child 
support obligations.  Since the original child support order was filed in 
1989, the man has maintained a variety of employment positions. 
'	  WisconsinA man was sentenced to 21 months imprisonment, 1 year 
supervised release and ordered to pay $85,000 in restitution.  He was also 
ordered to be employed as a condition of his release and to cooperate fully 
with the state child support agency.  The man, who at one time worked in 
law enforcement, failed to pay support for his three children. 
'	  NebraskaA man was sentenced to 6 months home confinement, 5 years 
probation and ordered to pay $74,000 in restitution. He worked as an auto 
repossession broker. 
'	  South CarolinaA man was sentenced to 18 months incarceration, 3 years 
supervised release and ordered to pay $55,000 in restitution for unlawful 
possession of a controlled substance, false statements in an application for 
a passport and failure to pay child support. When initially arrested and 
charged with fraud in connection with identification documents and false 
statements in application and use of passports, investigators with the U.S. 
Department of State found that the man had also failed to pay child 
support for his 11-year-old daughter in Oklahoma. 
'	  OhioA former doctor of osteopathic medicine was sentenced to 
20 months in prison, 2 years supervised release and ordered to pay a 
38
  Administrations for Children and Families and on Aging 
$620 special assessment. After a jury convicted him in April on eight 
counts of failure to pay child support, the man paid full restitution and 
advance child support payments totaling $55,000 to the custodial parent. 
'	  AlaskaA woman was sentenced to 5 years probation and ordered to pay 
$18,000 in restitution. She never made a support payment for her three 
children who reside with their father in Michigan. 
INSURANCE INTERCEPT PROGRAM    (cid:32)
These reviews assessed two innovative programs for intercepting insurance 
claim payments to noncustodial parents with child support debts. The OIG 
estimated that Massachusetts collected $10.6 million from insurance payments to 
noncustodial parents from April 1999 through September 2001, thereby reducing 
outstanding child support by about 22 percent, increasing financial support to 
children by $5.4 million, and recovering $4.4 million in public assistance (federal 
share: $2.2 million). Similar results were achieved in Rhode Island. Average 
collections per case were $3,200 in Massachusetts and $3,400 in Rhode Island. 
Startup and annual operating costs were minimal in both states. The insurance 
intercept program can also help states locate noncustodial parents. 
The OIG recommended that ACF initiate a national program or encourage 
other states to implement a similar program.  The ACF supports implementation 
of a nationwide system to assist in offsetting insurance proceeds for child support 
arrearages. (A-01-02-02501; A-01-01-02508) 
COMMUNITY SERVICES ECONOMIC 
DEVELOPMENT GRANT    (cid:32)
At the departments request, OIG performed a limited-scope review of a 
corporations administration of an Office of Community Services (OCS) economic 
development grant. The review found that the corporation did not meet the grant 
objectives of creating a community-owned restaurant to provide employment to 
30 individuals.  Also, the grant funds, which totaled $250,000, were not used as 
outlined in the OCS-approved grant. 
The OIG recommended that OCS recover the $250,000 and that the 
corporation evaluate its ability to properly control and account for federal funds 
before submitting future HHS grant proposals. Corporation officials generally 
disagreed with the findings and recommendations. (A-04-02-00010) 
  Performance measure. Details can be found in Appendix H. 
39
  Administrations for Children and Families and on Aging 
MISUSE OF ACF GRANT FUNDS 
'	  North CarolinaAn employee of the states Department of Health and 
Human Services was ordered to pay $274,000 in restitution and a $250,000 
criminal fine for obstruction of justice. The employee caused the state to 
submit false claims to the HHS Title IV-E program for expenses incurred 
by an unrelated organization with which she had a personal affiliation. 
The employee also attempted to impede the federal investigation by con-
cealing the fact that she had federal grant funds for foster care and adoptive 
children paid either to herself or the organization. 
'	  LouisianaTwo individuals were jointly ordered to pay $54,000 in 
restitution for false claims.  As owners of three day care facilities, the 
individuals submitted false claims to the Louisiana Department of Social 
Services for Child Care and Development Program services funded 
through an HHS block grant. The facility billed for services provided to 
children who were not actually present at the day care facilities or who 
were present only part time when full-time services were claimed. 
FY 2001 FINANCIAL STATEMENT AUDIT: 
ADMINISTRATION ON AGING   (cid:32)
In support of its audit of the consolidated departmentwide financial 
statements for FY 2001, OIG contracted with an independent accounting firm to 
audit the Administration on Agings financial statements. The accounting firm 
issued an unqualified opinion on the FY 2001 financial statements and noted no 
material weaknesses. (A-17-01-00019) 
  Performance measure. Details can be found in Appendix H. 
40
  General Oversight 
The Office of the Assistant Secretary for Budget, Technology and 
Finance (ASBTF) is responsible for developing and executing the 
Department of Health and Human Services (HHS) budget; ensuring that 
HHS performance measurement and reporting are in compliance with the 
Government Performance and Results Act; establishing and monitoring 
departmental policy for financial management (including debt collection, 
audit resolution, cost policy, and financial reporting); and developing and 
monitoring HHS information technology policy (including IT security). 
The Assistant Secretary is the departments Chief Financial Officer and 
oversees the departments Chief Information Officer. The department also 
has the responsibility, by virtue of the magnitude of its funding, to nego-
tiate the payment rates and methods that many outside entities, such as 
state and local governments, charge for administering HHS and other 
federal programs. 
The Office of the Assistant Secretary for Administration and 
Management (ASAM) is responsible for HHS policies regarding human 
resources, grants, and acquisitions management. This office also oversees 
the Program Support Center, which provides a range of administrative 
services, such as human resources, financial management, and adminis-
trative operations. 
The OIG has oversight responsibility for these activities at the 
departmental level. A related major responsibility flows from Office of 
Management and Budget (OMB) Circular A-133, under which HHS is the 
cognizant agency to audit the majority of federal funds awarded to major 
research schools, state and local government cost allocation plans, and 
separate indirect cost plans of state agencies and local governments. Also, 
OIG oversees the work of nonfederal auditors of federal money at some 
6,700 entities, such as community health centers and Head Start grantees, 
as well as at state and local governments, colleges and universities, and 
other nonprofit organizations. The OIG is also responsible for auditing 
the departments financial statements. 
41
  General Oversight 
RESULTS ACT    
The Government Performance and Results Act (GPRA) of 1993 mandates 
that federal agencies establish strategic planning and prepare annual performance 
plans, beginning with FY 1999. The annual performance plans set measurable 
goals for the years accomplishments, and annual reports compare actual perfor-
mance with those goals. The OIGs work focuses on measures related to mission-
critical issues and areas at high risk of fraud, waste, and abuse and includes assess-
ments of data collection methods and controls over the systems that produce 
performance data. An ongoing objective of OIGs audits, inspections, and investi-
gations is to identify performance results and recommend improvements. 
The OIGs continuing payment error rate reviews at CMS relate directly 
to assessment of CMS-generated financial performance data. The CMS uses 
OIGs annual estimate of the Medicare fee-for-service error rate as a basis for 
setting performance goals and for measuring performance. For FY 2001, OIG 
reported an estimated 6.3 percent error rate. The CMS goal is to reduce this rate 
to 5 percent by 2002. 
In addition, OIG reviewed selected Administration for Children and 
Families (ACF) performance measures in the FY 2000 GPRA report to determine 
the reliability of the performance results reported and to evaluate the process used 
to verify this information. The review covered 12 performance measures for 3 ACF 
programs: Developmental Disabilities, Head Start, and the Low Income Home 
Energy Assistance Program.  In summary, OIG found that: 
!	 Reported results for 11 of the 12 measures agreed with ACF supporting 
documentation; 
!	 Results for the 12th measure were overstated; however, the performance 
target was still met based on corrected results; and 
!	 ACF program staff conducted data verification activities as described in 
the FY 2000 performance report. 
Although OIG does not plan to make specific recommendations based on 
the review, ACF program offices may benefit by establishing policies and pro-
cedures for ensuring that reported results are reliable. These policies could include 
identifying the actions that program staff should take and documenting significant 
differences between targeted and reported results or significant variances from 
year to year for a particular grantee. (A-12-01-00061) 
  Performance measure. Details can be found in Appendix H. 
42
 General Oversight 
FY 2001 FINANCIAL STATEMENT AUDIT: 
PROGRAM SUPPORT CENTER    
In support of its audit of the consolidated HHS-wide financial statements 
for FY 2001, OIG contracted with an independent accounting firm to audit the 
Program Support Centers financial statements. The accounting firm issued an 
unqualified opinion on the centers FY 2001 financial statements and noted no 
material weaknesses. (A-17-01-00007) 
NONFEDERAL AUDITS 
The OMB Circular A-133 establishes audit requirements for state and 
local governments, colleges and universities, and nonprofit organizations receiving 
federal awards. Under this circular, covered entities are required to have an 
annual organization-wide audit which includes all federal money they receive. 
These annual audits are conducted by nonfederal auditors, such as public 
accounting firms and state auditors. As cognizant auditor, OIG reviews the 
quality of these audits and assesses the adequacy of the entitys management of 
federal funds. In the second half of FY 2002, OIGs National External Audit 
Review Center reviewed about 924 reports that covered $1.05 trillion in audited 
costs. Federal dollars covered by these audits totaled $322.2 billion, about $148.5 
billion of which was HHS money. 
The OIGs oversight of nonfederal audit activity not only provides 
department managers with assurances about the management of federal programs 
but also identifies any significant areas of internal control weakness, noncom-
pliance, and questioned costs that require formal resolution by federal officials. 
By taking a proactive stance, OIG identifies entities for high-risk monitoring and 
any trends that could indicate problems in HHS programs. In addition, OIG 
profiles non-federal audit findings of a particular program or activity over time to 
identify systemic problems. As a further enhancement of audit quality, OIG 
provides training and technical assistance to grantees and the auditing profession. 
To rely on the work of nonfederal auditors, OIG maintains a quality 
control review process which assesses the nonfederal reports received and the 
audit work that supports selected reports. The nonfederal audit reports reviewed 
and issued during this reporting period fall into the following categories: 
  Performance measure. Details can be found in Appendix H. 
43
 General Oversight 
Reports issued: 
Without changes or with minor changes  878 
With major changes  29 
With significant inadequacies  17 
Total  924 
The 924 reports included recommendations for HHS program officials 
to take action on cost recoveries totaling $10.5 million, as well as 4,363 recom-
mendations for improving management operations. In addition, these audit reports 
provided information for 84 special memoranda which identified concerns for 
increased monitoring by departmental management. 
RESOLVING RECOMMENDATIONS 
The tables that appear on the following pages are provided in accordance 
with section 5 of the Inspector General Act and indicate the dollar value of 
actions taken on OIG recommendations. 
In Table 1, Dollar Value Questioned costs are those challenged because 
of violation of law, regulation, grant conditions, etc. Dollar Value Unsupported 
costs are those not supported by adequate documentation. Table 2 summarizes 
recommendations that funds be put to better use through cost avoidances, budget 
savings, etc. These costs are separate from the amount ordered or returned as a 
result of OIG investigations. 
44
 General Oversight 
Table 1:  Reports With Questioned Costs 
Reports  Number of  Dollar Value  Dollar Value 
Reports  Questioned  Unsupported 
Section 1 
For which no management 
decision had been made by 
the beginning of the reporting 
period1  474  $1,247,792,000  $175,915,000 
Issued during the reporting 
period  138  $419,040,000  $98,054,000 
Total Section 1  612  $1,666,832,000  $273,969,000 
Section 2 
For which management 
decision was made during 
the reporting period2,3 
Disallowed costs  $177,558,000  $32,251,000 
Costs not disallowed  $38,000,000  $90,000 
Total Section 2  175  $215,558,000  $32,341,000 
Section 3 
For which no management 
decision had been made by 
the end of the reporting period 
Total Section 1 minus 
Total Section 2  437  $1,451,274,000  $241,628,000 
Section 4 
For which no management 
decision was made within 
6 months of issuance4  309  $1,098,343,000  $109,834,000 
45
 General Oversight 
Table 2:  Funds Recommended to Be Put to Better Use 
Reports  Number of  Dollar Value 
Reports 
Section 1 
For which no management decision had 
been made by the beginning of reporting 
period1  48  $8,965,518,000 
Issued during the reporting period  7  $5,825,000 
Total Section 1  55  $8,971,343,000 
Section 2 
For which management decision was 
made during the reporting period 
Value of recommendations that 
were agreed to by management 
Based on proposed 
management action  4  $569,857,000 
Based on proposed 
legislative action  1  $100,000,000 
Value of recommendations that 
were not agreed to by management  0 
Total Section 2  5  $669,857,000 
Section 3 
For which no management decision had 
been made by the end of the reporting 
period2 
Total Section 1 minus 
Total Section 2  50  $8,301,486,000 
46
 General Oversight 
LEGISLATIVE AND REGULATORY 
REVIEW AND DEVELOPMENT 
Review Functions 
Section 4(a) of the Inspector General Act of 1978 requires that the 
Inspector General review existing and proposed legislation and regulations and 
make recommendations in this report concerning the impact on the economy and 
efficiency of the administration of the departments programs and on the prevention 
of fraud and abuse.  In reviewing regulations and legislative proposals, OIG uses 
as the primary basis for its comments the audits, inspections, investigations and 
other activities highlighted in this and previous semiannual reports. 
Development Functions 
The OIG is responsible for the development and public announcement of 
a variety of sanction regulations addressing civil money penalty and program ex-
clusion authorities administered by the Inspector General, as well as advisory 
opinions and safe harbor regulations related to the anti-kickback statute. During 
this reporting period, OIG: 
!	 Published proposed rulemaking to expand the existing safe harbor for 
certain waivers of beneficiary coinsurance and deductible amounts to 
benefit the policyholders of Medicare SELECT supplemental insurance. 
The proposed safe harbor is designed to protect waivers of coinsurance 
and deductible amounts under Part A or Part B of the Medicare program 
owed by beneficiaries covered by a Medicare SELECT policy issued in 
accordance with section 1882(t)(1) of the Social Security Act (the Act), if 
the waiver is in accordance with a price reduction agreement covering 
such policy-holders between the Medicare SELECT issuer and the provider 
or supplier offering the waiver. This proposed rule was published in the 
Federal Register in September (67 FR 60202, September 25, 2002). 
!	 Developed draft proposed rulemaking to revise OIGs authority to propose 
the imposition of civil monetary penalties and assessments, by reorgan-
izing and simplifying existing regulatory text and eliminating obsolete 
references contained in the current regulations.  Among the proposed 
revisions, this rule would establish separate subparts within 42 CFR part 
1003 for various categories of violations; modify the current definition for 
the term claim; update various references to managed care organization 
authorities; and clarify the application of section 1140 of the Act with 
respect to the misuse of certain departmental symbols, emblems or names 
through Internet and e-mail communications. 
47
 General Oversight 
!	 Coordinated regulatory development efforts with the Centers for Disease 
Control and Prevention with regard to implementation of the Public Law 
107-88, the Public Health Security and Bioterrorism Act. Specifically, 
OIGs portion of this interim final rulemaking will amend 42 CFR part 
1003 by addressing new CMPs for violations of section 351A of the 
Public Health Service Act with respect to the control or transfer of listed 
biological agents and toxins. 
Also, during this period, OIG developed and published the following two 
Federal Register notices: 
!	 A draft Compliance Program Guidance (CPG) for Ambulance Suppliers 
(67 FR 39015; June 6, 2002). Through this draft, OIG set forth its general 
views on the value and fundamental principles of ambulance industry 
CPG and the specific elements that ambulance providers and suppliers 
should consider when developing a CPG initiative. 
!	 A solicitation notice seeking information and recommendations for 
revising the CPG for the hospital industry (67 FR 41433; June 18, 2002). 
EMPLOYEE FRAUD AND MISCONDUCT 
Most of the persons employed by HHS are dedicated, honest civil servants. 
Occasionally, however, individuals violate their fiduciary responsibilities. The 
OIG conducts or oversees investigations of serious allegations of wrongdoing by 
department employees, as in the following example: 
'	 Illinois A former CMS employee was sentenced to 4 months 
imprisonment and ordered to pay $39,000 in restitution for wire fraud 
and false claims.  The employee engaged in a scheme to benefit from 
preparing false federal income tax returns. Part of her scheme involved 
filing tax returns for individuals without their knowledge or consent. In 
these instances, she had the refunds mailed to her residence or electron-
ically transferred into bank accounts she fraudulently opened.  The em-
ployee used her government computer to prepare and electronically file 
some of the tax returns. 
INVESTIGATIVE PROSECUTIONS 
During this semiannual reporting period, OIG investigations resulted in 267 
successful criminal actions. Also during this period, 577 cases were presented for 
48  General Oversight 
criminal prosecution to DOJ and, in some instances, to state and local prosecutors. 
Criminal charges were brought by prosecutors against 316 individuals and 
entities. 
In addition to terms of imprisonment and probation imposed in the judicial 
processes, over $709.8 million was ordered or returned as a result of OIG investi-
ations during this reporting period.  Civil settlements from investigations resulting 
from audit findings are included in this figure. 
PROGRAM FRAUD CIVIL REMEDIES ACT 
The Program Fraud Civil Remedies Act (PFCRA), 31 U.S.C.  3801-
3812, authorizes the imposition of civil monetary penalties and assessments 
against anyone who makes a false, fictitious, or fraudulent claim or written 
statement to a federal agency.  It was modeled after the Civil Monetary Penalty 
Law (42 U.S.C. 1320a-7a), which is applicable to false or otherwise improper 
claims presented to Medicare, Medicaid or other federal health care programs. 
Under PFCRA, a person who presents a false, fictitious or fraudulent claim 
to a federal agency may be subject to a civil monetary penalty of up to $5,000 per 
claim or statement, as well as an assessment of up to double the amount of each 
claim falsely made. The OIG is responsible for investigating allegations of false 
claims and statements presented to the department. 
No matters were specifically referred for administrative action solely 
under PFCRA during FY 2002.  While cases are routinely analyzed for potential 
action under PFCRA, at HHS the availability of other criminal, civil and adminis-
trative remedies often renders unnecessary the referral of cases for action solely 
under PFCRA. However, OIG does assert its administrative authority under 
PFCRA as one basis in settlement agreements, in which OIG is a party, that 
resolve cases arising under the False Claims Act and other federal statutes.  In 
addition, as part of these settlements, the defendant is released from liability 
under PFCRA. 
49
 50
 Appendices 
51
 52
 Appendix A

