U.S. DEPARTMENT OF HEALTH & HUMAN SERVICES
OIG
Semiannual Report
to Congress
OFFICE OF INSPECTOR GENERAL
OCTOBER 1,2005-MARCH 31, 2006
U.S. DEPARTMENT OF HEALTH & HUMAN SERVICES This semiannual report 
and other OIG publications and information 
are available on the Internet at http://oig.hhs.gov   
Message From the Inspector General 
 
 
This  report,  submitted  pursuant  to  the  Inspector  General  Act  of  1978,  as  amended, 
summarizes the activities of the Office of Inspector General (OIG) for the 6-month 
reporting period that ended March 31, 2006. 
 
OIG is dedicated to the mission of detecting fraud, waste, and abuse and promoting 
economy  and  efficiency  in  the  programs  of  the  Department  of  Health  and  Human 
Services (HHS).  Oversight of the Medicare and Medicaid programs, as well as the over 
300 important discretionary programs administered by this Department, involves careful 
planning  and  effective  resource  allocation.    To  be  effective,  OIG  must  consistently 
evaluate and prioritize activities based on existing responsibilities, new mandates, and 
unforeseen events.   
 
Over the last 6 months, OIG conducted a wide range of planned activities, addressed 
many significant new oversight responsibilities under the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA), and responded to requests for 
assistance  from  the  Department  and  the  Inspector  General  community  after  the 
devastating hurricanes in the Gulf region.  Balancing all of these activities required 
coordination between the components within OIG, as well as effective collaboration with 
the Department, Inspector General community, Federal law enforcement, and State and 
local entities. 
 
OIG  work  during  this  reporting  period  continued  to  focus  on  Medicaid  activities, 
including Medicaid prescription drug fraud, drug pricing under the Federal upper limit 
program, and State financing mechanisms used to maximize Medicaid payments.  In 
addition, quality of care in nursing homes and community-based settings and durable 
medical equipment pricing remained OIG priorities.   
 
The MMA mandated and prudent oversight work was also a focal point of OIG activities 
during the last 6 months.  OIG issued a report on Medicare drug reimbursement for 
cancer patients and a report examining access to drugs under prescription drug plans 
formularies for beneficiaries transitioning from Medicaid to Medicare.  OIG continued to 
monitor  implementation  of  the  prescription  drug  benefit  and  the  potential  fraud 
associated with this new program. 
 
 
 
 
 
 
 
 
 
i   
 
 
 
 
As demonstrated by OIGs hurricane response, to be effective, we cannot operate in 
isolation.  We must continue to work closely with our Federal, State, and local partners to 
leverage limited resources to achieve the maximum results for the American taxpayer.  
This team approach becomes even more important as OIG begins implementing its new 
Medicaid fraud responsibilities under the Deficit Reduction Act of 2005. 
 
I  want  to  express  my  sincere  appreciation  to  Congress,  as  well  as  to  the  senior 
management of the Department, for their continued support.  I am honored to be leading 
an organization of highly professional and talented employees who are committed to the 
mission of OIG and the important programs administered by the Department. 
 
 
Daniel R. Levinson 
Inspector General 
ii   
Highlights 
 
Summary of Accomplishments 
For the first half of fiscal year (FY) 2006, the Office of Inspector General (OIG) reported 
expected recoveries of approximately $1.02 billion:  $288 million in audit receivables and 
$732.4 million in investigative receivables.* 
 
Also for this semiannual period, OIG reported exclusions of 1,540 individuals and entities 
for fraud or abuse involving Federal health care programs and/or their beneficiaries; 226 
criminal actions against individuals or entities that engaged in crimes against departmental 
programs; and 119 civil actions, which include False Claims Act and unjust enrichment 
suits filed in district court, Civil Monetary Penalties Law settlements, and administrative 
recoveries related to provider self-disclosure matters.  
 
