U.S. Department of Health and Human Services 
Office of Inspector General 
Semiannual
 
Report
to 
 
Congress
  
October 1, 2013  March 31, 2014 
 
O  
IG   
 
   
  OIG Organization 
 
The Department of Health and Human Services (HHS) Office of Inspector General (OIG) employs about 
1,500 professional staff members who are deployed throughout the Nation in regional and field offices 
and in Washington, DC, headquarters.  We collaborate with HHS and its operating and staff divisions, the 
Department of Justice (DOJ) and other executive branch agencies, Congress, and States to bring about 
systemic changes, successful prosecutions, negotiated settlements, and recovery of funds.  Following are 
descriptions of our mission-based components.  The components are supported by the Immediate Office 
of the Inspector General and the Office of Management and Policy. 
The Office of Audit Services (OAS) provides auditing services for HHS, either by 
 
S conducting audits with its own audit resources or by overseeing audit work done by 
others.  Audits examine the performance of HHS programs and/or its grantees and 
A
contractors in carrying out their respective responsibilities and are intended to 
provide independent assessments of HHS programs and operations.  These 
O
assessments help reduce waste, abuse, and mismanagement and promote economy 
and efficiency throughout HHS. 
  The Office of Evaluation and Inspections (OEI) conducts national evaluations to 
I
provide HHS, Congress, and the public with timely, useful, and reliable information on 
E
significant issues.  These evaluations focus on preventing fraud, waste, and abuse and 
O promoting economy, efficiency, and effectiveness in HHS programs.  OEI reports also 
present practical recommendations for improving program operations. 
The Office of Investigations (OI) conducts criminal, civil, and administrative 
  investigations of fraud and misconduct related to HHS programs, operations, and 
I beneficiaries.  With investigators working in almost every State and the District of 
O
Columbia, OI actively coordinates with DOJ and other Federal, State, and local law 
enforcement authorities.  The investigative efforts of OI often lead to criminal 
convictions, administrative sanctions, or CMPs. 
The Office of Counsel to the Inspector General (OCIG) provides general legal services 
 
to OIG, rendering advice and opinions on HHS programs and operations and providing 
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all legal support for OIGs internal operations.  OCIG represents OIG in all civil and 
administrative fraud and abuse cases involving HHS programs, including False Claims 
I
C Act, program exclusion, and CMP cases.  In connection with these cases, OCIG also 
negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
O opinions, issues compliance program guidance, publishes fraud alerts, and provides 
other guidance to the health care industry concerning the antikickback statute and 
other OIG enforcement authorities. 
  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014   
 
 
A Message From 
 
tThhis Seem iIannnusalp Reepocrt ttoo Corng rGesse, snubmeittreda pulr suant to the Inspector 
 
General Act of 1978, as amended, summarizes the activities of the Office of 
Daniel R. Levinson 
Inspector General (OIG), Department of Health and Human Services (HHS), for  Inspector General 
the 6-month period that ended March 31, 2014.   
During this reporting period, OIG ramped up its o versight of the Departments efforts to implement the 
Affordable Care Act, including the Health Insurance Marketplaces.  OIG has a substantial body of work 
underway focusing on core risk areas associated with the Marketplaces, such as eligibility systems, 
payment accuracy, contractor oversight, and data security.  We have completed significant aspects of 
data collection for some audits and evaluations, and resulting reports will offer recommendations to 
address vulnerabilities and better ensure Marketplaces operate efficiently and effectively.  During this 
reporting period, which covered the Marketplace open enrollment period, OIG coordinated closely with 
Federal and State law enforcement partners to monitor the Marketplaces for fraud against consumers.  
OIGs commitment to ensuring the appropriate use of prescription drugs by Medicare and Medicaid 
beneficiaries continues.  The misuse of prescription drugs has significant financial, safety, and quality of 
care consequences for the programs and patients.  OIGs investigative results during this reporting period 
included the sentencing of a radiologic technician and drug addict who stole painkillers prepared for 
patients awaiting cardiac catheterizations.  Court documents showed that the technician, who was 
infected by the potentially fatal virus hepatitis C, took syringes prefilled with the painkiller, injected 
himself, then refilled the syringes with saline, which was then administered unknowingly by nurses to 
patients using the tainted syringes.  At least 45 patients were infected with the virus.  Work highlighted 
in this report includes other significant cases of drug overutilization, fraud, and abuse that resulted in 
criminal or civil prosecutions in State and Federal courts and Federal health care program exclusions of 
individuals and entities; such cases play a vital role in protecting HHS programs and beneficiaries.   
Our reports continue to identify vulnerabilities in, and recommendations for improving, the Centers for 
Medicare & Medicaid Services (CMS) oversight of the contractors that administer more than a half 
trillion dollars in benefits each year.  Reports generated during this reporting cycle identified Medicare 
Administrative Contractor performance shortcomings and highlighted issues that limit CMSs ability to 
effectively oversee Part C and Part D contractors.  Many CMS contractors rely on medical records to 
conduct work aimed at ensuring program integrity, yet a new OIG report raises concerns about 
contractors ability to identify improper payments and fraud using electronic medical records.  Our 
reports offer recommendations to improve contractor performance and CMS oversight. 
Grants oversight and management is a significant challenge facing the Department.  For example, since 
2012 we have performed a series of reviews of States efforts to administer and implement the Child 
Care and Development Block Grant, which provides financial assistance for child care for approximately 
1.6 million children each month.  New OIG work highlighted in this semiannual report focuses on 
challenges related to monitoring the health and safety of children served by these block grants to ensure 
that grant funds are used effectively to improve the availability, quality, and affordability of child care.    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014   
 
 
 
Since its 1976 establishment, OIG has worked diligently with its partners to fight waste, fraud, and abuse 
in Medicare and more than 300 other HHS programs.  Moreover, our partnership with other Federal, 
State, and local law enforcement entities as part of the Health Care Fraud Prevention and Action Team 
(HEAT) continues to produce strong results.  I would once again like to express my appreciation to 
Congress and to the Department for their sustained commitment toward improving the efficiency and 
effectiveness of HHS programs.   
 
Daniel R. Levinson 
Inspector General  
 
 
  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page i 
 
 
The Department of Health and Human Services (HHS) Office of Inspector General (OIG) 
Semiannual Report to Congress (Semiannual Report) describes significant problems, abuses, deficiencies, 
Highlights 
and investigative outcomes relating to the administration of HHS programs and operations that were 
disclosed during the reporting period.  This edition addresses work completed during the first half of 
fiscal year (FY) 2014 (October  March) and summarizes key accomplishments during the period.   
Accomplishments 
 
In the first half of FY 2014, OIG reported expected recoveries of more than $3.1 billion consisting of 
nearly $295 million in audit receivables and about $2.83 billion in investigative receivables, which 
include about $813.7 million in non-HHS investigative receivables resulting from our work in areas such 
as the States shares of Medicaid restitution.   
OIG reported 465 criminal actions against individuals or entities that engaged in crimes against HHS 
programs; and 266 civil actions, which include false claims and unjust-enrichment lawsuits filed in 
Federal district court, civil monetary penalties (CMP) settlements, and administrative recoveries related 
to provider self-disclosure matters.  We also reported exclusions of 1,720 individuals and entities from 
participation in Federal health care programs; 
Medicare Fraud Strike Force accomplishments 
 
The Health Care Fraud Prevention and Enforcement Action Team (HEAT) was started in 2009 by HHS and 
the Department of Justice (DOJ) to strengthen programs and invest in new resources and technologies to 
prevent and combat health care fraud, waste, and abuse.  HEAT has continued with increasing 
momentum to identify and hold accountable those who seek to defraud Medicare and Medicaid. 
Medicare Fraud Strike Force teams coordinate law enforcement operations conducted jointly by Federal, 
State, and local law enforcement entities.  The teams, now a key component of HEAT, have a record of 
successfully analyzing data to quickly identify and prosecute fraud.  The Strike Force began in 
March 2007 and is operating in nine major cities.  During this semiannual period, Strike Force efforts 
resulted in the filing of charges against 94 individuals or entities, 107 criminal actions, and $294.1 million 
in investigative receivables.  The effectiveness of the Strike Force model is enhanced by interagency 
collaboration.  For example, we refer credible allegations of fraud to the Centers for Medicare 
& Medicaid Services (CMS) so that it can suspend payments to the suspected perpetrators, thereby 
immediately preventing losses from claims submitted by Strike Force targets.   
Strike Force case exampleUnnecessary services, therapy, and tests   
New York  Irina Shelikhova managed the daily operations of three medical clinics.  According to the 
indictment, the clinics submitted over $71 million in false claims to Medicare, for which Medicare 
reimbursed approximately $47 million.  Shelikhova and her co-conspirators paid cash kickbacks to 
Medicare beneficiaries in return for receiving unnecessary physicians services, physical therapy, and  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page ii 
 
 
diagnostic tests at the clinics.  Shelikhova hired a medically unlicensed co-defendant to impersonate a 
physician and render phony medical care to such patients and she directed employees to create fake 
medical notes and to forge physicians names on prescriptions and charts.  Shelikhova, who was listed on 
HHS OIGs Most Wanted Fugitives web site until her capture in 2012, was sentenced to 15 years in prison 
and ordered to pay $50.9 million in restitution, joint and several, for her involvement in the scheme.  
Shelikhova will face deportation from the United States at the conclusion of her prison term.  A 
co-conspirator was sentenced to 2-and-a-half years in prison and was ordered to pay $9.1 million in 
restitution, joint and several.  Other co-conspirators were previously sentenced to a combined 22 years 
and 7 months in prison and ordered to pay more than $60 million in restitution, joint and several.  
Prescription drug issues 
 
Medicare and Medicaid are major payers for prescription drugs.  Our investigations and reviews find 
vulnerabilities at many levels, including pharmaceutical manufacturer noncompliance, retail pharmacy 
and prescriber schemes, and flawed reimbursement methodologies. 
Allegations of promoting the sale of drugs for unapproved uses 
Pennsylvania  In one of the largest health care fraud settlements in U.S. history, Johnson & Johnson 
(J&J) and its subsidiaries agreed to pay more than $2.2 billion to resolve criminal and civil allegations 
relating to the prescription drugs Risperdal, Invega, and Natrecor.  The allegations included promoting 
the drugs for uses not approved as safe and effective by the FDA and paying kickbacks to physicians and 
to the nations largest long-term care pharmacy provider, Omnicare, Inc.  According to court documents, 
sales representatives allegedly urged physicians and other prescribers who treated elderly dementia 
patients to prescribe the drug Risperdal to treat symptoms of anxiety, agitation, depression, hostility, 
and confusion.  Written sales aids emphasized symptoms and minimized any mention of the FDA-
approved use, which was for the treatment of schizophrenia.  The company also provided incentives for 
off-label promotion and intended use by basing sales representatives bonuses on total sales in their 
respective sales areas of Risperdal, not just the sales for FDA-approved uses.  J&J entered into a 
corporate integrity agreement (CIA) with OIG that includes provisions designed to promote 
accountability and transparency. 
Multi-million dollar conspiracyillegal prescriptions and drug trafficking 
Pennsylvania  During this semiannual period, 51 defendants were sentenced for their participation in a 
multi-million-dollar drug conspiracy involving illegal prescriptions, pseudo-patients, and multiple drug 
trafficking organizations.  According to court records, pseudo patients were transported by the vanload 
to a medical practice to obtain prescriptions for oxycodone-based products.  The pseudo patients paid 
cash for the office visits; used their Medicare, Medicaid, or private insurance cards and cash to pay for 
the filled prescriptions at various pharmacies; and, in exchange for payments, provided the filled 
prescriptions to members of six separate drug trafficking organizations to be resold on the street.  Thus 
far, a total of 61 defendants have been sentenced to a combined 253 years in prison.  
Pill mill operationPhysician Kermit Gosnell 
Pennsylvania  According to the indictment, Physician Kermit Gosnell and his co-conspirators allegedly 
ran a pill mill out of Womens Medical Society.  His customers, often referred to as drug seekers,  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page iii 
 
 
purchased prescriptions for controlled prescription drugs without any legitimate medical purpose.  
Investigators believe that Gosnell used his practice to distribute over 500,000 pills containing oxycodone, 
400,000 pills containing alprazolam, and over 19,000 ounces of cough syrup containing codeine.  Many 
of the illegal prescriptions were paid for by Pennsylvania Medicaid, Medicare Part D, and other insurers.  
Gosnell was sentenced to 30 years in prison and ordered to forfeit approximately $200,000 and pay a 
$50,000 fine. 
Injections tainted with Hepatitis C virus 
New Hampshire  David Kwiatkowski was a radiologic technician who was employed at 15 health care 
facilities in eight states.  According to court documents, while employed at Hays Medical Center in 
Kansas in June 2010, Kwiatkowski became aware that he was infected with Hepatitis C.  Notwithstanding 
that knowledge, Kwiatkowski injected himself with syringes of the anesthetic fentanyl, which were 
intended for patients who were undergoing medical procedures.  He added saline to the same syringes, 
which were then administered unknowingly by nurses to the patients.  Consequently, instead of 
receiving the prescribed dose of fentanyl, the patients received saline that was tainted with the Hepatitis 
C virus.  Kwiatkowski repeated this pattern of behavior at other hospitals where he worked, which led to 
at least 45 patients becoming infected with Hepatitis C.  Some of these patients experienced very 
serious health complications, including one death in which Hepatitis C was a contributing factor.  
Kwiatkowski was sentenced to 39 years in prison and ordered to pay $22,680 in restitution after pleading 
guilty to charges of tampering with a consumer product and fraudulently obtaining controlled 
substances. 
Physician administered drugsHerceptin 
We reported that 77 percent of payments that Medicare contractors made to providers for full vials of 
Herceptin were incorrect and included overpayments of about $24.2 million, or more than one-third of 
total dollars reviewed. Herceptin (trastuzumab) is a Medicare-covered drug used to treat breast cancer 
that has spread to other parts of the body.  Herceptin is one of many drugs packaged in multiuse vials. 
Therefore, the problem of provider billing for full vials may exist with other such drugs.  On nearly all of 
the incorrect line items, the providers reported the units of service for the entire content of 1 or more 
vial(s), each containing 440 milligrams of Herceptin, rather than reporting the units of service for the 
amount actually administered.  A-05-13-00024. 
Oversight of contractors and information systems 
 
CMS relies on contractors to administer the Medicare program and is responsible for overseeing the 
contractors performance.  Medicare contractors are responsible for administering more than a half 
trillion dollars in benefits each year.  MACs process Parts A and B claims; Medicare Advantage (MA) plans 
provide managed care services under Part C; Part D plans provide prescription drug coverage under 
Part D; and various benefit integrity contractors serve to protect Medicare from fraud, waste, and abuse.  
CMS also oversees contractors information systems to ensure they perform as intended. 
Contractor performance and quality assurance 
Given the billions of dollars awarded to MACs and the critical role they play in administering the 
Medicare program, effective oversight of MACs performance is important to ensure that they are  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page iv 
 
 
adequately processing claims and performing other assigned tasks.  We found that Medicare 
Administrative contractors (MACs) did not meet one-quarter of the quality assurance standards 
reviewed and MACs had not resolved issues with 27 percent of these unmet standards as of June 2012.  
MAC standards have stringent performance requirements; a number of standards require 100-percent 
performance compliance.  CMS did not require action plans for 12 percent of unmet standards, and 
unmet standards without action plans were almost four times more likely to have issues that go 
unresolved.  OEI-03-11-00740. 
CMSs use of data for oversight of Medicare Part C contractors. 
We reported that CMS regularly reviews data that Medicare Advantage (MA) organizations submit 
pursuant to Part C reporting requirements, but its followup and uses of the data are limited.  CMS has 
collected such data from MA organizations since 2009.  The data are intended to serve as a resource for 
CMS to conduct oversight.  OEI-03-11-00720. 
Part D sponsor reporting of fraud and abuse data 
We reported that more than half of Part D sponsors did not voluntarily report data on potential fraud 
and abuse.  CMS requires sponsors to conduct inquiries and implement corrective actions in response to 
incidents of potential fraud and abuse; however, 28 percent of Part D plan sponsors reported performing 
none of these actions between 2010 and 2012.  Of those sponsors that did report data, more than 
one-third did not identify any incidents for at least one of their reporting years.  Although CMS said that 
it conducted basic summary analyses of the sponsor-submitted data, it did not perform quality 
assurance checks on the data or use them to monitor or oversee the Part D program.  OEI-03-13-00030. 
Electronic health records vulnerabilities and safeguards 
Vulnerabilities.  We reported that although electronic health records (EHR) technology may make it 
easier to commit fraud, CMS and its contractors have not adjusted their practices for identifying and 
investigating fraud in EHRs.  Few contractors reviewed EHRs differently from paper medical records.  
Also, not all contractors reported being able to identify copied language or overdocumentation in 
medical records.  Finally, CMS had provided limited guidance to Medicare contractors on EHR fraud 
vulnerabilities.  OEI-01-11-00571. 
Safeguards.  We determined the extent to which hospitals that received EHR Medicare incentive 
payments had implemented the recommended fraud safeguards.  Findings included that only about one 
quarter of hospitals had policies on the use of the copy-paste feature in EHR technology, which, if used 
improperly, could pose a fraud vulnerability.  OEI-01-11-00570. 
State Medicaid information systems vulnerabilities 
We identified 79 findings in the 10 State Medicaid agencies whose information system general controls 
we audited between calendar years 2010 and 2012.  Some primary objectives of general controls are to 
safeguard data, protect computer applications, prevent unauthorized access to system software, and 
ensure continued computer operations after unexpected interruptions.  In some of the general control 
areas, we noted findings with similar vulnerabilities in different State agencies, which indicated that the 
vulnerabilities identified in these findings were systemic and pervasive.  State officials pointed most 
frequently to resource constraints that made information system security a lower priority.  Officials also  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page v 
 
 
described a lack of formal policies and procedures when explaining the causes of the vulnerabilities.  
A-07-14-00433. 
Other Medicare and Medicaid reviews 
 
Medicare Part A helps cover certain inpatient services, such as those provided in hospitals and skilled 
nursing facilities and some home health services.  Part B helps cover certain other medical services, 
equipment, supplies, and drugs that Part A does not cover.  Health care providers and suppliers bill 
Medicare for reimbursement.  For the Medicaid program, States have considerable flexibility in designing 
and operating their programs; however, to receive a Federal share of Medicaid costs, applicable State 
and Federal requirements must be met.  Health care providers and suppliers are paid by the States.  The 
States then report the amounts to CMS to receive the Federal share.   
Payments on behalf of unlawfully present, incarcerated, and deceased beneficiaries 
Unlawfully present beneficiaries.  We identified $91.6 million in improper payments to unlawfully 
present beneficiaries in Part B during CYs 2009 through 2011.  When CMS received untimely information 
indicating that unlawful presence overlapped with the dates of service on previously paid Medicare 
claims, CMS did not notify Medicares contractors of this updated information, and the contractors did 
not detect and recoup improper payments.  For the same period, we estimated $29 million in gross drug 
costs associated with unlawfully present beneficiaries in Part D.  A-07-12-06038. 
Incarcerated beneficiaries.  We identified nearly $33.6 million in uncollected improper payments on 
behalf of incarcerated beneficiaries in Part A and Part B during CYs 2009 through 2011.  With certain 
exceptions, prisons (instead of Medicare) pay for the health care of incarcerated beneficiaries who are 
otherwise eligible for Medicare.  CMS does not always receive timely updates regarding incarceration 
information before Medicare contractors pay providers on behalf of incarcerated beneficiaries.  Similarly, 
we estimated that more than $11.6 million in gross drug costs were associated with incarcerated 
beneficiaries in Part D for CYs 2006 through 2010.  A-07-12-06035.   
Deceased beneficiaries.  Prior OIG studies and audit reports have identified Medicare payments made on 
behalf of deceased beneficiaries.  Although CMS has safeguards to prevent and recover Medicare 
payments made on behalf of deceased beneficiaries, it inappropriately paid $23 million in 2011 for dates 
of service after beneficiaries deaths.  Part C accounted for 86 percent of the improper payments. 
Additionally, 11 percent of the improper payments resulted from the fact that dates of death were 
missing or incorrect.  Further, we identified 251 providers and suppliers that had high numbers of paid 
and/or unpaid Part B claims with service dates after beneficiaries deaths.  OEI-04-12-00130. 
HospitalsInpatient payment policies:  DRG Window 
Expanding the window of time covered by Medicares lump sum payments for inpatient care would 
result in cost savings.  We reviewed outpatient services that the admitting hospitals provided during the 
11 days prior to the existing window and found that in 2011, Medicare and its beneficiaries paid an 
estimated $263 million for such services.  OIG has previously recommended expanding the window, but 
CMS has not sought authority to do so.  OEI-05-12-00480.  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page vi 
 
 
Nursing homesHarm to patients and questionable resident hospitalizations 
Nursing home harm to patients.  We reported that an estimated 22 percent of Medicare beneficiaries 
experienced adverse events during skilled nursing facility (SNF) stays.  An additional 11 percent 
experienced temporary harm events during SNF stays.  Physician reviewers determined that 59 percent 
of the adverse events and temporary harm events were clearly or likely preventable. They attributed 
much of the preventable harm to substandard treatment, inadequate resident monitoring, and failure or 
delay of necessary care.  Over half of the residents who experienced harm returned to a hospital for 
treatment, with an estimated cost to Medicare of $208 million in August 2011.  This equates to 
$2.8 billion spent on hospital treatment for harm caused in SNFs in FY 2011.  Because many of the events 
that we identified were preventable, our study confirms the need and opportunity for SNFs to 
significantly reduce the incidence of resident harm events.  OEI-06-11-00370. 
Nursing home resident hospitalization rates.  We reported that in FY 2011, nursing homes transferred 
one-quarter of their Medicare residents to hospitals for inpatient admissions, and Medicare spent 
$14.3 billion on these hospitalizations. Nursing home residents went to hospitals for a wide range of 
conditions, with septicemia the most common.  Annual rates of Medicare resident hospitalizations 
varied widely across nursing homes.  Hospitalizations are costly to Medicare, and research indicates that 
transfers between settings increase the risk of residents experiencing harm and other negative care 
outcomes.  High rates of hospitalizations by individual nursing homes could signal quality problems 
within those homes.  Nursing homes with the following characteristics had the highest annual rates of 
resident hospitalizations:  homes in Arkansas, Louisiana, Mississippi, or Oklahoma and homes with one, 
two, or three stars in the CMS Five-Star Quality Rating System.  OEI-06-11-00040. 
Medicaid residential habilitation services:  New York 
Payment rates for residential habilitation services provided at State-operated residences did not meet 
the Federal requirement that payment for services be consistent with efficiency and economy.  For State 
fiscal year 2010, Federal Medicaid payments exceeded actual costs for providing these services by 
approximately $320 million (57 percent more than actual costs). Further, the payment rate for 
supervised residential habilitation services at State-operated residences was more than double the 
average rate for privately operated residences that offered the same services.  We also determined that 
if New York had used the prior years actual costs in calculating payment rates for residential habilitation 
services, its State fiscal year 2011 reimbursement would have been approximately $692 million 
($346 million Federal share) less than what it claimed.  A-02-13-01008. 
Medicaid pediatric dental services:  New York 
We identified 23 general dentists and 6 orthodontists in New York with questionable billing. These 
providers are extreme outliers when compared to their peers. Medicaid paid the providers $13.2 million 
for pediatric dental services in 2012.  Our findings raise concerns that certain providers may be billing for 
services that are not medically necessary or were never provided. They also raise concerns about the 
quality of care provided to Medicaid children.  Although some of the billing may be legitimate, providers 
who bill for extremely large amounts of services warrant further scrutiny.  OEI-02-12-00330. 
Medicaid State stewardshipExcessive withdrawal of funds 
The Maryland Medicaid program obtained Federal Medicaid funds for FYs 2009 through 2011 that were 
not supported by net expenditures. The State agency obtained $12.9 billion in Federal Medicaid funds,  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page vii 
 
 
but CMS awarded the State agency only $12.8 billion for Medicaid expenditures. Maryland 
inappropriately withdrew the difference of $115.3 million.  Also, Maryland did not always withdraw 
Federal funds from the appropriate Payment Management System (PMS) accounts because of fund 
deficiencies, a faulty procedure, and other errors.  The withdrawals caused the balances in the accounts 
to be wrong.  A-06-12-00051. 
Public health and human services reviews 
 
Public health activities and programs represent the countrys primary defense against acute and chronic 
diseases and disabilities and generally promote and enhance health.  Other HHS-related reviews include 
human services programs and administrative functions.   
World Trade Center program Contractor compliance 
Centers for Disease Control and Prevention (CDC).  The World Trade Center Health Program (WTCHP) 
was established in January 2011.  Under the WTCHP, CDC contracted with clinics to provide medical 
services and pharmacy benefits to eligible responders and survivors with health conditions related to the 
September 11, 2001, terrorist attacks on the World Trade Center.  We found that CDC and the National 
Institute for Occupational Safety and Health (NIOSH) did not monitor and evaluate clinic compliance with 
contract terms and conditions, as required by Federal regulations. Also, contracting officials did not take 
timely or appropriate action when they learned of three instances of clinic contract noncompliance. 
Further, evaluations of contractor performance were not completed, as required, and were not always 
entered into the information systems.  A-02-11-02003. 
340B Drug discount programEntity compliance 
Health Resources and Services Administration (HRSA).  The 340B Drug Pricing Program requires drug 
manufacturers participating in Medicaid to provide discounted covered outpatient drugs to certain 
eligible health care entities, known as covered entities. These entities may contract with pharmacies to 
dispense drugs purchased through the program on their behalf.  The majority of covered entities do not 
use contract pharmacies.  Recent HRSA audits of covered entities have found program violations related 
to contract pharmacies.  Our February 2014 report is a descriptive review of contract pharmacy 
arrangements and examines, under such agreements, how entities prevent drug diversion and duplicate 
discounts.  We found complications with regard to both issues.  We also found that most covered entities 
in our study do not conduct all of the oversight recommended by HRSA.  OEI-05-13-00431. 
Child Care and Development FundState monitoring and compliance 
Administration for Children and Families (ACF).  We reported that all States complied with the Federal 
requirement to have health and safety requirements for licensed child care providers in three specified 
areas.  However, States monitoring requirements did not always meet the ACF recommendations for 
background screenings or the recommended standards for unannounced inspections.  In selected States 
that we reviewed, monitoring of licensed providers was not conducted in accordance with States own 
requirements.  Moreover, ACF did little to monitor how States were overseeing CCDF providers.   
OEI-07-10-00231. 
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page viii 
 
 
OIG participation in congressional hearings 
 
 
3-26-2014  Brian Martens, Assistant Special Agent in 
Charge, Miami Region, testified before the 
Senate Special Committee on Aging on 
preventing Medicare fraudhow we can best 
protect seniors and taxpayers.  Testimony.  
    
Brian Martens, Assistant Special 
Agent in Charge, Miami 
 
3-25-2014  Gloria Jarmon, Deputy Inspector General for 
Audit Services, testified before the House 
Committee on Education and Workforce, 
Subcommittee on Early Childhood, 
Elementary, and Secondary Education, on the 
foundation for success through strengthening 
 
the Child Care and Development Block Grant 
Gloria Jarmon, Deputy Inspector 
program.  Testimony. 
General for Audit Services 
 
3-04-2014  Robert Vito.  Regional Inspector General for 
Evaluation and Inspections, testified before 
the House Committee on Energy and 
Commerce, Subcommittee on Health, about 
keeping the promisehow better managing 
Medicare can protect seniors. 
 