Savings Achieved through Policy and Procedural Changes Resulting from Audits,

Investigations and Inspections 

April 1, 2002, through September 30, 2002

The following schedule highlights savings resulting from Office of Inspector General (OIG) efforts 
to prevent unnecessary obligations for expenditures of agency funds or to improve agency systems and 
operations. These achievements depend greatly on the contributions of others, such as partners within 
the department and elsewhere. The amounts shown represent funds or resources that will be used more 
efficiently as a result of documented measures taken by the Congress or by management in response to 
OIG audits, investigations and inspections, including: actual reductions in unnecessary budget outlays; 
deobligations of funds; reductions in costs incurred or pre-award grant reductions from agency programs 
or operations; and reduction and/or withdrawal of the federal portion of interest subsidy costs on loans or 
loan guarantees, or insurance or bonds. 
Legislative savings are annualized amounts based on Congressional Budget Office (CBO) estimates 
consistent with CBO savings. In keeping with OIG policy, savings from the Medicare provisions of the 
Balanced Budget Act (BBA) of 1997 were adjusted downward to reflect CBO estimates for related pro-
visions of the Balanced Budget Refinement Act (BBRA) of 1999. Administrative savings are calculated 
by OIG using departmental figures, where available, for the year in which the change is effected or for 
multiple years, if applicable. 
Total savings from these sources amount to $7,921 million for this period. 
Savings 
OIG Recommendation  Implementing Action  (millions) 
Centers for Medicare and Medicare Services 
Medicare Home Health Payments:  $4,500 
Restructure the payment system for  Chapter I of Subtitle G of the BBA of 1997 (as amended 
home health care to eliminate inappro- by the Omnibus Consolidated and Emergency Supple-
priate incentives which unnecessarily  mental Appropriations Act of 1998), which pertains to 
increase cost and utilization; prevent  home health benefits, addresses OIGs concerns regarding 
unscrupulous providers from gaining  the need to restructure and control the payment system 
entry into the program; and improve  for these services. For example, it mandates that a pro-
program controls, such as eligibility  spective payment system be developed and that the total 
determinations and approval of plans of  payments in fiscal year (FY) 2000 be equal to the amount 
care and services. (OEI-04-93-00260;  that would have been paid under the prior system if cost 
OEI-09-96-00110; CIN:  limits were reduced by 15 percent. It also eliminates 
A-04-96-02121)  periodic interim payments to home health agencies. 
Medicare Indirect Medical  $1,780 
Education:  Section 4621 of the BBA (as amended by the BBRA of 
The Centers for Medicare and Medicaid  1999) reduced the indirect teaching adjustment factor 
Services (CMS) should base the  from 7.7 percent in FY 1997 to 7.0 percent in FY 1998; 
indirect medical education adjustment  6.5 percent in FY 1999; 6.0 percent in FY 2000; and 
factor on the level supported by CMS  5.5 percent in FY 2001 and thereafter. 
empirical data. 
(CIN: A-07-88-00111) 
53
 Appendix A 
Medicaid Enhanced Payments to  $800 
Local Providers:  On January 18, 2002, CMS issued a final rule that 
The CMS should reconsider capping  modified the Medicaid upper payment limit (UPL) 
the aggregate upper payment limit at  provisions to remove the 150 percent UPL for services 
100 percent for all facilities rather than  furnished by non-state government-owned or operated 
the 150 percent allowance for non- hospitals. The rule became effective on May 15, 2002. 
state-owned government hospitals. 
(CIN: A-03-00-00216) 
Graduate Medical Education  $310 
Payments:  Sections 4623 and 4626 of the BBA provided for limits 
The CMS should reevaluate  in the number of residents counted for purposes of 
Medicares policy of paying graduate  Medicare GME payments and offered payments for 
medical education (GME) costs for  voluntary reductions in the number of residents to limit 
all physician specialities and should  Medicares share of GME costs. 
consider submitting legislation to 
reduce Medicares investment in GME 
to arrive at a more representative and 
accurate sharing of GME costs. 
(CIN: A-06-92-00020) 
Medicare Disproportionate Share:  $210 
The disproportionate share adjustment  Section 4403 of the BBA provided for the reduction of 
should be reduced, if not eliminated,  disproportionate share payments that hospitals would 
without redistribution of the funds to  otherwise receive by 1 percent in FY 1998, 2 percent in 
prospective payment system hospitals.  FY 1999, 3 percent in FY 2000, 4 percent in FY 2001,
(CIN: A-04-87-01004)  5 percent in FY 2002 and 0 percent thereafter. 
Hospice Certification:  $70 
The CMS should restructure hospice  Sections 4441-4449 of the BBA of 1997 contained 
benefit policies to curb inappropriate  provisions to control hospice payments and practices, 
growth in the program, particularly  such as replacing the current unlimited fourth benefit 
with regard to the fourth benefit period.  period with an unlimited number of 60-day benefit 
(OEI-05-95-00250;  periods (each requiring recertification). 
CIN: A-05-96-00023) 
Fraud and Abuse Provisions of the  $60 
Balanced Budget Act:  Subtitle D of the BBA contained a number of provisions 
Require durable medical equipment  that corresponded to and were supported by OIG work. 
(DME) suppliers and home health  For example, the BBA authorized the Secretary to 
agencies (HHAs) to provide Social  collect SSNs and employer identification numbers from 
Security numbers (SSNs) and employee  entities under Medicare, Medicaid and Title V; 
identification numbers (OEI-04-96- authorized the Secretary to refuse to enter into contracts 
00240 & OEI-09-96-00110); refuse to  with physicians or suppliers that have been convicted of 
enter into a provider agreement with  felonies; authorized the exclusion of entities owned or 
any HHA whose owners or principals  controlled by the family or household members of 
have prior criminal records or are the  excluded individuals; authorized CMS to make inherent 
relatives of owners of a provider that  reasonableness adjustments up to 15 percent to all Part 
had defrauded the Medicare program  B services except physician services; authorized up to 
(OEI-09-96-00110); allow CMS to  five demonstration projects to be completed by 
apply inherent reasonableness  December 31, 2002, (one must be oxygen and oxygen 
continued  equipment) which can have multiple sites, 
54
 Appendix A 
Fraud and Abuse Provisions of the 
Balanced Budget Act (continued)  to allow competitive bidding; and prohibited 
provisions when assessing the appro reasonable cost payments for items such as 
priateness of Medicare payments (OEI- entertainment, gifts and donations, education expenses 
03-94-00392); authorize competitive  and personal use of automobiles. The BBA also 
bidding as a means of providing  required DME suppliers, HHAs and others to post 
Medicare services (OEI-03-94-00021;  surety bonds of a minimum of $50,000. 
OEI-06-92-00866; OEI-03- 96-00230); 
and require DME suppliers and HHAs 
to post surety bonds as a condition of 
participation. (OEI-04-96-00240; 
OEI-09-96-00110). Also, clarify which 
general and administrative and fringe 
benefit costs at hospitals and HHAs are 
related to patient care; specifically, 
distinguish between employee benefits 
and/or perquisites to entertainment and 
patient care, and specify that cost of 
entertainment, goods or services for 
personal use, alcohol, all fines and 
penalties and associated interest, dues, 
and membership costs associated with 
civic and community organizations are 
not allowable. (CINs: A-03-92-00017, 
A-04-93-02067) 
Hospital Sales:  $60 
The CMS should eliminate the  Section 4404 of the BBA eliminated the requirement 
requirement that Medicare adjust for  that Medicare make adjustments by setting the Medicare 
gains and losses when hospitals  capital asset sales price equal to the net book value. 
undergo changes of ownership. 
(OEI-03-96-00170) 
Rural Health Clinics:  $50 
The oversight and functioning of the  Section 4205 of the BBA extended the per-visit payment 
current cost reimbursement system  limits to provider-based clinics and stipulated that the 
should be improved by implementing  shortage area requirements designation be reviewed 
caps on provider-based rural health  triennially. 
clinics (RHCs) and allowing states to 
do so, or finding other ways to make 
reimbursement between provider-
based and independent RHCs more 
equitable. In addition, the certification 
process should be modified to increase 
state involvement and ensure more 
strategic placement of RHCs. Recerti-
fication should be required of RHCs 
within a specific time limit (for example 
5 years), applying new criteria to 
document the need and impact on 
access. (OEI-05-94-00040) 
55
 Appendix A 
Medicaid Expenditures for  $35.8 
Supplementation Payments to  The CMS issued a disallowance letter for $125.3 million 
County Nursing Homes:  which includes the $89.5 million in federal matching 
Pennsylvania should: 1) discontinue  funds recommended for refund and an additioanl $35.8 
the practice of overclaiming federal  million overclaimed supplementation payments from 
matching funds by overreporting sup- June 30, 2000 to June 30, 2001. 
plementation payments and 2) refund 
$89.5 million in federal matching funds 
for overclaimed supplementation pay-
ments in state fiscal years 1997 through 
1999. (CIN: A-03-00-00211) 
Payments for Ambulance Services:  $10 
The CMS should seek legislative  Section 4531 of the BBA of 1997 made interim 
authority to develop a fee schedule for  reductions in ambulance payments by limiting the 
ambulance transportation and examine  allowed rate of increase and mandated the establish-
the inherent reasonableness of current  ment of a fee schedule by January 1, 2000. Such fee 
allowable charges. (OEI-05-95-00300)  schedule is to be set so that aggregate payments are 
reduced by 1 percent. 
Administration for Children and Families 
Availability of Health Insurance for  $5.7 
Title IV-D Children:  The BBA of 1997 established Title XXI of the Social 
The OIG recommended that the State  Security Act, known as the State Childrens Health 
of Connecticut either: 1) implement  Insurance Program (SCHIP), to enhance Medicaid 
policies and procedures to require  coverage provided to children and allow states to create 
noncustodial parents (NCPs) to pay  insurance options for families who exceed Medicaid 
all or part of the Medicaid costs for  resource and income limits. Connecticut received CMS 
their dependent children or 2) establish  approval in April 1998 to initiate a child health program. 
a statewide health insurance plan that  Under Connecticut law, applicants include noncustodial 
provides reasonably priced compre- parents under court orders to provide health insurance. 
hensive coverage for children, with 
costs paid by NCPs. 
(CIN: A-01-97-02506) 
Various Operating Divisions 
Results of Investigations:  $29.9 
In addition to any restitution, fines,  The operating division takes action based on the results 
settlements or judgments, or other  of OIG investigation to suspend or terminate payments 
monetary amounts resulting from  to the offending individual or entity. 
successful investigations, additional 
monetary losses are avoided through 
timely communication of the 
investigative results to the operating 
division. 
56
 Appendix B