Serono Settlement 
Serono, S.A., along with its U.S. subsidiaries, Serono, Inc., Serono Holdings, Inc., and 
Serono Laboratories, Inc. (collectively known as Serono), agreed to enter a global criminal, 
civil, and administrative settlement that included the payment of $704 million plus interest 
and  a  5-year  Corporate  Integrity  Agreement  (CIA).    The  global  settlement  resolved 
allegations that Serono engaged in the illegal promotion of its AIDS-related drug Serostim 
and offered and paid illegal remunerations to physicians and pharmacies to induce them to 
prescribe  and/or  purchase  Serostim.    The  company  also  used  an  unapproved  medical 
device  as  a  marketing  tool  to  diagnose  AIDS-wasting  syndrome,  the  condition  that 
Serostim was approved to treat. 
 
SmithKline Beecham Corporation Settlement 
Doing business as GlaxoSmithKline, SmithKline Beecham Corporation agreed to pay the 
Government $149 million plus interest and enter into a 5-year addendum to its existing 
CIA with OIG.  The settlement resolved allegations that the pharmaceutical manufacturer 
engaged in certain improper pricing and marketing practices for Zofran and Kytril, two 
antiemetic drugs used primarily in conjunction with oncology and radiation treatment.    
 
Exclusion of South Beach Community Hospital 
OIG excluded South Beach Community Hospital (formerly South Shore Hospital and 
Medical Center) from participation in Medicare, Medicaid, and other Federal health care 
programs based on the hospitals material breach of a CIA.  This action marks the first 
time that OIG has sought to exclude a provider for failure to abide by the terms of a CIA 
previously negotiated as part of the resolution of a False Claims Act case against that 
provider.     
 
                                                 
*This figure represents HHS investigative receivables only; receivables on behalf of other Federal agencies, 
States, and others are not included here.  Also, savings from implemented recommendations and other 
actions to put funds to better use are annual only and will be reported in the fall semiannual report. 
iii   
 
 
Medicare Drug Reimbursement 
As required by the Medicare Prescription Drug, Improvement, and Modernization Act of 
2003, OIG analyzed a new methodology for Medicare Part B reimbursement of certain 
drugs and biologicals used to treat cancer patients.  The report concluded that physician 
practices in the specialties of hematology, hematology/oncology, and medical oncology 
could generally purchase the drugs at prices below the new reimbursement rates.  OIG 
based this conclusion on statistical estimates, including an estimate of average prices paid 
for selected codes that constituted more than 94 percent of the $4.5 billion in total 2004 
Medicare-allowed amounts for drugs associated with these three physician specialties.  
OIG recommended that Congress consider the results of this review in deliberations about 
drug reimbursement methodology.   
 
Deficiencies in 340B Drug Discount Program Oversight 
Because of systemic problems with the accuracy and reliability of the Governments record 
of 340B ceiling prices, OIG found that the Health Resources and Services Administration 
(HRSA) cannot appropriately oversee the 340B Drug Pricing Program because it lacks the 
oversight mechanisms and authority to ensure that 340B entities pay at or below the 340B 
ceiling price.  HRSA and the Centers for Medicare & Medicaid Services (CMS) agreed 
with  most  of  OIGs  recommendations  and  have  already  taken  steps  to  improve  the 
calculation of the 340B ceiling price.   
 
Dual Eligibles Transition:  Drug Access Under Prescription Drug Plans 
Formularies 
This study found that dual eligiblesbeneficiaries of both Medicare and Medicaid
may need targeted assistance to navigate the transition from Medicaid to the new Medicare 
Part D drug benefit, given the variation among Part D formularies, as well as the medical 
and  resource  challenges  faced  by  this  population.    Taking  advantage  of  the  options 
available  when  their  drug  is  not  covered requires  knowledge  and  proactive  effort  by 
beneficiaries and may require additional assistance from CMS and States to ensure a 
smooth transition.   
 
Outside Activities of FDA Employees 
OIG  identified  several  vulnerabilities  that  limit  the  ability  of  the  Food  and  Drug 
Administration  (FDA)  to  effectively  review  the  outside  activities  of  its  employees.  
Departmental employees are allowed, with approval, to work privately with non-Federal 
entities on their personal time, but these activities must not conflict with employees 
official duties.   
 