Testimony.  Robert Vito, Regional Inspector 
General for Evaluation and 
Inspections, Philadelphia 
             
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page ix 
 
 
Contents 
 
Selected acronyms ................................................................................. xv
 
Centers for Medicare & Medicaid Services .............................................. 1
 
CMS financial management and reporting .................................................... 1 
CMS financial report for fiscal year 2013 ............................................................................ 1 
CMS oversight of Medicare contractor performance..................................... 2 
Contractor performance and quality assurance ................................................................. 2 
Contractor payment error rate reduction plans ................................................................. 2 
Contractor performance related to processing appeals. .................................................... 3 
CMSs use of data for oversight of Medicare Part C contractors ........................................ 3 
Part D sponsor reporting of fraud and abuse data ............................................................. 4 
Part D sponsors tracking and transfer of true-out-of-pocket cost data ............................. 4 
Contractor pension assets and postretirement benefit assets ........................................... 4 
CMS records and information systems security and functionality ................. 5 
Protected records disclosure and accounting ..................................................................... 5 
Information security at Medicare contractors .................................................................... 6 
Electronic health records vulnerabilities and safeguards ................................................... 6 
Accuracy of data in CMS contractors systems ................................................................... 7 
Medicare payments, policies, and quality ................................................ 9
 
Medicare improper claims and payments ..................................................... 9 
CliniciansHigh cumulative payments ............................................................................... 9 
Home health servicesPayments in New England ............................................................ 9 
HospitalsOutlier payments ............................................................................................ 10 
Hospitals Postacute care transfer policy ....................................................................... 10 
HospitalsOutpatient clinic visits .................................................................................... 10 
HospitalsOutpatient drugs ............................................................................................ 11 
Unlawfully present, incarcerated, and deceased beneficiaries ........................................ 12 
Lower limb prosthetics ...................................................................................................... 13 
Organ procurement payments .......................................................................................... 13 
Physician administered drugsHerceptin ........................................................................ 13 
Polysomnography (sleep studies) ..................................................................................... 14  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page x 
 
 
Medicare wasteful payments, policies, and practices .................................. 14 
End stage renal diseasePayments for drugs .................................................................. 14 
Part B drugsPrice substitution ....................................................................................... 15 
HospitalsInpatient payment policies:  DRG Window..................................................... 15 
HospitalsCharacteristics of critical access hospitals ...................................................... 16 
Local coverage determinationsEffect on payments ...................................................... 16 
Vacuum erection systems ................................................................................................. 16 
Physician-owned distributorsSpinal devices ................................................................. 17 
Medicare quality of care .............................................................................. 17 
End stage renal disease grievance process ....................................................................... 17 
Nursing homesHarm to patients and questionable resident hospitalizations .............. 18 
Medicaid payments, policies, and quality .............................................. 19
 
Medicaid-related information systems security and functionality .............. 19 
Terminated providersFederal and State information-sharing system ........................... 19 
State information systems vulnerabilities ......................................................................... 19 
National correct coding initiative:  Georgia ...................................................................... 20 
Improper State claims for Federal reimbursement ...................................... 20 
Laboratory ServicesMaine ............................................................................................. 20 
Assistive technology services:  New York .......................................................................... 20 
Duplicate fee for service and managed care payments:  New York .................................. 21 
Residential habilitation services:  New York ..................................................................... 21 
Pediatric dental servicesQuestionable billing:  New York. ............................................ 22 
Other medical equipment and supplies ............................................................................ 22 
Physician administered drugs:  Maryland ......................................................................... 23 
Supported employment services:  New Jersey ................................................................. 24 
Orthodontic services:  New York City ................................................................................ 24 
Excessive disproportionate share hospital payments:  New Jersey .................................. 24 
State payment of Medicare Part B deductibles and coinsurance ..................................... 25 
Medicaid wasteful policies and practices..................................................... 26 
Diabetic testing supplies ................................................................................................... 26 
State stewardshipExcessive withdrawal of funds .......................................................... 26 
Medicaid quality of care and patient safety ................................................. 27 
State oversight of managed care credentialing ................................................................ 27  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page xi 
 
 
Legal and investigative activities related to Medicare and Medicaid .... 29
 
Advisory opinions and other industry guidance .......................................... 30 
Health care fraud prevention and enforcement .......................................... 30 
HEAT provider compliance training ................................................................................... 30 
Medicare Fraud Strike Force activities .............................................................................. 31 
Strike force case$50.9 million in restitution .................................................................. 31 
Other strike force examples .............................................................................................. 31 
Other criminal and civil enforcement activities ........................................... 32 
Special Assistant U.S. Attorney Program ........................................................................... 32 
Most wanted fugitives listed on OIGs Web site ............................................................... 33 
Recently completed actions and settlements .............................................. 34 
Pharmaceutical company .................................................................................................. 34 
Prescription drug fraud ..................................................................................................... 34 
Medical clinics ................................................................................................................... 35 
Dental practices ................................................................................................................ 36 
Home health care .............................................................................................................. 36 
Hospice care ...................................................................................................................... 37 
Hospitals............................................................................................................................ 37 
Identity theft ..................................................................................................................... 38 
Medical devices ................................................................................................................. 38 
Medical equipment and supplies ...................................................................................... 38 
Personal care services ....................................................................................................... 39 
Physical therapy ................................................................................................................ 40 
Physicians .......................................................................................................................... 40 
Skilled nursing facilities ..................................................................................................... 41 
Transportation fraud ......................................................................................................... 41 
State Medicaid Fraud Control Units ............................................................. 41 
OIG oversight of State MFCUs ........................................................................................... 41 
MFCU funding and accomplishments in FY 2013 ............................................................. 41 
OIG onsite reviews of MFCUs ............................................................................................ 42 
Joint investigations with MFCUs ....................................................................................... 42 
Sanction authorities and other administrative actions ................................ 43 
Program exclusions ........................................................................................................... 43 
Corporate integrity agreements........................................................................................ 44 
Civil Monetary Penalties Law ............................................................................................ 45  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page xii 
 
 
Patient Dumping ............................................................................................................... 45 
Provider self-disclosure protocol ................................................................. 46 
Public health agencies and enforcement activities ................................ 49
 
Office of the Assistant Secretary for Health ................................................. 49 
Protection of human subjects ........................................................................................... 49 
Centers for Disease Control and Prevention ................................................ 49 
World Trade Center programContractor compliance .................................................... 49 
Presidents Emergency Plan for AIDS Relief program ....................................................... 50 
Health Resources and Services Administration ............................................ 50 
HRSA 340B Drug discount programContract Pharmacy Arrangements ........................ 50 
HRSA health centersElectronic health records .............................................................. 51 
Public-Health-Related Legal Actions and Investigations .............................. 51 
Health Education Assistance Loan Program ...................................................................... 51 
HEAL Exclusions ................................................................................................................. 52 
Human services agencies and enforcement activities ........................... 53
 
Administration for Children and Families ..................................................... 53 
Adoption assistanceConnecticut ................................................................................... 53 
Head Start program ........................................................................................................... 53 
Child Care and Development FundState monitoring and compliance .......................... 54 
Child support enforcement activities ........................................................... 54 
OIG investigations ............................................................................................................. 54 
Engaging the public in capturing deadbeat parents ......................................................... 55 
Other HHS-related reviews ..................................................................... 57
 
Financial reporting and improper payment reduction ................................. 57 
HHS financial report for FY 2013 ....................................................................................... 57 
Improper Payments Information Act of 2002 ................................................................... 57 
Grants and Contracts ................................................................................... 58 
Hurricane Sandy grant and contract vulnerabilities.......................................................... 58 
Small Business Innovative Research Program ................................................................... 58 
Recovery Act retaliation complaint investigations ............................................................ 59 
Contract Audits ................................................................................................................. 59  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page xiii 
 
 
OIG reviews of non-Federal audits ............................................................... 59 
Other reporting requirements and reviews ................................................. 60 
Health Insurance Portability and Accountability Act Security Rule .................................. 60 
Government Charge Card Abuse Prevention Act .............................................................. 61 
Legislative and regulatory reviews .................................................................................... 61 
Affordable Care Act implementation ........................................................... 62 
Early Retiree Reinsurance Program:  Jersey City ............................................................... 62 
Appendixes ............................................................................................. 63
 
Appendix A:  Reporting requirements in the Inspector General Act of 1978 ................... 65 
Appendix B:  Questioned costs and funds to be put to better use ................................... 67 
Appendix C:  Peer review results ...................................................................................... 75 
Appendix D:  Summary of Sanction authorities ................................................................ 77 
 
 
  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page xiv 
 
 
 
 
 
 
 
 
 
 
http://oig.hhs.gov 
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page xv 
 
 
 
ACF  Administration for Children and Families 
Affordable Care Act  Patient Protection and Affordable Care Act of 2010, P.L. No. 111-148 
Selected acronyms  
AFR  agency financial report and other accompanying information 
AHRQ  Agency for Healthcare Research and Quality 
AIDS  Acquired Immunodeficiency Syndrome 
CAH  critical access hospital 
CBA  competitive bidding area 
CCDF  Child Care and Development Fund 
CCIIO  Center for Consumer Information and Insurance Oversight 
CCW  Community Care Waiver (program) 
CDC  Centers for Disease Control and Prevention 
CERT  Comprehensive Error Rate Testing 
CFO Act  Chief Financial Officers Act of 1990, P.L. No. 101-576 
Charge Card Act  Government Charge Card Abuse Prevention Act of 2012, P.L. No. 112-194 
CHIP  Childrens Health Insurance Program 
CIA  corporate integrity agreement 
CMP  civil monetary penalty 
CMPL  Civil Monetary Penalties Law 
CMS  Centers for Medicare & Medicaid Services 
COR  contracting officer representative 
CY  calendar year 
DME  durable medical equipment 
DOJ  Department of Justice 
DSH  disproportionate share hospital 
DUA  data use agreement 
EHR  electronic health record 
EMTALA  Emergency Medical Treatment and Labor Act 
ERRP  Early Retiree Reinsurance Program 
ESRD  end stage renal disease 
FCA  False Claims Act 
FDA  Food and Drug Administration 
FIR  financial information reporting 
FISMA  Federal Information Security Management Act of 2002, P.L. No. 107-347 
FY  fiscal year 
HEAL  Health Education Assistance Loan 
HHA  home health agency 
HHS  Department of Health and Human Services 
HIPAA  Health Insurance Portability and Accountability Act of 1996, P.L. No. 104-191 
HIV  Human Immunodeficiency Virus 
HRSA  Health Resources and Services Administration 
IPERA  Improper Payments Elimination and Recovery Act of 2010, P.L. No. 111-204 
IPIA  Improper Payments Information Act of 2002, P.L. No. 107-300  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page xvi 
 
 
IRB  institutional review board 
LCD  local coverage determination 
MA  Medicare  Advantage 
MAC  Medicare Administrative Contractor 
MCE  Medicaid managed care entities 
MCSIS  Medicaid and Childrens Health Insurance Program State Information Sharing 
System 
MFCU  Medicaid Fraud Control Unit 
MMA  Medicare Prescription Drug, Improvement, and Modernization Act of 2003, 
P.L. No. 108-173 
MMIS  Medicaid Management Information System 
MSN  Medicare Summary Notice 
NCCI  National Correct Coding Initiative 
NGS  National Government Services, Inc. (Medicare contractor) 
NHS  Noridian Healthcare Solutions, LLC (Medicare contractor) 
NIOSH  National Institute for Occupational Safety and Health 
OASIS  Outcome and Assessment Information Set 
OCR  Office for Civil Rights 
OHRP  Office for Human Research Protections 
OIG  Office of Inspector General 
OMB  Office of Management and Budget 
ONC  Office of the National Coordinator for Health Information Technology 
PDE  prescription drug event 
PEPFAR  Presidents Emergency Plan for AIDS Relief 
PI  principal investigator 
PMS  Payment Management System 
POD  physician-owned distributor 
PRB  postretirement benefit 
PSC  Program Support Center (HHS) 
PT/OT  physical therapy/occupational therapy 
QASP  quality assurance surveillance plan 
RAC  Recovery Audit Contractor 
SNF  skilled nursing facility 
SOSI  statement of social insurance 
SSA  Social Security Administration 
TANF  Temporary Assistance to Needy Families 
The Act  Social Security Act 
TrOOP  true out-of-pocket (costs) 
ZPIC  Zone Program Integrity Contractor 
 
 
 
 
  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 1 
 
 
Centers for Medicare 
CMS financial management and reporting 
& Medicaid Services  
CMS financial report for fiscal year 2013 
  CMS Financial Report, Fiscal Year 2013.  Audit Opinion Section. Daniel R. Levinson, Inspector General, 
Report on the Financial Statement Audit of the Centers for Medicare & Medicaid Services for Fiscal 
Year 2013 (pp. 108 - 109, 127, 134 - 135).  A-17-13-02013.  2013 DEC. 
The Chief Financial Officers Act of 1990 (P.L. No. 101-576), as amended, requires the Office of lnspector 
General (OIG) or an independent external auditor, as determined by OIG, to audit the CMS financial 
statements in support of the U.S. Department of Health and Human Services (HHS) audit.  We contracted 
with the independent certified public accounting firm of Ernst & Young, LLP, to conduct the CMS audit.  
The findings and recommendations center on financial reporting and information system controls. 
Financial reporting.  The Centers for Medicare & Medicaid Services (CMS) relies on a decentralized 
organizational structure and complex financial management systems, not only within its central office 
and regional offices processes, but also within many of the Medicare contractor organizations, to 
accumulate data for its financial reporting.  Most recommendations were carried forward from past 
years.  During fiscal year (FY) 2013, CMS improved its financial management performance in many areas 
and continues to focus on the remaining significant deficiencies.   
Recommendations regarding financial reportingCMS should continue to monitor State Medicaid draws 
of Federal funds; work with States to resolve issues and to report timely, accurately, and consistently on 
the funds drawn; determine the reasonableness of the methodology used to estimate accruals by 
establishing and performing claims-level detailed look-back analyses of Medicaid entitlement benefits 
due and payable; allow more time to analyze findings and develop remediation plans by continuing to 
improve the efficiency of the various error rate processes; implement an integrated financial 
management system to promote consistency and reliability in accounting and financial reporting; 
enhance its process for developing, documenting, and validating critical accounting matters; delegate to 
the centers or offices the responsibility to provide robust analyses on a routine and recurring basis; and 
continue to adhere to established policies and procedures to ensure that the statement of social 
insurance (SOSI) model methodology, related calculations, and estimates are consistently documented.  
Information Systems Controls.  CMSs information systems controls were considered a significant 
deficiency in the FY 2013 financial statement audit because CMS continues to experience difficulties in 
implementing its policy of least privilege access, preventing and monitoring for inconsistencies in access 
rights, and mitigating the potential impact on adequate segregation of duties.  Also, there was 
inconsistent implementation planning and execution of CMSs overall directives and guidance over 
information security controls across the CMS enterprise, including the Medicare claims processing 
contractors.    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 2 
 
 
Recommendations regarding information systems controlsCMS should ensure that systems are 
appropriately and timely certified, that related system security plans are complete and are prepared by 
all system owners and Medicare fee-for-service contractors, and that documentation of all 
interconnections between Medicare contractors is consistently prepared.  To prevent excessive or 
inappropriate access, CMS should ensure that all application changes and interfaces to CMS systems, 
including Medicare fee-for-service shared systems, are documented and tested timely, adequately, and 
completely and ensure that appropriate segregation of duties is established for all systems that support 
CMSs programs, including Medicare fee-for-service claims and related financial processing at claims 
processing contractors and enterprise data centers.   
CMS oversight of Medicare contractor performance 
CMS relies on contractors to administer the Medicare program and is responsible for overseeing the 
contractors performance.  Medicare contractors are responsible for administering more than a 
half-trillion dollars in benefits each year.  Medicare Administrative Contractors (MACs) process Parts A 
and B claims; Medicare Advantage (MA) plans provide managed care services under Part C; Part D plans 
provide prescription drug coverage under Part D; and various benefit integrity contractors serve to 
protect Medicare from fraud, waste, and abuse. 
Contractor performance and quality assurance 
  Medicare Administrative Contractors Performance.  OEI-03-11-00740.  2014 JAN. 
MACs had not met one-quarter of the quality assurance standards reviewed and they had not resolved 
issues with 27 percent of the unmet standards as of June 2012.  MAC standards have stringent 
performance requirements; a number of standards require 100-percent performance compliance.  CMS 
did not require action plans for 12 percent of unmet standards, and unmet standards without action 
plans were almost four times more likely to have issues go unresolved.  RecommendationsCMS should 
require action plans for all quality assurance standards not met, use the results of quality assurance 
reviews to help select award fee metrics for review, meet timeframes for completing quality assurance 
reports, meet timeframes for completing award fee determinations, establish reasonable timeframes for 
issuing contractor performance reports, and seek legislative change to increase the time between MAC 
contract competitions to give CMS more flexibility in awarding new contracts when MACs are not 
meeting CMS requirements.   
Contractor payment error rate reduction plans 
  Medicare Claims Administration Contractors Error Rate Reduction Plans.  OEI-09-12-00090.  
2014 JAN. 
We reported that most error rate reduction plans submitted by claims administration contractors 
included the required elements.  However, corrective actions were not always relevant to claims 
administration contractors Comprehensive Error Rate Testing program (CERT) results and varied 
substantially in number.  The CERT program measures the improper payment rate (error rate) in the 
Medicare fee-for-service program.  To reduce the error rate, CMS requires claims administration  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 3 
 
 
contractors to submit error rate reduction plans.  We found that CMSs oversight of error rate reduction 
plans is limited, and some of the sampled plans that CMS approved did not include five required 
elements or were for contracts with high error rates.  We also found that limitations in CMSs 
administration of incentives for error rate reduction may reduce their effectiveness.  
RecommendationsCMS should review its process for overseeing claims administration contractors 
error rate reduction, ensure that contractors submit clear plans for reducing their error rates, provide 
additional guidance for contractors and CMS staff who review plans, and provide error rate reduction 
incentives that are aligned with the contracts error rates and performance periods. 
Contractor performance related to processing appeals. 
  The First Level of the Medicare Appeals Process, 20082012: Volume, Outcomes, and Timeliness.  
OEI-01-12-00150.  2013 OCT. 
In 2012, Medicare contractors processed 2.9 million first-level appeals (redeterminations).  The 
redeterminations involved 3.7 million claims, an increase of 33 percent since 2008.  Although 80 percent 
of all redeterminations in 2012 involved Part B services, redeterminations involving Part A services have 
risen more rapidly.  By 2012, appeals involving Medicares recovery audit contractors (RAC) accounted 
for 39 percent of all appealed Part A claims.  Contractors who conduct redeterminations decided in favor 
of Part A appellants at a lower rate than that for Part B appellants.  Also, the contractors largely met 
required timeframes for processing redeterminations and paying favorably appealed claims, but they fell 
short of meeting timeframes for transferring case files for second-level appeals.  Moreover, Medicare 
contractors use information from redeterminations in a variety of ways to improve their operations and 
to educate providers.  Finally, CMS employs multiple methods to improve contractors processing of 
redeterminations, including fostering communication among contractors and implementing the 
Medicare Appeals System (MAS) for first-level appeals.  RecommendationsCMS should use the MAS to 
monitor contractor performance, continue to foster information sharing among Medicare contractors, 
and monitor the quality of redeterminations data in MAS. 
CMSs use of data for oversight of Medicare Part C contractors 
  CMS Regularly Reviews Part C Reporting Requirements Data but Its Followup and Use of the Data 
Are Limited.  OEI-03-11-00720.  2014 MAR. 
We reported that CMS regularly reviews data that MA organizations submit pursuant to Part C reporting 
requirements, but its followup and uses of the data are limited.  CMS has collected such data from MA 
organizations since 2009.  The data are intended to serve as a resource for CMS to conduct oversight.  
RecommendationsCMS should determine whether outlier data values submitted by MA organizations 
reflect inaccurate reporting or atypical performance, use appropriate Part C reporting requirements data 
as part of its reviews of MA organizations performance, and establish a timeline for releasing public use 
files for Part C reporting requirements data. 
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 4 
 
 
Part D sponsor reporting of fraud and abuse data 
  Less Than Half of Part D Sponsors Voluntarily Reported Data on Potential Fraud and Abuse.   
OEI-03-13-00030.  2014 MAR. 
We reported that more than half of Part D sponsors did not voluntarily report data on potential fraud 
and abuse.  CMS requires sponsors to conduct inquiries and implement corrective actions in response to 
incidents of potential fraud and abuse; however, 28 percent of Part D plan sponsors reported performing 
none of these actions between 2010 and 2012.  Of those sponsors that did report data, more than one-
third did not identify any incidents for at least one of their reporting years.  Although CMS said that it 
conducted basic summary analyses of the sponsor-submitted data, it did not perform quality assurance 
checks on the data or use them to monitor or oversee the Part D program.  RecommendationsCMS 
should amend regulations to require sponsors to report to CMS their identification of and response to 
incidents of potential fraud and abuse; provide sponsors with specific guidelines on how to define and 
count incidents, related inquiries, and corrective actions; review data to determine why certain sponsors 
reported especially high or low numbers of incidents, related inquiries, and corrective actions; and share 
sponsors data on potential fraud and abuse with all sponsors and law enforcement. 
Part D sponsors tracking and transfer of true-out-of-pocket cost data  
  CMS Should Improve Oversight for the Transfer of True Out-of-Pocket Costs Between Part D 
Plans.  A-05-12-00053.  2013 DEC.  
We reported that the Federal Government and Medicare Part D enrollees could have saved 
approximately $1.6 million in 2010 if CMS had provided adequate oversight to ensure the correct 
transfer of all true out-of-pocket (TrOOP) costs for enrollees who changed prescription drug plans during 
the 2010 coverage year.  TrOOP costs are prescription drug costs paid by enrollees (or by specified third 
parties) that count toward the Part D annual out-of-pocket threshold that enrollees must meet before 
their catastrophic drug coverage begins.  Part D sponsors are responsible for tracking and transferring 
enrollees TrOOP costs as enrollees change plans during the coverage year.  Effective January 1, 2009, 
sponsors must use the Financial Information Reporting (FIR) system to transfer TrOOP balances and gross 
covered drug costs whenever an enrollee makes an enrollment change.  CMS and the TrOOP facilitator 
did not have adequate procedures to ensure these FIR transactions were initiated and were complete 
and PDE records were updated.  RecommendationsCMS should transfer TrOOP costs in accordance 
with Federal requirements and implement controls to ensure the TrOOP facilitator initiates specific FIR 
transactions, compare FIR to prescription drug event (PDE) records to determine which FIR transactions 
are incomplete and require plan resubmission, and ensure subsequent plan sponsors are properly 
updating PDE records with reported FIR information. 
Contractor pension assets and postretirement benefit assets 
  National Government Services, Inc., Understated Its Medicare Segment Pension Assets as of 
January 1, 2010.  A-07-13-00408.  2013 OCT.  
National Government Services, Inc. (NGS), a Medicare contractor, understated its Medicare segment 
pension assets by about $1.2 million as of January 1, 2010.  CMS reimburses a portion of the annual  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 5 
 
 
contributions that Medicare contractors make to their pension plans.  The Medicare segment pension 
assets are integral to calculating the allowable Medicare pension costs.  CMS incorporated pension 
segmentation requirements into Medicare contracts beginning with FY 1988.  Previous OIG reviews 
found that Medicare contractors did not always correctly identify and update the segmented pension 
assets.  RecommendationsNGS should adjust the errors and establish controls to ensure compliance 
with Federal regulations and the Medicare contracts pension segmentation requirements when 
allocating contributions and transferred prepayment credits, benefit payments, participant transfers, and 
investment earnings and expenses.   
  Noridian Healthcare Solutions, LLC, Understated Its Medicare Segment Postretirement Benefit 
Assets as of January 1, 2011.  A-07-13-00420.  2014 MAR.  
Contract administration and costspostretirement benefit assets.  Noridian Healthcare Solutions, LLC 
(NHS), a Medicare contractor, understated the Medicare segment postretirement benefit plan assets by 
$1.1 million as of January 1, 2011.  CMS reimburses a portion of contractors costs for postretirement 
benefit (PRB) plans.  Medicare segment PRB assets are used in calculating the allowable Medicare PRB 
costs.  NHS understated the Medicare segment PRB assets because it incorrectly identified Medicare 
segment participants and, therefore, incorrectly identified the Medicare segment contributions and 
prepayment credits.  In addition, NHS lacked controls to ensure that it calculated the assets in 
accordance with requirements.  RecommendationsNHS should adjust the errors and establish controls 
to ensure compliance with Federal regulations and the Medicare contracts pension segmentation 
requirements when updating the Medicare segment PRB assets with contributions, income, claims paid, 
and expenses. 
CMS records and information systems security 
and functionality 
Protected records disclosure and accounting 
  Disclosure and Accounting of Protected Records by CMS Between 2006 and 2011.   
OEI-09-11-00430.  2014 JAN. 
For at least 98 percent of all approved data requests in our sample, CMSs disclosures of records were 
consistent with the routine uses identified in the system of records notices.  Five percent of all data files 
disclosed by CMS were not requested in the data use agreement (DUA) or updated DUAs.  A DUA is a 
legally binding agreement that contains the written terms and conditions that govern each disclosure.  
Among other things, CMS uses DUAs to ensure that its disclosures are in compliance with the Privacy 
Act.  CMS did not have the DUAs on file for 33 percent of all user agreement files.  Recommendations
CMS should develop a process to ensure that the data requested are the ones disclosed to the entity; 
ensure that the DUA and DUA-related documents are in a user agreement file; ensure that entities 
submit the required documents to properly close their DUAs; use a standardized, documented process 
for requesting and approving DUA extensions; and ensure that expiration dates are consistent between 
the DUA and Data Agreement and Data Shipping Tracking System.    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 6 
 
 
Information security at Medicare contractors  
  Review of Medicare Contractor Information Security Program Evaluations for Fiscal Year 
2011.  A-18-13-30100.  2014 JAN.  
The evaluations of the Medicare contractor information security program were adequate in scope and 
were sufficient, but CMS should continue to ensure that all Medicare contractor findings are remediated.  
Each Medicare contractor must have its information security program evaluated annually by an 
independent entity.  These evaluations must address the eight major requirements enumerated in the 
Federal Information Security Management Act of 2002 (FISMA).  The Social Security Act (the Act) also 
requires evaluations of the information security controls for a subset of systems but does not specify the 
criteria for these evaluations.  OIG must submit to Congress annual reports on the results of these 
evaluations, to include assessments of their scope and sufficiency. This report fulfills that responsibility 
for FY 2011. 
Electronic health records vulnerabilities and safeguards 
  CMS and Its Contractors Have Adopted Few Program Integrity Practices To Address 
Vulnerabilities in EHRs.  OEI-01-11-00571.  2014 JAN.   
  Not All Recommended Fraud Safeguards Have Been Implemented in Hospital EHR Technology.  
OEI-01-11-00570.  2013 DEC.  
Vulnerabilities.  We reported that though electronic health record (EHR) technology may make it easier 
to commit fraud, CMS and its contractors have not adjusted their practices for identifying and 
investigating fraud in EHRs.  Few contractors reviewed EHRs differently from paper medical records.  In 
addition, not all contractors reported being able to identify copied language or overdocumention in a 
medical record.  Finally, CMS had provided limited guidance to Medicare contractors on EHR fraud 
vulnerabilities.  RecommendationsCMS should provide guidance to its contractors on detecting fraud 
associated with EHRs.  Second, CMS should direct its contractors to use providers audit logs. Audit log 
data distinguish EHRs from paper medical records and could be valuable to CMSs contractors when 
reviewing medical records. 
Safeguards.  We determined the extent to which hospitals that received EHR Medicare incentive 
payments had implemented the recommended fraud safeguards.  We reported that nearly all hospitals 
followed recommendations for audit functions, data transfer safeguards, and user authorization and 
access controls.  Almost half of hospitals had begun implementing recommended tools to include patient 
involvement in anti-fraud efforts.  Finally, only about one quarter of hospitals had policies on the use of 
the copy-paste feature in EHR technology, which, if used improperly, could pose a fraud vulnerability.  
RecommendationsHHS should ensure that audit logs are operational whenever EHR technology is 
available for updates or viewing.  ONC and CMS should strengthen their collaborative efforts to develop 
a comprehensive plan to address fraud vulnerabilities in EHRs.  Finally, we recommend that CMS develop 
guidance on the use of the copy-paste feature in EHR technology.  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 7 
 
 
Accuracy of data in CMS contractors systems 
  Over Four Million Medicare Summary Notices Mailed to Beneficiaries Were Not Delivered in 2012.  
OEI-03-12-00600.  2014 JAN. 
We reported that there continues to be a problem with incorrectly populated beneficiary addresses in 
the data systems that claims processors use to process Medicare summary notices (MSNs).  We found 
that as a result, over 4 million MSNs that claims processors had mailed to beneficiaries were not 
delivered in 2012.  Some of the undelivered MSNs reviewed were associated with compromised 
beneficiary or provider identification numbers.  If MSNs go undelivered, beneficiaries do not have the 
opportunity to review the services or items billed to Medicare and report suspicious billing.  
RecommendationsCMS should provide guidance to claims processors about whether and how to track 
and follow up on MSNs that are returned as undeliverable and ensure that the address information used 
by claims processors to print addresses on MSNs is complete and properly formatted.   
 