Unimplemented Office of Inspector General Recommendations 

to Put Funds to Better Use

This schedule represents potential annual savings or one-time recoveries which could be realized 
if Office of Inspector General (OIG) recommendations were enacted by the Congress and the administration 
through legislative or regulatory action, or policy determinations by management. (In many cases, these 
recommendations are beyond the direct authority of the departmental operating division.) It should be 
noted, however, that the Congress normally develops savings over a budget cycle which results in far 
greater dollar impact statements. Savings are based on preliminary OIG estimates and reflect economic 
assumptions which are subject to change. The magnitude of the savings may also increase or decrease as 
some of the proposals could have interactive effects if enacted together. 
More detailed information may be found in OIGs Red Book which can be accessed on the 
Internet at http://oig.hhs.gov. 
Savings 
OIG Recommendation  Status  (millions) 
Centers for Medicare and Medicaid Services 
Medicare Coverage of State and Local  $1,559 
Government Employees:  In responding to OIGs report, CMS agreed 
The CMS should require Medicare coverage and  with the recommendation to mandate 
hospital insurance contributions for all state and  Medicare coverage for all state and local 
local employees, including those hired prior to  government employees. However, this 
April 1, 1986. If this proposal is not enacted, CMS  proposal was not included in the Presidents 
should seek legislation making Medicare the  FY 2003 budget. The CMS did not agree 
secondary payer for retirees of exempt state and  with the recommendation to make Medicare 
local government agencies (CIN: A-09-88-00072)  the secondary payer. 
Excessive Medicare Payments for Prescription  $1,600 
Drugs:  The CMS concurred; they have attempted 
The CMS should examine its Medicare drug  administrative remedies to lower payments 
reimbursement methodologies.  for some drugs using inherent reasonable-
(OEI-03-00-00310; OEI-03-97-00292;  ness, but Congress suspended use of this 
OEI-03-97-00293; OEI-03-97-00390;  authority pending issuance of federal rule-
OEI-03-95-00420; OEI-03-94-00390)  making. In addition, legislation passed on 
December 21, 2002, requires GAO to 
complete a comprehensive drug-pricing 
study before CMS can begin using average 
wholesale pricing as a way to lower prices 
for certain drugs. 
Clinical Laboratory Tests:  $1,130* 
The CMS should develop a methodology and  The CMS initially agreed with the first 
legislative proposal to pay for tests ordered as  recommendation but not the second. The 
custom panels at substantially less than the full  BBA required the Secretary to contract with 
price for individual tests, and study reinstating the  the Institute of Medicine for a study of Part 
beneficiary coinsurance and deductible provisions  B laboratory test payments. The study was 
for laboratory services as a means of controlling  completed in December 2000, and the 
utilization.  report was provided to CMS. 
(CINs: A-09-89-00031; A-09-93-00056) 
*This savings estimate would result from the copayment; the savings estimate for panels has yet to be determined. 
57  Appendix B 
Hospital Capital Costs:  $820 
The CMS should determine the extent that capital  The CMS did not agree with the 
reductions are needed to fully account for hospitals  recommendation. Although the BBA of 
excess bed capacity and report the percentage to the  1997 reduced capital payments, it did not 
Congress.  include the effect of excess bed capacity 
(CINs: A-09-91-00070; A-14-93-00380)  and other elements included in the base-
year historical costs. The Presidents FY 
2001 budget would have reduced capital 
payments and saved $630 million in FY 
2001 through FY 2005. 
Ensure Appropriateness of Medicare Payments  $685 
for Mental Health Services:  The CMS concurred and has initiated some 
The CMS should ensure mental health services are  efforts, particularly regarding community 
medically necessary, reasonable, accurately billed,  mental health centers. 
and ordered by an authorized practitioner by using a 
comprehensive program of targeted medical 
reviews, provider education, improved 
documentation requirements, and increased 
surveillance of mental health services. 
(OEI-02-99-00140, OEI-03-99-00130 CINs: A-04-
98-02145, A-01-99-00507, A-01-99-00530;) 
Payment Policy for Medicare Bad Debts:  $340 
The OIG presented four options for CMS to  In responding to OIGs report, CMS agreed 
consider, including the elimination of a separate  with the recommendation to include a bad 
payment for bad debts, the offset of Medicare bad  debt factor in the DRG rates. The BBA of 
debts against beneficiary Social Security payments,  1997 provided for some reduction of bad 
the limitation of bad debt payments to prospective  debt payments to providers. The Benefits 
payment system hospitals that are profitable, and  Improvement and Protection Act (BIPA) of 
the inclusion of a bad debt factor in the diagnosis- 2000 subsequently increased bad debt 
related group (DRG) rates. The CMS should seek  reimbursement. However, additional 
legislative authority to further modify bad debt  legislative changes are needed to implement 
policies. (CIN: A-14-90-00339)  the modifications that OIG recommended. 
Review Cost Effectiveness of Pay and Chase  $185 
Methods for Medicaid Pharmacy Third-Party  The CMS agreed that states cost-avoidance 
Liability Recoveries:  waivers should be reexamined and is 
The CMS should determine whether states cost- directing the regional offices to reevaluate 
avoidance waivers for pharmacy claims are meeting  the waivers and determine if states are 
the cost-effectiveness criterion. The CMS can  paying and chasing claims without waivers. 
ascertain cost effectiveness by requiring states to  In addition, CMS is working with states that 
track dollars that they pay and chase and the  currently cost-avoid pharmacy claims and is 
amounts that they recover. The CMS should also  developing guidance to assist them in 
review states policies to determine if they are  implementing cost-avoidance. 
paying and chasing pharmacy claims without 
waivers. (OEI-03-00-00030) 
Graduate Medical Education:  $157.3 
The CMS should revise the regulations to remove  The CMS did not concur with the 
from a hospitals allowable graduate medical  recommendations. Although the BBA of 
education (GME) base-year costs any cost center  1997 and the BBRA of 1999 contained 
with little or no Medicare utilization and submit a  provisions to slow the growth in Medicare 
continued  spending on GME, OIG believes that 
58
 Appendix B 
Graduate Medical Education (continued) 
legislative proposal to compute Medicares per- its recommendations should be imple-
centage of participation under the former, more  mented and that further savings can be 
comprehensive system. (CIN: A-06-92-00020)  achieved. 
Review Medicaid Reimbursement Methodology  $140 
for HIV/AIDS Drugs:  The CMS no longer believes the 
The CMS should review the current reimbursement  recommended change is necessary and 
methodology and work with states to more accu- believes that reimbursement changes will 
rately estimate pharmacy acquisition costs for 16  occur through revised AWPs, based on the 
HIV/AIDS drugs examined and initiate a review of  Presidents budget proposal for a legislative 
Medicaid rebates for them. (OEI-05-99-00611)  change that would base the Medicaid drug 
rebate on the difference between AWP and 
the best price for a drug. 
Paperless Claims:  $126 
The CMS should lead a target outreach to  The CMS concurred with OIGs 
encourage voluntary conversion to paperless  recommendations. The administrations 
Medicare claim filing by physicians who submit  proposal for both FY 2002 and 2003 would 
claims on paper and who have a moderate to high  assess a $1.50 fee on most, but not neces-
level of interest in making the switch. This effort  sarily all, paper claims. Also, under the 
should be coordinated with efforts to promote  CMS Claims Processing User Fee Act of 
further use of electronic data interchange by  2001, significant outreach to providers will 
providers under the administrative simplification  be conducted. 
provisions of the Health Insurance Portability and 
Accountability Act of 1996. The CMS should 
begin to plan now for the policy changes that will 
be necessary to achieve an almost completely 
paperless environment for processing Medicare 
claims. These policy changes can include 
targeting a date when all physicians will be 
mandated to submit paperless claims, targeting a 
date when paperless claim submission will become 
a condition for Medicare participation, or 
continuing to accept paper claims, but imposing a 
filing fee to cover the incremental cost of doing so. 
(CIN: A-05-94-00039; OEI-01-94-00230) 
Medicaid Drug Rebate Program:  $123 
The best price calculation in the Medicaid drug  Disagreeing with the recommendation, 
rebate program should be indexed to the consumer  CMS believes that savings will be achieved 
price index-urban. (CIN: A-06-94-00039)  through the Presidents budget proposal to 
enact a legislative change that would base 
the drug rebate on the difference between 
the AWP and the best price for a drug. 
Identify Medical Equipment/Supply Claims  $91 
Lacking Valid, Active UPINs:  The CMS concurred. The agency planned 
The CMS should create edits to identify medical  to implement an edit to reject claims listing 
equipment and supply claims that do not have a  a deceased physicians UPIN beginning in 
valid and active unique physician identification  April 2002 and later expand this to include 
number (UPIN) listed for the ordering physician.  all inactive and invalid UPINs. 
(OEI-03-01-00110) 
59
 Appendix B 
Expansion of the DRG Payment Window:  $83.5 
The CMS should propose legislation to expand the  The CMS did not concur with the 
DRG payment window to at least 7 days  recommendation, and no legislative 
immediately prior to the day of admission.  proposal was included in the Presidents 
(CIN: A-01-92-00521)  FY 2001 budget. 
Inpatient Psychiatric Care Limits:  $47.6 
The CMS should develop new limits to deal with  The CMS agreed with OIGs findings but 
the high cost and changing utilization patterns of  stated that further analysis would be 
inpatient psychiatric services and apply a 60-day  required before any legislative changes 
annual and a 190-day lifetime limit to all  could be supported. 
psychiatric care regardless of the place of service. 
(CIN: A-06-86-62045) 
Nonemergency Advanced Life Support  $47 
Ambulance Services:  The BBA of 1997 required that CMS link 
The CMS should modify its Medicare policy to  payments to services provided and that the 
allow payment for nonemergency advanced life  definitions of basic life support and advanced 
support ambulance service only when that level of  life support ambulance services be subject 
service is medically necessary, instruct carriers to  to negotiated rulemaking. The Negotiated 
institute controls to ensure that payment is based on  Rulemaking Committee Statement on the 
the medical need of the beneficiary, and closely  Medicare Ambulance Services Fee 
monitor carrier compliance.  Schedule was signed in February 2000. 
(CINs: A-01-91-00513; A-01-94-00528)  The CMS published the final rule in the 
Federal Register in February 2002. 
Medicare Orthotics:  $43 
The CMS should take action to improve Medicare  Although CMS concurred with OIGs 
billing for orthotic devices. The CMS should also  original recommendations, problems 
require standards for suppliers of custom-molded  continue. 
and custom-fabricated orthotic devices. 
(OEI-02-95-00380, OEI-02-99-00120, OEI-02-99-
00121) 
Reimbursement for Hospital Beds:  $40 
The CMS should take immediate steps to reduce  The CMS concurred and is considering 
Medicare payments for hospital beds used in the  options to determine the best approach to 
home. This should include the elimination of the  achieve a fair price for hospital beds. The 
higher reimbursement rate currently paid during the  agency is examining payment allowances 
first 3 months of rental.  and methodologies at other payers and is 
(CIN: A-06-91-00080; OEI-07-96-00221;  reviewing data to determine if Medicare 
OEI-07-96-00222)  payments are excessive. However, the 
BBRA of 1999 imposed a moratorium on 
the application of CMS inherent reasonable-
ness authority. Thus, while the moratorium 
is in place, CMS may not act on a determin-
ation that costs are excessive. The BIPA of 
2000 increased DME payments by 3.7 per-
cent for 2001. 
60
 Appendix B 
End Stage Renal Disease Payment Rates:  $22* 
The CMS should reduce the payment rates for  The CMS agreed that the composite 
outpatient dialysis treatments to reflect current  payment rates should reflect the costs of 
efficiencies and economies in the marketplace.  outpatient dialysis treatment in efficiently 
(CIN: A-14-90-00215)  operated facilities, and the BBA of 1997 
required the Secretary to audit the cost 
reports of each dialysis provider at least 
once every 3 years. The BBRA of 1999 
increased each composite rate payment for 
dialysis services furnished during 2000 by 
1.2 percent above the payment for services 
provided on December 31, 1999. The BIPA 
of 2000 increased the rate for services pro-
vided in 2001 by 2.4 percent and required 
the Secretary to develop a composite rate 
that includes, to the extent feasible, pay-
ment for clinical diagnostic laboratory tests 
and drugs that are routinely used in dialysis 
treatments but are currently separately 
billable. 
Medicaid Reimbursement for Clinical  $17.8 
Laboratory Services:  The CMS wrote to all state Medicaid 
State agencies should install edits to detect and  directors in January 1997, alerting them to 
prevent payments for clinical laboratory services  OIGs review, encouraging them to use 
that exceed the Medicare limits and billings that  Medicares bundling policies, and urging 
contain duplicate tests, recover overpayments, and  them to install appropriate payment edits in 
make adjustments for the federal share of the  their claim processing systems. The OIG is 
amounts recovered.  conducting several follow-up reviews in 
(CINs: A-01-95-00005; A-05-95-00035;  this area. 
A-01-96-00001; A-06-95-00078; A-06-95-00031; 
A-04-95-01108; A-04-95-01109; A-07-95-01139; 
A-07-95-01147; A-04-95-01113; A-07-95-01138; 
A-09-95-00072; A-05-96-00019; A-10-95-00002; 
A-01-95-00006; A-02-95-01009; A-03-96-00200; 
A-03-96-00202; A-03-96-00203; A-05-95-00062; 
A-06-96-00002; A-06-95-00100; A-04-98-01185; 
A-03-00-00204; A-01-01-00003) 
Reclassify Respiratory Assist Devices with a  $11.5 
Back-Up Rate:  The CMS concurred. 
The CMS should reclassify bi-level respiratory 
assist devices with a back-up rate from the 
frequent and substantial servicing category to the 
capped rental category under the durable medical 
device benefit. (OEI-07-99-00440) 
*This estimate represents annual program savings of $22 million for each dollar reduction in the composite rate, 
given the population of ESRD beneficiaries at the time of OIGs review. 
61
 Appendix B 
Medicare Claims for Railroad Retirement  $9.1 
Beneficiaries:  The FY 2002 and 2003 budgets did not 
The CMS should discontinue use of a separate  include this type of legislative proposal. 
carrier to process Medicare claims for railroad 
retirement beneficiaries. (CIN: A-14-90-02528) 
Indirect Medical Education:  TBD* 
The CMS should reduce the indirect medical  The CMS agreed with the recommendation, 
education (IME) adjustment factor to the level  and the BBA of 1997, as amended by the 
supported by CMS empirical data and initiate  BBRA of 1999, reduced the IME adjustment 
further studies to determine whether different  to 5.5 percent in 2002 and thereafter. The 
adjustment factors are warranted for different types  OIG believes the factor should be further 
of teaching hospitals. (CIN: A-07-88-00111)  reduced to eliminate any overlap with the 
disproportionate share adjustment. 
Medicare Secondary PayerEnd Stage Renal  TBD 
Disease Time Limit:  The CMS was concerned that an indefinite 
The CMS should extend the Medicare secondary  MSP provision might encourage insurers to 
payer (MSP) provisions to include end stage renal  drop uneconomical services, namely facility 
disease (ESRD) beneficiaries without a time  dialysis and transplantation. The OIG 
limitation. (CIN: A-10-86-62016)  continues to advocate that when Medicare 
eligibility is due solely to ESRD, the group 
health plan should remain primary until the 
beneficiary becomes entitled to Medicare 
for old age or disability. At that point, 
Medicare would become the primary payer. 
Home Health Agencies:  TBD 
The CMS should revise Medicare regulations to  Although the BBA of 1997 included 
require the physician to examine the patient before  provisions to restructure home health 
ordering home health services.  benefits, CMS still needs to revise 
(OEI-04-93-00262; OEI-04-93-0026;  Medicare regulations to require that 
OEI-12-94-00180; OEI-02-94-00170; CINs:  physicians examine Medicare patients 
A-04-95-01103; A-04-95-01104; A-04-94-02087;  before ordering home health services. 
A-04-94-02078; A-04-96-02121; A-04-97-01169;  Subsequent to the BBA, OIGs four-state 
A-04-97-01166; A-04-97-01170; A-04-99-01195)  review found that unallowable services 
continued to be provided because of 
inadequate physician involvement. While 
agreeing in principle, CMS said it would 
continue to examine both coverage rules 
and conditions of participation to develop 
the discipline necessary for ensuring proper 
certification. Also, CMS established 
additional payments for physician care plan 
oversight and undertook efforts to educate 
physicians and beneficiaries. 
Connection Between the Calculation of Medicaid  TBD 
Drug Rebates and Drug Reimbursement:  The CMS agreed to pursue a change in the 
The CMS should seek legislation that would require  rebate program similar to that recom-
participating manufacturers to pay Medicaid drug  mended. The Presidents FY 2003 budget 
continued  proposes a legislative change that would 
base the drug rebate on the difference 
*To be determined. 
62
 Appendix B 
Connection Between the Calculation of Medicaid 
Drug Rebates and Drug Reimbursement  between the AWP and the best price for a 
(continued )  drug. 
rebates based on average wholesale price (AWP) or 
study other viable alternatives to the current 
program of using average manufacturer price 
(AMP) to calculate the rebates. This legislation 
would have resulted in about $1.15 billion in 
additional rebates for 100 brand-name drugs with 
the highest total Medicaid reimbursements in 
calendar years 1994-96. (CIN: A-06-97-00052) 
Various Operating Divisions 
Medicare Rates for Indian Health Service  $8.2 
Contracted Health Services:  The IHS concurred with OIGs 
The Indian Health Service (IHS) should revise its  recommendations. However, the proposal 
legislative proposal to incorporate OIGs updated  was not included in the Presidents 
savings figures and should identify elements to be  FY 2003 budget. 
included in the implementing regulations. Also, 
IHS should continue to pursue the most favorable 
rates at hospitals that have previously offered less 
than Medicare rates and should strategically 
identify and pursue other opportunities where lower 
rates may be negotiated. (CIN: A-15-97-50001) 
Recharge Center Costs:  $1.9 
The Assistant Secretary for Administration and  The Deputy Assistant Secretary for Grants 
Management should propose changes to OMB  and Acquisition Management concurred. In 
Circular A-21 to improve guidance on the financial  addition, the Council on Government 
management of recharge centers. The revision  Relations generally agreed and stated that 
should include criteria for establishing, monitoring,  the proposed criteria should be included in 
and adjusting billing rates to eliminate accumulated  the Compliance Supplement to OMB 
surpluses and deficits; preventing the use of recharge  Circular A-133, which provides guidance to 
funds for unrelated purposes and excluding unal- independent auditors in conducting compli-
lowable costs from the calculation of recharge rates;  ance audits of educational institutions. This 
ensuring that federal projects are billed equitably;  suggestion was forwarded to OMB for 
and excluding recharge costs from the recalculation  consideration. 
of facilities and administrative cost rates. 
(CIN: A-09-96-04003) 
63
 64
 Appendix C