Series of Inspections on Caseworker Visits for Children in Foster Care   
Caseworker visitation is an element critical to maintaining the safety and wellbeing of 
children in foster care.  Two related OIG reports found that a significant number of States 
could not quantify the extent to which children were receiving visits, despite Federal  
 
 
 
iv   
 
 
investment in statewide automated systems.  The Administration for Children and Families 
is taking steps to address these issues with the States. 
 
Medicaid Upper-Payment-Limit Calculations in Four States 
The Federal upper payment limit is an estimate of the amount that would be paid for 
Medicaid services under Medicare payment principles.  As part of a series of reviews, OIG 
found that four States had made large Medicaid overpayments to hospitals and/or nursing 
facilities because the States had not calculated the upper payment limits in compliance 
with Federal regulations and State Medicaid plans.  OIG recommended that Alabama, 
Indiana, and New York refund a total of approximately $72.2 million to the Federal 
Government and that Mississippi work with CMS to resolve approximately $171 million in 
potential Federal overpayments. 
 
Departmental Financial Statement Audit 
For  the  seventh  consecutive  year,  the  Department  received  a  clean  opinion  on  its 
financial  statements,  meaning  that  the  statements  were  reliable  and  fairly  presented.  
However, the auditors noted two material weaknesses.  First, the lack of an integrated 
financial management system and weaknesses in internal controls made it difficult for the 
Department to prepare timely and accurate financial statements.  Second, CMS lacked 
comprehensive controls over the payment of Medicare managed care benefits.  Material 
weaknesses are systemic problems that affect a number of operating divisions or problems 
of significant dollar amounts that affect a single division.  
 
 
v    
OIGs Hurricane-Related Activities 
 
In the months after Hurricanes Katrina and Rita hit the Gulf Coast, OIG launched an 
aggressive coordinated oversight effort.  OIG is working to ensure that:  Federal response 
and recovery funds are spent appropriately; those attempting to defraud the Government 
are  brought  to  justice;  and  the  individuals  responsible  for  the  relief  efforts  are  wise 
stewards in their work assisting those impacted by the hurricanes and their aftermath.  In 
addition, more than 2,500 HHS staff and volunteers have been sent to the Gulf States in 
response to the hurricane disasters. 
 
OIG is working with Federal, State, and local partners in this effort, including participating 
as a member of the Presidents Council on Integrity and Efficiency Homeland Security 
Roundtable,  which  is  coordinating  the  oversight  activities  of  the  various  Inspectors 
General.  In addition, along with other members of the OIG community, OIG is a member 
of the Department of Justice Katrina task force in Baton Rouge.  This task force is 
designed to investigate allegations of fraud related to Federal outlays in connection with 
Hurricane Katrina.  Separate from this, OIG is conducting several investigations jointly 
with  the  Medicaid  Fraud  Control  Unit  in  the  State  of  Louisiana  in  connection  with 
allegations of poor quality of care and patient abuse and neglect that occurred during and 
in the aftermath of Hurricane Katrina. 
 
OIG has initiated extensive audit, inspection, and investigative activities related to the 
oversight of HHS hurricane recovery efforts.  A list of current projects follows. 
 
HHS Tasks Requested by FEMA  
As of March 31, 2006, the total spending authority for hurricane-related tasks that  
the Federal Emergency Management Agency (FEMA) asked HHS to perform totaled  
$349.4 million.  HHS should provide timely, accurate, complete, and consistent accounting 
for Gulf Coast-related costs reimbursed by FEMA.  An OIG audit will determine whether 
HHS is appropriately accounting for these costs. 
 
Transporting Medically Needy Evacuees 
OIG  is  evaluating  the  performance  of  a  contactor  in  charge  of  returning  all  Texas, 
Louisiana,  and  Mississippi  evacuees  who  require  en-route  medical  care  and  therefore 
cannot travel via commercial air or without medical assistance.  It is estimated that 6,000 
individuals may need to be transported.  This contractor was awarded $21 million for 
Texas  evacuees,  and  an  additional  $20  million  may  be  awarded  when  Louisianas 
infrastructure is reestablished to permit transporting evacuees back to their respective 
medical facilities.  
 