  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 8 
 
 
 
 
 
 
 
 
 
 
 
http://oig.hhs.gov 
 
  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 9 
 
 
Medicare payments, 
Medicare improper claims and payments 
policies, and quality 
CliniciansHigh cumulative payments 
  Reviews of Clinicians Associated With High Cumulative Payments Could Improve Medicare 
Program Integrity Efforts.  A-01-11-00511.  2013 DEC.  
We identified 303 clinicians who were each responsible for more than $3 million in Part B payments 
during calendar year (CY) 2009.  We determined that MACs and Zone Program Integrity Contractors 
(ZPICs) had identified 104 of the 303 for improper payment reviews.  As of December 31, 2011, the 
MACs and ZPICs had completed reviews of 80 of the 104 clinicians and had identified $34 million in 
overpayments.  Three of the clinicians had their medical licenses suspended, and two were indicted.  
The results of the reviews demonstrate that identifying clinicians who are responsible for high 
cumulative payments could be a useful means of identifying improper payments.   
RecommendationsCMS should establish a cumulative payment thresholdtaking into consideration 
costs and potential program integrity benefitsabove which a clinicians claims would be selected for 
review and implement a procedure for timely identification and review of clinicians claims that exceed 
the payment threshold.  
Home health servicesPayments in New England 
  Medicare Often Made Overpayments to New England Home Health Agencies for Claims Without 
Required Outcome and Assessment Information Set Data for Calendar Year 2010.   
A-01-12-00508.  2014 MAR. 
We estimated that the regional home health intermediary for six New England States made 
approximately $25.1 million in Medicare overpayments because it did not deny claims that home health 
agencies (HHAs) submitted without the required Outcome and Assessment Information Set (OASIS) data, 
which is a condition of payment.  CMS uses OASIS data to help determine payment rates and for other 
purposes.  Beginning January 1, 2010, CMS required HHAs to submit accepted OASIS data as a condition 
of payment and instructed that claims from HHAs that lacked OASIS data were not to be paid.  
Overpayments occurred because HHAs often had inadequate controls for the submission of OASIS data.  
Further, Medicare payment controls were inadequate to prevent or detect payments to HHAs for claims 
that were missing accepted OASIS data.  RecommendationsCMS should complete a process that would 
allow the claims processing system to interface with State survey agency systems to identify, on a 
prepayment basis, HHA claims without accepted OASIS data submissions and encourage its contractors 
to conduct periodic postpayment reviews of HHA claims, to include ensuring that OASIS data support 
claims, until sufficient prepayment controls are established.  CMS also should adjust the overpayments 
identified, reopen nonsampled claims, and recover any additional overpayments found.  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 10 
 
 
HospitalsOutlier payments 
  Medicare Hospital Outlier Payments Warrant Increased Scrutiny.  OEI-06-10-00520.  2013 NOV. 
We reported that nearly all hospitals received outlier payments and that some received a much higher 
proportion of their Medicare reimbursements from outlier payments.  The routine receipt of outlier 
payments for certain diagnoses at high-outlier hospitals raises concerns about why charges for similar 
patient-care cases vary substantially across hospitals.  Medicare makes supplemental payments to 
hospitals, known as outlier payments, which are designed to protect hospitals from significant financial 
losses resulting from patient-care cases that are extraordinarily costly.  In some cases, high charges could 
be the result of high costs because hospitals attract a disproportionate share of exceptionally costly 
patients or because they apply costly technologies and treatments.  RecommendationsCMS should 
instruct its contractors to increase monitoring of outlier payments, include information about the 
distribution of outlier payments with other publicly reported hospital data, and examine whether 
diagnoses associated with high rates of outlier payments warrant coding changes or other adjustments. 
Hospitals Postacute care transfer policy 
  Noridian Healthcare Solutions, LLC, Inappropriately Paid Hospitals Medicare Claims Subject to the 
Postacute Care Transfer Policy in Jurisdiction 2.  A-09-13-02035.  2013 NOV. 
Medicare contractor Noridian Healthcare Solutions, LLC (NHS), inappropriately paid Medicare claims 
subject to the postacute care transfer policy; as a result Medicare made overpayments to 73 hospitals 
totaling $1.1 million over 4 years.  The overpayments occurred because the hospitals improperly coded 
claims as discharges to home or certain types of health care institutions rather than as transfers to 
postacute care.  Another reason that the overpayments occurred was that Medicares system edits 
related to postacute care transfers were not working properly.  Also, the edits that were related to 
transfers to home health care erroneously calculated the number of days between the dates of service 
on the inpatient claim and the home health claim, an error that CMS corrected.   
RecommendationsNHS should educate hospitals in Jurisdiction 2 on the importance of reporting the 
correct patient discharge status codes on transfer claims, especially when home health services have 
been ordered; work with the system maintenance contractor to ensure that it receives the automatic 
adjustments identifying overpayments on inpatient claims; and recover the overpayments identified in 
our review.   
HospitalsOutpatient clinic visits 
  CMS Did Not Always Correctly Make Clinic Visit Payments to Hospitals.   
A-04-12-06154.  2014 MAR. 
Medicare made an estimated $7.5 million in incorrect outpatient payments to hospitals for established 
patients clinic visits for 2010 and 2011.  Medicare payments to hospitals for outpatient clinic visits vary 
on the basis of whether patients are new or established. An established patient has been treated more 
than once at the same hospital during a 3-year period.  The hospitals attributed the incorrect payments 
to clerical errors, the fact that staff did not fully understand Medicare billing requirements for clinic 
visits, reliance on the code that the physician selected for the visit, or billing systems that could not  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 11 
 
 
identify established patients.  Also, Medicare does not have edits in place to identify Medicare payments 
for patients who were already registered at a facility.  RecommendationsCMS should work with its 
MACs to provide additional guidance to hospitals on billing clinic visits for new or established patients, 
instruct hospitals on the need for stronger compliance controls that ensure proper billing of clinic visits, 
recover the incorrect payments identified in our sample, resolve the remaining line items, and recover 
any additional overpayments found.   
HospitalsOutpatient drugs 
  The Medicare Contractors for Jurisdiction E Overpaid Providers for Selected Outpatient Drugs.   
A-09-13-02009.  2014 JAN.  
  The Medicare Contractor for Jurisdiction F Overpaid Providers for Selected Outpatient Drugs.   
A-09-13-02003.  2014 JAN.  
  The Medicare Contractor for Jurisdiction 5 Overpaid Providers for Selected Outpatient Drugs.   
A-07-13-04201.  2014 MAR. 
  Medicare Contractors for Jurisdiction 8 Overpaid Providers for Selected Outpatient Drugs.   
A-05-13-00012.  2014 MAR. 
  The Medicare Contractors for Jurisdiction 11 Overpaid Providers for Selected Outpatient Drugs.   
A-03-13-00011.  2014 FEB.  
  The Medicare Contractor  for Jurisdiction 12 Overpaid Providers for Selected Outpatient Drugs.   
A-03-13-00012.  2014 FEB. 
  Medicare Contractors for Jurisdiction 15 Overpaid Providers for Selected Outpatient Drugs.   
A-05-13-00013.  2014 MAR 
CMS pays Medicare claims through the Medicare administrative contractor or fiscal intermediary 
(Medicare contractor) in each Medicare jurisdiction.  From July 1, 2009, through June 30, 2012, Medicare 
contractors nationwide paid hospitals $11.5 billion for outpatient drugs, which include biologicals and 
radiopharmaceuticals. Previous OIG reviews of outpatient services have found that Medicare contractors 
overpaid providers for selected outpatient drugs.  This series of reports focuses on payments for selected 
outpatient drugs.  The objective of the reviews was to determine whether payments that the Medicare 
contractors for various jurisdictions made to providers for selected outpatient drugs were correct. 
We have found several types of errors, including that providers reported incorrect units of service, 
reported a combination of incorrect units of service and incorrect standardized billing codes, did not 
provide supporting documentation, and billed separately for an outpatient drug for which payment was 
packaged with the primary service.  Providers attributed the incorrect billings to clerical errors and to 
provider billing systems that could not prevent or detect the incorrect billing of outpatient drug services. 
The Medicare contractors overpaid these providers because insufficient edits were in place to prevent or 
detect the overpayments. 
Our findings and recommendations are addressed to the subject Medicare contractors.  
Recommendations variously include that the contractors should use the results of the audits in their  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 12 
 
 
ongoing provider education activities, recover identified overpayments, and verify the payment of 
identified underpayments. 
Unlawfully present, incarcerated, and deceased beneficiaries 
  Medicare Improperly Paid Millions of Dollars for Prescription Drugs Provided to Unlawfully Present 
Beneficiaries During 2009 Through 2011.  A-07-12-06038.  2013 OCT.  
We identified $91.6 million in improper payments to unlawfully present beneficiaries in Part B during 
CYs 2009 through 2011.  When CMS received untimely information indicating that unlawful presence 
overlapped with the dates of service on previously paid Medicare claims, CMS did not notify Medicares 
contractors of this updated information, and the contractors did not detect and recoup improper 
payments.  For the same period, we estimated $29 million in gross drug costs associated with unlawfully 
present beneficiaries in Part D.  RecommendationsCMS should implement policies and procedures to 
detect and recoup improper payments made for Medicare services rendered to unlawfully present 
beneficiaries and ensure that Medicare contractors recoup the improper payments we identified. 
  Medicare Improperly Paid Millions of Dollars for Prescription Drugs Provided to Incarcerated 
Beneficiaries During 2006 Through 2010.  A-07-12-06035.  2014 JAN.  
We identified nearly $33.6 million in uncollected improper payments on behalf of incarcerated 
beneficiaries in Part A and Part B during CYs 2009 through 2011.  With certain exceptions, prisons 
(instead of Medicare) pay for the health care of incarcerated beneficiaries who are otherwise eligible for 
Medicare.  CMS does not always receive timely updates regarding incarceration information before 
Medicare contractors pay providers on behalf of incarcerated beneficiaries.  Similarly, we estimated that 
more than $11.6 million in gross drug costs were associated with incarcerated beneficiaries in Part D for 
CYs 2006 through 2010.  RecommendationsImplement policies and procedures to detect and recoup 
improper payments made for Medicare services rendered to incarcerated beneficiaries; ensure that all 
claims with exception codes are processed consistently and pursuant to Federal requirements; work with 
other entities, including the Social Security Administration (SSA), to identify ways to improve the 
timeliness with which CMS receives incarceration information; ensure that Medicare contractors recoup 
the improper payments we identified; and identify improper payments made on behalf of incarcerated 
beneficiaries after our audit period and recoup those payments.   
  Medicare Payments Made on Behalf of Deceased Beneficiaries in 2011.   
OEI-04-12-00130.  2013 OCT. 
Health care fraud schemes have involved the submission of fraudulent claims by providers or suppliers to 
Medicare, including claims for deceased beneficiaries, and prior OIG studies and audit reports have 
identified Medicare payments made on behalf of deceased beneficiaries.  Our October 2013 report 
revealed that although CMS has safeguards to prevent and recover Medicare payments made on behalf 
of deceased beneficiaries, it inappropriately paid $23 million in 2011 for dates of service after 
beneficiaries deaths.  Part C accounted for 86 percent of the improper payments. Additionally, 
11 percent of the improper payments resulted from the fact that dates of death were missing or 
incorrect.  Further, we identified 251 providers and suppliers that had high numbers of paid and/or  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 13 
 
 
unpaid Part B claims with service dates after beneficiaries deaths.  Recommendationsimprove existing 
safeguards to prevent future improper Medicare payments after beneficiaries deaths, take appropriate 
action on improper Medicare payments made on behalf of deceased beneficiaries and correct inaccurate 
dates of death, monitor both paid and unpaid Part B claims with service dates after beneficiaries deaths, 
and take appropriate action on providers and suppliers that had high numbers of paid and/or unpaid 
Part B claims with service dates after beneficiaries deaths. 
Lower limb prosthetics 
  National Government Services, Inc., Paid Unallowable Lower Limb Prosthetics Claims.   
A-07-13-05039.  2013 OCT.  
National Government Services, Inc. (NGS, operating in Indiana), paid $1.5 million for 770 lines of service 
for lower limb prostheses from January 1, 2009, through September 30, 2012, that did not meet local 
coverage determination (LCD) requirements.  RecommendationsNGS should continue to monitor the 
edits it developed and updated to ensure that they are functioning correctly and recover $1.5 million in 
identified overpayments for lines of service for lower limb prostheses that did not meet LCD 
requirements. 
Organ procurement payments 
  Medicare Could Have Saved Millions if Organ Procurement Organizations Had Correctly Reported 
Procurement of Double Lungs as Two Organs.  A-09-12-02085.  2013 DEC.   
Organ procurement organizations (OPOs) are not-for-profit organizations that facilitate organ donation 
and transplantation. Because lungs are in pairs, they are procured as one or two organs and should be 
reported as such. When OPOs report the number of transplanted lungs incorrectly, Medicare costs may 
be misstated.  Both independent and hospital-based OPOs incorrectly reported lung statistics because 
they relied on CMSs Provider Reimbursement Manual, which does not provide specific instructions on 
reporting double lungs.  If the 44 OPOs had reported procurement of 1,721 double lungs correctly, the 
Medicare program could have saved an estimated net amount of $8.9 million during the year.  
RecommendationsCMS should clarify instructions on how independent and hospital-based OPOs 
should report lung statistics in Medicare cost reports and work with the Medicare contractors to educate 
OPOs on the correct reporting of double lungs in Medicare cost reports.  
 Physician administered drugsHerceptin 
  Medicare Contractors Nationwide Overpaid Millions to Providers for Full Vials of Herceptin.   
A-05-13-00024.  2013 NOV.  
We reported that 77 percent of payments that Medicare contractors made to providers for full vials of 
Herceptin were incorrect and included overpayments of about $24.2 million, or more than one-third of 
total dollars reviewed. Herceptin (trastuzumab) is a Medicare-covered drug used to treat breast cancer 
that has spread to other parts of the body.  Herceptin is one of many drugs packaged in multiuse vials. 
Therefore, the problem of provider billing for full vials may exist with other such drugs.  On nearly all of 
the incorrect line items, the providers reported the units of service for the entire content of one or more  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 14 
 
 
vial(s), each containing 440 milligrams of Herceptin, rather than reporting the units of service for the 
amount actually administered. The providers attributed the incorrect payments to clerical errors and to 
billing systems that could not prevent or detect the incorrect billing of units of service.  The incorrect 
payments made by Medicare contractors during our audit period occurred because the pertinent 
systems did not have sufficient edits in place during this period to prevent or detect the overpayments.   
RecommendationsCMS should require that Medicare contractors implement a Herceptin-specific 
system edit to identify for review claim lines billed with unit counts in multiples of 44 that represent 
billings equivalent to entire multiuse vial(s) and review other multiuse-vial drugs to determine whether 
system edits are needed to prevent incorrect billings.  CMS should also ensure that Medicare contractors 
collect the identified overpayment amounts, review payments made to providers after our audit period 
ended for full vials of Herceptin, and recover any additional overpayments identified. 
 Polysomnography (sleep studies) 
  Questionable Billing for Polysomnography Services.  OEI-05-12-00340.  2013 OCT. 
Medicare paid nearly $17 million for polysomnography services (a type of sleep study) that did not meet 
one or more of three Medicare requirements.  Payments for services with inappropriate diagnosis codes 
composed a majority of these payments.  Eighty-five percent of claims with inappropriate diagnosis 
codes came from hospital outpatient departments.  Inappropriate payments might have been averted 
with effective electronic edits that automatically deny claims or suspend them for manual review.  
Further, 180 providers exhibited patterns of questionable billing for polysomnography services.  Most of 
these providers submitted an unusually high percentage of claims for beneficiaries with another 
polysomnography claim on the same day, which is questionable because beneficiaries can undergo only 
one polysomnography service in a day, as the process requires an overnight stay.  Recommendations 
CMS should implement or improve claims processing edits and consider using measures of questionable 
billing from this study to identify providers for further investigation.  We also recommend that CMS take 
appropriate action regarding inappropriate payments and providers that exhibited patterns of 
questionable billing. 
Medicare wasteful payments, policies, and practices 
End stage renal diseasePayments for drugs 
  Update: Medicare Payments for End Stage Renal Disease Drugs.  OEI-03-12-00550.  2014 MAR.  
As of January 2011, Federal law required CMS to bundle Medicare reimbursement for almost all end 
stage renal disease (ESRD) treatmentsincluding drugs that were previously billed separatelyinto one 
payment rate.  CMS is required to reduce the ESRD payment bundles base rate for 2014 to reflect 
changes in utilization and should take into account recent drug sales and pricing data.  Our findings show 
that acquisition costs for most of the drugs under review have decreased, but the costs for drugs that 
represented the majority of facilities total drug costs have increased.  This means that any savings 
resulting from a decrease in utilization may potentially be offset by the drugs cost increase. In addition, 
although independent dialysis facilities could acquire the majority of ESRD drugs for less than Medicare  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 15 
 
 
reimbursement, any reductions to the ESRD base rate could potentially harm hospital-based dialysis 
facilities because these facilities had difficulty purchasing ESRD drugs for less than reimbursement, in the 
aggregate.  
RecommendationsCMS should rebase (i.e., redetermine the basis of) the ESRD base rate to reflect 
current trends in drug acquisition costs, as required by law; distinguish payments in the ESRD base rate 
between independent and hospital-based dialysis facilities; and consider updating the ESRD payment 
bundle using a factor that takes into account drug acquisition costs. 
Part B drugsPrice substitution 
   Comparing Average Sales Prices and Average Manufacturer Prices for Medicare Part B Drugs:  
An Overview of 2012.  OEI-03-13-00570.  2014 MAR.  
When Congress established average sales price (ASP) as the basis for Medicare Part B drug 
reimbursement, it also provided a mechanism for monitoring market prices and limiting potentially 
excessive ASP-based payment amounts.  Specifically, the ASP statute mandates that OIG compare ASPs 
with average manufacturer prices (AMPs) and directs CMS to lower reimbursement for certain drugs on 
the basis of OIGs findings.  To comply with its statutory mandate, OIG has completed 29 quarterly 
pricing comparisons since the ASP reimbursement methodology for Part B drugs was implemented in 
January 2005.  CMS began substituting payment amounts in April 2013 in accordance with a price 
substitution policy that is relatively limited in scope.  Under this price substitution policy, 14 drug codes 
would have been subject to reimbursement reductions on the basis of data from 2012, saving Medicare 
and its beneficiaries an estimated $1.8 million between the fourth quarter of 2012 and the third quarter 
of 2013.  However, because CMS did not begin substituting prices until the second quarter of 2013, only 
eight drug codes were actually subject to reductions, generating an estimated $819,000 in savings.  If 
CMS had expanded its price substitution criteria, the agency could have generated a quarter of a million 
dollars in additional savings.  RecommendationsCMS should expand the price substitution policy to 
include drug codes with complete AMP data in a single quarter and drug codes with partial AMP data.   
HospitalsInpatient payment policies:  DRG Window 
  Medicare and Beneficiaries Could Realize Substantial Savings If the DRG Window Were Expanded.  
OEI-05-12-00480.  2014 FEB. 
Expanding the window of time covered by Medicares lump sum payments for inpatient care would 
result in cost savings.  We reviewed outpatient services that the admitting hospitals provided during the 
11 days prior to the existing window and found that in 2011, Medicare and its beneficiaries paid an 
estimated $263 million for such services.  OIG has previously recommended expanding the window, but 
CMS has not sought authority to do so.  RecommendationsCMS should seek legislative authority to 
expand the DRG window to include additional days prior to the inpatient admission and seek legislative 
authority to expand the DRG window to include other hospital ownership arrangements, such as 
affiliated hospital groups.  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 16 
 
 
HospitalsCharacteristics of critical access hospitals 
  Services Provided at Critical Access Hospitals in 2011.  OEI-05-12-00081.  2013 DEC. 
In previous reports, OIG recommended that policymakers reevaluate which facilities are certified as 
critical access hospitals (CAHs).  In addition, the Administration has proposed to decertify some CAHs 
and change how remaining CAHs are paid.  For most services provided, Medicare reimburses CAHs at 
101 percent of their costs rather than at the rates set by the prospective payment systems or fee 
schedules.  In 2011, Medicare and beneficiaries paid approximately $8.5 billion for services provided at 
CAHs.  This report provides additional information for policymakers to consider while reassessing how 
CAHs should be certified and paid, including what types of services were provided at CAHs in 2011; how 
the types of services provided at CAHs in 2011 compared to the types of services provided at acute-care 
hospitals in 2011; and how much Medicare paid for services provided at CAHs in 2011.  The report does 
not contain new recommendations. 
Local coverage determinationsEffect on payments 
  Local Coverage Determinations Create Inconsistency in Medicare Coverage.  OEI-01-11-00500.  
2014 JAN. 
We reported that in October 2011, over half of Part B procedure codes were subject to LCDs in one or 
more States.  The presence of these LCDs was unrelated to the cost and utilization of items and services. 
Furthermore, LCDs limited coverage for these items and services differently across States. LCDs also 
defined similar clinical topics inconsistently.  Although CMS has taken steps to increase consistency 
among LCDs, it lacks a plan to evaluate new LCDs for national coverage.  RecommendationsCMS 
should establish a plan to evaluate new LCD topics for national coverage consistent with the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) requirements and continue 
efforts to increase consistency among existing LCDs.  We also recommend that CMS consider requiring 
MACs to jointly develop a single set of coverage policies. 
Vacuum erection systems 
  Medicare Payments for Vacuum Erection Systems Are More Than Twice as Much as the Amounts 
Paid for the Same or Similar Devices by Non-Medicare Payers.  A-07-12-05024.  2013 DEC.  
Medicare payment amounts for vacuum erection systems (VES) remain grossly excessive compared with  
non-Medicare reimbursement.  Medicare pays suppliers more than twice as much for VES as the 
Department of Veterans Affairs and consumers over the Internet pay for these types of devices.  
Processes exist to remedy this imbalance by adjusting Medicare payment rates for VES.  Use of the 
inherent reasonableness process would achieve cost savings. If the Medicare fee schedule amount for 
VES had been adjusted to approximate the amount paid for the same or similar devices by non-Medicare 
payers, the Federal Government would have saved an average of approximately $14.4 million for each of 
the 6 years reviewed, and Medicare beneficiaries would have saved approximately $3.6 million annually.  
RecommendationsCMS should either use its authority under the inherent reasonableness regulations 
to determine whether the payments for VES are grossly excessive and, if so, establish a special payment  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 17 
 
 
limit or seek legislative authority to include VES in the Competitive Bidding Program and then implement 
a National Mail-Order Competitive Bidding Program for VES.  
Physician-owned distributorsSpinal devices 
  Spinal Devices Supplied by Physician-Owned Distributors:  Overview of Prevalence and Use.   
OEI-01-11-00660.  2013 OCT. 
This report responds to a congressional request to determine the extent to which physician-owned 
distributors (PODs) provide spinal devices to hospitals.  PODs physician-owners can include the surgeons 
who implant the PODs devices; these owners have an opportunity to profit from using the devices their 
PODs sell.  Critics of PODs claim that such ownership creates a conflict of interest that may affect 
physicians clinical decision making.  PODs assert that their devices cost less than devices provided by 
other spinal device companies.  However, our findings raise questions about PODs claim that their 
devices cost less than those of other suppliers. Surgeons performed more spinal surgeries at hospitals 
that purchased from PODs, and those hospitals experienced increased rates of growth in the number of 
spinal surgeries performed in comparison to the rate for all hospitals.  In FY 2012, surgeons performed 
more spinal surgeries at hospitals in our sample that purchased from PODs than at those that did not 
purchase from PODs.  Taken together, these factors may increase the cost of spinal surgery to Medicare 
over time.  Hospitals policies varied in whether they required physicians to disclose ownership interests 
in PODs to either the hospitals or their patients.  Thus the ability of hospitals and patients to identify 
potential conflicts of interest among these providers is reduced.   
Medicare quality of care  
End stage renal disease grievance process 
  The ESRD Beneficiary Grievance Process.  OEI-01-11-00550.  2013 DEC. 
Previous OIG work found that the ESRD beneficiary grievance process was unreliable in identifying and 
resolving quality-of-care concerns.  Medicare regulations require that dialysis facilities implement a 
process for beneficiaries to file grievances without reprisal or denial of services.  Beneficiaries also have 
the option of filing grievances with ESRD Network Organizations (networks), which are Medicare 
contractors that work with dialysis facilities.  Dialysis facilities have latitude in what they record as a 
grievance, and two-thirds of facilities recorded five or fewer grievances in 2011.   
Our December 2013 report revealed that the most common grievances recorded concerned the comfort 
or appearance of the physical environment and interactions with staff.  Anonymous grievance processes 
can be difficult to implement, and fear of reprisal may be difficult for facilities to measure.  ESRD 
networks involvement with beneficiary grievances is constrained by limited data and reporting. They 
analyze grievances for trends, but the database they use is of limited utility.  CMS is unable to readily 
provide network grievance and complaint data.  RecommendationsCMS should define grievance for 
facilities, require that facilities report grievances regularly to their respective networks, provide guidance 
to facilities on what constitutes a robust process for anonymous grievances, work with the Agency for 
Healthcare Research and Quality (AHRQ) to add a question to the standardized satisfaction survey to  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 18 
 
 
assess ESRD beneficiaries fear of reprisal, and provide networks with better technical support for their 
grievance database. 
Nursing homesHarm to patients and questionable resident hospitalizations 
  Adverse Events in Skilled Nursing Facilities: National Incidence Among Medicare Beneficiaries.  
OEI-06-11-00370.  2014 FEB. 
We reported that an estimated 22 percent of Medicare beneficiaries experienced adverse events during 
their skilled nursing facility (SNF) stays.  An additional 11 percent experienced temporary harm events 
during their SNF stays.  Physician reviewers determined that 59 percent of the adverse events and 
temporary harm events were clearly or likely preventable.  They attributed much of the preventable 
harm to substandard treatment, inadequate resident monitoring, and failure or delay of necessary care. 
Over half of the residents who experienced harm returned to a hospital for treatment; the estimated 
cost to Medicare was $208 million in August 2011.  This equates to $2.8 billion spent on hospital 
treatment for harm caused in SNFs in FY 2011.   
Because many of the events that we identified were preventable, our study confirms the need and 
opportunity for SNFs to significantly reduce the incidence of resident harm events.  Therefore, we 
recommend that AHRQ and CMS raise awareness of nursing home safety and seek to reduce resident 
harm through methods used to promote hospital safety efforts.  This would include collaborating to 
create and promote a list of potential nursing home eventsincluding events we found that are not 
commonly associated with SNF careto help nursing home staff better recognize harm.  CMS should 
also instruct State agency surveyors to review nursing home practices for identifying and reducing 
adverse events. 
  Medicare Nursing Home Resident Hospitalization Rates Merit Additional Monitoring.   
OEI-06-11-00040.  2013 NOV. 
We reported that in FY 2011, nursing homes transferred one quarter of their Medicare residents to 
hospitals for inpatient admissions and that Medicare spent $14.3 billion on these hospitalizations. 
Nursing home residents went to hospitals for a wide range of conditions; septicemia was the most 
common.  Annual rates of Medicare resident hospitalizations varied widely across nursing homes.  
Nursing homes with the following characteristics had the highest annual rates of resident 
hospitalizations:  homes in Arkansas, Louisiana, Mississippi, or Oklahoma and homes with one, two, or 
three stars in the CMS Five-Star Quality Rating System.  RecommendationsCMS should develop a 
quality measure that describes nursing home resident hospitalization rates and instruct State survey 
agencies to review the proposed quality measure as part of the survey and certification process. 
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 19 
 