Unimplemented Office of Inspector General Program

and Management Improvement Recommendations

This schedule represents Office of Inspector General (OIG) findings and recommendations which, if 
implemented, would result in substantial benefits. The benefits relate primarily to effectiveness rather 
than cost-efficiency. 
More detailed information may be found in OIGs Orange Book which can be accessed on the 
Internet at http://oig.hhs.gov. 
OIG Recommendation  Status 
Centers for Medicare and Medicaid Services 
Accountability Over Billing and Collection of 
Medicaid Drug Rebates:  The CMS concurred with the recommendation. States 
The CMS should ensure that states implement  will now be required to maintain detailed supporting 
accounting and internal control systems in accordance  records of all rebate amounts invoiced to drug companies 
with applicable federal regulations for the Medicaid  using a formal accounts receivable system. The CMS 
drug rebate program. Such systems must provide for  issued a notice of proposed rulemaking in FY 1996. 
accurate, current, and complete disclosure of drug 
rebate transactions and provide CMS with the financial 
information it needs to effectively monitor and manage 
the Medicaid drug rebate program. 
(CIN: A-06-92-00029) 
Fairly Presenting the Medicare Accounts 
Receivable Balance:  The CMS hired consultants to assist in validating the 
The CMS should require Medicare contractors to  FY 1999 accounts receivable activity and balance, as 
implement or improve internal controls and systems to  well as the activity for the first 6 months of FY 2000. 
ensure that reported accounts receivable are valid and  The Presidents FY 2001 budget included funding to 
documented.  establish financial management controls at the con-
(CINs: A-17-95-00096; A-17-97-00097;  tractors and to hire contractor staff to implement the 
A-17-98-00098; A-17-00-00500; A-17-00-02001)  controls. For the long term, CMS is developing an 
integrated general ledger system as the cornerstone of 
its financial management controls. 
Safeguards Over Medicaid Managed Care 
Programs:  Although CMS initially concurred with some specific 
The CMS should consider safeguards available to  recommendations, the agency believes that section 
reduce the risk of insolvency and to ensure consistent  4706 of the BBA of 1997 sets forth congressional 
and uniform state oversight.  expectations on this issue in specifically requiring 
(CIN: A-03-93-00200)  managed care organizations to meet the solvency 
standards established by the state for private health 
maintenance organizations. 
Guidance to Drug Manufacturers to Better 
Implement the Medicaid Drug Rebate Program:  The CMS did not concur, stating that the drug law 
The CMS should survey manufacturers to identify the  and the rebate agreements already established a 
various calculation methods used to determine average  methodology for computing AMP. The OIG disagreed 
manufacturer price (AMP). The CMS should also  because the rebate law and agreement defined AMP 
develop a more specific policy for calculating AMP but did not provide specific written methodology for 
continued  computing AMP. 
65
 Appendix C 
Guidance to Drug Manufacturers to Better  . 
Implement the Medicaid Drug Rebate Program 
(continued) 
which would protect the interests of the government 
and which would be equitable to the manufacturers. 
(CIN: A-06-91-00092) 
Physician Office Surgery: 
The peer review organizations (PROs) should extend  The CMS has issued policy guidance and manual 
their review to surgery performed in physicians  instructions to explicitly state that PROs have the 
offices. (OEI-07-91-00680)  responsibility to review all care in physician offices 
when a beneficiary complains. 
Ensure Accuracy of Carrier Payment Data: 
The CMS should conduct a review of carriers claims  The CMS stated that a review is under way to compare 
processing data to examine the scheduled date of  data contained in the National Claims History File with 
payment entered on claims sent to the Common  data at the carrier level. In addition, CMS has 
Working File (CWF). If there is no correlation  approved two new edits which will enforce the 
between the claims payment date variable and the  payment floor standards on claims sent to the CWF. 
actual date of payment, CMS should define what data 
should be entered into this field and how it should be 
calculated, and/or revise the current variable definition 
to clarify for National Claims History data users that 
the schedule date of payment is not an accurate 
reflection of the actual claim payment date. The CMS 
should also review the carriers claims processing data 
to determine the accuracy of the information contained 
in the CROWD system. 
(OEI-03-00-00350) 
Prevent Duplicate Payments for the Same Service 
by Multiple Carriers:  The CMS concurred with OIGs recommendations and 
The CMS should revise CWF edits to detect and deny  will re-examine existing criteria regarding duplicate 
duplicate billings to individual carriers or to more than  editing in the CWF system to determine the cost 
one carrier, or increase post-payment reviews if such  effectiveness of including the carrier number in the 
edits are determined not to be cost effective.  match criteria. The CMS entered a contract to study 
(OEI-03-00-00090, OEI-03-00-00091)  duplicate billing 
Prevent Inappropriate Payments for Blood Glucose 
Test Strips:  The CMS concurred with the recommendations and 
The CMS should alert suppliers of the importance of  noted a number of initiatives that have reduced the 
properly completed documentation to support their  incidence of improper payments in recent years. 
claims for test strips; require suppliers to indicate 
actual and accurate start and end dates on claim 
forms; promote supplier concurrence and cooperation 
with OIGs recently issued compliance guidelines; and 
advise beneficiaries to report any instances of 
fraudulent or abusive practices involving their home 
blood glucose monitors, test strips, or related supplies 
to their DMERCs. (OEI-03-98-00230) 
66
 Appendix C 
Educate Beneficiaries on Reducing Financial 
Liability for DME:  The CMS concurred with OIGs recommendations and 
The CMS should educate beneficiaries on ways to  has undertaken a number of efforts to increase 
reduce financial liability for medical equipment and  beneficiary education and awareness about the 
supplies and re-evaluate Medicare fee schedules for  consequences of assigned and non-assigned claims. 
ostomy supplies. (OEI-07-99-00510) 
Change DME Payment Category for Respiratory 
Assist Devices:  The CMS concurred with OIGs recommendation, 
The CMS should move the bi-level respiratory assist  stating that it plans to move the bi-level respiratory 
device with a backup rate from the frequent and  assist device with a back-up rate from the frequent 
substantial servicing payment category to the capped  and substantial servicing payment category to the 
rental payment category.  capped rental payment category. The CMS believes 
(OEI-07-99-00440)  this change is needed to reflect the requirements of 
Section 1834 (a) (3) of the Social Security Act 
Improve Resident Assessment Instruments: 
The CMS should more clearly define minimum data set  The CMS generally concurred with OIGs 
(MDS) elements and work with states to train nursing  recommendations for improved data definitions and 
home staff. The OIG also recommend that CMS  training, but did not concur with the recommendation 
establish an audit trail to validate the 108 MDS  to establish an audit trail. 
elements that affect facility reimbursement by 
Medicare. (OEI-02-99-00040, OEI-02-99-0041) 
Improve Assessments of Mental Illness: 
The OIG recommended that CMS work with states to  The CMS concurred with most of OIGs 
improve the assessment of persons with serious mental  recommendations and has made revisions to its training
illness and use survey and certification to monitor  curriculum for nursing home surveyors. 
compliance. The OIG also recommended that CMS 
define specialized services that are to be provided by 
the state to nursing home residents with mental illness. 
(OEI-05-99-00700) 
Identify Nursing Home Residents with Serious 
Mental Illness:  Except for reporting MDS records by primary, 
The CMS should improve the quality and usefulness of  secondary, and tertiary diagnoses, CMS concurred with 
these data sources by requiring the use of a unique  most of OIGs recommendations. The CMS does not 
provider number across systems, requiring reporting of  feel that adding space to the MDS to record diagnoses 
resident data by age and diagnosis, and encouraging  would solve the problem. 
states to use these data in demonstrating their progress 
in placing disabled persons in the most integrated 
settings. The OIG also recommends training to 
improve data collection and accurate coding. 
(OEI-05-99-00701) 
Eliminate Inappropriate Payments for Mental 
Health Services:  The CMS generally concurred with the 
The CMS should promote provider awareness of  recommendations and plans to explore a variety of 
documentation and medical necessity requirements,  educational efforts and will refer the reports to the 
develop a comprehensive list of psychological testing  carrier clinical workgroup on psychiatric services. 
tools that can be correctly billed, target problematic  Carriers will conduct data analysis of psychological 
services for pre-payment edits or post-payment  testing and psychotherapy claims and will conduct 
continued  medical review, if indicated. 
67
 Appendix C 
Eliminate Inappropriate Payments for Mental 
Health Services (continued) 
medical review, and encourage carriers to take 
advantage of the MDS, especially for its assessment of 
patient cognitive level. 
(OEI-03-99-00130, OEI-02-99-00140) 
Lower Medicaid Expenditures on HIV/AIDS 
Drugs:  The CMS agreed with the overall intent of OIGs 
For the 16 HIV/AIDS drugs examined in this study,  recommendations, but expressed reservations with 
OIG recommend that CMS review the current  many of the specific suggestions offered for achieving 
reimbursement methodology and work with states to  them. Primarily, CMS felt that it does not have the 
find a method that more accurately estimates pharmacy  statutory authority to make the suggested changes. 
acquisition cost and review Medicaid rebates for the 
drugs examined. (OEI-05-99-00611) 
Increase Organ Donation: 
The CMS should revise the Medicare conditions for  The CMS concurred with the recommendations and 
coverage for Organ Procurement Organizations  indicated it will explore ways in which additional data 
(OPOs) to make them more accountable for imple- can be used to assess OPO effectiveness and hospital 
menting the new donation rule and require OPOs to  compliance with the donation rule. The HRSA also 
provide hospital-specific data on referrals and on organ  concurred with the recommendations. 
recovery. The HRSA should require that OPOs submit 
hospital-specific data on referrals and on organ 
recovery and support demonstration projects on how to 
effectively train and make use of designated 
requestors. (OEI-01-99-00020) 
Various Public Health Agencies 
Improve Oversight of Tissue Banking: 
The FDA should expedite publication of its regulatory  The Deputy Secretary concurred that FDA should 
agenda requiring registration of tissue banks, enhanced  expedite its planned rulemaking activities related to 
donor suitability screening and testing, and the use of  tissues, specifically the final rule to require registration 
good tissue practices. The FDA should set a realistic,  of tissue banks. The department also found 
yet aggressive, date by which it would complete an  considerable merit in OIGs recommendation for an 
initial inspection of all tissue banks. The FDA should  intensified inspection program directed towards entities 
determine the appropriate minimum cycle for tissue  that procure, process, and store human tissues. In 
bank inspections, and work with states and  Congressional testimony, FDA said that all three of the 
professional associations to determine in what areas  proposed rules have been published, and one rule 
oversight activities could be coordinated.  (Establishment Registering and Listing) was finalized. 
(OEI-01-00-00441)  The FDA also worked to inspect all 36 identified, 
uninspected tissue banks. 
Improve Effectiveness of the FDAs Adverse Event 
Reporting System for Dietary Supplements:  The FDA agreed with the majority of OIGs 
The OIG recommends that FDA 1) facilitate greater  recommendations. The Center for Food Safety and 
detection of adverse events by requiring dietary  Applied Nutrition (CFSAN) indicated that it has 
supplement manufacturers to report serious events to  embarked on significant efforts to enhance its adverse 
FDA for some products; 2) obtain more information on  event reporting system through development of a new 
adverse event reports by requiring manufacturers to  system called the CFSAN Adverse Event Reporting 
register themselves and their products with FDA; 3)  System. 
notify manufacturers when FDA receives a serious 
continued 
68
 Appendix C 
Improve Effectiveness of the FDAs Adverse Event 
Reporting System for Dietary Supplements 
(continued) 
adverse event report and develop a new computer 
database to track and analyze adverse event reports; 
4) expedite the development and implementation of 
good manufacturing practices for dietary supplement 
manufacturers; and 5) disclose more useful information 
to the public about dietary supplement adverse events. 
(OEI-01-00-00180) 
Improve Protection for Research Subjects in 
Foreign Clinical Trials:  The FDA supported OIGs recommendations, but 
The FDA should examine ways to obtain more  noted that in most cases it did not have the resources to 
information about the performance of non-US  implement the recommendations. The OHRP concurs 
Institutional Review Boards (IRBs) and help those  with the recommendations and emphasized that its new 
inexperienced IRBs build their capacities; encourage  Office of International Activities will serve as a focal 
all non-US investigators participating in research to  point and coordinating center for the departments 
sign attestations upholding human subject protections;  efforts to improve human subject protection. 
and develop a database to track the growth and location 
of foreign research. The OHRP should exert 
leadership in developing strategies to ensure adequate 
human subject protections for non-US clinical trials 
funded by the Federal Government and those that 
contribute data to new drug applications. 
(OEI-01-00-00190) 
Improve Managed Care Organizations Reporting to 
the National Practitioner Data Bank:  The HRSA awarded a contract to Price Waterhouse 
The Agency for Health Care Research and Quality  Coopers to look at the feasibility study for assessing 
should devote attention to the kind of educational and  compliance with the NPDB reporting requirements. 
remedial efforts that could be directed to practitioners  The feasibility study addresses both hospital and 
who have been experiencing performance problems.  managed care organizations reporting. 
The HRSA should conduct an outreach program to 
inform managed care organizations of their reporting 
responsibilities, and CMS should examine its 
practitioner monitoring systems. (OEI-01-99-00690) 
Administration for Children and Families 
Improve the Establishment of Child Support 
Orders for Low-Income Non-Custodial Parents:  The ACF is helping ten states test approaches to 
The ACFs Office of Child Support Enforcement  serving young, never-married fathers who may have 
should work with states to emphasize parental  obstacles to employment and who do not have a child 
responsibility and improve the ability of low-income  support order. The ACF has granted a contract to 
non-custodial parents to meet their obligations. The  determine how computerized income data can be used 
ACF should facilitate and support state experiments to  by local child support offices to independently verify 
test the payment effects of using various periods of  the income of non-custodial parents and be used in the 
retroactivity in determining the amount of support  establishment or modification of child support orders 
owed; facilitate and support state experiences to test  where income documentation or verification is lacking 
negotiating child support debt owed to the states in  or incomplete. 
exchange for improved payment compliance. 
(OEI-05-99-00391) 
69
 Appendix C 
General Oversight 
Cost Principles for Federally Sponsored Research 
Activities:  Hospital cost principles have been updated in a draft 
The department should modernize and strengthen cost  regulation which was expected to be issued as a notice 
principles applicable to hospitals by either revising  of proposed rulemaking by September 30, 2002. 
existing guidelines to conform with Office of 
Management and Budget (OMB) Circular A-21 or 
working with OMB to extend Circular A-21 coverage 
to all hospitals. (CIN: A-01-92-01528) 
70
 Appendix D