Auditing Vulnerable Hurricane-Related Procurements 
OIG  is  reviewing  all  hurricane-related  contractual  procurements  over  $100,000  and  a 
sample of contracts under $100,000 in two stages.  Initially, OIG is assessing the risk of 
fraud, waste, or abuse in these procurements.  Based on these risk assessments, OIG will  
 
vii   
 
 
select for indepth audit the most vulnerable hurricane-related HHS procurements.   These  
audits will specifically focus on the methods of procurement, costs incurred, and the 
quantity, quality, and timeliness of deliverables.  Ten audits are currently in progress.   
 
Investigations of Quality of Care Allegations 
OIG is currently investigating 13 quality of care cases in the Gulf area.  The treatment of 
certain  beneficiaries  residing  in  health  care  facilities  during  the  disaster  is  being 
investigated based on allegations of euthanasia, gross negligence, and poor quality of care. 
 
The Use of Purchase Cards in Response to Hurricane Katrina 
OIG is presently analyzing the use of purchase cards by HHS personnel deployed in 
response to Hurricane Katrina.  The study focuses on compliance with both established and 
emergency HHS and agency spending guidelines and procedures.  This study builds on 
OIGs March 2003 report International Merchant Purchase Authorization Card Program:  
Review  of  Calendar  Year  2001  Transactions.    That  study  found  that  44  percent  of 
transactions sampled did not fully comply with requirements for using the IMPAC cards.  
These  past  findings,  combined  with  the  urgent  nature  of  the  responses  to  Hurricane 
Katrina, provide a useful opportunity to examine the use of HHS purchase cards during 
responses to large-scale public health emergencies. 
 
Implementation of National Response Plan Responsibilities 
OIG will audit HHSs implementation of its responsibilities under the National Response 
Plan, specifically, Emergency Support Function #8:  Public Health and Medical Services.  
At appropriate departmental, operating division, and staff division levels, OIG will assess 
the handling of FEMA-requested mission assignments using established plans, objectives, 
and  other  pertinent  benchmarks.    The  audit  results  will  be  critical  for  improving 
departmental processes for future public emergencies. 
 
Use of Emergency Preparedness Grants in Selected Gulf Coast States 
OIG will audit the use of HHS emergency preparedness grant funding in the Gulf Coast 
States.  OIG will determine whether such funding, which is provided annually by the 
Centers  for  Disease  Control  and  Prevention  and  the  Health  Resources  and  Services 
Administration, has been utilized for approved purposes and whether items funded by 
these grants were effective in the hurricane response and recovery efforts.  Reviews will be 
performed in Florida, Alabama, Louisiana, Texas, and Mississippi.  
 
Claims for Services Not Rendered in Medicare and Medicaid Programs 
OIG  auditors  will  perform  a  data  match  of  services  performed  during  the  months 
immediately  following  Hurricane  Katrina  to  providers  located  in  zip  codes  declared 
national disaster areas.  The results will be analyzed to determine whether any providers 
that were not in operation were continuing to bill the Medicare and/or Medicaid programs. 
 
Identification of Aberrant Providers in Medicare and Medicaid Programs 
Through  the  use  of  software  applications,  OIG  auditors  will  identify  providers  who 
submitted claims to Medicare and/or Medicaid for services provided to evacuees that 
greatly exceeded the number of claims submitted by other providers in the peer group.  
viii   
 
 
These claims will then be selectively reviewed to determine whether they are legitimate 
and medically necessary. 
 
Establishment of Claims Identifiers in Medicare 
In Consolidated HHS Response to OMB Data Call:  Katrina Stewardship, the Centers 
for  Medicare  &  Medicaid  Services  (CMS) presented  a  risk  assessment  for  Hurricane 
Katrina-related activities.  As noted in this document, OIG auditors plan to determine 
whether  (1)  CMS  established  the  necessary  claims  identifiers  (called  special  claims 
condition  codes  and  modifiers)  and  CMS  contractors  implemented  those  claims 
identifiers and (2) the claims identifiers accurately represent the numbers, dollars, and 
nature of disaster-related claims. 
 