 
Medicaid payments, 
Medicaid-related information systems 
policies, and quality 
security and functionality  
Terminated providersFederal and State information-sharing system 
  CMS System for Sharing Information About Terminated Providers Needs Improvement.   
OEI-06-12-00031.  2014 MAR. 
We reported that CMSs process for sharing information about providers that were terminated for cause 
needs improvement.  Sharing terminated provider data among States prevents terminated providers in 
one State from enrolling in another State Medicaid program.  The Patient Protection and Affordable Care 
Act (Affordable Care Act) required CMS to establish a process for sharing such information.  Hence, CMS 
established a Web-based portal for States and Medicare to use for this purpose.   
RecommendationsCMS should require each State Medicaid agency to report all terminated providers, 
ensure that the shared information contains only records that meet CMSs criteria for inclusion, and take 
action to improve the completeness of records shared through the process.   
State information systems vulnerabilities 
  High-Risk Security Vulnerabilities Identified During Reviews of Information Technology General 
Controls at State Medicaid Agencies.  A-07-14-00433.  2014 MAR. 
We identified 79 findings in the 10 State Medicaid agencies whose information system general controls 
we audited between calendar years (CYs) 2010 and 2012.  Information system general controls are the 
structure, policies, and procedures that apply to an entitys overall computer operations.  Some primary 
objectives of general controls are to safeguard data, protect computer applications, prevent 
unauthorized access to system software, and ensure continued computer operations after unexpected 
interruptions.  In some of the general control areas, we noted findings with similar vulnerabilities in 
different State agencies, which indicated that the vulnerabilities identified in these findings were 
systemic and pervasive.  State officials pointed most frequently to resource constraints that made 
information system security a lower priority.  Officials also described a lack of formal policies and 
procedures when explaining the causes of the vulnerabilities.  This review aggregates findings from the 
individual reports and is intended to provide information to assist those State agencies and the Centers 
for Medicare & Medicaid Services (CMS) in strengthening system security.  It does not make new 
recommendations. 
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 20 
 
 
National correct coding initiative:  Georgia 
  Georgia Did Not Pay Some Line Items on Medicaid Claims in Accordance With Its Medicaid 
National Correct Coding Initiative Methodologies.  A-04-12-06159.  2013 DEC.  
Georgia did not pay some line items in accordance with its Medicaid National Correct Coding Initiative 
(NCCI) methodologies on claims that hospitals submitted from November 1, 2010, through September 
30, 2011.  The NCCI promotes correct coding of health care services provided to beneficiaries and 
prevents payment for improperly coded services.  Overall, the State agency satisfied Federal and State 
requirements by implementing the Medicaid NCCI into the Georgia Medicaid Management Information 
System (GAMMIS).  However, the Medicaid NCCI edits did not prevent all erroneous payments.  The 
State agency made erroneous payments to providers totaling $1.5 million ($1 million Federal share).  The 
State agency acknowledged that the Medicaid NCCI edits did not work as intended and that it paid line 
items in error.  RecommendationsGeorgia should ensure that the Medicaid NCCI edits were properly 
incorporated and are functioning as intended in the GAMMIS and refund the erroneous payments.  
Subsequent to our fieldwork, agency officials stated that all of the erroneous payments identified in our 
universe had been recovered from providers. 
Improper State claims for Federal reimbursement 
Laboratory ServicesMaine 
  Maine Did Not Always Claim Federal Medicaid Reimbursement for Clinical Diagnostic Laboratory 
Services in Accordance With Requirements.  A-01-13-00005.  2014 MAR. 
We reported that Maine paid clinical diagnostic laboratory services providers more than they would have 
been paid under Medicare or more than the amounts allowed by State regulations.  As a result, the 
Federal reimbursement that the State agency claimed exceeded the rates allowed by Federal and State 
requirements by $3.5 million ($2.5 million Federal share).  The overpayments occurred because the State 
agency did not always follow its policies and procedures.  RecommendationsMaine should follow its 
policies and procedures to ensure that the amounts claimed for hospital outpatient and independent 
clinical laboratory services do not exceed the amounts that would be paid under Medicare (for out-of-
State providers) or the amounts allowed by State regulations (for in-State providers) and refund the 
excessive Federal share to the Federal Government. 
Assistive technology services:  New York 
  New York Claimed Some Unallowable Costs for Assistive Technology Services Under the States 
Developmental Disabilities Waiver Program.  A-02-10-01039.  2013 NOV.  
On the basis of a sample, we estimated that New York improperly claimed at least $1.8 million of Federal 
reimbursement for assistive technology services that did not comply with certain Federal and State 
requirements.  New York Medicaid covers a variety of assistive technology services performed under 
contracts, including services tailored to enable individuals to increase or maintain the ability to live 
independently and safely at home or in the community (e.g., installation of wheelchair ramps).  Most  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 21 
 
 
claims were unallowable because they were not provided pursuant to a required written plan of care.  
State policies and procedures did not adequately ensure that conditions were met and that contractors 
properly claimed reimbursement from the State.  RecommendationsNew York should ensure that the 
pertinent State agencies strengthen related policies and procedures, refund the overpaid amounts we 
identified, and work with CMS to resolve potentially unallowable amounts and refund any additional 
unallowable amounts.   
Duplicate fee for service and managed care payments:  New York 
  New York State Made Unallowable Medicaid Fee-for-Service Payments for Beneficiaries Also 
Enrolled in Medicaid Managed Care.  A-02-12-01007.  2014 JAN.   
New York State did not prevent separate Medicaid fee-for-service payments from being made for 
beneficiaries who were also enrolled in Medicaid managed care organizations.  For all 107 inpatient 
admissions included in our sample, the State agency improperly claimed Federal Medicaid fee-for-
service reimbursement for inpatient hospital services on behalf of beneficiaries for whom separate 
Medicaid managed care payments were made under a different Medicaid identification number.  The 
improper payments occurred because the State agency operated two eligibility systems that did not 
identify beneficiaries with multiple Medicaid identification numbers.  In addition, local departments of 
social services did not use all available resources within the systems to ensure that beneficiaries were 
not issued multiple Medicaid identification numbers.  On the basis of our sample results, we estimated 
that the State agency improperly claimed at least $23.4 million in Federal Medicaid fee-for-service 
reimbursement for inpatient hospital services made on behalf of beneficiaries for whom separate 
Medicaid managed care payments were also made. 
RecommendationsNew York should use all available resources to ensure that no beneficiary is issued 
multiple Medicaid identification numbers or develop one eligibility system that could be used to 
determine whether applicants are enrolled in any medical or public assistance program throughout New 
York State.  New York should refund $23.4 million to the Federal Government. 
Residential habilitation services:  New York 
  Medicaid Rates for Residential Habilitation Services Provided at New York State-Operated 
Residences Are Excessive.  A-02-13-01008.  2014 MAR. 
Payment rates for residential habilitation services provided at State-operated residences did not meet 
the Federal requirement that payment for services be consistent with efficiency and economy. 
Specifically, for State fiscal year (FY) 2010, Federal Medicaid payments exceeded actual costs for 
providing these services by approximately $320 million (57 percent more than actual costs).  Further, the 
payment rate for these services was more than double the average rate for privately operated residences 
that offered the same services.  We also determined that if New York had used the prior years actual 
costs in calculating payment rates, its State FY 2011 total reimbursement would have been 
approximately $692 million ($346 million Federal share) less than what it claimed.   
Payment rates for residential habilitation services were significantly higher because CMS did not 
adequately consider the appropriateness of the rate-setting methodology when it approved New Yorks 
waiver agreement.  The application did not describe in detail the methodology used to calculate the  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 22 
 
 
payment rates for State-operated residences.  According to New York officials, that methodology used 
the prior years adjusted payment rates, which were calculated using reimbursable costs rather than 
actual costs, to determine payment rates for the current year.  RecommendationsCMS should work 
with New York to ensure that the methodology used to set payment rates for State-operated residences 
meets the Federal requirement that payment for services be consistent with efficiency and economy.   
Pediatric dental servicesQuestionable billing:  New York. 
  Questionable Billing for Medicaid Pediatric Dental Services in New York.  OEI-02-12-00330.   
2014 MAR.  
We identified 23 general dentists and 6 orthodontists in New York with questionable billing.  The 
providers are extreme outliers when compared to their peers. Medicaid paid these providers 
$13.2 million for pediatric dental services in 2012.  The general dentists and orthodontistsrepresenting 
3 percent of dental providers we reviewedreceived extremely high payments per child; provided an 
extremely large number of services per child; or provided certain selected services, such as pulpotomies 
or extractions, to an extremely high proportion of children.  Additionally, almost a third of the general 
dentists were associated with a single dental chain that had settled lawsuits for providing services that 
were medically unnecessary or that failed to meet professionally recognized standards of care to 
children.  Our findings raise concerns that certain providers may be billing for services that are not 
medically necessary or were never provided.  They also raise concerns about the quality of care provided 
to Medicaid children. Although some of the billing may be legitimate, providers who bill for extremely 
large amounts of services warrant further scrutiny.   
RecommendationsNew York should continue to monitor general dentists and orthodontists to identify 
patterns of questionable billing, ensure that the State employs adequate safeguards to monitor general 
dentists and orthodontists under managed care, and ensure appropriate followup on the general 
dentists and orthodontists identified as having questionable billing. 
Other medical equipment and supplies 
  State Medicaid Program Efforts to Control Costs for Disposable Incontinence Supplies.   
OEI-07-12-00710.  2014 JAN. 
We reported that all State Medicaid programs implemented cost-control measures--such as quantity 
limitations or reductions in fee-schedule amounts for incontinence supplies.  Five States implemented 
competitive bidding programs.  These programs reported savings of up to 50 percent.  If States had paid 
suppliers at the median competitive bidding rate, they could have paid 23 percent less and saved 
$62 million. Other positive outcomes resulted from competitive bidding, such as increased beneficiary 
access to supplies, increased product quality, and State control of providing supplies. However, States 
reported encountering initial challenges with their competitive bidding programs, and six States 
attempted to establish competitive bidding but did not fully implement it.  RecommendationCMS 
should encourage States to seek further cost savings for disposable incontinence supplies. 
  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 23 
 
 
  The Minnesota Medicaid Program Could Significantly Lower Payment Rates for Selected Durable 
Medical Equipment and Supplies.  A-05-13-00015.  2014 JAN.  
The Minnesota Medicaid program could have saved an estimated $2.27 million by establishing a 
competitive bidding program for durable medical equipment (DME) and supplies to obtain pricing similar 
to pricing that Medicare obtained through its competitive bidding program. The competitive bidding 
program sets lower payment rates than conventional Medicare payment rates for selected items while 
ensuring beneficiary access to quality items and services.  We determined that average Medicare 
payment rates obtained through competitive bids for the 42 selected items were significantly lower than 
Minnesotas average Medicaid payment rates.  RecommendationMinnesota should establish 
competitive bidding that functions similarly to Medicares competitive bidding program for the purchase 
of the 42 selected DME items, which could have resulted in cost savings. 
  The California Medicaid Program Could Significantly Lower Payment Rates for Selected Durable 
Medical Equipment.  A-09-13-02028.  2014 MAR. 
The California Medicaid program (Medi-Cal) could have saved an estimated $3.9 million for CY 2011 by 
establishing a competitive bidding program for reimbursement of standard power wheelchairs, oxygen 
systems, and oxygen concentrators similar to Medicares competitive bidding program or by revising its 
reimbursement methodology to obtain pricing similar to the Medicare payment rates in Californias 
competitive bidding area (CBA).  For the three product types reviewed, we determined that Medicare 
payment rates in Californias CBA were significantly lower than the Medi-Cal payment amounts.  
RecommendationCalifornia should establish a competitive bidding program similar to Medicares.  
Physician administered drugs:  Maryland  
  Maryland Claimed Unallowable Federal Reimbursement for Some Medicaid Physician-
Administered Drugs.  A-03-12-00200.  2013 NOV.  
Maryland did not always comply with Federal Medicaid requirements for billing manufacturers for 
rebates for physician-administered drugs.  Federal reimbursement for covered outpatient drugs 
administered by a physician is not available to States that do not comply with Federal requirements for 
capturing data to bill and collect rebates.  Maryland paid $9.4 million for claims received on paper forms 
but billed for rebates on only $35,000.  As a result, it improperly claimed Federal reimbursement for 
$3.5 million of single-source and top-20 multiple-source drugs.  RecommendationsMaryland should 
update its Medicaid Management Information System (MMIS) edits to require national drug codes for 
payment on all drug claims; establish and implement processes to ensure that all physician-administered 
drug claims, including claims submitted on paper forms, are processed for rebates; refund the 
unallowable Federal share; and work with CMS to determine whether other questionable amounts are 
unallowable and refund the Federal share.  
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 24 
 
 
Supported employment services:  New Jersey 
  Most of New Jerseys Claims for Medicaid Supported Employment Services Were Unallowable.   
A-02-12-01009.  2013 DEC.  
Most of the New Jersey Department of Human Services (State agency) claims for Federal Medicaid 
reimbursement for supported employment services in the community care waiver (CCW) program did 
not comply with certain Federal and State requirements.  Supported employment services are ongoing 
support services and other appropriate services needed to support and maintain individuals with 
developmental disabilities in a work setting.  On the basis of our sample results, we estimated that the 
State agency improperly claimed at least $6.9 million in Federal Medicaid reimbursement for 
unallowable supported employment services.  The claims for unallowable services were made primarily 
because most providers did not ensure that supported employment services were documented or 
provided by approved personnel to eligible beneficiaries.  
RecommendationsNew Jersey should ensure that reimbursement is claimed only for documented 
supported employment services, that supported employment services are provided only to beneficiaries 
for whom there is a completed and approved care plan, that all job coaches meet qualifications, and that 
all beneficiaries approved for supported employment services have been assessed and certified to need 
the required level of care.  New Jersey should refund any unallowable Federal share to the Federal 
Government. 
Orthodontic services:  New York City  
  New York Improperly Claimed Medicaid Reimbursement for Orthodontic Services to Beneficiaries 
in New York City.  A-02-11-01003.  2013 OCT.  
New York claimed Federal Medicaid reimbursement for orthodontic services provided to beneficiaries 
in New York City that did not always comply with Federal and State requirements.  Of the 100 
beneficiaries in our random sample, the State agency improperly claimed Medicaid reimbursement for 
43 beneficiaries with 1 or more services that were unallowable.  On the basis of our sample results, we 
estimated that the State agency claimed at least $7.8 million in unallowable Federal reimbursement.  
The deficiencies occurred because the State and providers did not ensure that cases were reviewed 
annually to determine the need for continuing care and that services were documented.  Further, the 
State provided only limited guidance to providers on State regulations, and the State did not sufficiently 
educate providers regarding their responsibilities.  RecommendationsNew York should strengthen 
guidance and provider education activities related to authorizing continuing treatment and maintaining 
adequate documentation and refund the unallowable Federal share to the Federal Government.  
Excessive disproportionate share hospital payments:  New Jersey 
  New Jersey Claimed Excessive Medicaid Disproportionate Share Hospital Payments to Four Hospitals.  
A-02-10-01042.  2014 MAR. 
DSH payments may not exceed hospitals uncompensated care costs for providing services to patients 
who are eligible for Medicaid or have no health insurance for services provided during the year (known  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 25 
 
 
as the hospital-specific limit).  New Jersey claimed reimbursement for DSH payments to four hospitals 
that exceeded the hospital-specific limit by $44 million ($22 million Federal share).  The overpayments 
occurred because the State had not established procedures for reconciling and adjusting DSH payments. 
RecommendationsNew Jersey should establish procedures for reconciling and adjusting DSH payments 
to hospital-specific limits and refund unallowable Federal share to the Federal Government. 
State payment of Medicare Part B deductibles and coinsurance 
  Michigan Claimed Improper Medicaid Reimbursement for Some Medicare Part B Premiums.   
A-05-12-00035.  2014 MAR. 
Michigan claimed Federal Medicaid reimbursement for some Medicare Part B premiums it paid on 
behalf of beneficiaries who were ineligible for the buy-in program.  Participating State Medicaid agencies 
are allowed to pay the monthly Medicare Part B premiums and claim reimbursement for the Federal 
share for certain Medicaid beneficiaries who are entitled to both Medicare and Medicaid benefits.  The 
premium payments are made in cooperation with CMS under what is known as the buy-in program.  
On the basis of our sample results, we estimated that Michigan improperly claimed at least $517,000 
(Federal share) in Medicare Part B premiums it paid for individuals ineligible for enrollment in the buy-in 
program for the quarters ended December 31, 2008, through March 31, 2010.  In addition, for the 
quarters ended December 31, 2007, through September 30, 2008, Michigan claimed $232.8 million 
($139.5 million Federal share) for Part B premiums it paid on behalf of beneficiaries it could not readily 
identify nor document as eligible for the buy-in program. 
RecommendationsMichigan should strengthen coordination with CMS and Social Security 
Administration officials to ensure appropriate corrective action is taken in verifying changes reported in a 
beneficiarys eligibility status.  Michigan should refund the unallowable Federal share and work with CMS 
to determine the allowability of Part B premiums claimed for Medicaid reimbursement for which it had 
inadequate support and refund any unallowable amount claimed.  
  Colorado Did Not Properly Pay Some Medicare Part B Deductibles and Coinsurance.   
A-07-13-03189.  2013 DEC.  
During FYs 2011 and 2012, Colorado did not always claim Medicaid payments for Medicare Part B 
deductibles and coinsurance in accordance with Federal requirements and the approved State plan.  For 
30 of the 100 claims in our sample, the State agency did not limit payment of Medicare Part B 
deductibles and coinsurance by State Medicaid plan rates, as required under Colorados Medicaid State 
plan.  Because Federal requirements provide that a State plan for medical assistance is mandatory upon 
the State and all of its political subdivisions, these 30 claims thus violated Federal requirements as well 
as the requirements of the State plan.  
These errors occurred because the State agency did not compare the Medicare payment to the State 
Medicaid plan rate, as required by the State plan.  The State agency did not make this comparison 
because it did not have policies and procedures requiring it to do so for all Medicare Part B crossover 
claims.  On the basis of our sample results, we estimate that the State agency claimed unallowable 
Medicaid payments of at least $3.1 million ($1.7 million Federal share) during FYs 2011 and 2012.  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 26 
 
 
We recommended that Colorado refund $1.7 million to the Federal Government for unallowable 
Medicaid payments for Medicare Part B deductibles and coinsurance and develop and implement 
policies and procedures to ensure that it compares the Medicare payment to the State Medicaid plan 
rate, as required by the State plan, to determine the allowable Medicare Part B deductibles and 
coinsurance for all crossover claims.  
Medicaid wasteful policies and practices 
Diabetic testing supplies 
  State Medicaid Agencies Can Significantly Reduce Medicaid Costs for Diabetic Test Strips.   
A-05-13-00033.  2014 MAR.   
See also:   
  Results of Reviews at Three Suppliers of Diabetic Testing Supplies.  A-09-13-02032.  2014 MAR. 
  OIG Spotlight article on diabetic strips, available on our Web site (News Room). 
We reported that home blood-glucose test strips (test strips) are available to CMS and certain State 
Medicaid agencies at a net cost well below that available to other State Medicaid agencies.  We 
conducted audits in Illinois, Indiana, New Jersey, New York, and Ohio to determine whether 
opportunities exist for State Medicaid programs to achieve savings for test strips.  In these audits, we 
found that the State Medicaid agencies had saved or could have saved $56 million for the period we 
reviewed.  This included $17.9 million saved through the use of manufacturer rebates, $29.7 million of 
potential savings through the use of manufacturer rebates or competitive bidding in the purchase of test 
strips, and $8.3 million in additional savings in States that obtained pricing comparable to pricing under 
Medicares national mail-order competition for diabetic supplies.  One State Medicaid program initiated 
a competitive bidding program after the completion of our audit.  RecommendationsCMS should work 
with State Medicaid agencies to determine whether the use of manufacturer rebates and lower provider 
reimbursement rates could achieve net savings for the purchase of test strips. 
State stewardshipExcessive withdrawal of funds  
  Maryland Withdrew Excessive Federal Medicaid Funds for Fiscal Years 2009 Through 2011.   
A-06-12-00051.  2013 DEC.  
The Maryland Department of Health and Mental Hygiene (State agency) obtained Federal Medicaid 
funds for FYs 2009 through 2011 that were not supported by net expenditures.  The State agency 
obtained $12.9 billion in Federal Medicaid funds, but CMS awarded the State agency only $12.8 billion 
for Medicaid expenditures.  The State agency inappropriately withdrew the difference of $115.3 million, 
consisting of $116.7 million that the State agency inappropriately withdrew from FY 2012 grant award 
funds because of errors that occurred during its quarterly reconciliations for FYs 2009 through 2011 and 
$1.4 million owed to the State agency because it mistakenly returned more funds than necessary in an 
FY 2011 account that was originally overdrawn.  Additionally, the State agency did not always withdraw 
Federal funds from the appropriate Payment Management System (PMS) accounts because of fund  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 27 
 
 
deficiencies, a faulty procedure, and other errors.  The withdrawals caused the balances in the accounts 
to be wrong. 
RecommendationsMaryland should ensure that the amounts used in its quarterly reconciliations are 
accurate and that it makes reconciliation adjustments to return or obtain Federal funds, establish 
procedures in its quarterly reconciliations to account for adjustments to expenditures not included on 
the CMS-64 report but that affect the State agencys grant award amounts, monitor PMS accounts to 
anticipate fund deficiencies and determine whether to refund overdrawn amounts or to request a 
supplemental grant award, and ensure that it withdraws funds from the appropriate PMS account.  
Maryland should refund $115.3 million to the Federal Government. 
Medicaid quality of care and patient safety 
State oversight of managed care credentialing 
  State and CMS Oversight of the Medicaid Managed Care Credentialing Process.   
OEI-09-10-00270.  2013 NOV. 
States must establish uniform provider credentialing policies and include Federal credentialing provisions 
in contracts with Medicaid Managed Care Entities (MCEs).  States must also monitor MCEs compliance 
with these Federal provisions and any additional State credentialing requirements in contracts.  We 
reported that five of six States reviewed did not monitor MCEs compliance with the Federal provider 
nondiscrimination contract provision.  This provision requires that MCEs not discriminate against 
providers that serve high-risk populations or that specialize in conditions requiring costly treatment 
(67 Fed. Reg. 40989, 41031 (June 14, 2002).)  Also, CMS oversight to ensure compliance of State 
contracts was inconsistent. Our review of 32 checklists showed that CMS regional office staff did not 
indicate whether 25 percent of contracts met all Federal credentialing provisions and that many 
checklists were missing other required contract information.  RecommendationsCMS should issue 
guidance to States on monitoring MCE compliance with the Federal provider nondiscrimination contract 
provision.  We also recommend that CMS regional office staff accurately complete the checklist to 
ensure State compliance with the Federal credentialing provisions. 
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 28 
 
 
 
 
 
 
 
 
 
 
 
http://oig.hhs.gov 
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 29 
 
 
Legal and investigative activities 
For this semiannual period, we reported 427 criminal and 266 civil actions against individuals or entities 
that engaged in health-care-related offenses.  We also reported $2.02 billion in investigative receivables 
related to Medicare and Medicaid 
due to the U.S. Department of Health and Human Services (HHS) and $811.9 million in non-HHS 
investigative receivables, including civil and administrative settlements or civil judgments related to 
Medicare; Medicaid; and other Federal, State, and private health care programs.  
One of the most common types of fraud perpetrated against Medicare, Medicaid, and other Federal 
health care programs involves filing false claims for reimbursement.  False claims may be pursued under 
Federal and State criminal statutes and, when appropriate, under the False Claims Act (FCA).  Depending 
on the types of fraud or other violations involved, OIG investigations may culminate in criminal or civil 
court judgments and decisions, administrative sanctions and decisions, and/or negotiated settlement 
agreements.  Investigative outcomes take many forms, including incarceration, restitution, fines, 
penalties, forfeitures, assessments, and exclusion of individuals or entities from participation in all 
Federal health care programs.  Frequently used exclusion and penalty authorities are described in 
Appendix D of this Semiannual Report to Congress (Semiannual Report) and on our Web site at:  
https://www.oig.hhs.gov/fraud/enforcement/cmp/index.asp. 
 
Chart 1: All programs 
 
 
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 30 
 
 
Chart 2:  All programs 
 
 
(Includes non-HHS receivables, e.g., States share of Medicaid restitution.) 
 