Notes to Tables 1 and 2

Notes to Table 1 
1The opening balance was adjusted upward $39 million. 
2During the period, revisions to previously reported management decisions included: 
CIN:	 A-07-94-00761 Health Care Service Corp-Charging Pension Costs: Results of this audit were 
superseded by a later audit, in the amount of $325,512. 
CIN:	 A-03-92-03316 Human Services Res., Inc. Contract #U70-MHU000004: Based on additional 
documentation received, the costs are allowable. The amended amount of Cost Question is 
$318,025. 
CIN:	 A-05-97-47032 Bad River Band of Lake Superior Tribe of Chippewa. The contracting officer has 
stated that the $172, 076 was used for acceptable allowable expenses and need not be returned. 
Not detailed are revisions to previously disallowed management decisions totaling $65,557. 
3Included are management decisions to disallow $19,662,000 that was identified in nonfederal audit reports. 
4A. 
Due to administrative delays, many of which are beyond management control, resolution of the following 
audits was not completed within 6 months of issuance; however, based upon discussions with management, 
resolution is expected before the end of the next semiannual reporting period: 
CIN: A-04-00-02171 REV. AL MEDICAID INTERGOVERNMENTAL TRANSFERS - HOSP. ENHANC, 
MAY 2001, $236,983,528 
CIN: A-06-00-00041 INCORRECTLY REPORTED PPS TRANSFERS - CMS/OIG PROJECT, NOVEMBER 
2001, $163,900,000 
CIN: A-06-00-00056 MEDICAID DRUGS - REVIEW OF REPACKAGED DRUGS EX FROM, MARCH 2001, 
$108,000,000 
CIN: A-04-00-01220 IMPLE. MEDICARES POSTACUTE CARE TRANSFER POLICY, OCTOBER 2001, 
$52,311,082 
CIN: A-04-98-00123 REVIEW FOSTER CARE PMTS - CHILD CARE IN NC, APRIL 2001, $48,183,445 
CIN: A-01-00-00538 NATIONAL IDENTIFICATION OF SNF CONSOLIDATED BILLNG, JUNE 2001, 
$47,633,686 
CIN: A-01-00-00509 M/C PART B PMTS FOR DME PROVIDED TO SNF PATIENTS, JULY 2001, $35,000,000 
CIN: A-04-00-65030 STATE OF SOUTH CAROLINA, JULY 2000, $31,755,510 
CIN: A-07-99-01279 OP PSYCH, JANUARY 2001, $18,515,190 
CIN: A-06-00-00051 AUDIT OF MEDICARE REHAB AGENCY COSTS IN TX, RHS, I, JUNE 2001, 
$18,394,465 
CIN: A-05-01-00052 DME REVIEW IN INDIANA, OCTOBER 2001, $16,377,560 (Related recommendation of 
$4,400,000 outstanding on Table 2) 
CIN: A-06-01-00035 COLLECTION OF AFDC OVERPAYMENTS, JANUARY 2002, $13,800,000 
CIN: A-01-01-02501 REVIEW OF CT RETROACTIVE FOSTER CARE PAYMENTS CLAIMED UNDER 
TITLE IV-E, SEPTEMBER 2002, $13,238,313 
CIN: A-01-01-02502 REVIEW OF UNCOLLECTED AFDC OVERPAYMENTS, AUGUST 2001, $12,400,000 
CIN: A-07-01-02616 REVIEW OF MUTUALS OVERSIGHT OF PIP, AUGUST 2001, $11,336,867 
CIN: A-01-01-00513 MEDICARE PT B PMT FOR DME I/P PRTL MNTH STAYS SNF, OCTOBER 2001, 
$10,500,000 
71
 Appendix D 
CIN: A-05-00-00045 OIG PARTNERSHIP: STATE AUDITOR REPORT ON MEDICAID, MAY 2000, 
$8,500,000 
CIN: A-09-97-44262 STATE OF CALIFORNIA, APRIL 1997, $7,300,000 
CIN: A-03-91-00552 INDEPENDENT LIVING PROGRAM - NATIONAL, MARCH 1993, $6,529,545 (Related 
recommendation of $10,161,742 outstanding on Table 2) 
CIN: A-02-99-02001 NYS REV OF RETROACTIVE KINSHIP CLAIMS, SEPTEMBER 2000, $5,833,676 
CIN: A-03-99-00052 ALLEGHENY/CHESAPEAKE ORF, SEPTEMBER 2001, $5,540,344 (Related 
recommendation of $467,646 outstanding on Table 2) 
CIN: A-04-00-02161 MEDICAID SCHOOL-BASED SERVICES IN NORTH CAROLINA, NOVEMBER 2001, 
$5,344,160 
CIN: A-07-99-02537 BLUE CROSS & BLUE SHIELD OF MASSACHUSETTS, NOVEMBER 1999, $5,270,461 
CIN: A-01-00-00506 DIAGNOSIS-RELATED GROUP PAYMENT WINDOW, JULY 2001, $5,042,207 
CIN: A-01-97-00516 ADMIN. COSTS - PART A&B, RAILROAD RETIRE BOARD, JUNE 1999, $4,939,184 
CIN: A-05-01-00023 ADMINISTRATIVE COSTS REVIEW - ADMINASTAR FEDERAL, JANUARY 2002, 
$4,694,863 
CIN: A-02-00-01047 DEMO BSWNY-FINANCIAL, MARCH 2002, $4,505,051 
CIN: A-07-96-02001 MEDICARE PART B ADMIN COSTS AT BC/BS COLORADO, DECEMBER 1996, 
$4,483,104 
CIN: A-07-98-01263 DENVER CMHC, MAY 2000, $4,447,607 
CIN: A-07-00-00108 RURAL HEALTH CENTER REVIEW, OCTOBER 2001, $4,088,929 
CIN: A-04-01-05002 AUDIT MEDICAID PAYMENTS FOR CLINICAL LABORATORIES, JANUARY 2002, 
$3,522,639 
CIN: A-07-00-00109 MEDICARE CONTRACT TERM. & SEG. CLOSING - GALIC, SEPTEMBER 2000, 
$3,505,560 
CIN: A-03-00-00002 TRIGON PT-A AND TERMINATION, SEPTEMBER 2001, $3,464,705 
CIN: A-02-95-01019 STAFF BUILDERS HOME OFFICE MEDICARE COST REV. ORT, AUGUST 1998, 
$3,434,274 
CIN: A-05-93-00054 IL-ASSOCIATED INSURANCE GROUP-CONTRACT AUDIT, OCTOBER 1993, 
$3,355,560 
CIN: A-07-99-01283 HMO - AFTER DEATH PAYMENTS, FEBRUARY 2000, $3,250,000 
CIN: A-07-99-01298 DATE OF DEATH-2, MAY 2001, $3,200,000 (Related recommendation of $700,000 
outstanding on Table 2II) 
CIN: A-03-94-00029 VERITUS INC - ADMIN COST, FEBRUARY 1998, $3,140,363 
CIN: A-05-98-00042 ADMINISTAR INS. CO. - ADMIN. COSTS AUDIT, SEPTEMBER 1999, $3,111,728 
CIN: A-06-99-00057 AUDIT OF MEDICARE REHAB AGENCY SRVCS IN TX, RHS, IN, JANUARY 2001, 
$3,097,201 
CIN: A-09-98-50183 STATE OF CALIFORNIA, MARCH 1998, $3,000,000 
CIN: A-07-01-00132 INDEPENDENCE BLUE CROSS -PENSION SEGMENT CLOSING AUDIT, FEBRUARY 
2002, $2,913,129 
CIN: A-01-96-00508 MEDICARE ADMIN COSTS PARTS A&B AND RRB - TRAVELERS, MARCH 1996, 
$2,803,260 
CIN: A-05-97-00005 ADMINISTRATIVE COSTS CLAIMED UNDER MEDICARE A & B, FEBRUARY 1998, 
$2,569,067 
CIN: A-05-92-00026 ASSOCIATED INSURANCE CO. - MEDICARE ADMIN, FEBRUARY 1992, $2,530,409 
CIN: A-02-91-01006 BLUE SHIELD OF WESTERN NY MEDICARE ADM CTS PORTER, SEPTEMBER 1991, 
$2,379,239 
CIN: A-04-00-01209 OUTPATIENT PSYCHIATRIC SRVCS AT HOLLYWOOD PAV. HOSP, APRIL 2001, 
$2,366,287 
CIN: A-03-99-00038 EDGEWATER PSYC HOSPITAL, MARCH 2001, $2,348,604 (Related recommendation of 
$208,731 outstanding on Table 2) 
CIN: A-04-97-01166 REV. HOME HEALTH SRVCS BY STAFF BUILDERS HOME HLTH, APRIL 1999, 
$2,300,000 
CIN: A-07-97-01247 DUPLICATE PAYMENTS - HMO/FFS, OCTOBER 1999, $2,300,000 
72
 Appendix D 
CIN: A-04-97-01170 REVIEW HOME HEALTH SRVCS BY MEDCARE HOME HLTH SRVCS, APRIL 1999, 
$2,200,000 
CIN: A-09-01-00056 PACIFICARE-CALIFORNIA JAN 1998 INSTITUTIONAL PMTS, SEPTEMBER 2001, 
$2,158,577 
CIN: A-07-01-68554 STATE OF NEBRASKA, JUNE 2001, $2,113,388 
CIN: A-04-00-02162 REVIEW TREATMENT OF QUALIFIED DISCHRGS @ FCSO, FEBRUARY 2001, 
$2,042,060 
CIN: A-02-00-02502 UNIVERSITY OF MEDICINE & DENTISTRY CONTRACT AUDIT, APRIL 2001, 
$2,002,011 
CIN: A-05-00-00034 PROVENA ST. JOSEPH HOSPITAL-O/P PSYCH SERVICES, NOVEMBER 2000, 
$1,978,583 
CIN: A-04-97-01169 REVIEW HOME HLTH SRVCS BY MEDTECH HOME HLTH SRVCS, APRIL 1999, 
$1,900,000 
CIN: A-06-96-00009 NEW MEXICO BCBS ADMIN COST - CONTRACTED, NOVEMBER 1997, $1,879,366 
CIN: A-05-97-00014 GROUP HEALTH PLAN INC.(HEALTHPARTNERS) INST. BENES, JUNE 1998, 
$1,808,308 
CIN: A-03-00-00007 REVIEW OF 1-DAY DISCHARGES - PA., APRIL 2001, $1,649,411 (Related 
recommendation of $6,300,000 outstanding on Table 2) 
CIN: A-04-97-02143 REVIEW THERAPY SRVCS IN LIFE CARE SNFS IN TN, DECEMBER 1999, 
$1,638,025 
CIN: A-02-97-01039 MEDASSIST - ORT ORTHOTICS PROVIDER TARGET, NOVEMBER 1999, $1,616,222 
CIN: A-04-99-01196 OIG-HCFA JOINT REVIEW OF JMV MEDICAL CORP., DECEMBER 2000, $1,600,417 
CIN: A-03-00-00215 ANNABURG MANOR NURSING HOME COST REPORT, MARCH 2002, $1,582,079 
CIN: A-03-96-00012 BCBSM PT-B NON-RENEWAL COSTS, AUGUST 1998, $1,557,459 
CIN: A-09-96-00064 ORT - HOSPICE - CALIFORNIA, MARCH 1997, $1,350,000 
CIN: A-10-91-00011 WPS - KEYSTONE COMPUTER ACQUISITION, OCTOBER 1992, $1,346,681 
CIN: A-05-95-00042 BCBSA ADMINISTRATIVE COSTS - CONTRACTED AUDIT, DECEMBER 1995, 
$1,333,598 
CIN: A-05-01-00064 REVIEW OF OUTPATIENT REHABILITATION CLAIMS REIMBURSED BY 
MEDICARE DURING CALENDAR YEAR 1999, FEBRUARY 2002, $1,235,892 
CIN: A-05-00-00004 NEW CENTER COMMUNITY MENTAL HEALTH CENTER, JUNE 2000, $1,181,000 
CIN: A-05-00-00049 PARTNERSHIP PLAN - IL HOSPITAL TRANSFERS, JUNE 2001, $1,150,113 
CIN: A-02-97-01026 EDDY VNA (#337152) HHA ELIGIBILITY REVIEW, SEPTEMBER 1999, $1,131,593 
CIN: A-05-98-00050 FOLLOW-UP MEDICAID CLINICAL LABORATORIES, JULY 1999, $1,097,036 
CIN: A-02-94-01029 HOSPICE ELIGIBILITY RVW IN PR - SAN GERMAN - ORT, JUNE 1995, $1,070,814 
CIN: A-09-98-00052 CALIFORNIA MEDICAL REVIEW INC. (CA. PRO), JANUARY 1999, $1,067,991 
CIN: A-05-01-00037 BC/BS OF MN. ADMIN COSTS - LEON SNEAD & CO., JUNE 2001, $1,037,090 
CIN: A-04-99-01199 REV. PSYCHIATRIC OUTPATIENT SRVCS-CORAL GABLES HOS, APRIL 2001, 
$1,031,497 
CIN: A-01-98-00500 PAYMENT EDITS FOR PSYCHIATRIC AT MA PART B CARRIER, SEPTEMBER 1998, 
$1,000,000 
CIN: A-09-94-01010 CLOSEOUT AUDIT - CONT NO. N01-ES-75196 (STRATAGENE), MARCH 1994, 
$983,208 
CIN: A-04-00-01210 REVIEW TREATMENT - QUALIFIED DISCHRGS-BCBSGA, DECEMBER 2000, 
$891,000 
CIN: A-05-92-00060 CONTRACTOR AUDIT - BCBS - ADMIN, FEBRUARY 1993, $879,609 
CIN: A-02-97-01034 DR. PILA FOUNDATION HOME CARE PRORAM (PONCE), SEPTEMBER 1999, 
$857,208 
CIN: A-07-98-02533 TRAVELERS FACP, DECEMBER 1998, $854,214 
CIN: A-04-01-05004 REVIEW MEDICARE CLAIMS FOR DEPORTED BENEFICIARIES, MARCH 2002, 
$836,711 
CIN: A-06-99-00013 MEDICARE PART A ADMIN NM BLUE CROSS BLUE SHIELD, DECEMBER 1999, 
$817,487 
73
 Appendix D 
CIN: A-02-98-01040 NIAGARA CTY DEPT. OF HLTH-#337001-HHS ELIG REVIEW, DECEMBER 1999, 
$807,679 
CIN: A-03-99-00008 BLUE CROSS BLUE SHIELD OF DELAWARE - PART A, JANUARY 2000, $798,939 
CIN: A-09-01-00094 PACIFICARE CORPORATE JANUARY 1998 MEDICARE INSTITUTIONAL STATUS, 
FEBRUARY 2002, $786,003 
CIN: A-07-99-00981 ASSIST REVIEW OF MEDICARE A/R HCFA RO DENVER, JANUARY 2000, $754,926 
CIN: A-06-01-00027 REVIEW PALMETTOS HH-PPS RAP POLICIES & PROCEDURES, SEPTEMBER 2001, 
$743,917 
CIN: A-01-01-00509 REVIEW OF OUTPATIENT SUPPLY CHGS @ ST. MARYS HOSP, SEPTEMBER 2001, 
$726,712 
CIN: A-09-00-00103 PACIFICARE HMO - MEDICARE DUAL ELIGIBLES, MAY 2001, $720,858 
CIN: A-05-91-00136 COMMUNITY MUTUAL INS CO. ADMIN COSTS, AUGUST 1992, $720,668 
CIN: A-09-97-00078 PHYSICIAN BILLINGS DR. SPENCER, JANUARY 1999, $683,264 
CIN: A-06-01-00090 PREAWARD - APASS MAINTAINER DATA PROCESSING SERVICES-ABCBS, 
SEPTEMBER 2001, $678,651 
CIN: A-05-00-64226 NA - ILLINOIS DEPT. OF PUBLIC AID, MAY 2000, $654,017 
CIN: A-01-98-00503 PSYCHIATRIC OUTPT SERVICES AT THE FRANKLIN MED CTR, NOVEMBER 1998, 
$646,517 
CIN: A-01-99-00535 AUDIT OF M/C PART A ADMIN COSTS-ANTHEM BC/BS CT, AUGUST 2000, 
$621,256 
CIN: A-04-00-00138 MEDICAID ESCHEATED WARRANTS - FLORIDA, JANUARY 2002, $613,891 
CIN: A-06-98-00066 ORT REVIEW OF ULTIMATE HOME HEALTH CARE INC., OCTOBER 1999, $602,982 
CIN: A-04-94-01078 MONITORING ADMIN COST -AUDIT MEDICARE P.B BCBSSC, JULY 1994, $594,092 
CIN: A-04-93-01069 MONITORG ADMIN COST AUDIT MEDICARE PART A BCBSSC, JULY 1994, 
$590,844 
CIN: A-04-01-01007 GABCBS MEDICARE PART A ADMINISTRATIVE COST AUDIT, NOVEMBER 2001, 
$575,471 
CIN: A-09-00-00067 COLLEGE HOSPITAL - O/P PSYCH SVCS, APRIL 2001, $567,888 
CIN: A-01-02-70271 STATE OF MAINE , DECEMBER 2001, $561,697 
CIN: A-09-01-00055 REVIEW OF IMD CLAIMS - STATE OF CALIFORNIA, MARCH 2002, $551,394 
CIN: A-05-00-00011 LIBERTYVILLE MANOR SNF -THERAPY SERVICES, SEPTEMBER 2001, $506,937 
CIN: A-05-99-00062 AMERICARE PHYSICAL THERAPY SERVICES, DECEMBER 2000, $503,619 
CIN: A-09-99-56858 HAWAII DEPT. OF HUMAN SERVICES, FEBRUARY 1999, $502,000 
CIN: A-03-92-16229 STATE OF PENNSYLVANIA, MARCH 1992, $496,876 
CIN: A-05-01-67384 MICHIGAN DEPT. OF COMMUNITY HEALTH , FEBRUARY 2001, $481,693 
CIN: A-04-98-01192 REVIEW AMERICAS BEHAV.HLTH CARES PART. HOSPITALIZ, DECEMBER 1999, 
$452,928 
CIN: A-06-00-00011 FINAL ADMINISTRATIVE COST PROPOSAL - AR BC/BS, NOVEMBER 2000, 
$442,177 
CIN: A-07-01-00120 REVIEW OF UNFUNDED PENSION COCST AT BCBS OF OK, JULY 2001, $413,800 
CIN: A-05-97-00013 PACIFICARE OF CA - HMO INSTITUTIONAL STATUS PROJECT, APRIL 1998, 
$407,784 
CIN: A-02-01-67912 STATE OF NEW YORK , MARCH 2001, $389,622 (Related recommendation of 
$19,000,000 outstanding on Table 2) 
CIN: A-05-00-00030 CONTRACTED AUDIT - NATIONWIDE INS. - MEDICARE ADMIN., OCTOBER 2000, 
$385,081 
CIN: A-04-00-01208 OUTPATIENT CLINIC COSTS, CORAL GABLES HOSPITAL, FL, FEBRUARY 2001, 
$384,295 
CIN: A-09-98-00095 BLUE SHIELD OF CALIFORNIA, OCTOBER 1999, $378,191 
CIN: A-01-01-00516 REVIEW OF MEDICARE OUTLIER PAYMENTS AT BRIGHAM & WOMENS 
HOSPITAL, DECEMBER 2001, $357,573 
CIN: A-01-99-00518 PSYCHIATRIC OUTPATIENT SVCS AT DANBURY HOSPITAL, MAY 2000, $342,168 
74
 Appendix D 
CIN: A-10-01-00005 AUDIT OF ADMIN COSTS AT MEDICARE NORTHWEST, SEPTEMBER 2001, 
$332,274 
CIN: A-07-01-02630 REVIEW OF MUTUALS SETTLEMENT OF HHA COST REPORTS, JANUARY 2002, 
$319,949 
CIN: A-06-01-00028 AUDIT OF OBSERVATION SERVICE BILLINGS BY PPS HOSPITALS, 
FEBRUARY 2002, $298,549 
CIN: A-05-96-00069 CPA AUDIT OF HOOPER HOLMES HHA G&A -OI CASE OPEN, FEBRUARY 1998, 
$280,515 (Related recommendation of $17,555 outstanding on Table 2) 