Duplicate Medicaid Payments to Providers in Medicaid 
OIG auditors will determine whether providers submitted claims and were paid by multiple 
State Medicaid agencies for the same service for the same evacuee.  OIG auditors will 
conduct work to determine whether providers received (1) Medicaid payments from both 
the evacuees home State and the host State in which the evacuee is residing or (2) 
Medicaid payments for services paid by FEMA. 
 
Commissioned Corps Deployment in Response to Hurricane Katrina 
OIG  will  evaluate  whether  the  U.S.  Public  Health  Service  Commissioned  Corps  has 
achieved its goal to be 100 percent deployable in order to effectively mobilize and respond 
to public health emergencies by the end of 2005, focusing on the recent deployments 
associated with Hurricanes Katrina and Rita.  The timing of the Commissioned Corpss 
goal coincides with one of the Corpss largest deployments in its 207-year history.  In the 
weeks following Hurricane Katrina, more than 1,400 officers worked with State, local, and 
private agencies in 7 Gulf States, and after 1 month, over 700 remained in the Gulf States 
and evacuee areas to provide relief services.   
 
Nursing Home Evacuation Planning and Execution 
Nursing home residents and their families rely on facility administrators to plan for and 
execute appropriate evacuation procedures during times of disaster.  However, the recent 
catastrophes in the Gulf States precipitated by Hurricanes Katrina and Rita have raised 
concerns about nursing home evacuation plans and coordination efforts between facilities 
and State/local resources in times of disaster.  To address these concerns, the Senate 
Special Committee on Aging requested OIG to conduct a study of facility evacuation 
planning  and  execution.    This  study  responds  to  the  Committees  request  and  also 
continues the ongoing work of OIG to monitor the health and safety of nursing home 
residents. 
 
Specifically, OIG will determine whether these homes complied with Federal requirements 
to develop and practice emergency preparedness plans and whether the plans included 
evacuation of residents.   This report will also examine to what extent plans were executed 
for facilities that evacuated or considered evacuation during recent disasters.  Additionally, 
the report will identify lessons learned from these facilities regarding development and 
ix   
 
 
execution  of  emergency  preparedness  plans,  including  factors  that  promote  or  hinder 
successful evacuation. 
 
Hurricane Katrina-Related Medical Review Contract 
Because of the tragedy of Hurricanes Katrina and Rita, beneficiaries of HHS programs 
who resided in the Gulf Coast States may have been evacuated to various places around the 
United  States  or  otherwise  significantly  affected.    In  response  to  this  tragedy,  HHS 
expanded  coverage  criteria  for  some  programs,  including  Medicaid,  to  make  Federal 
benefits available to victims in their time of need.  In this series of studies, OIG will focus 
on identifying the appropriateness of payments made to providers for medical and durable 
medical equipment services for beneficiaries who had benefits before the hurricanes and 
those who have qualified as a result of the hurricanes. 
x   
Table of Contents 
 
CENTERS FOR MEDICARE & MEDICAID SERVICES.........................................1 
CMS-Related Reports...................................................................................................2 
Review of Services Provided by Inhalation Drug Suppliers.........................................2 
Calculation of Volume-Weighted Average Sales Price for Medicare Part B 
Prescription Drugs....................................................................................................2 
Adequacy of Medicare Part B Drug Reimbursement to Physician Practices 
for the Treatment of Cancer Patients.......................................................................3 
Allergen Immunotherapy for Medicare Beneficiaries...................................................3 
Use of Modifier 25.........................................................................................................3 
Use of Modifier 59 To Bypass National Correct Coding Initiative Edits....................4 
Billings for Home Health Services................................................................................4 
Fiscal Year 2005 Hospital Payment Monitoring Program............................................5 
Fiscal Year 2005 Comprehensive Error Rate Testing Program....................................5 
Hospital Wage Data Used To Calculate Inpatient Prospective Payment 
System Wage Indexes..............................................................................................6 
Compliance With the Interrupted Stay Provision of the Inpatient 
Rehabilitation Facility Prospective Payment System.............................................6 
Graduate Medical Education for Dental Residents.......................................................7 
Medicare Payments for Ambulance Transports............................................................8 
Billings for Ambulance Services...................................................................................8 
A Review of Nursing Facility Resource Utilization Groups........................................9 
Community Mental Health Center Payments................................................................9 
Medicare Contractor Pension Costs.............................................................................10 
Dual Eligibles Transition:  Drug Access Under Prescription Drug Plans 
Formularies.............................................................................................................10 
How Inflated Published Prices Affect Drugs Considered for the Federal 
Upper Limit List.....................................................................................................10 
Medicaid Disproportionate Share Hospital Payments................................................11 
Family Planning Service Costs....................................................................................12 
Medicaid Upper-Payment-Limit Calculations for Hospitals and Nursing 
Facilities in Four States..........................................................................................12 
Medicaid Services Delivered in Schools.....................................................................14 
xi   
 