Advisory opinions and other industry guidance  
As part of OIGs continuing efforts to promote the highest level of ethical and lawful conduct by the 
health care industry, we issue advisory opinions and other guidance to educate industry and other 
stakeholders on how to avoid fraud, waste, and abuse.  Advisory opinions, which are developed in 
consultation with the Department of Justice (DOJ), are issued to requesting parties regarding the 
interpretation and applicability of certain statutes relating to Federal health care programs.  The Health 
Insurance Portability and Accountability Act of 1996,  205, allows OIG to provide case-specific formal 
guidance on the application of the anti-kickback statute and safe harbor provisions and other OIG health 
care fraud and abuse sanctions.  From October 1, 2013, to March 31, 2014, OIG received 29 requests for 
advisory opinions and issued 9 opinions.  
Health care fraud prevention and enforcement 
On May 20, 2009, HHS Secretary Kathleen Sebelius and Attorney General Eric Holder announced the 
creation of the Health Care Fraud Prevention and Enforcement Action Team (HEAT), an interagency effort 
focused specifically on combating health care fraud.  HEAT includes senior officials from DOJ and HHS 
who are strengthening programs, as well as investing in new resources and technologies, to prevent and 
combat fraud, waste, and abuse. 
HEAT provider compliance training  
OIG provides free training on our Web site for health care providers, compliance professionals, and 
attorneys.  OIGs Provider Compliance Training was an initiative developed as part of HEAT in 2011 that  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 31 
 
 
continues to reach the health care community with OIGs message of compliance and prevention via 
free, downloadable, comprehensive training materials and podcasts.  OIGs provider compliance training 
resources can be accessed at http://oig.hhs.gov/newsroom/video/2011/heat_modules.asp.  
Medicare Fraud Strike Force activities  
The Medicare Fraud Strike Force (Strike Force) is a key component of HEAT.  Strike Force was established 
in March 2007 and is operating in nine citiesMiami, Florida; Los Angeles, California; Detroit, Michigan; 
Houston, Texas; Brooklyn, New York; Baton Rouge, Louisiana; Tampa, Florida; Chicago, Illinois; and Dallas, 
Texas.  Strike Force teams coordinate joint law enforcement operations conducted by Federal, State, and 
local law enforcement entities.  These teams have a proven record of success in analyzing data and 
investigative intelligence to quickly identify fraud and bring prosecutions.  During this reporting period, 
Strike Force efforts resulted in the filing of charges against 94 individuals or entities, 107 criminal actions, 
and $294.1 million in investigative receivables. 
Strike force case$50.9 million in restitution 
New York  Irina Shelikhova managed the daily operations of three medical clinicsBay Medical Care PC, 
SVS Wellcare Medical PLLC, and SZS Medical Care PLLC.  According to the indictment, the clinics 
submitted over $71 million in false claims to Medicare, for which Medicare reimbursed approximately 
$47 million.  From March 2005 to July 2010, Shelikhova and her co-conspirators paid cash kickbacks to 
Medicare beneficiaries in return for receiving unnecessary physicians services, physical therapy, and 
diagnostic tests at the clinics.  Shelikhova hired a medically unlicensed co-defendant to impersonate a 
physician and render phony medical care to such patients.  She also directed employees to create fake 
medical notes to support the false billings and to forge physicians names on prescriptions and charts.  
Shelikhova, who was listed on HHS OIGs Most Wanted Fugitives web site until her capture in 2012, was 
sentenced to 15 years in prison and ordered to pay $50.9 million in restitution, joint and several, for her 
involvement in the scheme.  Shelikhova will face deportation from the United States at the conclusion of 
her prison term.  A co-conspirator was sentenced to 2-and-a-half years in prison and was ordered to pay 
$9.1 million in restitution, joint and several.  Other co-conspirators were previously sentenced to a 
combined 22 years and 7 months in prison and ordered to pay more than $60 million in restitution, joint 
and several.   
Other strike force examples 
New York  Dmitry Shteyman was the chief operating officer and vice president of Solstice Wellness 
Center, a medical clinic that purportedly provided physical therapy and diagnostic tests to Medicare 
beneficiaries.  According to the indictment, Shteyman and his co-conspirators allegedly paid beneficiaries 
up to $300 in kickbacks to be transported by ambulance to and from Solstice to receive physician 
services, physical therapy, and diagnostic tests.  The services either were not provided or were medically 
unnecessary.  Shteyman and his co-conspirators then submitted false claims to Medicare on behalf of 
Solstice for the services.  Shteyman was sentenced to 8 years and 1 month of incarceration and ordered 
to pay $1.4 million in restitution, joint and several, after pleading guilty to conspiracy to commit health 
care fraud.   
California  Charles Agbu owned and operated the durable medical equipment (DME) company Bonfee, 
Inc.  His daughter, Obiageli Agbu, owned and operated the DME company Ibon, Inc.  According to the 
indictment, co-conspirators Candalaria Estrada and Alejandro Maciel acted as marketers who solicited  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 32 
 
 
and obtained Medicare beneficiaries information by offering them medically unnecessary medical 
equipment.  The information was used by Dr. Emmanuel Ayodele and others to create fraudulent 
prescriptions and medical documents.  Charles and Obiageli Agbu then used the information to submit 
or cause the submission of more than $11 million in false claims to Medicare for power wheelchairs and 
other medical equipment that had not been provided or were medically unnecessary.  Charles Agbu, 
Estrada, Maciel, and Ayodele pleaded guilty and were sentenced to a combined 14 years and 9 months 
of incarceration and were ordered to pay joint and several restitution of $6.3 million.  Obiageli Agbu was 
convicted at trial and is currently awaiting sentencing.   
Florida  Miguel Guillermo Jimenez and Marina Sanchez-Pajon co-owned Flores Home Health Care, Inc., 
a home health agency that was located and operated in Miami-Dade County, Florida.  From 
approximately October 2009 through June 2012, Flores Home Health Care billed Medicare and was paid 
approximately $8 million for physical therapy and home health services that were not medically 
necessary and/or had not been provided.  Jimenez and Sanchez-Pajon were sentenced to a combined 
12 years in prison and ordered to pay $8.4 million in joint and several restitution for their involvement in 
the fraud scheme.   
Other criminal and civil enforcement activities  
Special Assistant U.S. Attorney Program  
During this reporting period, DOJ and OIG continued their participation in a program in which OIG 
attorneys, some of whom are Special Agents, serve as Special Assistant U.S. Attorneys.  OIG attorneys are 
detailed full time to DOJs Criminal Division, Fraud Section, for temporary assignments, including 
assignments to the Medicare Fraud Strike Force.  Other attorneys prosecute matters on a case-by-case 
basis.  Both arrangements offer excellent litigation training for OIG attorneys and enhance collaboration 
between the Departments in their efforts to fight fraud.  Under this program, OIG attorneys have 
successfully litigated important criminal cases relating to the fraudulent billing of medical equipment and 
supplies, infusion therapy, and physical therapy, as well as other types of Medicare and Medicaid fraud.  
Related case examples follow. 
Michigan  Orlando Mena controlled and directed operations at two Detroit-area health care provider 
companiesWorld Health Care Medical Center, LLC (WHC) and Wyoming Medical Center, LLC (WMC).  
WMC was co-owned and operated by Reinaldo Orellana.  According to court documents, Orlando Mena, 
Orellana, and co-conspirators Akim Mena and Xiomara Rodriguez allegedly offered and paid kickbacks 
and bribes, including cash and prescriptions for OxyContin, to Medicare beneficiaries in exchange for 
visiting the businesses.  The conspirators then submitted false and fraudulent claims to Medicare for 
medically unnecessary office visits and various unnecessary tests.  Between August 2008 and June 2010, 
the defendants caused the billing of more than 300,000 prescriptions for OxyContin.  Orlando Mena, 
Akim Mena, and Rodriguez, all of whom were on HHS OIGs Most Wanted fugitives list until their 
captures in 2012, were sentenced to a combined 20 years and 10 months in prison and were ordered to 
pay more than $3.7 million in restitution, joint and several, after pleading guilty to charges of conspiracy 
to commit health care fraud.  Orellana, who hired marketers to recruit Medicare patients in the scheme, 
was sentenced to 4-and-a-half years of incarceration and was ordered to pay $1.4 million in restitution, 
joint and several.  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 33 
 
 
Tennessee  Husband and wife Woody Medlock, Sr., and Kathy Medlock owned and operated 
Murfreesboro Ambulance Service (MAS), an ambulance company that transported Medicare and 
Medicaid patients to and from dialysis treatments who were not qualified to receive ambulance 
transportation.  According to evidence presented at trial, for more than a decade, the Medlocks 
submitted and caused MAS to submit about $1.2 million in false claims to Medicare and Medicaid.  
The claims falsely represented that beneficiaries were on stretchers when, in fact, they were actually 
transported in the front seat of the ambulance or in a seat in the back of the ambulance and that 
patients were transported individually when, in fact, two patients were transported simultaneously in 
one ambulance.  To conceal the fraud, the Medlocks and their co-conspirators allegedly omitted facts 
and/or provided vague descriptions on records that were used to falsely bill Medicare.  The Medlocks 
were sentenced to a combined 12 years and 1 month of incarceration after being convicted by a jury on 
charges of conspiracy, Medicare fraud, making false statements related to health care matters, wire 
fraud, and aggravated identity theft.  The Medlocks were also ordered to pay $457,730 in restitution, 
joint and several.   
Most wanted fugitives listed on OIGs Web site  
The OIG Most Wanted Fugitives Web site continues to garner national and international attention and 
has greatly assisted in helping to capture fugitives charged with defrauding Federal health care programs 
and stealing millions of taxpayer dollars.  The Most Wanted Fugitives Web site is continuously updated 
and features a profile and statistics for each fugitive, as well as an online tip form and a hotline number 
for individuals to report fugitive-related information to OIG, in English or Spanish, 24 hours a day, 
365 days a year.  The Most Wanted Fugitives list can be accessed at https://oig.hhs.gov/fraud/fugitives. 
During this reporting period, three fugitives were captured.  Following are two examples.   
Hector Hernandez  Most Wanted Fugitive Hector Hernandez was arrested on January 6, 2014, while 
traveling in a vessel toward the coast of Key West, Florida.  In July 2009, Hernandez was indicted on 
charges of health care fraud and money laundering.  Investigators believe that Hernandez, through his 
company, submitted approximately $3.1 million in fraudulent Medicare claims for durable medical 
equipment (DME), such as sterile gauzes, appliance cleaners, urinary leg bags, and extension drainage 
tubings that were not prescribed by a doctor and had not been provided to Medicare beneficiaries.  
Medicare paid Hernandezs company, Complete Medical Center, Inc., approximately $1.4 million in 
reimbursement for the false claims.   
Carmen Gonzalez  Most Wanted Fugitive Carmen Gonzalez was captured and arrested in September 
2013.  Gonzalez was convicted at trial on charges of conspiracy to defraud the United States, conspiracy 
to cause the submission of false claims, conspiracy to pay health care kickbacks, and conspiracy to 
commit health care fraud.  She was sentenced to 9 years in prison and ordered to pay more than 
$8.2 million in joint and several restitution.   
Because of the success of OIGs Most Wanted Fugitives Web site, OIG launched its Most Wanted 
Deadbeat Parents Web site at: https://oig.hhs.gov/fraud/child-support-enforcement/index.asp.  The site 
identifies parents who fail to pay court-ordered child support for their children;  as a result, an 
unnecessary strain is placed on the custodial parents and the children, as well as on agencies that 
enforce these matters. Examples are provided in the Human Services Reviews section of this 
Semiannual Report.   HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 34 
 
 
Recently completed actions and settlements 
Pharmaceutical company  
Pennsylvania  In one of the largest health care fraud settlements in U.S. history, Johnson & Johnson 
(J&J) and its subsidiaries agreed to pay more than $2.2 billion to resolve criminal and civil allegations 
relating to the prescription drugs Risperdal, Invega, and Natrecor.  The allegations included promoting 
the drugs for uses not approved as safe and effective by the Food and Drug Administration (FDA) and 
paying kickbacks to physicians and to the Nations largest long-term care pharmacy provider, Omnicare, 
Inc.  According to court documents, sales representatives for J&J subsidiary Janssen Pharmaceuticals Inc. 
(Janssen) allegedly urged physicians and other prescribers who treated elderly dementia patients to 
prescribe the drug Risperdal to treat symptoms of anxiety, agitation, depression, hostility, and 
confusion.  Janssen allegedly created written sales aids for use by its ElderCare sales force that 
emphasized symptoms and minimized any mention of the FDA-approved use, which was for the 
treatment of schizophrenia.  The company also provided incentives for off-label promotion and intended 
use by basing sales representatives bonuses on total sales of Risperdal in their respective sales areas, 
not just the sales for FDA-approved uses.  J&J agreed to pay a criminal fine, a forfeiture amount, and a 
civil settlement amount based on the False Claims Act.  Also, Janssen pleaded guilty to one misdemeanor 
count of introduction of a misbranded drug (Risperdal) into interstate commerce.  Finally, J&J entered 
into a CIA with OIG that includes provisions designed to promote accountability and transparency.   
Prescription drug fraud  
New Hampshire  David Kwiatkowski was a radiologic technician who was employed at 15 health care 
facilities in 8 states.  According to court documents, while employed at Hays Medical Center in Kansas in 
June 2010, Kwiatkowski became aware that he was infected with Hepatitis C.  Notwithstanding that 
knowledge, Kwiatkowski injected himself with syringes of the anesthetic fentanyl, which were intended 
for patients who were undergoing medical procedures.  He added saline to the same syringes, which 
were then administered unknowingly by nurses to the patients.  Consequently, instead of receiving the 
prescribed dose of fentanyl, the patients received saline that was tainted with the Hepatitis C virus.  
Kwiatkowski repeated this pattern of behavior at other hospitals where he worked, which investigators 
determined, caused least 45 patients to become infected with Hepatitis C.  Some of these patients 
experienced very serious health complications, including one death in which Hepatitis C was a 
contributing factor.  Kwiatkowski was sentenced to 39 years in prison and ordered to pay $22,680 in 
restitution after pleading guilty to charges of tampering with a consumer product and fraudulently 
obtaining controlled substances. 
Pennsylvania  During this semiannual period, 51 defendants were sentenced for their participation in a 
multi-million-dollar drug conspiracy involving illegal prescriptions, pseudo-patients, and multiple drug 
trafficking organizations.  According to court records, pseudo patients were transported by the vanload 
to the medical practice of Dr. Norman Werther to obtain prescriptions for oxycodone-based products.  
The pseudo patients paid about $150 in cash for the office visits; used their Medicare, Medicaid, or 
private insurance cards and cash to pay for the filled prescriptions at various pharmacies; and, 
in exchange for payments, provided the filled prescriptions to members of six separate drug trafficking 
organizations that would resell the drugs on the street.  In return, the pseudo-patients were paid 
approximately $300 to $1,000 depending on the type of prescription they received.  The operation 
resulted in the illegal distribution of more than 700,000 pills containing oxycodone.  Werther was  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 35 
 
 
previously sentenced to 20 years in prison and ordered to forfeit $10 million, joint and several.  Thus far, 
a total of 61 defendants have been sentenced to a combined 253 years in prison.   
Pennsylvania  Physician Kermit Gosnell owned the practice entitled Family Medical Society, A Division 
of Womens Medical Society, Inc. (Womens Medical Society).  According to the indictment, Gosnell and 
his co-conspirators allegedly ran a pill mill out of Womens Medical Society.  His customers, often 
referred to as drug seekers, purchased prescriptions for controlled prescription drugs without any 
legitimate medical purpose.  Investigators believe that Gosnell used his practice to distribute over 
500,000 pills containing oxycodone, 400,000 pills containing alprazolam, and over 19,000 ounces of 
cough syrup containing codeine.  Gosnell allegedly saw customers in the evenings and until the early 
hours of the morning, at which time he sometimes provided a cursory physical examination before 
writing prescriptions for controlled substances.  Many of the illegal prescriptions and some office visits 
were paid for by Pennsylvania Medicaid, Medicare Part D, and other insurers.  Gosnell was sentenced to 
30 years in prison and ordered to forfeit approximately $200,000 and pay a $50,000 fine.   
Florida  Jose Teijeiro was the manager and registered agent of Greenwall Pharmacy Discount, Inc.  
(Greenwall Pharmacy).  According to court records, Teijeiro and his co-conspirators paid recruiters to 
refer Medicare beneficiaries to Greenwall Pharmacy, where their Medicare numbers were used to file 
false claims for various health care benefits, primarily prescription drugs.  Teijeiro also purchased false 
invoices from a pharmaceutical wholesaler.  Medicare Part D plan sponsors paid Greenwall Pharmacy 
approximately $6.8 million in reimbursement for the false claims.  Teijeiro was sentenced to 5 years and 
3 months of incarceration and ordered to pay $6.8 million in restitution after pleading guilty to 
conspiracy to commit health care fraud.   
Kentucky  National Respiratory Services, LLC (NRS), was a Louisville-based mail-order pharmacy.  In July 
2006, Medicare drastically reduced the reimbursement rate for compounded drugs to discourage 
companies from using those particular codes.  On July 1, 2007, Medicare began denying all claims for 
inhalation compounded drugs, deeming them medically unnecessary.  According to the indictment, 
NRS allegedly marketed directly to doctors who specialized in treating respiratory illnesses, and solicited 
business from these doctors to supply their patients with the drugs that the doctors prescribed to treat 
asthma, emphysema, and other respiratory illnesses.  Between July 2006 and June 2008, NRS 
compounded drugs and then falsely represented that the drugs were FDA-approved when, in fact, these 
drugs were not FDA approved, were of various potencies, were non-sterile, and therefore were 
adulterated and misbranded. NRS was ordered to pay $2 million in restitution, joint and several, after 
pleading guilty to health care fraud charges.  NRS owner Chris Keegan, vice-president Johnny Perry, 
consultant/minority owner Jim Rives, and pharmacists Linda Schmidt and Leo Parrino were all sentenced 
in connection with this case.   
Medical clinics 
Texas  Sunday Joseph Edem controlled and operated several medical clinics in and around Houston, 
Texas, despite being excluded from participation in all Federal health care programs on the basis of an 
earlier health care fraud conviction in California.  To conceal his involvement with the clinics, Edem 
registered the clinics in the names of other individuals, known as straw owners, including the mother 
of his child and employees at the clinics.  According to court documents, Edem allegedly paid individuals 
to recruit Medicare beneficiaries, including some residing in homeless shelters, to visit the clinics to 
receive medically unnecessary diagnostic tests.  Edem partnered with Donald Gibson II, who acted as the 
medical director of the clinics, though he did not see or evaluate patients.  Edem and Gibson then  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 36 
 
 
billed Medicare more than $15 million for the unnecessary tests, using Gibsons Medicare provider 
number.  Edem was sentenced to 6 years of incarceration and ordered to pay $4.3 million in restitution, 
joint and several, after pleading guilty to conspiracy to commit health care fraud.  Gibson was sentenced 
to 4 years and 4 months in prison and ordered to pay $6.9 million in restitution.   
Kentucky  Dr. Bryan Wood and Dr. Robin Peavler owned and operated a chain of addiction treatment 
clinics located in 12 Kentucky cities.  After Wood and Peavler became owners of the clinical laboratory 
PremierTox 2.0 LLC (PremierTox), they allegedly began referring all drug screens completed at the clinics 
to PremierTox for additional comprehensive urine drug screening tests, which were often unnecessary 
and more expensive than suitable alternative tests.  PremierTox allegedly submitted false claims that 
misidentified the class of drug that was tested for and, as a result, obtained greater reimbursement than 
it was entitled to receive.  Wood, Peavler, PremierTox, and Addixxion Recovery of Kentucky, LLC (d/b/a 
SelfRefind) collectively agreed to pay $15.75 million to resolve civil allegations under the False Claims Act 
that they billed Federal health care programs for medically unnecessary and excessive urine tests.  As 
part of the settlement, PremierTox agreed to enter into a 5-year CIA with OIG that obligates PremierTox 
to undertake substantial internal compliance reforms and commit to third-party reviews of claims 
submitted to Federal health care programs. 
Dental practices 
Connecticut  Gary Anusavice, who was excluded by OIG from participating in Federal health care 
programs (including Medicaid) partnered with a dentist to fraudulently open three dental practices in 
Connecticut.  In the applications to enroll the entities as Medicaid providers, Anusavice failed to disclose 
that he had an ownership interest in the dental practices, that he was the subject of prior disciplinary 
and criminal actions, or that he was excluded from the Medicaid program.  Anusavice concealed his 
involvement in the dental practices by having other licensed dentists, including his business partner, act 
as nominal heads of the clinics.  Anusavice used the proceeds of this fraudulent scheme to purchase a 
mansion, boat, Mercedes Benz, and other personal items.  From tax years 2008 through 2011, Anusavice 
did not file federal tax returns.  Anusavice was sentenced to 8 years and 1 month in jail and ordered to 
pay $5.2 million in restitution after pleading guilty to charges of health care fraud and tax evasion.   
Home health care 
Michigan  The owners of five home health companies created fictitious therapy files, appearing to 
document physical and occupational therapy services provided to Medicare beneficiaries when, in fact, 
no such services were provided.  According to court documents, the owners hired patient recruiters, 
who offered cash and the promise of prescriptions drugs to Medicare beneficiaries in return for their 
Medicare identification numbers.  Physical therapists and physical therapist assistants at the companies 
used the Medicare information to create false physical therapy files using blank, pre-signed forms to 
make it appear as if physical therapy services had been rendered.  The forms were then used to bill 
Medicare nearly $20 million for services that had not been rendered and were medically unnecessary.  
Nine individualsMuhammad Shahab, Vishnu Meda, Mehran Javidan, Curtis Mallory, Jessica Vigil, Maira 
Suleman, Sherry Prescott, Tariq Chaudhary, and Faisal Chaudrywere sentenced to a combined 26 years 
and 11 months of incarceration and ordered to pay a combined $29.9 million in restitution, joint and 
several, for their connections to the scheme.   
Florida  Caring Nurse Home Health, Corp. and Good Quality Home Health, Inc., were Florida-based 
businesses that purportedly provided home health care and physical therapy services to eligible  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 37 
 
 
Medicare beneficiaries.  According to the indictment, the companies presidents and co-conspirators 
allegedly paid kickbacks to individuals to recruit beneficiaries as patients.  The companies then billed 
Medicare for home health services, including diabetic injections, skilled nursing visits, and physical 
therapy, which were not medically necessary and/or had not been provided.  The defendants also sent 
patient recruiters and beneficiaries to doctors to obtain prescriptions for home health services that were 
not medically necessary.  The two companies submitted about $52.5 million in claims to Medicare for 
home health services purportedly provided to about 1,300 beneficiaries.  During this reporting period, 
five patient recruiters (Elizabeth Monteagudo, Cristobal Gonzalez, Emilio Amador, Eduims Mora, and 
Jose Contreras) were sentenced to a combined 20 years and 4 months in prison and ordered to pay a 
combined $30.6 million in restitution, joint and several.  The presidents of the two companies were 
previously sentenced to a combined 13 years and 3 months in prison and ordered to pay $35 million in 
restitution. 
Hospice care 
Pennsylvania  Dr. Eugene Goldman, aka Yevgeniy Goldman, served as the medical director of Home Care 
Hospice, Inc. (HCH), from 2000-2011.  Evidence presented at trial showed that, from January 2004 to 
October 2008, Goldman received about $228,773 in kickbacks for Medicare and Medicaid patient 
referrals to HCH.  Goldman received up to $400 for each new patient referral and $150 per month for 
each patient that remained in hospice care.  To conceal the illegal kickback arrangement, HCH and 
Goldman entered into a fictitious written contract to create the false appearance that all payments were 
for bona fide services rendered in Goldmans capacity as medical director.  Goldman was sentenced to 
4 years and 3 months of incarceration and was ordered to pay $300,000 in fines after being convicted on 
charges of conspiracy to receive kickbacks and for receiving kickbacks for Medicare referrals.   
Hospitals 
Kentucky  Saint Joseph Health System, Inc. (d/b/a Saint Joseph London (SJL)), agreed to pay 
$16.5 million to resolve allegations that it violated the anti-kickback statute, Stark Law, and False Claims 
Act.  The Government alleged that SJL was aware that doctors working at its facility performed 
unnecessary invasive cardiac procedures on Medicare and Medicaid patients, including coronary stents, 
pacemaker implants, coronary artery bypass graft surgeries, and diagnostic catheterizations.  SJL also 
allegedly entered into sham management agreements with two cardiologists who owned a medical 
practice that had entered into an exclusive arrangement with SJL to provide cardiology services to SJLs 
patients.  As part of the settlement, SJL entered into a 5-year CIA with OIG that requires SJL to appoint 
physician executives to oversee medical staff quality-of-care matters, appoint a Medical Director of the 
Cardiac Catheterization Laboratory, and hire a Peer Review Consultant to evaluate SJLs peer review 
practices. 
New York  John Reynolds was the former chief executive officer (CEO) of the Hospital for Special 
Surgery, Inc. (HSS).  According to court documents, from approximately 1997 to 2006, Reynolds engaged 
in several fraudulent acts.  For example, he solicited and received approximately $420,000 in kickbacks 
from at least two different hospital vendors in return for using his position at the hospital to secure 
contracts for the vendors; he extorted nearly $300,00 in annual bonus money from a hospital employee; 
and he solicited and received about $670,000 in kickbacks from a health care organization in the United 
Kingdom in return for using his position to approve a clinical partnership between the hospital and the 
United Kingdom company.  Through the schemes, Reynolds pocketed approximately $1.4 million.   HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 38 
 
 
He deceived the hospital by making false statements and withheld information from the hospitals board 
of directors relating to his outside consulting arrangements.  Reynolds also provided Federal agents with 
false information during interviews.  Reynolds was sentenced to a year-and-a-half in jail and ordered to 
pay $383,500 in restitution after pleading guilty to charges of wire fraud and making false statements to 
a Federal agent.   
Identity theft 
Amira Avendano-Hernandez, an undocumented alien, falsely used the identifying information of another 
person to obtain federally funded health care benefits and Social Security disability benefits.  From 2004 
to 2009, she received health care items and services, including a liver transplant, for which Medicaid and 
Medicare collectively paid a total of $165,463.  From 2005 through 2011, Avendano-Hernandez used the 
same false identity to fraudulently qualify for about $66,457 in Social Security disability benefits, which 
she converted to her own use knowing she was not entitled to them.  Avendano-Hernandez was 
sentenced to 6 months in prison and ordered to pay $231,920 in restitution after pleading guilty to a 
charge of theft of Government funds. 
Medical devices 
Florida  Genzyme Corporation agreed to pay nearly $22.3 million to resolve allegations that it 
improperly marketed and knowingly caused false claims to be submitted to Federal health care programs 
for use of its device, Seprafilm, in a form that was altered and untested and was therefore not 
reimbursable.  Seprafilm is a Class III medical device approved by FDA as an adhesion barrier for open 
abdominal and pelvic surgery.  From January 2003 through May 2010, Genzyme sales representatives 
allegedly taught doctors and other staff to cut the Seprafilm sheets into small pieces, add saline, and 
allow the pieces to dissolve until the desired consistency was reached.  The resulting slurry was used in 
laparoscopic or key hole surgeries by inserting a catheter filled with the mixture into the patients body 
and squirting it into the abdominal cavity. 
Minnesota  Boston Scientific Corporation and its subsidiaries, Guidant LLC, Guidant Sales LLC, and 
Cardiac Pacemakers, Inc. (collectively, Guidant), agreed to pay $30 million to resolve allegations that 
Guidant knowingly sold defective heart devices to health care facilities that, in turn, implanted the 
devices into Medicare patients.  Guidant manufactured and sold implantable defibrillators, which are 
used in patients at risk of cardiac arrest due to an irregular heartbeat.  The Government alleged that two 
lines of Guidants implantable cardiac devices contained a defect that would render them ineffective 
when implanted into patients chests.  Guidant allegedly learned that both lines of the devices were 
defective as early as April 2002 and November 2003, respectively.  Although Guidant took corrective 
action to fix the defects, it allegedly continued to sell its remaining stock of the old, defective versions of 
the devices and took steps to hide the cause of the defect from patients, doctors, and FDA.  In 2010, 
Guidant pleaded guilty to criminal charges of misleading FDA and failing to submit a labeling change to 
FDA relating to the defective devices.   
Medical equipment and supplies 
Texas  Emeka Daniel Orji owned and operated Spectrum Foundation, Inc. (Spectrum), a Texas business 
that purportedly provided Medicare and Medicaid beneficiaries with orthotics and other durable 
medical equipment (DME).  According to the indictment, Orji and his co-conspirators used Spectrum to 
submit claims for DME items that were medically unnecessary or were not provided at all and claims for  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 39 
 
 
DME that were intentionally miscoded.  Spectrum then submitted claims to Medicare in excess of 
$3.4 million for these and other items, including 157 unpaid claims on behalf of deceased beneficiaries.  
Orji also owned and operated an ambulance transportation company and submitted or caused the 
submission of claims to Medicare for ambulance services that had not been provided or for instances 
when the beneficiaries had been transported in a standard minivan.  Orji was sentenced to 4 years in 
prison and ordered to pay nearly $1.5 million in restitution following his conviction for conspiracy to 
commit health care fraud and health care fraud aiding and abetting. 
Louisiana/Kansas  Robert Shea and Mark Franz were the owners of the mail-order diabetic supply 
companies Global Medical, Inc., and Global Medical Direct, LLC.  Between April 2008 and January 2012, 
Shea and Franz allegedly caused the companies to enter into numerous marketing contracts with 
insurance brokerage and other companies with customer bases likely to have a high percentage of 
diabetes patients.  Shea and Franz allegedly paid the companies on the basis of the number of patients 
referred for diabetic supplies, a violation of the anti-kickback statute.  Shea and Franz agreed to pay 
$7 million to resolve these allegations, which purportedly led to the submission of false claims to the 
Medicare and TRICARE programs.  Both Shea and Franz also agreed to a 20-year period of exclusion from 
participation in Medicare, Medicaid, and all other Federal health care programs.  In addition, Global 
Medical and Global Medical Direct agreed to pay $5 million in proceeds from the sale of all of the 
companies assets to settle civil allegations under the False Claims Act.  
Personal care services 
Illinois  Operation Home Alone was a joint law enforcement effort to crack down on individuals who 
exploited Illinois Home Services Program and received Medicaid funds to which they were not entitled. 
This operation  uncovered several personal care services fraud schemes, such as personal assistants 
billing for services that could not have been performed because the personal assistants were in jail or 
out of town or because the beneficiaries were residing in hospitals or nursing homes, or were out of 
town.  The investigations also revealed that personal assistants and/or beneficiaries had conspired to 
receive Medicaid payments for services not rendered and had split the Medicaid payments (see example 
below).  As a result of Operation Home Alone, 11 defendants have been sentenced to more than 5 years 
in prison and 26 years of probation and 2 additional defendants have pleaded guilty and are awaiting 
sentencing. 
Illinois  Lisa Luckett was a Medicaid beneficiary involved in a personal care services scheme.  According 
to court documents, Luckett, who was receiving Medicaid disability benefits because she was on non-
working disability,, completed an Employment Agreement between Customer and Personal Assistant 
form in which she falsely stated that her daughter was the personal care assistant for a Medicaid 
beneficiary who was living with Luckett.  Luckett then submitted false home service time sheets to 
Medicaid, claiming that her daughter had performed more than 3,500 hours of personal assistant 
services.  Luckett then pocketed the money reimbursed by Medicaid.  When her daughter learned from 
the Internal Revenue Service (IRS) that her name was being used, she advised Luckett to stop using her 
name.  Luckett then conspired with her neighbor, Henry Billups III, who agreed to have his name used in 
exchange for a portion of the amount reimbursed by Medicaid.  According to published reports, Luckett 
ignored the beneficiarys serious and ongoing medical issues that should have led to hospitalization.  
Instead, she kept the beneficiary in the home and continued to receive payments from the State. The 
beneficiary died in Lucketts home as a result of malnutrition and sepsis due to neglect.  Luckett and  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 40 
 