CIN: A-01-00-00511 REVIEW OF O/P PHARMACY SVC-BAYSTATE MED CTR, NOVEMBER 2000, 
$279,409 
CIN: A-06-97-00015 NEW MEXICO PRO CLOSE OUT AUDIT, SEPTEMBER 1999, $268,844 
CIN: A-09-94-30178 STATE OF ARIZONA, JUNE 1994, $267,021 
CIN: A-09-00-00089 COMMUNITY URGENT CARE MEDICAL GROUP, NOVEMBER 2001, $266,236 
CIN: A-03-98-00027 KHPW/INSTITUTIONAL STATUS/MEDICARE, NOVEMBER 1998, $263,573 
CIN: A-03-01-00010 CAREFIRST OF MD - PT-A ADMIN - FYS 1996-1999, FEBRUARY 2002, $225,302 
CIN: A-05-00-60454 ST. CROIX CHIPPEWA OF WISCONSIN, DECEMBER 1999, $224,452 
CIN: A-04-00-01222 CAPITAL HLTH PLAN, COST-BASED MANAGED CARE PLAN, SEPTEMBER 2001, 
$221,952 
CIN: A-01-00-00549 BETH ISRAEL AUDIT OF OUTPATIENT PHARMACY SVC, MARCH 2001, $221,905 
CIN: A-05-99-00067 WPS PART B ADMINISTRATIVE COSTS, NOVEMBER 2000, $221,644 
CIN: A-01-01-00523 REVIEW OF OUTPATIENT PHARMACY SERVICES AT NOBLE HOSPITAL, 
NOVEMBER 2001, $216,797 
CIN: A-02-01-65217 PUERTO RICO DEPT. OF THE FAMILY , DECEMBER 2000, $213,264 
CIN: A-07-01-02095 CONRAD - CPA REPORT ON FACP OF BC/BS OF MONTANA, OCTOBER 2001, 
$211,086 
CIN: A-05-96-00052 ORT ASSIST - ANCILLARY COSTS - NW COM. HOSP., JUNE 1997, $206,508 
CIN: A-06-96-00064 ORT SNF RESEARCH AT METHODIST HOSPITAL, JANUARY 1997, $200,000 
CIN: A-04-01-00002 TITLE IV-E FOSTER CARE PMTS-CHILD CARE CLAIMS-NC-2, NOVEMBER 2001, 
$186,282 
CIN: A-03-01-00555 PDPI INC. - HEAD START, JUNE 2001, $185,577 
CIN: A-07-02-03016 TRANSAMERICA SUPPLEMENTAL PENSION PLAN COSTS, MARCH 2002, $180,244 
CIN: A-06-02-69127 ALL INDIAN PUEBLO COUNCIL INC. , DECEMBER 2001, $179,889 
CIN: A-02-00-01020 BCBS OF WESTERN NY (CARMICHAEL & CO., CPA, APRIL 2001, $171,631 
CIN: A-03-98-00034 FREESTATE HP/INSTITUTIONAL STATUS/MEDICARE, MARCH 1999, $156,987 
CIN: A-09-01-00084 VISTA DEL MAR NEPHROLOGY GROUP, NOVEMBER 2001, $151,566 
CIN: A-05-00-00031 CONTRACTED AUDIT OF UGS - MEDICARE ADMIN. COSTS, NOVEMBER 2000, 
$138,182 
CIN: A-09-99-52846  INTER-TRIBAL COUNCIL OF CALIFORNIA INC., FEBRUARY 1999, $136,360 
CIN: A-03-01-00219 NATIONAL ASSOCIATION OF POTECTION & ADVOACY -NAPAS, 
SEPTEMBER 2001, $136,181 
CIN: A-02-98-01002 IPRO CLOSEOUT AUDIT - CPA CONTRACT MONITORING, DECEMBER 1998, 
$135,492 
CIN: A-02-00-01019 HORIZON BCBS LEON SNEAD & CO., CPA, SEPTEMBER 2001, $134,584 
CIN: A-05-00-00060 MEDICA FOLLOW-UP, REIMB. RATES FOR INSTI. BENES, JUNE 2001, $133,795 
CIN: A-06-00-00014 REV OF INFUSION THERAPY CLAIMS @ DOCTORS HEALTHCAR, JUNE 2000, 
$132,238 
CIN: A-04-01-68784 STATE OF SOUTH CAROLINA , JUNE 2001, $129,884 
CIN: A-02-01-04000 INTERIM AUDIT OF RUTGERS CONTRACT NO.SP0103-96-D-, JANUARY 2002, 
$125,415 
CIN: A-02-02-71384 STATE OF NEW YORK , MARCH 2002, $118,773 
CIN: A-09-01-66969 FRESNO INDIAN HEALTH ASSOCIATION INC. , FEBRUARY 2001, $116,607 
75
 Appendix D 
CIN: A-05-97-00023 KAISER FOUNDATION-HMO INSTITUTIONAL STATUS PROJECT, APRIL 1998, 
$116,096 
CIN: A-02-96-02001 INTERNATIONAL RESCUE COMMITTEE - REFUGEE PROGRAM, JANUARY 1998, 
$114,631 (Related recommendation of $90,528 outstanding on Table 2) 
CIN: A-03-99-00003 AETNA-US HEALTHCARE/INSTITUTIONAL STATUS/MEDICARE, JULY 1999, 
$113,993 
CIN: A-02-96-01001 VNS OF NY HOME CARE -ORT/ HHA TARGET, SEPTEMBER 1997, $110,841 
CIN: A-03-01-00001 EASTERN SHORE AMBULANCE CO., AUGUST 2001, $110,417 
CIN: A-01-00-62266 STATE OF MAINE, MARCH 2000, $106,500 
CIN: A-01-01-00527 REVIEW OF MEDICARE OUTLIER PAYMENTS AT RHODE ISLAND HOSPITAL, 
FEBRUARY 2002, $105,686 
CIN: A-02-99-58263 PUERTO RICO OFFICE OF THE GOVERNOR OFFICE OF CHILD, JULY 1999, $101,799 
CIN: A-10-00-61811 STATE OF WASHINGTON, JANUARY 2000, $101,047 
CIN: A-09-01-00080 NEPHROLOGY ASSOCIATES MEDICAL GROUP - RIVERSIDE, NOVEMBER 2001, 
$100,788 
CIN: A-04-01-68839 STATE OF FLORIDA , JUNE 2001, $98,770 
CIN: A-05-00-65775 STATE OF WISCONSIN, SEPTEMBER 2000, $98,586 
CIN: A-07-99-01287 WELLMARK ADMIN COSTS 98, NOVEMBER 1999, $95,990 
CIN: A-09-97-00066 WALTER MCDONALD - INDIRECT COST RATE AUDIT, MARCH 1998, $95,733 
CIN: A-09-01-00096 AUDIT OF VERMONT SLAUSON ECONOMIC DEVELOPMENT CORP. GRANT 
AWARD NUMBER 90EE0153, DECEMBER 2001, $95,560 
CIN: A-09-98-00065 CSBG DISC. GRANT #90EE004901 - LATINO RESOURCES, JANUARY 1999, $95,102 
CIN: A-01-99-00507 NAT-WIDE REF OPNT PSYCH SVC AT ACUTE CARE HOSPITLS, MARCH 2000, 
$94,716 (Related recommendation of $224,466,692 outstanding on Table 2) 
CIN: A-10-97-00003 BCWAAK-ADM COSTS REMOTE NETWORK ACTIVITIES FY93&94, FEBRUARY 
1998, $94,643 
CIN: A-07-95-01164 MEDICARE ADMIN COSTS -GENERAL AMERICAN, DECEMBER 1995, $89,929 
(Related recommendation of $16,632 outstanding on Table 2) 
CIN: A-09-02-69757 VERMONT SLAUSON ECONOMIC DEVELOPMENT CORP. & AFFIL, 
NOVEMBER 2001, $89,581 
CIN: A-06-00-00013 REVIEW OF INFUSION THERAPY CLAIMS @ SPRING CREEK N, JUNE 2000, $89,288 
CIN: A-01-01-00503 REVIEW OF O/P MEDICAL SUPPLIES AT MERCY HOSPITAL, JULY 2001, $88,904 
CIN: A-07-00-00118 REVIEW OF KANSAS RURAL HEALTH CENTER, MAY 2001, $87,493 
CIN: A-08-99-56914 RURAL AMERICA INITIATIVES, JULY 1999, $87,468 
CIN: A-04-01-01006 MBCBS MEDICARE PART A ADMINISTRATIVE COST AUDIT, NOVEMBER 2001, 
$87,042 
CIN: A-05-01-00071 PAYMENTS TO HUMANA-K.C. FOR INSTITUTIONAL BENEFICIARIES, 
DECEMBER 2001, $84,808 
CIN: A-10-01-67562 KENAITZE INDIAN TRIBE , MARCH 2001, $79,533 
CIN: A-04-94-02080 FINALIZATION OF BCBSFL DATA MATCH, JUNE 1995, $79,316 
CIN: A-04-01-02003 REVIEW FLORIDA MEDICAID CLAIMS - IMDS, MARCH 2002, $78,880 
CIN: A-04-96-01137 PARTIC. PART OF HCFA SURV.TEAM - DAYTONA NURSG-ORT, DECEMBER 1996, 
$76,130 
CIN: A-01-99-00530 NATIONWIDE REV OF O/P PSYCH SVCS @ PSYCH HOSPITALS, DECEMBER 2000, 
$75,413 (Related recommendation of $56,936,287 outstanding on Table 2) 
CIN: A-01-00-00503 REVIEW OF MEDICARE OUTLIER PAYMENTS-MASS GENERAL, DECEMBER 2000, 
$73,019 
CIN: A-08-01-68617 OGLALA SIOUX TRIBE , SEPTEMBER 2001, $63,011 
CIN: A-05-99-00045 KAISER HEALTH PLAN OF OHIO - INSTITUTIONAL STATUS, MAY 2000, $61,177 
76
 Appendix D 
CIN: A-05-96-00072 MI DEPT. OF COMMUNITY HEALTH/MEDICAID LAB SERVICES, AUGUST 1997, 
$59,956 
CIN: A-06-01-68876 STATE OF LOUISIANA , JUNE 2001, $59,914 
CIN: A-01-96-00505 CFO AUDIT OF HCFA'S FINANCIAL STATEMENTS, JULY 1997, $59,327 
CIN: A-02-00-62534 CITY OF NEW YORK NEW YORK, JANUARY 2000, $58,309 
CIN: A-05-96-00051 ORT ASSIST-ANCILLARY COSTS-ST JOSEPH, JUNE 1997, $58,008 
CIN: A-09-97-00059 HEALTH SERVICES ADVISORY GROUP, INC PRO-AZ, MAY 1997, $57,925 
CIN: A-08-99-54138 ROSEBUD SIOUX TRIBE, NOVEMBER 1998, $56,223 
CIN: A-04-00-64899 NA - STATE OF TENNESSEE, JULY 2000, $55,129 
CIN: A-07-97-01206 PENSION - WASHINGTON/ALASKA - UNFUNDED, MARCH 1997, $54,000 
CIN: A-06-00-00053 OIG HCFA NEBULIZER PROJECT - NATIONAL ERROR RATE, OCTOBER 2001, 
$52,550 (Related recommendation of $133,960,552 outstanding on Table 2) 
CIN: A-08-00-60687 SOUTH DAKOTA FOUNDATION FOR MEDICAL CARE, NOVEMBER 1999, $52,536 
CIN: A-04-00-01223 REV. MGMT FEES - ONCOLOGY CLINIC-PKWY REGL MEDICAL, OCTOBER 2001, 
$52,000 
CIN: A-05-00-00059 TITLE XIX - MEDICAID ESCHEATED WARRANTS, MARCH 2001, $50,162 
CIN: A-02-02-70019 SENECA NATION OF INDIANS, DECEMBER 2001, $50,083 
CIN: A-09-95-00095 HEALTH SERVICES ADVISORY GROUP, INC (HSAG), DECEMBER 1995, $49,585 
(Related recommendation of $1,389,723 outstanding on Table 2) 
CIN: A-03-93-03306 SURVEY RESEARCH ASSOC. CACS NO1-ES-45067, DECEMBER 1993, $48,779 
CIN: A-09-01-68898 STATE OF ARIZONA , JUNE 2001, $46,237 
CIN: A-07-00-00106 PENSION SEGMENTATION AUDIT AT BCBS OF OKLAHOMA, JULY 2001, $45,508 
CIN: A-09-99-52845 INTER-TRIBAL COUNCIL OF CALIFORNIA INC., FEBRUARY 1999, $43,315 
CIN: A-09-99-57306 PICAYUNE RANCHERIA OF THE CHUKCHANSI INDIAN TRIBE, SEPTEMBER 1999, 
$43,159 
CIN: A-07-01-00121 REV. OF PEN. COSTS FOR MED. REIMB. FOR BCBS OF OK, JULY 2001, $42,463 
CIN: A-03-99-00017 PSU-HERSHEY/PHY CREDIT BALANCES/MEDICARE, DECEMBER 1999, $41,712 
CIN: A-01-01-00507 OUTPATIENT PHARMACY SVCS AT LAWRENCE MEMORIAL HOSP, 
SEPTEMBER 2001, $41,210 
CIN: A-05-00-00017 INDIANA MEDICAID TRANSPORTATION SERVICES, MARCH 2001, $39,735 
CIN: A-02-95-34275 PUERTO RICO DEPT. OF HEALTH, JUNE 1995, $37,515 
CIN: A-03-97-44742 ASSOCIATION OF TEACHERS OF PREVENTIVE MEDICINE INC, FEBRUARY 1998, 
$37,260 
CIN: A-07-98-53295 WINNEBAGO TRIBE OF NEBRASKA, SEPTEMBER 1998, $36,808 
CIN: A-10-00-63008 STATE OF IDAHO, MARCH 2000, $36,800 
CIN: A-08-00-65136 STATE OF SOUTH DAKOTA, JUNE 2000, $36,380 
CIN: A-03-00-00010 PS GEISINGER HMO/INSTITUTIONAL STATUS/MEDICARE, JANUARY 2001, 
$35,639 (Related recommendation of $306,269 outstanding on Table 2) 
CIN: A-02-00-65502 ABYSSINIAN DEVELOPMENT CORP., AUGUST 2000, $34,737 
CIN: A-04-00-60897 STATE OF FLORIDA, MARCH 2000, $33,397 
CIN: A-09-01-00050 BALBOA NEPHROLOGY MEDICAL GROUP, APRIL 2001, $32,568 
CIN: A-03-99-00004 PSU-GEISINGER/PHY CREDIT BALANCES/MEDICARE, DECEMBER 1999, $32,165 
CIN: A-07-97-01199 BCBS NEW MEXICO UNFUNDED PENSION COST, FEBRUARY 1997, $31,372 
CIN: A-05-02-69155 STATE OF WISCONSIN , DECEMBER 2001, $30,900 
CIN: A-04-01-01005 REVIEW DUPLICATE MEDICARE FEE-FOR-SERVICE PAYMENTS AT CAPITAL 
HEALTH PLAN, NOVEMBER 2001, $30,293 
CIN: A-03-00-00209 STATE SURVEY AND CERTIFICATION COSTS - VA, AUGUST 2001, $29,298 
CIN: A-03-98-03301 AAUAP - INCURRED COST REVIEW - HHS 105-95-7011, APRIL 1998, $28,289 
CIN: A-03-00-64076 NATIONAL MEDICAL ASSOCIATION, APRIL 2000, $27,106 
CIN: A-10-02-69837 NATIVE VILLAGE OF TYONEK , DECEMBER 2001, $26,848 
CIN: A-05-00-60452 ST. CROIX CHIPPEWA OF WISCONSIN, DECEMBER 1999, $26,363 
77
 Appendix D 
CIN: A-06-00-00020 REV OF INFUSION THERAPY CLAIMS @ VISTA CONTINUING, JUNE 2000, $25,008 
CIN: A-03-00-00004 GUTHRIE CLINIC/PHYSICIAN CREDIT BALANCES/MEDICARE, DECEMBER 1999, 
$23,759 
CIN: A-06-02-70732 UNITED STATES-MEXICO BORDER HEALTH ASSOCIATION , JANUARY 2002, 
$23,483 
CIN: A-06-02-71744 SENECA-CAYUGA TRIBE OF OKLAHOMA , MARCH 2002, $21,376 
CIN: A-04-00-01206 BCBSNC - MEDICARE PART A ADMIN COST AUDIT - CARMICHAEL, 
SEPTEMBER 2000, $21,302 
CIN: A-05-02-70624 STATE OF OHIO, JANUARY 2002, $19,970 
CIN: A-10-02-70455 STATE OF ALASKA , NOVEMBER 2001, $19,729 
CIN: A-04-01-67441 CATAWBA INDIAN NATION, APRIL 2001, $19,204 
CIN: A-04-97-01163 VIMI MEDICARE PRO CONTRACT AUDIT, SEPTEMBER 1997, $18,758 
CIN: A-03-00-00200 GUTHRIE CLINIC/PHYSICIAN CREDIT BALANCES/MEDICAID, DECEMBER 1999, 
$18,318 
CIN: A-05-93-21928 WRIGHT STATE UNIV., JULY 1993, $18,308 
CIN: A-09-02-68977 AMERICAN INDIAN FAMILY HEALING CENTER, JANUARY 2002, $18,081 
CIN: A-01-00-61896 JEWISH FAMILY SERVICE OF STAMFORD INC., DECEMBER 1999, $18,027 
CIN: A-03-97-00007 NE HEALTH CARE QUALITY FOUNDATION/CCAS/N HAMPSHIRE, MARCH 1997, 
$17,045 
CIN: A-07-00-00117 REV. OF PENSION COSTS FOR MED. REIMB. BC/BS OF ND, JANUARY 2001, $16,863 
CIN: A-01-99-55594 STATE OF VERMONT, NOVEMBER 1998, $16,623 
CIN: A-01-97-44143 BRANDEIS UNIV., JANUARY 1997, $16,602 
CIN: A-06-01-68297 NATIVE AMERICAN CENTER OF RECOVERY INC., MAY 2001, $16,314 
CIN: A-01-02-70440 UNIV. OF MASSACHUSETTS , JANUARY 2002, $16,031 
CIN: A-10-00-59080 NORTON SOUND HEALTH CORP., DECEMBER 1999, $15,000 
CIN: A-03-97-00008 NE HEALTH CARE QUALITY FOUNDATION/CCAS/VERMONT, MARCH 1997, 
$14,596 
CIN: A-08-01-67689 FORT BELKNAP INDIAN COMMUNITY, SEPTEMBER 2001, $14,340 
CIN: A-09-00-00104 PACIFICARE OF CALIFORNIA - INSTITUTIONAL STATUS, MARCH 2001, $14,278 
CIN: A-06-98-54189 CITY OF HOUSTON TEXAS, JULY 1998, $14,146 
CIN: A-09-96-00050 CFO - HCFA 1996, NOVEMBER 1997, $13,924 
CIN: A-10-00-63684 HOH INDIAN TRIBE, APRIL 2000, $13,602 
CIN: A-07-99-57985 STATE OF KANSAS, FEBRUARY 1999, $13,550 
CIN: A-03-98-50338 NATIONAL MEDICAL ASSOCIATION, FEBRUARY 1998, $12,968 
CIN: A-09-00-61853 FRESNO INDIAN HEALTH ASSOCIATION INC., MARCH 2000, $11,963 
CIN: A-03-01-66421 AMERICAN ASSOCIATION OF COMMUNITY COLLEGES, NOVEMBER 2000, 
$11,811 
CIN: A-15-01-20002 CONGRESS HEIGHTS TRAINING CENTER, INC. - FINANCIAL AUDIT ON OMH 
GRANT AWARD, SEPTEMBER 2001, $11,300 
CIN: A-05-01-00070 PAYMENTS TO GHP MCO/ST LOUIS FOR INSTITUTIONAL BENEFICIARIES, 
JANUARY 2002, $11,089 (Related recommendation of $98,698 outstanding on Table 2) 
CIN: A-03-01-00513 IRSA - KOSOVO ASSISTANCE GRANT 90-ZK-0002/01, DECEMBER 2001, $10,913 
CIN: A-07-00-63881 SANTEE SIOUX TRIBE OF NEBRASKA, APRIL 2000, $10,187 
CIN: A-10-97-00002 GROUP HEALTH INSTITUTIONALIZED, NOVEMBER 1997, $9,769 
CIN: A-02-01-66887 PUERTO RICO ADMINISTRATION OF CHILDREN & FAMILIES , FEBRUARY 2001, 
$9,000 
CIN: A-05-01-67360 MICHIGAN FAMILY INDEPENDENCE AGENCY , FEBRUARY 2001, $8,708 
CIN: A-07-97-01231 PROWEST-DOSHI WASHINGTON, JUNE 1997, $8,027 (Related recommendation of 
$163,552 outstanding on Table 2) 
CIN: A-05-00-63666 HO-CHUNK NATION, FEBRUARY 2000, $7,851 
CIN: A-05-01-68270 LAKE COUNTY COMMUNITY ACTION PROJECT, MAY 2001, $7,614 
78
 Appendix D 
CIN: A-03-98-00045 TEMPLE UNIV/PHYSICIAN CREDIT BALANCES/MEDICARE, JULY 1999, $7,280 

CIN: A-01-97-49174 BRANDEIS UNIV., AUGUST 1997, $7,068 

CIN: A-01-00-61715 STATE OF VERMONT, OCTOBER 1999, $6,766 

CIN: A-09-00-58580 TOHONO O ODHAM NATION, NOVEMBER 1999, $6,456 

CIN: A-05-02-70333 STATE OF OHIO, JANUARY 2002, $6,154 

CIN: A-07-95-01167 PENSION COSTS CLAIMED NEBRASKA BC/BS, JANUARY 1996, $6,075 

CIN: A-06-97-48062 SER-JOBS FOR PROGRESS NATIONAL INC., MAY 1997, $5,924 

CIN: A-01-00-60299 INDIAN TOWNSHIP TRIBAL GOVERNMENT PASSAMAQUODDY TR,

JANUARY 2000, $4,597 
CIN: A-04-97-01162 HMSA MARE PRO CONTRACT AUDIT, SEPTEMBER 1997, $3,871 
CIN: A-09-01-00067 EAST BAY NEPHROLOGY MEDICAL GROUP, AUGUST 2001, $3,418 
CIN: A-03-01-03303 JOHNS HOPKINS UNIVERSITY/KPMG/NIDA/N01DA-3-7301, FEBRUARY 2001, 
$3,347 
CIN: A-02-01-01038 EMPIRE BLUE CROSS AND BLUE SHIELD - PARTS A & B (CONRAD & 
ASSOCIATES), FEBRUARY 2002, $3,250 
CIN: A-05-02-69215 ONEIDA TRIBE OF INDIANS OF WISCONSIN, OCTOBER 2001, $3,109 
CIN: A-02-01-66889 PUERTO RICO ADMINISTRATION OF CHILDREN & FAMILIES , FEBRUARY 2001, 
$3,103 
CIN: A-03-95-03318 TRANS-MANAGEMENT SYSTEMS 105-92-1527 (CCO), MAY 1996, $3,016 
CIN: A-02-01-66888 PUERTO RICO ADMINISTRATION OF CHILDREN & FAMILIES , FEBRUARY 2001, 
$2,883 
CIN: A-06-01-00086 DISCRETIONARY GRANT-HUCKLEBERRY HOUSE BASIC CENTER IN CA, 
JANUARY 2002, $2,783 
CIN: A-07-98-02502 CT. BC/BS PENSION COSTS CLAIMED, MARCH 1998, $2,725 
CIN: A-03-98-51505 ALLIEDSIGNAL TECHNICAL SERVICES CORP., APRIL 1998, $2,722 
CIN: A-02-97-49366 SENECA NATION OF INDIANS, SEPTEMBER 1997, $2,655 
CIN: A-01-97-45487 ABT ASSOCIATES INC., JANUARY 1997, $2,596 
CIN: A-08-00-61852 NATIVE AMERICAN SERVICES AGENCY INC., FEBRUARY 2000, $2,575 
CIN: A-03-97-43996 ACTUARIAL RESEARCH CORP., OCTOBER 1996, $2,561 
CIN: A-03-96-44076 ST. PAULS COLLEGE, AUGUST 1996, $2,029 
CIN: A-09-01-00068 ROLLUP REPORT CALIFORNIA INPATIENT HEMODIALYSIS SERVICES, 
MARCH 2002, $1,858 
CIN: A-07-97-01232 PROWEST - DOSHI ALASKA, JUNE 1997, $1,473 (Related recommendation of $21,218 
outstanding on Table 2) 
CIN: A-07-00-02082 REVIEW OF A COST HMO - IOWA, FEBRUARY 2002, $1,006 
4 B. 
The following audits are in litigation: 
CIN: A-05-94-00064 MI BLUE CROSS/BLUE SHIELD, AUDIT OF ADMIN COSTS, JUNE 1996, $15,609,718 
CIN: A-07-96-01176 MEDICARE EXCESS PENSION ASSETS - BC MICH, NOVEMBER 1996, $11,904,263 
CIN: A-05-96-00058 CLOSE-OUT AUDIT OF MEDICARE CONTRACT - BCBS-MI, DECEMBER 1997, 
$5,226,443 
CIN: A-05-93-00013 MI-BLUE CROSS/BLUE SHIELD - CONTRACT MEDICARE AUDIT, APRIL 1993, 
$3,010,916 
CIN: A-07-92-00579 BC/BS OF MICHIGAN INC - UNFUNDED PENSION COSTS, OCTOBER 1992, 
$2,535,698 
CIN: A-05-95-00059 AUDIT OF ADMINISTRATIVE COSTS - BCBS MICHIGAN, JANUARY 1997, 
$1,787,345 
CIN: A-05-93-00057 MI-BLUE CROSS & BLUE SHIELD OF MI - CONTRACT AUDIT, JULY 1993, 
$1,409,954 
CIN: A-05-94-00047 NATIONWIDE INS., MEDICARE PART B ADMIN. COSTS, SEPTEMBER 1995, 
$1,049,309 
79
 Appendix D 
Notes to Table 2 
1The opening balance was adjusted upward by $199 million. 
2Management decision has not been made within 6 months on 25 reports. 
Discussions with management are ongoing and it is expected that the following audits will be resolved by 
the next semiannual reporting period: 
CIN: A-03-00-00203 PA/INTERGOVERNMENTAL TRANSFERS/MEDICAID, FEBRUARY 2001, 
$3,700,000,000 
CIN: A-05-00-00056 MEDICAID INTERGOVERNMENTAL TRANSFERS - IDPA, MARCH 2001, 
$1,870,000,000 
CIN: A-06-00-00023 MEDICAID PHARMACY/PHYSICIAN ACTUAL ACQUISITION COS, AUGUST 2001, 
$1,080,000,000 
CIN: A-10-00-00011 MEDICAID INTERGOVERNMENTAL TRANSFERS - WA STATE, MARCH 2001, 
$475,000,000 
CIN: A-06-01-00069 EVALUATION OF LEGISLATION TO INCREASE MEDICAID HOSP - SPEC DSH 
PYMT LIMITS, DECEMBER 2001, $380,000,000 
CIN: A-04-00-02165 REVIEW OF AL MEDICAID INTERGOVERNMENTAL TRANSFERS, MARCH 2001, 
$147,500,000 
CIN: A-04-00-02169 REV. AL MEDICAID INTERGOVERNMENTAL TRANSFERS-HOSPITAL ENHANCE, 
MAY 2001, $63,000,000 
CIN: A-07-98-02534 EMPIRE BC/BS PENSION PLAN TERMINATION, MARCH 2000, $38,626,351 
CIN: A-04-97-00109 EMERGENCY ASSISTANCE CLAIMS - NC, JULY 1998, $13,000,000 
CIN: A-01-99-00506 FOLLW-UP REVIEW OF SEPRTLY BILLABLE ESRD LAB TESTS, JANUARY 2001, 
$12,200,000 
CIN: A-06-99-00060 REVIEW OF AN HMO UNDERPAYMENT CLAIM OF 21 MILLION, JUNE 2001, 
$12,191,579 
CIN: A-01-00-00502 REV OF EXORBITANT MEDICARE PMTS FOR O/P SVCS, MAY 2001, $12,100,000 
CIN: A-07-96-01177 MEDICARE POST RETIREMENT CLAIM BC MICH, NOVEMBER 1996, $8,978,998 
CIN: A-06-99-00045 MEDICARE LEFT AGAINST MEDICAL ADVICE DISCHARGES, MARCH 2002, 
$6,800,000 
CIN: A-01-97-02506 REVIEW OF THE AVAIL OF MEDICAL COVERAGE/CSE SUPORT, JUNE 1998, 
$5,704,585 
CIN: A-06-00-00073 REV OF MGR CARE ADDTL BENEFITS FOR CY 00 OF NYLCAR, MARCH 2002, 
$4,000,000 
CIN: A-04-98-01188 REVIEW ADMIN. COSTS @ MEDICARE MANAGED RISK PLAN, AUGUST 1999, 
$2,559,357 
CIN: A-05-00-00083 REVIEW OF MEDICAID DME CLAIMS - MICHIGAN, OCTOBER 2001, $2,500,000 
CIN: A-05-01-00031 WI MEDICAID - DME, OCTOBER 2001, $1,250,000 
CIN: A-01-01-01501 REVIEW OF YALE UNIVERSITY SCHOOL OF MEDICINES GCRC, DECEMBER 2001, 
$600,000 
CIN: A-05-00-00057 REVIEW OF MEDICAID MUTUALLY EXCLUSIVE CODES-OH, NOVEMBER 2001, 
$450,000 
CIN: A-05-01-00074 REVIEW OF BID PROPOSAL RFP HCFA-01-0003, JUNE 2001, $282,049 
CIN: A-07-97-01230 OFMQ - DOSHI OKLAHOMA, JUNE 1997, $203,510 
CIN: A-01-97-00526 PSYCHIATRIC OUTPATIENT SERVICES, MARCH 1998, $7,245 
CIN: A-01-98-00506 PSYCHIATRIC OUTPATIENT AT NEWTON-WELLESLEY HOSPITAL, MARCH 1998, 
$1,120 
80
 Appendix E

Reporting Requirements of the Inspector General Act of 1978, as Amended

The specific reporting requirements of the Inspector General Act of 1978, as amended, are listed 
below with reference to the page in the semiannual report on which each is addressed. Where there are no 
data to report under a particular requirement, the word none appears in the column. A complete listing 
of audit and inspection reports is being furnished to the Congress under separate cover. Copies are 
available upon request. 
Section of the Act  Requirement  Page 
Section 4(a)(2)  Review of legislation and regulations  47 
Section 5 
(a)(1)  Significant problems, abuses and deficiencies  Throughout 
(a)(2)  Recommendations with respect to significant problems, 
abuses and deficiencies  Throughout 
(a)(3)  Prior significant recommendations on which corrective 
action has not been completed  Appendices B & C

(a)(4)  Matters referred to prosecutive authorities  48

(a)(5)  Summary of instances where information was refused  None

(a)(6)  List of audit reports  Under separate cover

(a)(7)  Summary of significant reports  Throughout

(a)(8)  Statistical Table 1Reports With Questioned Costs  45

(a)(9)  Statistical Table 2Funds Recommended to Be Put to 
Better Use  46

(a)(10)  Summary of previous audit reports without management 
decisions  Appendix D

(a)(11)  Description and explanation of revised management 
decisions  Appendix D

(a)(12)  Management decisions with which the Inspector 
General is in disagreement  None