 
Billups were each sentenced to 4 years and 6 months in prison, respectively, and were ordered to pay a 
combined $99,301 in restitution after pleading guilty to charges of health care fraud.   
Physical therapy 
Florida  Rosina Cheverez was president of two companies that purportedly provided physical and 
occupational therapy (PT/OT) services for various Comprehensive Outpatient Rehabilitation Facilities 
(CORFs), Outpatient Rehabilitation Facilities (OPTs), and home health agencies that billed Medicare.  
According to the indictment, Cheverez partnered with Miami area PT/OT companies and recruited and 
hired therapists and therapist assistants to sign treatment forms falsely indicating that they had provided 
PT/OT services to Medicare beneficiaries when, in fact, these services had not been performed.  These 
companies used the false treatment forms to bill Medicare for more than $42 million in claims for PT/OT 
services that had not been provided.  As a result, Medicare paid the companies $18.6 million in 
reimbursements to which they were not entitled.  Cheverez was sentenced to 10 years in prison and 
ordered to pay $14.4 million in restitution, joint and several, after pleading guilty to conspiracy to 
commit health care fraud.  Six other individuals were previously sentenced to a combined 15 years and 
9 months of incarceration and ordered to pay a combined $1.3 million in restitution, joint and several, 
for their connections to the scheme.   
Missouri  Contract therapy providers RehabCare Group, Inc. and RehabCare Group East, Inc. 
(collectively, RehabCare); Rehab Systems of Missouri (RSM); and management company Health Systems, 
Inc. (HSI) agreed to pay $30 million to resolve allegations that they violated the anti-kickback statute and 
the False Claims Act.  The Government alleged that, between March 2006 and December 2011, 
RehabCare arranged with RSM to obtain RSMs contracts to provide therapy to Federal health care 
program beneficiaries residing in 60 nursing homes controlled by RSMs majority owner and managed by 
HSI.  In exchange for this stream of referrals, RehabCare allegedly paid RSM prohibited remuneration in 
the form of an upfront payment of as much as $600,000, plus a percentage of the revenue generated by 
each referral. 
Physicians 
New Jersey  Dr. Jose Katz owned two companies that purportedly provided cardiology, 
internal medicine, and other medical services to Medicare and Medicaid beneficiaries:  Cardio-Med 
Services LLC (Cardio-Med) and Comprehensive Healthcare & Medical Services LLC (Comprehensive).  
According to published reports, Katz spent more than $6 million in advertising on Spanish-language 
media to entice patients to visit Cardio-Med and Comprehensive.  During the visits, Katz ordered and 
performed essentially the same diagnostic tests for nearly all the patients he treated, regardless of their 
symptoms.  Katz also instructed his non-physician employees to order and perform diagnostic tests for 
patients of other doctors working at his companies, even though he had not examined those patients 
and the other physicians had not ordered the unnecessary tests.  Katz admitted that he falsified patient 
charts and falsely diagnosed a majority of his patients with coronary artery disease and debilitating and 
inoperable angina to justify prescribing and administering unnecessary treatment, therefore subjecting 
them to serious risk of injury or death.  Katz was sentenced to 6-and-a-half years in prison and ordered 
to pay $19 million in restitution after pleading guilty to charges of attempt and conspiracy to commit 
health care fraud and false or fraudulent claims.    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 41 
 
 
Skilled nursing facilities 
California  Ensign Group, Inc. (Ensign), agreed to pay $48 million to resolve civil allegations under the 
False Claims Act that it knowingly submitted false claims to Medicare for rehabilitation therapy services 
at six of its skilled nursing facilities.  From January 1999 through August 2011, Ensign allegedly billed 
Medicare for levels of rehabilitation therapy services that had not been provided, were not medically 
necessary, and/or had been inflated on Minimum Data Set forms despite therapy logs that documented 
less therapy.  The Government also alleged that the Ensign facilities in question had a corporate culture 
that improperly incentivized therapists and others to increase the amount of therapy provided to 
patients to meet allegedly planned targets for Medicare revenue that were set without regard to 
patients individual therapy needs and could be achieved only by upcoding and/or providing unnecessary 
services.  In addition to agreeing to pay the settlement amount, Ensign agreed to enter into a 5-year CIA 
with OIG covering all of its approximately 95 skilled nursing facilities.  
Transportation fraud 
California  Filyn Corporation (Filyn) owns and operates Lynch Ambulance, operating in and around 
southern California.  According to court documents, from approximately 2001 through 2007, Filyn 
regularly billed Medicare and TRICARE for non-emergency, basic life support (BLS) transports of 
beneficiaries who were not bed-confined at the time of transport or whose transports were otherwise 
not medically necessary.  Filyn agreed to pay more than $3 million to resolve its civil liability under the 
False Claims Act.  In addition, Filyn entered into a 5-year CIA with OIG. 
California  Pacific Ambulance, Inc. (Pacific) and Bowers Companies, Inc. (Bowers) agreed to pay 
$8 million to resolve their civil liability under the False Claims Act.  Between 2004 and 2011, Pacific and 
Bowers allegedly entered into numerous below-cost contracts with skilled nursing facilities.  The 
Government investigation determined that all these contracts constituted prohibited swapping 
arrangements, wherein Pacific and Bowers allegedly offered prices to the skilled nursing facilities that 
were below their total costs of providing ambulance transport services in return for referrals of future 
Medicare business.   
State Medicaid Fraud Control Units  
OIG oversight of State MFCUs 
Medicaid Fraud Control Units (MFCUs or Units) are key partners with OIG in the fight against fraud, 
waste, and abuse in State Medicaid programs.  HHS OIG oversees MFCUs and administers grants that 
provide Federal funding for Unit operations.  The Federal Government reimburses 75 percent of the 
costs of operating a Unit; the States contribute the remaining 25 percent.  MFCUs investigate and 
prosecute Medicaid provider fraud and patient abuse and neglect in health care facilities or board and 
care facilities.   
MFCU funding and accomplishments in FY 2013  
In FY 2013, combined Federal and State expenditures for the operation of 50 MFCUs (including 1 in 
Washington, DC), totaled about $231.5 million.  The MFCUs employed 1,912 individuals.  Collectively, in 
FY 2013, MFCUs reported 15,590 investigations, of which 12,366 were related to Medicaid fraud and  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 42 
 
 
3,224 were related to patient abuse and neglect, including misappropriation of patients private funds.  
The cases resulted in criminal charges against or indictments of 1,588 individuals, including 1,197 for 
fraud and 391 for patient abuse and neglect, including patient funds cases.  In total, 1,341 criminal 
actions were reported in FY 2013, of which 991 were related to Medicaid fraud and 350 were related to 
patient abuse and neglect, including patient funds cases.  Civil judgments and settlements for FY 2013 
totaled 879 and monetary recoveries in civil cases totaled over $1.5 billion.  (Medicaid Fraud Control 
Units FY 2013 Annual Report.  OEI-06-13-00340.  Appendix C.  2014 MAR.)  See also Medicaid Fraud 
Control Units 2013 Statistics Interactive Map and Chart on our Web site. 
OIG onsite reviews of MFCUs   
OIG has developed 12 performance standards for use in assessing the operations of MFCUs.  A copy of 
the MFCU performance standards, most recently revised in June 2012, may be found on the OIG Web 
site.  Periodicallyapproximately every 5 yearsOIG conducts an in-depth onsite review of each Unit to 
evaluate its operations as related to the 12 performance standards and to assess compliance with laws, 
regulations, and OIG policy guidance.  OIG issued reports of onsite reviews of the following MFCUs 
during the reporting period.  The full reports are available on our Web site. 
  West Virginia State Medicaid Fraud Control Unit:  2013 Onsite Review.   
OEI-07-13-00080.  2013 OCT. 
  Montana Medicaid Fraud Control Unit:  2012 Onsite Review.  OEI-09-12-00700.  2013 OCT. 
  Vermont State Medicaid Fraud Control Unit:  2013 Onsite Review.  OEI-02-13-00360.  2013 DEC. 
  Nevada Medicaid Fraud Control Unit:  2012 Onsite Review.  OEI-09-12-00450.  2013 OCT. 
  Michigan Medicaid Fraud Control Unit:  2013 Onsite Review.  OEI-09-13-00070.  2014 JAN. 
  Minnesota State Medicaid Fraud Control Unit: 2013 Onsite Review.  OEI-06-13-00200.  2014 MAR. 
Joint investigations with MFCUs 
Texas  Joint investigation with the FBI and Texas MFCU.  Carla Herrera assisted in the operation of RGV 
DME, a durable medical equipment (DME) supplier based in McAllen, Texas.  Herrera acted as marketing 
director, supervised the office manager, and provided training to employees.  Beatriz Ramos was the 
office manager at RGV and was responsible for medical billing.  According to court records, the 
defendants and their co-conspirators billed Medicare and Texas Medicaid for DME, including power 
wheelchairs, hospital beds, and diabetic supplies, which had not been prescribed or ordered by the 
beneficiaries physicians, were not medically necessary, or had not been provided to the beneficiaries.  
The scheme included using marketers to solicit and obtain Medicare and Texas Medicaid beneficiaries 
identification numbers and other information in exchange for gifts or other items of value.  The 
defendants and co-conspirators submitted approximately 25,000 claims to Medicare and Texas Medicaid, 
totaling approximately $11 million.  Herrera and Ramos were sentenced to a combined 8 years and 
8 months in prison and ordered to pay a combined $9.5 million in restitution, joint and several.  Two 
co-conspirators, including RGVs owner, were previously sentenced to a combined 23 years and 
2 months in prison and ordered to pay $6.1 million in restitution.    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 43 
 
 
North Carolina  Joint investigation with the IRS, Federal Bureau of Investigation (FBI), and North 
Carolina MFCU.  Linda Radeker was a licensed professional counselor who operated Wellness Training 
Associates, a company that purportedly provided mental health and substance abuse counseling.  
According to court documents, from approximately 2008 to 2011, Radeker claimed in her Medicaid 
billings that she was the attending clinician for behavioral and mental health services.  Instead, Radeker 
rented her Medicaid provider number so others could bill Medicaid for services that had not been 
provided and/or for services that did not meet requirements.  In return, Radeker received up to 
50 percent of the fraudulent Medicaid reimbursement.  As part of the Scheme, Radekers co-conspirators 
recruited and obtained the Medicaid numbers of children from the community whose parents thought 
they were enrolling their children in after-school programs.  Radeker and her co-conspirators defrauded 
Medicaid of at least $6.1 million in payments for sham behavioral and mental health services.  Radeker 
was sentenced to 6 years of incarceration and ordered to pay $6.1 million in restitution, joint and 
several, after pleading guilty to charges of conspiracy to commit health care fraud and money laundering 
and aiding and abetting.   
Sanction authorities and other administrative actions  
Various Federal laws provide authorities to impose administrative sanctions for fraud and abuse, as well 
as other activities that pose a risk to Federal health care programs and their beneficiaries.  Sanctions 
include the exclusion of individuals and entities from Federal health care programs and the imposition of 
civil monetary penalties (CMPs) for submitting false and fraudulent claims to a Federal health care 
program or for violating the anti-kickback statute; the Stark Law; or the Emergency Medical Treatment 
and Labor Act (EMTALA), also known as the patient dumping statute.  
During this semiannual reporting period, OIG imposed 1,789 administrative sanctions in the form of 
program exclusions or administrative actions for alleged fraud or abuse or other activities that posed a 
risk to Federal health care programs and their beneficiaries.  Exclusion and penalty authorities are 
described in Appendix D and on our Web site at http://oig.hhs.gov/fraud/enforcement/cmp/index.asp.  
Program exclusions  
During this semiannual reporting period, OIG excluded 1,720 individuals and entities from Medicare, 
Medicaid, and other Federal health care programs.  Most of the exclusions resulted from convictions for 
crimes relating to Medicare or Medicaid, for patient abuse or neglect, or as a result of license revocation. 
OIG is also responsible for reinstating providers who apply and have met the requirements of their 
exclusions.  For a list of excluded individuals and entities, see: https://exclusions.oig.hhs.gov/.  Case 
examples follow. 
California  Physician Christine Daniel was excluded from Federal health care programs for a minimum 
period of 35 years on the basis of her conviction on counts of wire fraud, mail fraud, tax evasion, and 
witness tampering.  Daniel was sentenced to 14 years of incarceration and her license to practice as a 
medical doctor was suspended indefinitely by the Medical Board of California.  According to court 
documents, Daniel concocted a product that she labeled, described, and promoted under several 
different names.  She and her employees falsely claimed that the product could cure or treat many 
human diseases and conditions, including cancer, and falsely represented that the product was made of 
herbs from around the world and that the product was manufactured according to the needs of each 
patient.  Daniel caused the product to be shipped to customers throughout the United States, and  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 44 
 
 
customers traveled to her facility to receive treatment.  Depending on the purported product strength, 
Daniel charged between $750 and $4,270 for about a weeks supply. In reality, Daniels product did not 
have the represented cancer cure rate, was not made of herbs from around the world, and was not 
manufactured by Daniel in a laboratory for each patient.  Daniel was also suspended indefinitely from 
participation in the California Medi-Cal program.   
New York  HHS OIG captured fugitive Helene Michel, who owned and operated a DME company, was 
excluded for a minimum period of 35 years on the basis of her conviction for health care fraud and 
wrongful disclosure of individually identifiable health information.  According to court documents, from 
about April 2003 to about March 2007, Michel submitted and caused the submission of claims to 
Medicare and Medicaid for medical supplies that were purportedly provided to patients in nursing 
homes.  However, Michel knew that the supplies had not been provided.  Michel was sentenced to 
12 years of incarceration and ordered to pay $4.4 million in restitution.  She was also excluded from 
participation in the New York Medicaid program. 
California  Vincent Rubio, the former chief financial officer at Tustin Hospital and Medical Center, was 
excluded for a minimum period of 20 years on the basis of his conviction for conspiracy to pay kickbacks 
for patient referrals.  According to court documents, from about July 2003 to about September 2007, 
Rubio conspired with others to increase inpatient stays at the hospital by admitting homeless Medicare 
and Medi-Cal beneficiaries recruited by two individuals.  Rubio, acting on behalf of the hospital, paid 
illegal remunerations to companies owned by the recruiters, knowing the hospital would bill Medicare 
and Medi-Cal for the services provided to the recruited beneficiaries, including services that were not 
medically necessary.  Rubio was sentenced to 8 months of home detention and ordered to pay 
approximately $10.6 million in restitution. 
Pennsylvania  Physician Richard Minicozzi was excluded for a minimum period of 20 years on the basis 
of his conviction for conspiracy to distribute controlled substances and distribution of controlled 
substances.  According to court documents, from about January 2005 to about September 2010, 
Minicozzi sold controlled substances and prescriptions for controlled substances to cash-paying 
customers outside the usual course of professional practice and with no legitimate medical purpose.  
Minicozzi purchased the controlled substances from pharmaceutical supply companies and had the 
drugs shipped to his office, where he packaged the drugs into small boxes for resale to his customers.  
Minicozzi falsified medical records to make it appear as if his customers received medical exams and 
treatment.  Minicozzi was sentenced to 7 years of incarceration, and the Pennsylvania State Board of 
Medicine suspended his license to practice medicine for at least 10 years.  Additionally, Minicozzi was 
indefinitely precluded from participating in the Pennsylvania Medicaid program.  
Corporate integrity agreements  
Many health care providers elect to settle their cases before litigation.  As part of the settlements, 
providers often agree to enter into CIAs with OIG to avoid exclusions from Medicare, Medicaid, and 
other Federal health care programs.  Under a CIA, a provider commits to establishing a program and 
taking other specified steps to ensure future compliance with Medicare and Medicaid rules.  The 
compliance programs are designed, in part, to prevent future fraud.  OIG monitors providers compliance 
with these agreements.  OIG may impose penalties on entities that fail to comply with the requirements 
of their CIAs.   HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 45 
 
 
Civil Monetary Penalties Law  
The Civil Monetary Penalties Law (CMPL) authorizes OIG to impose administrative penalties on and 
assessments against a person who, among other things, submits, or causes to be submitted, claims to a 
Federal health care program that the person knows or should know are false or fraudulent.  During this 
semiannual reporting period, OIG concluded cases involving more than $18.7 million in CMPs and 
assessments.  The following are case examples. 
New York  Henry Schein, Inc., a medical and dental equipment supplier, agreed to pay more than 
$1.1 million to resolve allegations under the CMPL provisions applicable to kickbacks.  OIG alleged that 
Henry Schein, Inc., awarded customers, who were members of its Medical Privileges Program, points for 
every item purchased electronically through the company and allowed customers to redeem those 
points for an array of items, including travel, hotel stays, iPads, gift cards, toasters, toys, and medical 
office products and supplies.  However, OIG alleged that this type of remuneration was improper and did 
not qualify as a discount or rebate under the anti-kickback statute. 
Louisiana  Humana, Inc., agreed to pay $1.8 million for allegedly violating the CMPL.  OIG contended 
that Humana improperly submitted prescription drug event claims to the Medicare Part D program that 
included sales tax from Louisiana pharmacies, despite the fact that Medicare Part D drugs were not 
taxable under Louisiana law as of July 1, 2006.  This case represents the first CMPL settlement with a 
Medicare Part D plan.   
North Carolina  A diabetes supply company (Four Leaf Clover, Inc. (FLC)); a telemarketing company 
(Team Tech Solutions, Inc. (TTS)); and their owner-executives collectively agreed to pay $472,000 for 
allegedly violating the CMPL.  OIG contended that the companies and their executives paid and received 
kickbacks and caused the submission of false claims to Medicare for durable medical supplies as a result 
of illegal telemarketing.  OIG alleged that FLC contracted with TTS to make unsolicited calls to Medicare 
beneficiaries and paid TTS for each Medicare beneficiary referred for diabetes supplies.  FLC; its owner 
and President, William Sweeney; and its former co-owner and Chief Operating Officer, Michael Sweeney, 
agreed to be permanently excluded from participation in the Federal health care programs.  TTS and its 
owner and President, Justin Ortiz, agreed to be excluded for 10 years.   
Massachusetts  Ronald Goldberg, M.D., and his practice, Haverhill Family Practice (HFP), agreed to pay 
$162,676 for allegedly violating the CMPL.  OIG alleged that Goldberg and HFP improperly billed under 
Goldbergs provider number for services rendered by nurse practitioners.  Goldberg and HFP also 
allegedly submitted false claims for services that had not been provided to nursing home patients 
because the patients were in fact hospitalized or, because, in one case, the patient was deceased.   
Patient Dumping  
Some of the CMPL cases that OIG resolved between October 1, 2013, and March 31, 2014, were pursued 
under the Emergency Medical Treatment & Labor Act (EMTALA), a statute designed to prevent hospitals 
from denying emergency care to patients and to ensure patient access to appropriate emergency 
medical services.  Examples follow. 
North Carolina  Carolinas Medical Center (Carolinas) agreed to pay $50,000 to resolve its liability under 
EMTALA.  OIG alleged that Carolinas failed to provide an appropriate medical screening examination or 
stabilizing treatment to a patient who arrived at its emergency department with complaints of homicidal  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 46 
 
 
ideation and acute depression.  The patient also stated that he feared harming himself and his wife and 
that he had visual hallucinations.  The patient had visited Carolinas approximately 2 weeks earlier with 
similar complaints, at which time Carolinas learned the patient had access to firearms.  Following a 
cursory examination, the patient was discharged from the emergency department with a prescription for 
a mild anti-depressant, and, shortly after discharge, the patient killed his wife, two of his four children, 
and himself. 
Tennessee  Regional Medical Center at Memphis (RMC) agreed to pay $50,000 to resolve its liability 
under EMTALA.  OIG alleged that RMC failed to provide a medical screening examination that was within 
the hospitals capability to a 6-year-old patient who arrived at its emergency department with a 
fractured arm, accompanied by her parents.  The patient and her parents allegedly were refused entry 
into the emergency department and instead were instructed to walk to a nearby childrens hospital. 
Provider self-disclosure protocol  
OIG is committed to assisting health care providers and suppliers in detecting and preventing fraud and 
abuse.  Since 1998, we have made available comprehensive guidelines describing the protocol for 
providers to voluntarily submit to OIG self-disclosures of fraud, waste, or abuse.  The provider self-
disclosure protocol gives providers an opportunity to minimize the potential costs and disruption that a 
full-scale OIG audit or investigation might entail if fraud were uncovered.  The self-disclosure also allows 
the provider to negotiate a fair monetary settlement and potentially avoid being excluded from 
participation in Federal health care programs.  
The protocol guides providers and suppliers through the process of structuring a disclosure to OIG about 
matters that constitute potential violations of Federal laws.  After making an initial disclosure, the 
provider or supplier is expected to thoroughly investigate the nature and cause of the matters uncovered 
and make a reliable assessment of their economic impact.  OIG evaluates the reported results of each 
internal investigation to determine the appropriate course of action.  The self-disclosure guidelines are 
available on the OIG Web site at https://oig.hhs.gov/compliance/self-disclosure-info/index.asp.  
During this reporting period, self-disclosure cases resulted in $11.4 million in HHS receivables.  The 
following are examples of provider self-disclosure settlements. 
Texas  Seton Family of Hospitals (Seton) (d/b/a Towers Nursing Home (Towers)) self-disclosed to OIG 
that it submitted false claims to Medicare for post-hospital extended care services rendered at Towers, 
where the underlying certifications and recertifications did not meet applicable payment criteria.  The 
certifications and recertifications contained several irregularities, including missing dates and physician 
signatures, errors in documenting the reasons for continued skilled nursing facility care, and signing of 
certifications by physicians who did not necessarily have knowledge about the patients case.  Seton 
agreed to pay $1,139,789 for allegedly violating the CMPL.   
Michigan  The Guidance Center (TGC) self-disclosed to OIG that it submitted claims for multiple 
developmental disability services provided simultaneously to Medicaid patients when only one service 
was eligible for payment.  OIG alleged that TGC obtained greater reimbursement than it was entitled to 
receive by knowingly making or using a false record or statement that was material to a false or 
fraudulent claim for payment for services furnished under the Michigan Medicaid program. TGC agreed 
to pay $742,398 for allegedly violating the CMPL.    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 47 
 
 
Arizona  Havasu Regional Medical Center (HRMC) self-disclosed to OIG that it had a potentially 
problematic lease arrangement in place between its surgery center and a physician who served as an 
anesthesiologist and medical director at the surgery center.  Under the arrangement, HRMC permitted 
the physician to rent office space at a rate below fair market value and inappropriately provided the 
physician with two employees.  HRMC agreed to pay $510,179 for allegedly violating the CMPL 
provisions applicable to physician self-referrals and kickbacks.   
 
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Semiannual Report to Congress | Spring 2014  Page 48 
 
 
 
 
 
 
 
 
 
 
 
http://oig.hhs.gov 
 
  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 49 
 
 
Public health agencies 
Office of the Assistant Secretary for Health 
and enforcement activities 
Protection of human subjects 
  Biospecimen Research:  Meeting Basic Human Subjects Protection Requirements and 
Communicating Informational Risks.  OEI-01-11-00520.  2013 NOV. 
Researchers and bioethicists have identified human subjects potential loss of privacy and confidentiality 
as a challenge to research that involves biospecimens.  We reported that informed consent documents 
for biospecimen research contained required information on human subjects protections but varied in 
their substance and form.  Biospecimen research must comply with Federal regulations governing 
research on human subjects.  An institutional review board (IRB) must review and approve the research, 
and the principal investigator (PI) must obtain informed consent from all potential subjects unless the 
IRB waives the requirement for informed consent.  IRBs and PIs identified challenges in conducting and 
overseeing research involving biospecimens, such as determining how much information to share with 
human subjects, determining how biospecimens should be stored for future use, and dealing with the 
slow pace of change for regulations governing this type of research.  We found that some IRBs and PIs 
took steps to address the informational risks of collecting biospecimens and storing them for future 
research.  RecommendationThe Office for Human Research Protections (OHRP), which reports to the 
Assistant Secretary for Health, should provide a forum to IRBs and PIs to discuss informational risks to 
human subjects.  
Centers for Disease Control and Prevention 
World Trade Center programContractor compliance 
  World Trade Center Health Program:  CDC Should Strengthen Efforts To Monitor and Evaluate 
Clinic Compliance With Contract Terms.  A-02-11-02003.  2014 JAN.  
The World Trade Center Health Program (WTCHP) was established in January 2011. Under the WTCHP, 
the Centers for Disease Control and Prevention (CDC) contracted with clinics to provide medical services 
and pharmacy benefits to eligible responders and survivors with health conditions related to the 
September 11, 2001, terrorist attacks on the World Trade Center.  We found that CDC and the National 
Institute for Occupational Safety and Health (NIOSH) did not monitor and evaluate clinic compliance with 
contract terms and conditions, as required by Federal regulations.  Specifically, CDC contracting officers 
(COs) did not ensure that NIOSH contracting officer representatives (CORs) used the surveillance 
methodology established in the quality assurance surveillance plans (QASPs) developed to monitor clinic 
contract performance.  In addition, contracting officials did not take timely or appropriate action when  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 50 
 
 
they learned of three instances of clinic contract noncompliance.  Further, evaluations of contractor 
performance were not completed, as required, and were not always entered into the information 
systems.   
These inadequacies occurred because CDC and NIOSH did not consider the QASP surveillance 
methodology to be mandatory or the QASP performance standards to be realistic or attainable for the 
clinics and have standard operating procedures to ensure that required performance evaluations were 
conducted in a timely manner.  We recommended that CDC monitor clinics performance in accordance 
with contract terms, address clinics noncompliance with contract terms, and follow Federal Acquisition 
Regulation section 42.1503 by developing and implementing standard operating procedures for 
evaluating contract performance. 
Presidents Emergency Plan for AIDS Relief program 
  The University Teaching Hospital (in Zambia) Generally Managed the Presidents Emergency Plan 
for AIDS Relief Funds and Met Program Goals in Accordance With Award Requirements.   
A-04-13-04005.  2014 MAR. 
Through its Global HIV/AIDS Program, CDC implemented the Presidents Emergency Plan for AIDS Relief 
(PEPFAR) to combat HIV/AIDS by strengthening health systems and building sustainable human 
immunodeficiency virus/acquired immunodeficiency virus syndrome (HIV/AIDS) programs in more than 
75 countries.  Through a 5-year cooperative agreement, CDC awarded Presidents Emergency Plan for 
AIDS Relief (PEPFAR) funds totaling $4.9 million to the University Teaching Hospital (the Hospital) in 
Zambia for the budget period September 30, 2010, through September 29, 2011.  We reported that the 
Hospital generally managed PEPFAR funds and met program goals in accordance with award 
requirements.  However, the Hospital did not always follow its policies and procedures, and the Hospital 
did not submit an annual progress report to CDC.  It did submit an annual program results report, but the 
report did not show progress on 8 of the Hospitals 21 goals included in its approved cooperative 
agreement.  RecommendationsThe Hospital should work with CDC to resolve whether a specified 
expenditure was allowable; work with the Zambian Government for a value-added taxes exemption and 
refund; and enhance its internal controls by updating its policies and procedures to include detailed 
steps to account for and report PEPFAR funds. 
Health Resources and Services Administration 
HRSA 340B Drug discount programContract Pharmacy Arrangements 
  Contract Pharmacy Arrangements in the 340B Program.  OEI-05-13-00431.  2014 FEB. 
The 340B Drug Pricing Program requires drug manufacturers participating in Medicaid to provide 
discounted covered outpatient drugs to certain eligible health care entities, known as covered entities. 
These entities may contract with pharmacies to dispense drugs purchased through the program on their 
behalf.  The majority of covered entities do not use contract pharmacies.  Recent Health Resources and 
Services Administration (HRSA) audits of covered entities have found program violations related to 
contract pharmacies.  Our February 2014 report is a descriptive review of contract pharmacy  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 51 
 
 
arrangements and examines, under such arrangements, how entities prevent drug diversion and 
duplicate discounts.  We found complications with regard to both issues.  We also found that most 
covered entities in our study do not conduct all of the oversight recommended by HRSA.  Although 
almost all covered entities reported monitoring their contract pharmacy arrangements, the extent of 
such monitoring varied.  For example, few covered entities reported retaining independent auditors for 
their contract pharmacy arrangements, as recommended in HRSA guidance. 
HRSA health centersElectronic health records 
  Progress in Electronic Health Record Implementation Through HRSA Grants to Health Center 
Controlled Networks.  OEI-09-11-00380.  2014 JAN. 
We reported that most health centers had established a capability for capturing data electronically.  
However, fewer health centers established a capability for sharing data electronically.  Establishing 
data-sharing capabilities often requires health centers to incur additional electronic health record (EHR)-
related costs.  Although 76 percent of health centers reported facing financial sustainability challenges, 
grantee progress reports contained limited information related to the financial sustainability of EHR 
systems at health centers.  RecommendationsHRSA should use data to understand progress toward 
meaningful use objectives (for capturing and sharing data) and to provide guidance and technical 
assistance to health centers, ensure that health center- controlled networks grantees provide 
information on the financial sustainability of EHR systems at health centers, and examine the feasibility 
of collecting information directly from health centers regarding the financial sustainability of their EHR 
systems.  
Public-Health-Related 
Legal Actions and Investigations 
 