81
 82
 Appendix F

Summary of Sanction Authorities

The Inspector General Act of 1978 (Public Law 95-452), as amended, sets forth specific 
requirements for semiannual reports to be made to the Secretary for transmittal to the Congress. 
A selection of other authorities appears below: 
Program Exclusions 
Section 1128 of the Social Security Act (42 U.S.C.  1320a-7) provides several grounds for 
excluding individuals and entities from participation in Medicare, Medicaid and other federal health care 
programs. Exclusions are required for individuals and entities convicted of the following types of 
criminal offenses: 1) Medicare or Medicaid fraud; 2) patient abuse or neglect; 3) felonies for other health 
care fraud; and 4) felonies for illegal manufacture, distribution, prescription or dispensing of controlled 
substances. The OIG has the discretion to exclude individuals and entities on several other grounds, 
including: misdemeanors for other health care fraud (other than Medicare or Medicaid) or for illegal 
manufacture, distribution, prescription or dispensing of controlled substances; suspension or revocation of 
a license to provide health care for reasons bearing on professional competence, professional performance, or 
financial integrity; provision of unnecessary or substandard services; submission of false or fraudulent 
claims to a federal health care program; and engaging in unlawful kickback arrangements. 
Providers who are subject to exclusion are granted due process rights, including a hearing before 
an HHS administrative law judge and appeals to the HHS Departmental Appeals Board and the federal 
district and appellate courts, regarding whether the basis for the exclusion exists and the length of the 
exclusion is reasonable. 
Patient Dumping 
Section 1867 of the Social Security Act (42 U.S.C.  1395dd) provides that when an individual 
presents to the emergency room of a Medicare-participating hospital, the hospital must provide an appro-
priate medical screening examination to determine whether that individual has an emergency medical 
condition. If an individual has such a condition, the hospital must provide either: 1) treatment to stabilize 
the condition; or 2) an appropriate transfer to another medical facility. 
If a transfer is ordered, the transferring hospital must provide stabilizing treatment to minimize 
the risks of transfer and must ensure that the receiving hospital agrees to the transfer and has available 
space and qualified personnel to treat the individual. In addition, the transferring hospital must effect the 
transfer through qualified personnel and transportation equipment. Further, a participating hospital with 
specialized capabilities or facilities may not refuse to accept an appropriate transfer of an individual who 
needs services if the hospital has the capacity to treat the individual. 
The OIG is authorized to collect civil monetary penalties of up to $25,000 against small hospitals 
(less than 100 beds) and up to $50,000 against larger hospitals (100 beds or more) for each instance in 
which the hospital negligently violated any of the section 1867 requirements. In addition, OIG may col-
lect a penalty of up to $50,000 from a responsible physician for each negligent violation of any of the 
section 1867 requirements and, in some circumstances, may exclude a responsible physician. 
83
 Appendix F 
Civil Monetary Penalties Law 
Under the Civil Monetary Penalties Law (CMPL), section 1128A of the Social Security Act, 42 
U.S.C.  1320a-7a, a person is subject to penalties, assessments, and exclusion from participation in 
federal health care programs for engaging in certain activities. For example, a person who submits to a 
federal health care program a claim for items and services that the person knows or should know is false 
or fraudulent is subject to a penalty of up to $10,000 for each item or service falsely or fraudulently 
claimed, an assessment of up to three times the amount falsely or fraudulently claimed, and exclusion. 
For the purposes of the CMPL, should know is defined to mean that the person acted in 
reckless disregard or deliberate ignorance of the truth or falsity of the claim. The CMPL also authorizes 
actions for a variety of other violations, including submission of claims for items or services furnished by 
an excluded person, requests for payment in violation of an assignment agreement, and payment or 
receipt of remuneration in violation of the anti-kickback statute (42 U.S.C.  1320a-7b(b)). The authority 
to bring CMPL cases has been delegated to the Inspector General. 
Anti-Kickback Statute 
The anti-kickback statute authorizes penalties against anyone who knowingly and willfully 
solicits, receives, offers or pays remuneration, in cash or in kind, to induce or in return for 1) referring an 
individual to a person or entity for the furnishing, or arranging for the furn-ishing, of any item or service 
payable under the federal health care programs; or 2) purchasing, leasing or ordering, or arranging for or 
recommending the purchasing, leasing or ordering of any good, facility, service or item payable under the 
federal health care programs. (Section 1128B(b) of the Social Security Act, 42 U.S.C.  1320a-7b) 
Individuals and entities that engage in unlawful referral or kickback schemes may be subject to criminal 
penalties under the general criminal anti-kickback statue, civil monetary penalties under OIGs CMPL 
authority (Section 1128A(a)(7) of the Social Security Act, 42 U.S.C.  1320a-7a) and/or program 
exclusion under OIGs permissive exclusion authority (Section 1128(b)(7) of the Social Security Act, 42 
U.S.C.  1320a-7(b)(7)). 
False Claims Act 
Under the federal civil False Claims Act (FCA), 31 U.S.C.  3729-3733, a person or entity is 
liable for up to treble damages and up to $11,000 for each false claim it knowingly submits or causes to 
be submitted to a federal program. Similarly, a person or entity is liable under the FCA if it knowingly 
makes or uses, or causes to be made or used, a false record or statement to have a false claim paid. The 
FCA defines knowing to include not only the traditional definition, but also instances when the person 
acted in deliberate ignorance of the truth or falsity of the information or in reckless disregard of the truth 
or falsity of the information. Under the FCA, no specific intent to defraud is required. Further, the FCA 
contains a qui tam or whistleblower provision that allows private individuals to file suit on behalf of the 
United States and entitles that whistleblower to a percentage of any fraud recoveries. 
84
 Appendix G

Status of Public Proposals for New and Modified Safe Harbors 

to the Anti-Kickback Statute Pursuant to Section 205 of the 

Health Insurance Portability and Accountability Act of 1996

Pursuant to section 205 of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), 
Public Law 104-191, the Inspector General is required annually to solicit proposals (via Federal Register 
notice) for modifying existing safe harbors to the anti-kickback statute and for developing new safe 
harbors and special fraud alerts. 
In crafting safe harbors for a criminal statute, it is incumbent upon OIG to engage in a complete 
and careful revisitation of the subject area, so as to uncover all potential opportunities for fraud and 
abuse by unscrupulous providers. Having done so, OIG must then determine, in consultation with the 
Department of Justice, whether it can develop regulatory limitations and controls that will permit 
beneficial or innocuous arrangements, while also protecting the federal health care programs and their 
beneficiaries from abusive practices. 
In response to the 2001 annual solicitation, OIG received 22 timely responses containing the 
following proposals related to safe harbors: 
Proposal  OIG Response 
New safe harbor for certain fee-for-service  The OIG is developing a proposed rule on this 
arrangements between federally-qualified health  proposal. 
centers (FQHCs) and other providers, practitioners, 
and suppliers. 
Modification of existing rental and services safe  The OIG is not adopting this suggestion because 
harbors to include per use or per click fees.  arrangements that use per use or similar per click 
fees are often abusive and should be reviewed on a 
case-by-case basis, such as under the advisory opinion 
procedures. 
Modification of the existing safe harbors to conform  The OIG is considering this suggestion with respect to 
them to the final regulations under the physician self- the group practice safe harbor. With respect to other 
referral statute published by CMS on January 4, 2001.  safe harbors, the statutes generally serve somewhat 
different purposes and conforming the safe harbors to 
the self-referral exceptions may not be appropriate. 
The OIG may consider making some conforming 
changes, if appropriate, once the self-referral 
regulations are completed in their entirety. 
New safe harbors analogous to the new self-referral  The OIG is considering this suggestion. 
exceptions created by the CMS regulations (e.g., 
compliance training, incidental benefits, non-monetary 
compensation). 
New safe harbor for isolated transactions matching the  The OIG will consider this suggestion after CMS 
exception in the physician self-referral statute.  issues final self-referral regulations on the subject. 
85
 Appendix G 
New safe harbor for any payment from a faculty  The OIG is not adopting this suggestion because, 
practice plan affiliated with an academic medical  among other concerns, the specific proposal contains 
center to a faculty member for clinical practice  no fair market value limitation. 
services. 
New safe harbor for academic medical center  The OIG is not adopting this suggestion, as 
arrangements that would protect both compensation  the specific proposal is vague and lacks 
and ownership relationships within an academic  adequate safeguards. 
medical center. 
Modification of the existing shared risk exception to  The OIG is considering this suggestion. 
cover second tier contractors of FQHCs. 
Modification of the safe harbor for ambulatory surgical  The OIG is considering this suggestion. 
centers (ASCs) jointly owned by hospitals and 
physicians to add conditions under which a hospital 
would not be in a position to make or influence 
referrals. 
Modification of the ASC safe harbor to add an  The OIG is not adopting the proposed alternative test 
alternative to the 1/3-1/3 tests for referrals consisting  because it would protect investments by physicians for 
exclusively of personally performed services.  whom the ASC is not an extension of their offices, but 
who would nevertheless share in the technical 
components of services. Such arrangements are 
subject to abuse and should be evaluated on a case-by-
case basis, such as under the advisory opinion 
procedures. 
Modification of the ASC safe harbor to clarify whether  The OIG is considering the first of these suggestions. 
an ASC can require: 1) investors to comply with safe  The second suggestion is inconsistent with the anti-
harbor conditions and 2) a retiring physician to divest  kickback statute and poses a risk of abuse. Specific 
his or her interest.  cases should be evaluated on a case-by-case basis, such 
as under the advisory opinion procedures. 
Modification of the ASC safe harbor to protect an  The OIG is not adopting this suggestion, as it would 
otherwise qualifying physician investor even if certain  create an unclear rule that would be impractical from 
other investors (e.g., employees or anesthesiologists)  both a compliance and an enforcement perspective. 
are not protected. 
Modification of the ASC safe harbor to permit  The OIG is not adopting this suggestion. In the 
investments by multi-specialty group practices that  arrangements described, referral-source physicians 
include physicians who do not perform ASC services.  receive direct or indirect compensation for their ASC 
referrals. Such arrangements are subject to abuse and 
should be addressed on a case-by-case basis, such as 
under the advisory opinion procedures. 
Modification of the ASC safe harbor to allow  The OIG is not adopting this suggestion, as there is a 
separately billed ancillary services or, alternatively, to  substantial risk of abuse when physicians own interests 
incorporate the new physician self-referral exceptions  in ancillary services. The ASC ventures involving 
for implants, contact lenses, and integral radiology.  ancillary services should be addressed on a case-by-
case basis, such as under the advisory opinion 
procedures. 
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 Appendix G 
Modification of the ASC safe harbor to clarify  The OIG is considering these suggestions. 
1) the use of pass-through entities to hold ownership 
interests and 2) the treatment of physician investors 
who invest at different times. 
New safe harbor for fees charged by internet providers  The OIG is not adopting this suggestion. Given the 
of directory, connectivity, and referral services.  range and evolution of potential internet arrangements, 
it would be impracticable to craft appropriate safe-
guards. Moreover, some arrangements pose a risk of 
abuse. Internet arrangements are best addressed on a 
case-by-case basis (such as under the advisory opinion 
procedures) under traditional anti-kickback principles. 
New safe harbor for home health case finding  The OIG is not adopting this suggestion, because 
activities conducted by certain entities through  home health case finding activities pose a risk of 
physician practice preferred provider networks.  abuse under the anti-kickback statute. 
New safe harbor for rural health networks operating  The OIG is considering this suggestion. 
pursuant to the Medicare Rural Hospital Flexibility 
Program. 
New safe harbor for arrangements that comply with  The OIG is considering this suggestion. 
section 513 of the IRS Code pertaining to the provision 
of certain supporting goods and services by tax-exempt 
hospitals to other tax-exempt hospitals. 
New safe harbor for loans made by financing affiliates  The OIG is not adopting this suggestion, because the 
formed by manufacturers and distributors, if the loans  lending arrangements described in the proposal could 
are at fair market value with commercially reasonable  be subject to abuse and should be addressed on a case-
rates and terms.  by-case basis, such as under the advisory opinion 
procedures. It would be difficult in a safe harbor to 
specify the parameters of commercially reasonably 
rates and terms in a manner that would result in an 
appropriate safe harbor. 
New safe harbors for a variety of pharmaceutical  The OIG will not adopt these suggestions. The 
company arrangements, including: 1) payments by  practices addressed are potentially abusive under the 
manufacturers to PBMs analogous to the GPO safe  anti-kickback statute and should be addressed on a 
harbor; 2) the purchase of data and related services  case-by-case basis, such as under the advisory opinion 
from PBMs, MCOs, and similar organizations;  procedures. 
3) commission sales arrangements; 4) payments by 
manufacturers to providers for phase 1, 2, 3, and 4 
research studies; 5) disease management and patient 
compliance programs; 6) pharmaceutical sample 
programs; and 7) pharmaceutical coupon programs. 
Modification of the shared risk safe harbor to clarify its  The OIG is not adopting this suggestion. This proposal 
application to manufacturers, PBMs, and MCOs that  was considered and declined by the negotiated rule-
may not buy or receive products directly from the  making committee that established the shared risk safe 
manufacturers.  harbor. 
Modification of the discount safe harbor to clarify its  This suggestion requires further study. 
application to discounts applied to a manufacturers 
full product line. 
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 Appendix G 
Modification of the discount safe harbors reporting  This suggestion requires further study. 
requirements. 
New safe harbor based on rule of reason.  The OIG is not adopting this suggestion as it is vague, 
overly-broad, and contrary to the one purpose test. 
In addition to the proposals in the preceding table (some of which duplicate proposals from past 
years), OIG has had under consideration the following suggestions from prior years: 
Proposal  OIG Response 
New safe harbor for de minimis gifts to beneficiaries  The OIG is considering this suggestion. 
who refer new customers. 
New safe harbor for investments made by potential  The OIG is not adopting this suggestion as it would be 
recipients of referrals in an investment entity that is a  impracticable to develop appropriate safe harbor 
source of referrals.  conditions. These investment arrangements are best 
reviewed on a case-by-case basis, such as under the 
advisory opinion procedures. 
Modification of the existing safe harbors that rely on  The OIG is not adopting this suggestion because the 
Health Professional Shortage Area (HPSA) desig- OIG has been unable to identify a clear, measurable, 
nations with alternate measures of under-served areas.  and objective alternative designation. 
Modification of the GPO safe harbor to restrict fees.  The OIG is not adopting this suggestion as the OIG 
does not have authority to narrow the scope of the 
statutory exception absent a legislative amendment. 
Modification of the safe harbors generally to exclude  The OIG is not adopting this suggestion as it is 
from protection business arrangements involving  impracticable in the context of the overall safe harbor 
parties previously sanctioned by Medicare or  regulations. In many cases, such arrangements are 
Medicaid.  effectively barred under the exclusion authorities. 
New safe harbor for referrals of eyeglasses and contact  The OIG is not adopting this suggestion because the 
lenses sold by optical stores and for intraocular lenses  arrangements described pose a risk of abuse under the 
furnished during surgical procedures.  anti-kickback statute and should be evaluated on a 
case-by-case basis, such as under the advisory opinion 
procedures. 
New safe harbor for arrangements with independent  The OIG is not adopting this suggestion because the 
sales representatives and sales service companies that  arrangements described pose a risk of abuse under the 
use an employed sales force to sell another companys  anti-kickback statute and should be evaluated on a 
products.  case-by-case basis, such as under the advisory opinion 
procedures. 
New safe harbor for continuing education programs  The OIG is not adopting this suggestion because the 
sponsored by manufacturers, commercial laboratories,  arrangements described pose a risk of abuse under the 
and other providers for facilities and practitioners with  anti-kickback statute and should be evaluated on a 
which they have referral relationships.  case-by-case basis, such as under the advisory opinion 
procedures. 
88
 Appendix G 
New safe harbor for payments between related entities,  The OIG is not adopting this suggestion because the 
including parent companies and wholly owned  arrangements described pose a risk of abuse under the 
subsidiaries.  anti-kickback statute and should be evaluated on a 
case-by-case basis, such as under the advisory opinion 
procedures. 
New safe harbor for marketing of Medicare managed  The OIG is not adopting this suggestion as it is 
care plans by independent insurance underwriters.  unnecessary given existing CMS rules governing 
marketing of managed care plans. 
New safe harbor for flat rate fees charged to Medicare  The OIG is not adopting this suggestion as it is 
patients for outpatient surgeries.  unnecessary given implementation of the outpatient 
prospective payment system. 
89
 90
 Appendix H 
Performance Measure 
Performance measures are used to evaluate the achievement of a program goal, such as the 
efficiency of an immunization program measured by the number of inoculations provided per dollar of 
cost. The OIG has identified some items throughout this report as performance measures by placing the 
symbols    following the items. In OIGs opinion, the audits, inspections and investigations identified 
with the performance measure symbol offer management information about whether some aspect or all of 
the programs or activities reviewed are achieving their missions and goals. These proposals are provided 
to management for their consideration as they develop their performance measures. 
The following reports warrant the performance measure symbols: 
Clinical Trial Web Sites

FY 2001 Financial Statement Audits

Recruiting and Retaining Foster Parents

Insurance Intercept Program

FY 2001 Financial Statement Audit: Administration on Aging

Results Act

FY 2001 Financial Statement Audit: Program Support Center

91
 92
  Office of Inspector General Components 
Office of Audit Services (OAS)provides all auditing services for HHS, either through its 
own resources or by overseeing audit work of others. Audits examine the performance of 
HHS programs and/or its grantees and contractors in carrying out their respective responsibilities 
and are intended to provide independent assessments of HHS programs and operations in 
order to reduce waste, abuse and mismanagement and to promote economy and efficiency 
throughout the Department. 
Office of Counsel to the Inspector General (OCIG)provides legal services to OIG, 
rendering advice and opinions on HHS programs and operations, imposes program exclusions 
and civil monetary penalties on health care providers and litigates those actions within the 
Department. The OCIG also represents OIG in the global settlement of cases arising under the 
Civil False Claims Act, develops and monitors corporate integrity agreements, develops compliance 
program guidances, and renders advisory opinions on sanctions to the health care community. 
Office of Evaluation & Inspections (OEI)conducts short-term management and program 
evaluations that focus on issues of concern to the Department, the Congress and the public. 
The OEI generally focuses on programs with significant expenditures of funds and services to 
program beneficiaries or in which important management issues have surfaced. The findings 
and recommendations contained in the reports generate rapid, accurate, and up-to-date 
information on the efficiency, vulnerability and effectiveness of departmental programs. 
Office of Investigations (OI)conducts criminal, civil and administrative investigations of 
allegations of wrongdoing in HHS programs or to HHS beneficiaries and of unjust enrichment by 
providers. Investigative efforts lead to criminal convictions, administrative sanctions or civil 
monetary penalties. The OI serves as liaison to the Department of Justice on all matters relating to 
investigations of HHS programs and personnel. The OI also oversees State Medicaid fraud 
control units which investigate and prosecute fraud and patient abuse in the Medicaid program. 
Office of Management and Policy (OMP)provides mission support services to the IG and 
other components. The OMP formulates and executes the budget, develops policy, disseminates 
OIG information to the news media and public, liaises with the Department, Congress, and 
external organizations and manages information technology resources. The OMP also conducts 
and coordinates reviews of existing and proposed legislation and regulations to assess 
implications and economic consequences for HHS programs and operations. 
93