Health Education Assistance Loan Program 
The Office of Inspector General (OIG) excludes individuals who have defaulted on Health Education 
Assistance Loan (HEAL) loans from participation in Federal health care programs.  
Under the HEAL program, which stopped making loans in 1998, HRSA guarantees commercial loans to 
students seeking education in health-related fields.  The students are allowed to defer repayment of the 
loans until after they graduate and begin to earn income. Although HHSs Program Support Center (PSC) 
takes steps to ensure repayment, some loan recipients do not resolve their indebtedness.  After PSC has 
exhausted efforts to secure repayment of a debt, it declares an individual in default.  Thereafter, the 
Social Security Act permits exclusion of such individuals from Medicare, Medicaid, and all other Federal 
health care programs for nonpayment of the loans.  
Exclusion means that the individual may not receive reimbursement under these programs for 
professional services rendered, nor may any other provider receive reimbursement for services ordered 
or prescribed by the excluded individual.  OIG is responsible for excluding individuals who have defaulted 
on HEAL loans from participation in Federal health care programs.  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 52 
 
 
HEAL Exclusions 
During this semiannual reporting period, 37 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 default may enter 
into settlement agreements, whereby the exclusions are stayed while they pay specified amounts each 
month to satisfy their debts.  If they default on these settlement agreements, they may be excluded until 
the entire debt is repaid, and they may not appeal the exclusions.  
After being excluded for nonpayment of their HEAL debts, 2,502 individuals chose to enter into 
settlement agreements or completely repay their debts.  That figure includes 22 individuals who entered 
into such settlement agreements or completely repaid their debts during this semiannual reporting 
period. More than $190 million is being repaid through settlement agreements or through complete 
repayment.  Of that amount, $4.3 million is attributable to this semiannual reporting period. 
Practitioners in five States entered into settlement agreements to repay the amounts indicated: 
  New Jersey  Medical doctor ($323,257) 
  Tennessee  Dentist ($292,591) 
  Ohio  Osteopath ($155,087) 
  California  Dentist ($136,961) 
  Louisiana  Medical doctor ($101,275) 
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 53 
 
 
Human services agencies 
Administration for Children and Families 
and enforcement activities 
Adoption assistanceConnecticut 
  Connecticut Often Did Not Comply With Federal Adoption Assistance Requirements.   
A-01-12-02507.  2013 NOV.   
We reported that Connecticut did not always comply with Federal requirements in claiming adoption 
assistance payments for Federal reimbursement and did not always comply with Federal and State 
requirements for performing adoption assistance program background checks.  We estimated 
unallowable payments of at least $17.5 million for the review period.  With regard to whether required 
background checks had been performed, we estimated that the safety of 2,862 children may have been 
at risk.  Connecticut claimed ineligible adoption assistance payments because it did not always follow its 
established procedures for ensuring that claims met Federal requirements.  Also, the State agency did 
not have adequate controls in place to ensure that the required background checks were completed or 
to ensure that supporting documentation was retained.  RecommendationsConnecticut should 
strengthen and implement controls to ensure full compliance with financial and other eligibility 
requirements; strengthen and implement controls, such as but not limited to, accurate and appropriate 
checklists to ensure full compliance with background check requirements; discontinue claiming the Title 
IV-E adoption assistance we specified; and refund to the Federal Government the unallowable payments 
that were claimed without adequate documentation.  
Head Start program 
  The Council on Rural Service Programs, Inc., Claimed Unallowable Head Start Costs.   
A-05-12-00089.  2013 NOV.  
Of the $6.7 million in Head Start costs that we reviewed, the Council on Rural Service Programs, Inc. (the 
grantee), claimed $1.4 million that was allowable under applicable Federal regulations and the terms of 
the grants.  Of the remaining $5.4 million, the grantee claimed other unallowable costs of $1.1 million.  
We could not determine the allowability of the remaining $4.3 million in executive and administrative 
salary and fringe benefit costs that the grantee claimed under its Head Start grants because the grantee 
did not adequately support, with personnel activity reports, the distribution of salaries and wages.  
RecommendationsThe grantee should refund unallowable less-than-arms-length lease payments 
totaling $945,000; refund unallowable classroom rental payments totaling $59,000; refund costs totaling 
$70,000 for gift cards and other costs that did not benefit the Head Start program; and either refund 
$4.3 million to the Federal Government for inadequately supported executive and administrative salary 
and fringe benefit costs, of which as much as $1 million could have been for non-Head Start costs, or  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 54 
 
 
work with ACF to determine what portion of the costs was allowable; and take corrective actions to 
ensure that it complies with Federal regulations.  
Child Care and Development FundState monitoring and compliance  
  Child Care and Development Fund:  Monitoring of Licensed Child Care Providers.   
OEI-07-10-00230.  2013 NOV. 
We reported that all States complied with the Federal requirement to have health and safety 
requirements for licensed child care providers in three specified areas.  However, States monitoring 
requirements did not always meet Administration for Children and Families (ACF) recommendations for 
background screenings or the recommended standards for unannounced inspections.  In selected States 
that we reviewed, monitoring of licensed providers was not conducted in accordance with States own 
requirements.  Moreover, ACF did little to monitor how States were overseeing Child Care and 
Development Fund (CCDF) providers.  ACF administers the CCDF grant program, which provides financial 
assistance with child care for approximately 1.6 million children each month.  Federal law requires States 
to have health and safety requirements in three areas:  the prevention and control of infectious diseases, 
building and physical premises safety, and minimum health and safety training.  RecommendationsACF 
should seek authority to develop health and safety standards and ensure that States requirements meet 
them, develop requirements for States to conduct mandatory background screenings and periodic 
unannounced inspections, conduct periodic reviews of States compliance with their own licensing 
requirements related to minimum health and safety standards, and ensure that State plans comply with 
health and safety requirements.  Many of our concerns are addressed in ACFs Notice of Proposed 
Rulemaking issued on May 20, 2013. 
  Ohio Exceeded the 5-Percent Limit for Claiming Child Care Development Fund Administrative 
Expenditures   A-05-13-00014.  2013 NOV. 
Federal regulations limit the amount of CCDF funds that a State agency may claim for administrative 
expenditures to 5 percent of the total amount of discretionary, mandatory, and matching funds 
expended in a fiscal year.  From fiscal year (FY) 2007 through FY 2011, Ohio exceeded the 5-percent limit 
for claiming CCDF administrative expenditures by $3.2 million (Federal share).  The State agency 
misclassified $9 million ($8.3 million Federal share) as quality activities expenditures when they should 
have been classified as administrative expenditures.  The State agencys review of cost pool allocations 
did not identify the improper classification of administrative expenditures.  RecommendationsOhio 
should refund $3.2 million in cost pool expenditures that exceeded the 5-percent CCDF administrative 
limit and take corrective actions to ensure that cost pool expenditures are properly claimed.  
Child support enforcement activities 
 
OIG investigations 
IG investigates noncustodial parents who fail to pay court-ordered child support.  OIG works with the 
Office of Child Support Enforcement; the Department of Justice; U.S. Attorneys Offices; the U.S.  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 55 
 
 
Marshals Service; and Federal, State, and local partners to address the most egregious child support 
enforcement cases with appropriate law enforcement and prosecutorial action.  OIG investigations of 
child support enforcement cases nationwide resulted in 32 criminal actions and court-ordered 
restitution and settlements of $2.1 million during this semiannual reporting period.  The following are 
examples of child support enforcement cases: 
South Dakota  Child support enforcement Most Wanted Fugitive Dennis Thomas was sentenced to 
5 years of probation and ordered to pay $67,122 in restitution after pleading guilty to a charge of failure 
to pay child support.  In January 2013, OIG agents, along with members of the Great Falls Police 
Department in Montana, took Thomas into custody on his outstanding Federal arrest warrant issued in 
the District of South Dakota.  Thomas was originally indicted in December 2009 for failure to pay legal 
child support and has been a Federal fugitive since 2009.  
Vermont  Lee Godden was sentenced to 2 months of imprisonment and ordered to pay more than 
$100,000 in restitution following his guilty plea to two counts of failure to pay child support.  In 2004, 
Godden was ordered by a court to pay child support to the custodial parent of his two children. 
However, despite being gainfully employed, Godden made few or no child support payments since 2004. 
Idaho  David Cox was sentenced to 5 years of probation and ordered to pay $62,277 in restitution after 
being convicted on three counts of failure to pay legal child support.  Cox had been ordered to pay child 
support for his three minor children from three women.  At trial, it was revealed that Cox owed 
approximately $61,000 in past due child support obligations. 
Engaging the public in capturing deadbeat parents 
Because of the success of OIGs Most Wanted Fugitives Web site, OIG launched its Most Wanted 
Deadbeat Parents Web site. The site identifies parents who fail to pay court-ordered child support for 
their children and thereby put an unnecessary strain on the custodial parents and the children, as well as 
on agencies that enforce these matters.  The site, which is updated frequently, includes information on 
OIGs role in pursuing parents who fail to pay court-ordered child support and has a reporting button to 
turn in deadbeat parents.   
OIGs Most Wanted Deadbeat Parents Web site is at:  
https://oig.hhs.gov/fraud/child-support-enforcement/index.asp.  
  
 
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Semiannual Report to Congress | Spring 2014  Page 56 
 
 
 
 
 
 
 
 
 
 
 
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  HHS Office of Inspector General 
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Financial reporting and improper payment reduction 
Other HHS-related reviews 
HHS financial report for FY 2013  
  Department Health and Human Services Fiscal Year 2013 Agency Financial Report.  Section II.  
Daniel R. Levinson, Inspector General, OIG Report on the Financial Statement Audit of the 
Department of Health and Human Services for Fiscal Year 2013 (pp. 43, 44, 53, 56, 57, and 63).  
A-17-13-00001.  2013 DEC.  
The Chief Financial Officers Act of 1990, as amended (CFO Act), requires OIG or an independent external 
auditor, as determined by OIG, to audit HHS financial statements in accordance with applicable 
standards.  We contracted with the independent certified public accounting firm of Ernst & Young, LLP, 
to conduct the audit.  The FY 2013 financial statement audit noted that HHS continued to make strides to 
improve controls within the Information Technology infrastructure that supports the financial application 
system.  HHS continued to address and implement the existing governance, financial process and 
practices, and system tools needed to enhance controls over application information security and 
contingency planning.  The audit noted a focused effort is still needed to more completely remediate 
long outstanding deficiencies to a level that supports an auditors reliance on controls within the 
financial systems.  Deficiencies were noted over controls related to segregation of duties, change 
management, and access to HHS financial systems.   
The FY 2013 financial statement audit also noted internal control weaknesses in financial systems and 
processes, including the lack of integrated financial management systems and insufficient analysis of 
certain accounts that impaired the abilities of HHS and its operating divisions to adequately support and 
analyze account balances in a timely fashion.  HHSs financial management systems still did not 
substantially comply with Federal financial management systems requirements.   
RecommendationsHHS should continue to develop and refine its financial management systems and 
processes to improve its accounting, analysis, and oversight of financial management activity and 
continue to focus on remediating the remaining financial management system deficiencies.  
Improper Payments Information Act of 2002 
  U.S. Department of Health and Human Services Met Many Requirements of the Improper 
Payments Information Act of 2002 But Was Not Fully Compliant.  
 A-17-13-52000.  2013 MAR.  
OIG is required to review and report on HHSs annual Agency Financial Report and Other Accompanying 
Information (AFR) to determine compliance with the Improper Payments Information Act of 2002 (IPIA) 
as amended by the Improper Payments Elimination and Recovery Act of 2010 (IPERA).  (The acronym 
IPIA will refer to IPIA as amended by the IPERA.)  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 58 
 
 
We reported that although HHS met many of the IPIA requirements, it did not fully comply with the IPIA 
and Office of Management and Budget (OMB) guidance.  We evaluated the accuracy and completeness 
of the Departments reporting and did not identify any inaccuracies or gaps in the information reported 
for three programs (i.e., Medicaid, Head Start, and Foster Care).  Other findings included that for four 
programs (i.e., Child Care Development Funds, Medicare Fee-for-Service, Medicare Advantage, and 
Medicare Prescription Drugs), we identified inaccuracies, and for two programs (i.e., the Childrens 
Health Insurance Program (CHIP) and Temporary Assistance for Needy Families (TANF), we identified 
incomplete information.  We also found that the Department has achieved some success in reducing 
improper payment rates.   
RecommendationsHHS should improve its compliance with the IPIA by assessing the need for 
additional actions to meet improper payment rate reduction targets, developing and reporting improper 
payment rate reduction targets and corrective action plans for CHIP, ensuring that amounts used in the 
computations for reporting overpayments recaptured are accurate and complete, and ensuring data are 
retained in accordance with program requirements.   
Grants and Contracts 
Hurricane Sandy grant and contract vulnerabilities  
Hurricane Sandy struck the United States near Atlantic City, New Jersey, on October 29, 2012.  It was the 
second-costliest hurricane in U.S. history and caused immense devastation.  The storm affected 24 States 
and caused an estimated $71 billion in damage.  Disaster areas were declared from the Northeast, to the 
mid-Atlantic, and as far west as Wisconsin, a total of 12 states, and Washington D.C.  The storm ravaged 
over 150,000 homes and destroyed businesses and public assistance facilities.  Vital services rendered by 
some HHS programs were disrupted by the hurricane.  Additionally, various research facilities for the 
National Institutes of Health with a physical presence on the east coast were damaged by the storm.  
Our goal is to make sure people who need health and human services get the best care and resources to 
recover from disasters.  We have to make sure the recovery money goes to the right people.  And after 
any major disaster like Hurricane Sandy, we must try to prevent fraud, waste, and abuse by ensuring that 
limited resources are used properly. 
As part of our oversight with regard to Hurricane Sandy, we developed a series of videos that provide 
important guidance to HHS grant and contract officers, informing them of their roles and responsibilities, 
as well as risk areas when making awards to grantees or contractors.  The videos also provide tips to help 
grantees and contractors use funds effectively and appropriately.  The videos are available on our Web 
site at http://oig.hhs.gov/newsroom/podcasts/2014/sandy/. 
Small Business Innovative Research Program 
The National Defense Authorization Act for Fiscal Year 2012,  5143, requires OIG to annually report on 
the number of cases that were referred to it related to fraud, waste, or abuse in the Small Business 
Innovative Research / Small Business Technology Transfer (SBIR/STTR) program; the actions taken in each 
case; justification for not taking action on a case; and an accounting of funds used to address waste, 
fraud, and abuse in this program.  In our December 2013 report delivered to the three Congressional 
oversight committees, we reported that OIG spent approximately $295,504 in salaries on oversight 
related to the SBIR/STTR program.  HHS referred two new SBIR/STTR cases to OIG in FY 2013.  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 59 
 
 
Recovery Act retaliation complaint investigations 
The Recovery Act,  1553, prohibits non-Federal employers that have received Recovery Act funding 
from retaliating against employees who disclose evidence of mismanagement of Recovery Act funds or 
any violation of law related to Recovery Act funds.  OIGs are required to include in their Semiannual 
Reports to Congress the retaliation complaint investigations that they decided not to conduct or 
continue during the reporting period.  OIG did not discontinue or decline to conduct any Recovery Act 
whistleblower retaliation complaint investigations during this reporting period. 
Contract Audits 
Pursuant to the National Defense Authorization Act for FY 2008,  845, Inspectors General appointed 
under the Inspector General Act of 1978 are required to submit, as part of their Semiannual Reports to 
Congress, information on final, completed contract audit reports issued during the period to the 
contracting activity containing significant audit findings.  OIG did not issue final reports meeting  845 
criteria during this semiannual period. 
OIG reviews of non-Federal audits 
OIG reviews audits conducted by non-Federal auditors of entities receiving Federal awards.  In this 
semiannual period, OIGs National External Audit Review Center reviewed 1,506 reports covering 
$468.8 billion in audited costs.  Federal dollars covered by these audits totaled $111 billion, of which 
about $45.1 billion were HHS funds. 
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 
must conduct annual organization-wide single audits of all Federal money they receive.  These audits 
are conducted by non-Federal auditors, such as public accounting firms and State auditors.  OIG reviews 
the quality of these audits and assesses the adequacy of the entities management of Federal funds.   
OIGs oversight of non-Federal audit activity informs Federal managers about the soundness of 
management of Federal programs and identifies any significant areas of internal control weakness, 
noncompliance, and questioned costs for resolution or followup.  We identify entities for high-risk 
monitoring, alert program officials to any trends that could indicate problems in HHS programs, and 
profile non-Federal audit findings of a particular program or activity over time to identify systemic 
problems.  We also provide training and technical assistance to grantees and members of the auditing 
profession.  OIG maintains a process to assess the quality of the non-Federal reports received and the 
audit work that supports the selected reports.   
OIGs reports on non-Federal audits reviewed during this reporting period are categorized in the 
following table. 
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 60 
 
 
Non-Federal Audits, October 1, 2013, through March 31, 2014 
Number of Non-Federal Audits: 
  Not requiring changes or having minor changes    1,359 
  Requiring major changes  139 
  Having significant technical inadequacies  8 
Total  1,506 
 
The 1,506 reports included 3,219 recommendations for improving management operations.  In addition, 
these audit reports provided information for 61 OIG special memorandums that identified concerns for 
increased monitoring by management. 
Other reporting requirements and reviews 
Health Insurance Portability and Accountability Act Security Rule  
  The Office for Civil Rights Did Not Meet All Federal Requirements in Its Oversight and 
Enforcement of the Health Insurance Portability and Accountability Act Security Rule.   
A-04-11-05025.  2013 NOV. 
HHSs Office for Civil Rights (OCR), a staff division of the Office of the Secretary, did not meet certain 
Federal requirements critical to the oversight and enforcement of the Health Insurance Portability and 
Accountability Act Security Rule (Security Rule).  OCR had not assessed risks, established priorities, or 
implemented controls for its Federal requirements to provide for periodic audits of covered entities to 
ensure their compliance with Security Rule requirements.  Also, OCRs Security Rule investigation files 
did not contain required documentation supporting key decisions made because management had not 
implemented sufficient controls, including supervisory review and documentation retention, to ensure 
that investigators follow policies and procedures for properly initiating, processing, and closing Security 
Rule investigations.  Further, OCR had not fully complied with Federal cybersecurity requirements for its 
information systems used to process and store investigation data because it focused on system 
operability to the detriment of system and data security.  
RecommendationsOCR should assess risks, establish priorities, and implement controls for its auditing 
requirements pursuant to the Health Information Technology for Economic and Clinical Health Act 
(HITECH); provide for periodic audits in accordance with HITECH to ensure Security Rule compliance at 
covered entities; implement sufficient controls, such as supervisory reviews and documentation 
retention, to ensure that policies and procedures for Security Rule investigations are followed; and  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 61 
 
 
implement the National Institute of Standards and Technology Risk Management Framework for systems 
used to oversee and enforce the Security Rule. 
Government Charge Card Abuse Prevention Act 
   Letter to Office of Management and Budget Director to Meet Requirements of Government 
Charge Card Abuse Prevention Act of 2012 Regarding Agency Progress Implementing 
Recommendations on Charge-Card-Related Findings.  A-04-14-06173.  2014 JAN.  
This letter report describes the progress that HHS has made in implementing previous purchase and 
travel card audit recommendations and the status of OIGs annual risk assessment. The letter was issued 
to meet the requirements of the Government Charge Card Abuse Prevention Act of 2012 (P.L. No. 112-
194) (Charge Card Act) to report to OMB director on agency progress in the implementation of 
recommendations on charge-card-related findings.  In addition, while not required for this report, we 
also explain how we intend to conduct required annual risk assessments of agency purchase cards.  
Legislative and regulatory reviews 
Pursuant to the Inspector General Act,  4(a)(2), OIG is required to review existing and proposed 
legislation and regulations relating to HHSs programs and operations and make recommendations 
concerning their impact on economy and efficiency or the prevention and detection of fraud and abuse.  
Most audits and other reviews that we conduct are designed to test compliance with and/or assess the 
administration and oversight of existing laws and regulations.  Our reports of such reviews describe 
findings, which include questioned costs, inefficiencies, vulnerabilities to fraud, inconsistencies, errors in 
application, or weaknesses in oversight or supporting systems.  Our corresponding recommendations tell 
HHS and its operating or staff divisions what administrative, regulatory, or legislative actions we believe 
are needed to effectively respond to the findings.  Our regularly published core publications reflect the 
relationship between our work and laws and regulations.   
  Our Semiannual Report to Congress describes findings and recommendations from recently 
completed reviews, many of which focus on existing laws and regulations.   
  Our Compendium of Priority Recommendations describes priority findings and recommendations 
from past periods that remain to be implemented.   
  Our annual Work Plan provides citations to laws and regulations that are the subject of ongoing or 
future reviews. 
We also review proposed legislation and regulations related to HHS programs and operations.  HHS 
routinely involves us and its operating and other staff divisions in the review and development of HHS 
regulations through a well-established HHS process.  Our audits, evaluations, and investigations are 
sometimes cited in regulatory preambles as influencing HHS regulations.  In addition, we provide 
independent, objective technical assistance on a bipartisan, bicameral basis to congressional committees 
and members who request it.  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 62 
 
 
Affordable Care Act implementation 
OIG continues to perform reviews on the Patient Protection and Affordable Care Act of 2010, as 
amended by the Health Care and Education Reconciliation Act of 2010 (Affordable Care Act).  The 
Affordable Care Act made changes to HHS programs and enacted a range of new programs that affect 
the Department, such as the Early Retiree Reinsurance Program (ERRP).  The roll-out of the Health 
Insurance Exchanges (marketplaces) is a substantial management challenge to HHS.  OIGs current focus 
is on areas such as eligibility systems, payment accuracy, contractor oversight, data security, and 
consumer protection.  Our substantial body of work underway was developed in coordination with the 
Government Accountability Office (GAO) and other Federal and State oversight agencies. It is focused on 
identifying risks and vulnerabilities to the marketplaces to ensure efficient and effective operation and to 
minimize waste and abuse of funds.  Our work has and will continue to encompass other aspects of 
Affordable Care Act implementation such as Medicaid expansion, use of State establishment grants, and 
the use of start-up and solvency loans for Consumer Operated and Oriented Plan Loans.   
Following is an example of a recent Affordable Care Act review. 
Early Retiree Reinsurance Program:  Jersey City 
  Jersey City, New Jersey, Did Not Always Comply With Early Retiree Reinsurance Program 
Requirements.  A-05-12-00039.  2014 JAN.  
Jersey City, New Jersey (the City), incorrectly requested and received $130,000 in ERRP reimbursements 
on the basis of claims that were not in compliance with Federal requirements and the Center for 
Consumer Information and Insurance Oversight (CCIIO) guidance. The City, the plan sponsor, offered 
self-funded health benefits to eligible employees, retirees, and their dependents. The City did not have 
adequate policies and procedures to ensure that it submitted claims for reimbursement of only 
allowable costs incurred for individuals who met the definition of an early retiree and their spouses and 
dependents.  RecommendationsThe City should develop and implement policies and procedures to 
help ensure that the City claims only allowable health benefit costs incurred for individuals who meet 
the definition of an early retiree, refund $130,000 in incorrectly requested and received ERRP 
reimbursements, and work with CCIIO to correct any subsequent ERRP reimbursement requests that did 
not comply with Federal requirements and CCIIO guidance.  
 
  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 63 
 
 
 
Appendix A  Reporting requirements  
Appendixes 
Appendix B  Questioned costs and funds put to better use  
Appendix C  Peer reviews 
Appendix DSanction authorities  
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 64 
 
 
 
 
 
 
 
 
 
 
 
http://oig.hhs.gov 
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 65 
 
 
Appendix A:  
Reporting requirements in the 
Inspector General Act of 1978  
 
The reporting requirements of the Inspector General Act of 1978, as amended, are listed in the following 
table along with the location of the required information. 
Section  Requirement  Location 
Section 4     
(a)(2)  Review of legislation and regulations.  Other HHS-Related Issues section.   
Section 5     
(a)(1)  Significant problems, abuses, and  Throughout this report. 
deficiencies. 
(a)(2)  Recommendations with respect to significant  Throughout this report. 
problems, abuses, and deficiencies. 
(a)(3)  Prior significant recommendations on which  OIG Compendium of Unimplemented 
corrective action has not been completed.  Recommendations. 
(a)(4)  Matters referred to prosecutive authorities  Legal and Investigative Activities 
section 
(a)(5)  Summary of instances in which information  None. 
requested by OIG was refused. 
(a)(6)  List of audit reports.  Submitted to the Secretary under 
separate cover. 
(a)(7)  Summary of significant reports.  Throughout this report. 
(a)(8)  Statistical Table 1  Reports With Questioned  Appendix B. 
Costs. 
(a)(9)  Statistical Table 2  Funds Recommended To  Appendix B. 
Be Put to Better Use 
(a)(10)  Summary of previous audit reports without  Appendix B. 
management decisions.  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 66 
 
 
Section  Requirement  Location 
(a)(11)  Description and explanation of revised  Appendix B. 
management decisions. 
(a)(12)  Management decisions with which the  None. 
Inspector General disagrees. 
(a)(13)  Information required by the Federal Financial  Reported annually in the spring 
Management Improvement Act of 1996.  Semiannual Report to Congress, 
Other HHS-Related Issues section. 
(a)(14)-(16)  Results of peer reviews of HHS-OIG  Appendix C. 
conducted by other OIGs or the date of the 
last peer review, outstanding 
recommendations from peer reviews, and 
peer reviews conducted by HHS-OIG of other 
OIGs. 
Other reporting requirements 
Section  Requirement  Location 
845  National Defense Authorization Act for fiscal  Other HHS-Related Issues section. 
year 2008 (P.L. No. 110-181),  845.  Report 
significant contract audits. 
205  Health Insurance Portability and  Reported annually in the fall 
Accountability Act,  205.  Annually solicit via  Semiannual Report,  
a Federal Register notice proposals for  Appendix F. 
developing new and modifying existing safe 
 
harbors to the anti-kickback statute of the 
Social Security Act,  1128(b) and proposals 
for developing special fraud alerts.  Annually 
report annually to Congress on the status of 
the proposals received related to new or 
modified safe harbors. 
1553  American Recovery and Reinvestment Act of  Other HHS-Related Issues section. 
2009,  1553.  Report to Congress the 
retaliation complaint investigations OIG 
decided not to conduct or continue during 
the period.  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 67 
 
 
Appendix B:  
Questioned costs and 
funds to be put to better use  
 
The following tables summarize the Office of Inspector Generals (OIG) monetary recommendations and 
the Department of Health and Human Services (HHS) responses to them.  This information is provided in 
accordance with the Inspector General Act,  5(a)(8) and (a)(9); 5 U.S.C. App.  5(a)(8) and (a)(9); and 
the Supplemental Appropriations and Rescissions Act of 1980.   
Audit Reports With Questioned Costs 
Questioned costs are those questioned by OIG audits because of an alleged violation of a provision of a 
law, regulation, contract, grant, or other agreement governing the expenditure of funds.  Costs are 
questioned because the expenditure was not supported by adequate documentation or because the 
expenditure was unnecessary or unreasonable.  OIG includes those questioned costs that HHS program 
officials, in a management decisions, have agreed should not be charged to the Federal Government, 
commonly referred to as disallowed costs, as part of the expected recoveries in the Accomplishment 
section at the beginning of the Semiannual Report.  Superscripts indicate end notes. 
Table 1  Audit Reports With Questioned Costs  
Dollar Value  Dollar Value 
  Reports 
Questioned  Unsupported 
Section 1       
Reports for which no management decisions had 
been made by the beginning of the reporting  195  $802,141,000  $26,182,000 
period1 
Reports issued during the reporting period  84  $476,484,000  $139,500,000   
  Total Section 1  279  $1,278,625,000  $165,682,000 
Section 2       
Reports for which management decisions were 
     
made during the reporting period2, 3  
  Disallowed costs  139  $294,978,000*  $0 
  Costs not disallowed  5  $16,631,000   $1,044,000 
  Total Section 2  144  $311,609,000  $1,044,000 
 
*Audit receivables (expected recoveries). 
     
 
     
      HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 68 
 
 
Dollar Value  Dollar Value 
  Reports 
Questioned  Unsupported 
Section 3       
Reports for which no management decisions had 
been made by the end of the reporting period   135  $967,016,000  $164,638,000 
(Sec. 1 minus Sec. 2) 
Section 4        
Reports for which no management decisions were 
64  $505,679,000  $25,138,000 
made within 6 months of issuance4 
Audit Reports With Funds  
Recommended To Be Put to Better Use  
The phrase recommendations that funds be put to better use means that funds could be used more 
efficiently if management took action to implement an OIG recommendation through reductions in 
outlays, deobligation of funds, and/or avoidance of unnecessary expenditures.  Table 2 reports HHS 
program officials decisions to take action on these audit recommendations.   
Table 2  Audit Reports With Funds To Be Put to Better Use 
  Reports  Dollar Value 
Section 1     
Reports for which no management decisions had been made by the 
17  $1,345,668,000 
beginning of the reporting period1 
Reports issued during the reporting period  7  $388,155,000 
  Total Section 1  24  $1,733,823,000 
Section 2     
Reports for which management decisions were made during the 
   
reporting period 
Value of recommendations agreed to  
   
by management 
  Based on proposed management action  7  $49,411,000 
  Based on proposed legislative action    0 
Value of recommendations not agreed to by management  3  $2,664,000 
  Total Section 2  10  $52,075,000 
     
      HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 69 
 
 
  Reports  Dollar Value 
 
Section 3 
Reports for which no management decisions had been made by the 
14  $1,681,748,000 
end of the reporting period2 (Sec. 1 minus Sec. 2) 
 
End Notes 
Table 1 End Notes 
1 The opening balance was adjusted upward by $42 million because of a reevaluation of previously 
issued recommendations.  
2 Revisions to previously reported management decisions: 
  A-02-03-01003 Review of Medicaid Claims for School-Based Health Services in New Jersey.  The 
Departmental Appeals Board issued a favorable ruling for CMS upholding $42,229,773 of the 
disallowance.  Subsequent documentation provided by the state reduced disallowed cost by 
$7,127,694. 
  A-03-05-00203 Review of Medicaid Reimbursement Rates for School-Based Services in West Virginia.  
The Departmental Appeals board issued a favorable ruling for the State.  As a result of the appeal by 
the State, the $22,806,230 was determined to be allowable cost.   
  A-04-09-03046 Review of Concurrently Enrolled State Childrens Health Insurance Program and 
Medicaid Beneficiaries in Florida from April 1, 2007, Through March 31, 2008.  CMS accepted The 
State of Floridas request for reconsideration of the disallowed cost totaling $5,348,853 pursuant to 
section 1116(e) (1) of the Social Security Act.  Subsequent review by CMS reduced disallowed cost by 
$4,505,239.   
  A-05-10-95134 State of Indiana.  CMS subsequent review of additional information provided by the 
State, determined that the cost error was specific to the States accounting system which was not the 
source for the preparation of the CMS 64.  As a result, the identified cost totaling $9,415,799 was 
determined to be allowable.  
CMSs subsequent review of additional information obtained and confirmed with the State Board of 
Accounts determined that the identified cost totaling $13,998,978 was allowable.   
  A-10-10-95482 State of Oregon.  Subsequent review by CMS determined that the premium 
assistance program operating under a CMS Waiver, was not required to provide coverage based 
upon services in the Medicaid State Plan.  The $9,400,000 was determined to be allowable cost.   
  Not detailed are net reductions to previously disallowed management decisions totaling $3,348,973.  
3 Included are management decisions to disallow $31.6 million in questioned costs that were identified 
by non-Federal auditors in audits of State and local governments, colleges and universities, and nonprofit  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 70 
 
 
organizations receiving Federal awards conducted in accordance with Office of Management and Budget 
Circular A-133.  By law, OIG is responsible for ensuring that work performed by these non-Federal 
auditors complies with Federal audit standards; accordingly, OIG tracks, resolves, and reports on 
recommendations in these audits. 
4 Because of administrative delays, some of which were beyond management control, resolution of the 
following 64 audits was not completed within 6 months of issuance of the reports; however, agency 
management has informed us that the agency is working to resolve the outstanding recommendations 
before the end of the next semiannual reporting period:  
CIN: A-01-13-00505   REVIEW OF DUPUY ORTHOPAEDICS PROPOSED GLOBAL PAYMENT TO MEDICARE FOR 
REVISION SURGERIES RELATED TO THE DUPUY ASR HIP RECALL, JUL 2013, $98,200,000. 
CIN: A-07-12-01116  REVIEW OF MEDICARE PAYMENTS FOR UNLAWFULLY PRESENT BENEFICIARIES, JAN 
2013, $91,620,548. 
CIN: A-02-10-01043  NEW YORKS CLAIMS FOR MEDICAID SERVICES PROVIDED UNDER ITS TRAUMATIC BRAIN 
INJURY WAIVER PROGRAM DID NOT COMPLY WITH CERTAIN FEDERAL AND STATE 
REQUIREMENTS, MAY 2013, $54,265,195. 
CIN: A-09-06-00023  REVIEW OF LOS ANGELES COUNTY APPROVAL PROCESS OF RELATIVE FOSTER FAMILY 
HOMES, OCT 2009, $45,520,603. 
CIN: A-07-12-01113  REVIEW OF MEDICARE PAYMENTS FOR INCARCERATED BENEFICIARIES, JAN 2013, 
$33,587,634. 
CIN: A-01-02-00006  REVIEW OF RATE SETTING METHODOLOGY FOR MEDICAID SCHOOL BASED HEALTH 
SERVICES - CT, MAY 2003, $32,780,146. 
CIN: A-02-11-01008  REVIEW OF NYS MEDICAID HOME HEALTH CLAIMS MADE BY REST OF STATE PROVIDERS, 
SEP 2013, $31,482,913. 
CIN: A-05-08-00098  REVIEW OF OHIO DEPARTMENT OF JOB AND FAMILY SERVICES CLAIMS FOR COSTS 
REPORTED BY THE HAMILTON COUNTY DEPARTMENT OF JOB AND FAMILY SERVICES, 
JAN 2011, $30,595,545. 
CIN: A-07-10-06004  REVIEW OF PART D DRUGS PRESCRIBED BY EXCLUDED PROVIDERS, DEC 2011, 
$15,079,608. 
CIN: A-02-11-01038  REVIEW OF MEDICAID CLAIMS MADE BY HOSPITAL BASED CONTINUING DAY 
TREATMENT PROVIDERS IN NEW YORK STATE, SEP 2013, $8,281,766. 
CIN: A-09-12-02066  AUDIT OF MEDICARE PAYMENTS FOR INPATIENT CLAIMS THAT REQUIRE 96+ HOURS OF 
MECHANICAL VENTILATION, SEP 2013, $7,714,825. 
CIN: A-01-11-00534  NATIONWIDE REVIEW OF INPATIENT REHABILITATION FACILITIES PATIENT ASSESSMENT 
INSTRUMENTS FOR CALENDAR YEARS 2009 AND 2010, SEP 2012, $7,700,700. 
CIN: A-01-10-00508  REVIEW OF PAYMENTS TO HOSPITALS FOR NONPHYSICIAN OUTPATIENT SERVICES 
UNDER THE I/P PROSPECTIVE PAYMENT SYSTEM, JUN 2012, $6,100,000. 
CIN: A-04-08-03521  AUDIT OF UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS IN TN FOR THE PERIOD 
OCTOBER 1, 1998 TO DECEMBER 31, 2007, FEB 2009, $5,768,243. 
CIN: A-03-12-00004  REVIEW OF HORIZONS 2009 AND 2010 BONA FIDE SERVICE FEES, MAR 2013, 
$4,344,417. 
CIN: A-01-11-02500  REVIEW OF MASSACHUSETTS TITLE IV-E ADOPTION ASSISTANCE COSTS FOR FEDERAL 
FISCAL YEARS 2006 THRU 2008, AUG 2011, $4,242,540. 
CIN: A-07-12-03175  REVIEW OF CCDF TARGETED FUNDS IN NEBRASKA, APR 2013, $2,965,913.  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 71 
 
 
CIN: A-03-11-00002  REVIEW OF NEW ENGLAND JOINT ENTERPRISE 2009 DIR REPORTS, APR 2012, 
$2,710,732. 
CIN: A-03-12-00006  REVIEW OF TAHMOS 2009 AND 2010 BONA FIDE SERVICE FEES, MAR 2013, $2,355,532. 
CIN: A-03-12-00007  REVIEW OF ARCADIANS 2009 AND 2010 BONA FIDE SERVICE FEES, FEB 2013, 
$2,048,967. 
CIN: A-03-12-00005  REVIEW OF WINDSORS 2009 AND 2010 BONA FIDE SERVICE FEES, JAN 2013, $1,948,737 
CIN: A-05-12-00021  REVIEW OF CDCS OVERSIGHT OF PEPFAR FUNDS PROVIDED TO AURUM IN SOUTH 
AFRICA FOR 2009-10, AUG 2013, $1,690,605. 
CIN: A-02-11-02007  LONG ISLAND CHILD AND FAMILY DEVELOPMENT SERVICES, INC.S FINANCIAL 
MANAGEMENT SYSTEM DID NOT ACCURATELY DISCLOSE HEAD START PROGRAM 
RESULTS, MAY 2012, $1,489,093. 
CIN: A-07-11-06013  INDIRECT COSTS CLAIMED AS DIRECT COSTS - UNIVERSITY OF COLORADO DENVER, JUN 
2013, $1,419,524. 
CIN: A-03-12-00008  REVIEW OF XL HEALTH DIR, JAN 2013, $1,410,342. 
CIN: A-01-12-02500  REVIEW OF CONNECTICUTS TITLE IV-E ADMINISTRATIVE/TRAINING COSTS AND 
MAINTENANCE PAYMENTS, DEC 2012, $1,316,684. 
CIN: A-01-12-01501  REVIEW OF SAMHSA COSTS CLAIMED AT LATIN AMERICAN HEALTH INSTITUTE, BOSTON, 
MA, APR 2013, $1,261,328. 
CIN: A-09-11-01006  REVIEW OF CENTER FOR COMMUNITY & FAMILY SERVICES HEAD START FUNDS, JUN 
2013, $967,387. 
CIN: A-02-11-02005  LIMITED HEAD START REVIEW OF INCLUDED EDUCATIONAL SERVICES, JUL 2012, 
$588,830. 
CIN: A-02-10-01025  REVIEW OF NEW JERSEYS MEDICAID BUY-IN PROGRAM FOR MEDICARE BENEFICIARIES, 
AUG 2013, $523,919. 
CIN: A-09-11-01007  REVIEW OF CSBG RECOVERY ACT COSTS CLAIMED BY HI FOR HCAP, FEB 2013, $513,649. 
CIN: A-03-09-00003  REVIEW OF RISK ADJUSTMENT DATA FOR BRAVO HEALTH, SEP 2013, $422,409 
CIN: A-01-11-02505  NEON - HEAD START LIMITED SCOPE REVIEW - ALLOCATING OF COSTS - ARRA, JAN 2012, 
$406,434. 
CIN: A-01-11-02510  REVIEW OF CT CSBG RECOVERY ACT COSTS CLAIMED, APR 2013, $314,605. 
CIN: A-01-10-02505  RESULTS OF LIMITED SCOPE REVIEW OF CTE, INC., MAY 2011, $293,870. 
CIN: A-06-11-00055  REVIEW OF NEIGHBORHOOD CENTERS, INC., SEP 2013, $287,571. 
CIN: A-02-11-02015  REVIEW OF INSEC, INC. CSBG ARRA COSTS CLAIMED BY THE COMMONWEALTH OF 
PUERTO RICO, APR 2013, $285,412. 
CIN: A-04-12-04019  REVIEW OF NAMIBIA MOH FY 09 PEPFAR COOP AGREEMENT 5UGPS001094-2, JAN 
2013, $242,653. 
CIN: A-05-12-00023  REVIEW OF CDCS OVERSIGHT OF PEPFAR FUNDS PROVIDED TO SOUTHERN AFRICAN 
CATHOLIC BISHOPS CONFERENCE FOR JUNE 1, 2009 TO MAY 31, 2010, JUL 2013, 
$235,130. 
CIN: A-09-09-00045  RISK ADJUSTMENT DATA VALIDATION OF PAYMENTS MADE TO PACIFICARE OF 
CALIFORNIA FOR CALENDAR YEAR 2007 (CONTRACT H0543), NOV 2012, $224,388. 
CIN: A-05-09-00044  RISK ADJUSTMENT DATA VALIDATION OF PAYMENTS MADE TO PARAMOUNT CARE INC. 
FOR CALENDAR YEAR 2007 (CONTRACT NUMBER H3653), SEP 2012, $205,534 
CIN: A-05-12-00012  REVIEW OF IL CSBG RECOVERY ACT COSTS CLAIMED - ROCKFORD, JUL 2013, $205,296  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 72 
 
 
CIN: A-05-12-00024  NATIONAL HEALTH LABORATORY SERVICE DID NOT ALWAYS MANAGE PRESIDENTS 
EMERGENCY PLAN FOR AIDS RELIEF FUNDS OR MEET PROGRAM GOALS IN 
ACCORDANCE WITH AWARD REQUIREMENTS, AUG 2013, $185,768. 
CIN: A-06-09-00012  RISK ADJUSTMENT DATA VALIDATION - PACIFICARE H4590, MAY 2012, $183,247. 
CIN: A-04-11-01004  NORTHEAST FLORIDA COMMUNITY ACTION AGENCY, INC.S CSBG FUNDS AWARDED 
UNDER THE AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009, SEP 2012, 
$165,795. 
CIN: A-04-11-01008  FLORIDAS ADMINISTRATION OF CSBG RECOVERY ACT PROGRAM AND COSTS CLAIMED 
BY CENTRAL FLORIDA COMMUNITY ACTION AGENCY, INC., APR 2013, $160,404. 
CIN: A-07-10-01082  RISK ADJUSTMENT VALIDATIONS - CIGNA HEALTHCARE OF ARIZONA, INC. H0354, MAY 
2013, $151,453. 
CIN: A-04-11-03538  HEAD START HIGH RISK GRANTEE - MOBILE COMMUNITY ACTION AGENCY, INC., DEC 
2011, $147,587. 
CIN: A-07-11-02766  REVIEW OF WY CSBG RECOVERY ACT COSTS CLAIMED - CARBON COUNTY, AUG 2013, 
$143,588. 
CIN: A-09-09-01007  REVIEW OF IDAHOS TITLE IV-E ADOPTION ASSISTANCE COSTS FOR FEDERAL FISCAL 
YEARS 2006 THRU 2008, JUL 2009, $124,046. 
CIN: A-09-11-01013  REVIEW OF OREGONS HOUSING AND COMMUNITY SERVICES DEPARTMENT, APR 2013, 
$115,911. 
CIN: A-06-11-00058  REVIEW OF CSBG ARRA COSTS CLAIMED BY CROWLEYS RIDGE DEVELOPMENT COUNCIL, 
AUG 2012, $115,420. 
CIN: A-07-12-02779  REVIEW OF NATRONA COUNTY CSBG RECOVERY ACT COSTS CLAIMED, JUN 2013, 
$104,971. 
CIN: A-03-11-03300  AUDIT OF INDIRECT ADMIN COSTS CHARGED AS DIRECT COSTS AT THOMAS JEFFERSON 
UNIVERSITY, JUN 2013, $93,102. 
CIN: A-05-12-00022  THE SOUTH AFRICAN NATIONAL DEPARTMENT OF HEALTH DID NOT ALWAYS MANAGE 
PRESIDENTS EMERGENCY PLAN FOR AIDS RELIEF FUNDS OR MEET PROGRAM GOALS IN 
ACCORDANCE WITH AWARD REQUIREMENTS, AUG 2013, $77,790. 
CIN: A-04-11-01010  FLORIDAS ADMINISTRATION OF CSBG RECOVERY ACT PROGRAM AND COSTS CLAIMED 
BY THE AGRICULTURAL AND LABOR PROGRAM INC., FEB 2013, $58,437. 
CIN: A-06-11-00057  AUDIT DEVELOPMENT - VIETNAM PEPFAR REVIEWS, JUN 2013, $47,708. 
CIN: A-05-11-00083  REVIEW OF IL CSBG RECOVERY ACT COSTS CLAIMED (CITY OF CHICAGO), MAR 2013, 
$40,247. 
CIN: A-09-12-01000  REVIEW OF CSBG RECOVERY ACT ADMINISTRATIVE COSTS CLAIMED BY HI OFFICE OF 
COMMUNITY SERVICES, JUN 2012, $34,861. 
CIN: A-03-10-03110  TIGER TEAM - CONTRACT HHSN267-2007-00014C, OCT 2011, $27,707. 
CIN: A-02-11-02000  DIRECT COST REVIEW - SUNY ALBANY, OCT 2011, $27,384. 
CIN: A-09-11-01014  REVIEW OF CSBG RECOVERY ACT COSTS CLAIMED BY HI FOR THE HAWAII COUNTY 
ECONOMIC OPPORTUNITY COUNCIL, JUL 2012, $22,602. 
CIN: A-02-11-02008  DIRECT COST REVIEW - SUNY STONY BROOK, AUG 2012, $18,254. 
CIN: A-05-11-00053  THE COLUMBUS URBAN LEAGUE CLAIMED SOME UNALLOWABLE COSTS TO HEAD 
START, SEP 2012, $13,102. 
  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 73 
 
 
TOTAL NUMBER OF REPORTS:  64 
TOTAL AMOUNT:  $505,679,000 
Table 2 End Notes 
1The opening balance was adjusted upward by $ 2.3 million because of reevaluation of previously issued 
recommendations.  
2 Because of administrative delays, some of which were beyond management control, 7of the 14 audits 
open at the end of the period were not resolved within 6 months of issuance of reports.  OIG is working 
with management to reach resolution on these recommendations before the end of the next semiannual 
reporting period: 
CIN: A-01-12-00507  ACUTE-CARE INPATIENT HOSPITAL TRANSFERS TO INPATIENT HOSPICE CARE, MAY 2013, 
$602,519,187. 
CIN: A-01-12-00522  REVIEW OF ERYTHROPOIESIS STIMULATING AGENTS (ESA) UTILIZATION UNDER THE 
ESRD PPS, MAY 2013, $529,645,050. 
CIN: A-07-11-05017  NATIONWIDE REVIEW OF PART D INVESTMENT INCOME, APR 2013, $111,244,413. 
CIN: A-06-10-00059  REVIEW OF HOSPICE COVERED DRUGS NATIONWIDE, JUN 2012, $33,638,137. 
 
CIN: A-09-12-02066  AUDIT OF MEDICARE PAYMENTS FOR INPATIENT CLAIMS THAT REQUIRE 96 OR MORE 
HOURS OF MECHANICAL VENTILATION, SEP 2013, $6,000,000. 
CIN: A-05-06-00023  UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS - MN, SEP 2006, $28,240. 
CIN: A-09-09-01007  REVIEW OF IDAHOS TITLE IV-E ADOPTION ASSISTANCE COSTS FOR FEDERAL FISCAL 
YEARS 2006 THROUGH 2008, JUL 2009, $17,764. 
 
TOTAL NUMBER OF REPORTS:  7 
TOTAL AMOUNT:   $1,283,092,791     
 
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 74 
 
 
 
 
 
 
 
 
 
 
 
http://oig.hhs.gov 
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 75 
 
 
Appendix C:  
Peer review results 
 
The Inspector General Act of 1978, as amended, requires Offices of Inspector General (OIGs) to report 
the results of peer reviews of their operations conducted by other OIGs, the date of the last peer review, 
outstanding recommendations from peer reviews, and peer reviews conducted by the OIG of other OIGs 
in the semiannual period.  Peer reviews are conducted by member organizations of the Council of the 
Inspectors General on Integrity and Efficiency (CIGIE).  The required information follows. 
Office of Audit Services peer review results 
During this semiannual reporting period, no peer reviews involving the Office of Audit Services (OAS) 
were completed.  Listed below is information concerning OASs peer review activities during prior 
reporting periods.  
OAS  Date  Reviewing Office  Office Reviewed 
June 2012  Department of  HHS OIG, OAS 
Homeland Security 
The system of quality control for the audit organization of HHS OIG in effect for the year ending September 30, 
2011, has been suitably designed and complied with to provide HHS OIG with reasonable assurance of 
performing and reporting in conformity with applicable professional standards in all material respects.  Federal 
audit organizations can receive a rating of pass, pass with deficiencies, or fail.  HHS OIG received a peer review 
rating of pass. 
 
OAS  Date  Reviewing Office  Office Reviewed 
May 2012  HHS OIG, OAS  U. S. Environmental  
Protection Agency (EPA) 
The system of quality control for the audit organization of EPA OIG in effect for the year ending  September 30, 
2011, has been suitably designed and complied with to provide EPA OIG with reasonable assurance of 
performing and reporting in conformity with applicable professional standards in all material respects.  Federal 
audit organizations can receive a rating of pass, pass with deficiencies, or fail.  EPA OIG received a peer review 
rating of pass. 
 
(Peer Review Results continued next page)    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 76 
 
 
Office of Investigations peer review results  
During this semiannual reporting period, the U.S. Postal Service (USPS) Office of Inspector General 
conducted a peer review of HHS OIGs Office of Investigations (OI).  OI did not conduct a peer review of 
another OIG during this reporting period.  Listed below is information concerning OIs peer review 
activities during this and prior reporting periods.  
OI  Date  Reviewing Office  Office Reviewed 
August 2012  USPS-OIG  HHS-OIG, OI 
The system of internal safeguards and management procedures for the investigative function of HHS-OIG in 
effect for the year ending September 30, 2012, were in full compliance with the quality standards established by 
CIGIE and the Attorney Generals guidelines. 
 
OI  Date  Reviewing Office  Office Reviewed 
July 2011  HHS-OIG, OI  DoD-OIG 
The system of internal safeguards and management procedures for the investigative function of DoD-OIG in 
effect through July 2011 were in full compliance with the quality standards established by CIGIE and the 
Attorney Generals guidelines. 
 
OI  Date  Reviewing Office  Office Reviewed 
January 2011  HHS-OIG, OI  Department of Housing and Urban 
  Development (HUD) OIG 
The system of internal safeguards and management procedures for the investigative function of HUD-OIG in 
effect through February 2011 was in full compliance with the quality standards established by CIGIE and the 
Attorney Generals guidelines. 
 
 
    HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 77 
 
 
Appendix D:  
Summary of Sanction authorities 
  
The Inspector General Act of 1978, as amended, specifies requirements for semiannual reports to be 
made to the Secretary for transmittal to Congress.  A selection of other authorities appears below. 
Program Exclusions 
The Social Security Act,  1128 (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 Office of Inspector General (OIG) is authorized 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; or engaging in unlawful 
kickback arrangements. 
The Patient Protection and Affordable Care Act of 2010 (Affordable Care Act) added another basis for 
imposing a permissive exclusion, that is, knowingly making, or causing to be made, any false statements 
or omissions in any application, bid, or contract to participate as a provider in a Federal health care 
program, including managed care programs under Medicare and Medicaid, as well as Medicares 
prescription drug program. 
Providers subject to exclusion are granted due process rights.  These include a hearing before an 
administrative law judge and appeals to the Department of Health and Human Services (HHS) 
Departmental Appeals Board and Federal district and appellate courts regarding the basis for and the 
length of the exclusion. 
Civil Monetary Penalties Law 
The Civil Monetary Penalties Law (CMPL) of the Social Security Act, 1128A (42 U.S.C.  1320a-7a), 
imposes penalties, assessments, and exclusion from participation in Federal health care programs for 
engaging in certain activities.  For example, a person who submits, or causes to be submitted, 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 law and its implementing 
regulations also authorize 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  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 78 
 
 
agreement; violations of rules regarding the possession, use, and transfer of biological agents and toxins; 
and payment or receipt of remuneration in violation of the anti-kickback statute (42 U.S.C. 
 1320a-7b(b)). 
The Affordable Care Act added more grounds for imposing civil monetary penalties (CMPs).  These 
include, among other conduct, knowingly making, or causing to be made, any false statements or 
omissions in any application, bid, or contract to participate as a provider in a Federal health care 
program (including Medicare and Medicaid managed care programs and Medicare Part D); the 
Affordable Care Act authorizes a penalty of up to $50,000 for each false statement, as well as activities 
relating to fraudulent marketing by managed care organizations, their employees, or their agents.  
Patient Dumping 
The Social Security Act,  1867 (42 U.S.C.  1395dd), provides that when an individual goes to the 
emergency room of a Medicare-participating hospital, the hospital must provide an appropriate 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 treatment to stabilize the condition or 
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. 
OIG is authorized to collect CMPs of up to $25,000 against small hospitals (fewer 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 collect 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. 
Anti-Kickback Statute and  
Civil False Claims Act Enforcement Authorities 
The 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 an entity for the furnishing, or arranging for the furnishing, 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 of the Social Security Act,  1128B(b) 
(42 U.S.C.  1320a-7b(b)). 
Individuals and entities that engage in unlawful referral or kickback schemes may be subject to criminal 
penalties under the general criminal anti-kickback statute; a CMP under OIGs authority pursuant to the 
Social Security Act,  1127(a)(7) (42 U.S.C.  1320a-7a); and/or program exclusion under OIGs permissive 
exclusion authority under the Social Security Act,  1128(b)(7) (42 U.S.C.  1320a-7(b)(7)).  HHS Office of Inspector General 
Semiannual Report to Congress | Spring 2014  Page 79 
 
 
False Claims Amendments Act of 1986  Under the Federal False Claims Amendments Act of 1986 (FCA) 
(31 U.S.C.  37293733), a person or an entity is liable for up to treble damages and a penalty between 
$5,500 and $11,000 for each false claim it knowingly submits, or causes to be submitted, to a Federal 
program.  Similarly, a person or an 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 in which the 
person acted in deliberate ignorance or 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 a private individual to file a lawsuit on behalf of the United States 
and entitles that whistleblower to a percentage of any fraud recoveries.  The FCA was again amended in 
2009 in response to recent Federal court decisions that narrowed the laws applicability.  Among other 
things, these amendments clarify the reach of the FCA to false claims submitted to contractors or 
grantees of the Federal Government.