 
Determining if Children Classified as SCHIP Medicaid Expansion Meet 
Eligibility Criteria...................................................................................................15 
Medicaid Hospital Outlier Payments...........................................................................16 
Medicaid Provider Overpayments...............................................................................17 
State Fees for Nurse Aide Registration........................................................................17 
CMS Financial Statement Audit..................................................................................17 
Outreach......................................................................................................................18 
Advisory Opinions........................................................................................................18 
Provider Self-Disclosure Protocol...............................................................................18 
Federal and State Partnership:  Joint Audits of Medicaid...........................................19 
OIG Administrative Sanctions....................................................................................19 
Program Exclusions......................................................................................................19 
Civil Monetary Penalties..............................................................................................20 
Patient Dumping...........................................................................................................21 
Criminal and Civil Enforcement.................................................................................22 
Prescription Drugs........................................................................................................22 
Hospitals.......................................................................................................................23 
Durable Medical Equipment Supplier.........................................................................24 
Ambulance Company...................................................................................................24 
Practitioners..................................................................................................................24 
Nursing Homes.............................................................................................................24 
Medicaid Fraud Control Units....................................................................................24 
PUBLIC HEALTH AGENCIES...................................................................................27 
Public Health Agency-Related Reports......................................................................28 
HHS Agencies Compliance With the National Practitioner Data Bank 
Malpractice Reporting Policy................................................................................28 
Use of Departmental Alert List by CDC.....................................................................28 
National Institute of Environmental Health Sciences Superfund...............................29 
Ryan White Title II Funds in Puerto Rico...................................................................29 
Health Education Assistance Loan Defaults................................................................29 
Public Health-Related Investigations...........................................................................30 
xii   
 
 
ADMINISTRATION FOR CHILDREN AND FAMILIES AND 
ADMINISTRATION ON AGING...........................................................................33 
Administration for Children and Families-Related Reports.......................................34 
State Standards and Capacity To Track Frequency of Caseworker Visits With 
Children in Foster Care..........................................................................................34 
State Standards and Practices for Content of Caseworker Visits With 
Children in Foster Care..........................................................................................34 
Title IV-E Training Costs.............................................................................................35 
Undistributable Child Support Collections in Ohio....................................................35 
Administration on Aging-Related Report...................................................................36 
Performance Data for the Senior Medicare Patrol Projects:  December 2005 
Performance Report...............................................................................................36 
Child Support Enforcement........................................................................................36 
Task Forces...................................................................................................................36 
Investigations................................................................................................................38 
GENERAL OVERSIGHT..............................................................................................39 
General Oversight-Related Reports............................................................................40 
Departmental Financial Statement Audit.....................................................................40 
Departmental Service Organizations...........................................................................40 
North Carolina Internal Service Fund..........................................................................41 
Non-Federal Audits.....................................................................................................41 
Resolving Recommendations......................................................................................42 
Table 1:  Reports With Questioned Costs....................................................................43 
Table 2:  Funds Recommended To Be Put to Better Use...........................................44 
Legislative and Regulatory Review and Development...............................................45 
Regulatory Review Functions......................................................................................45 
Regulatory Development.............................................................................................45 
Employee Fraud and Misconduct................................................................................46 
Prosecutions................................................................................................................46 
APPENDIXES.................................................................................................................49 
Appendix A:  Savings Achieved Through Implementation of 
Recommendations in Audits and Evaluations and Investigative 
Recoveries October 1, 2005, Through March 31, 2006...............................51 
xiii   
 
 
Appendix B:  Unimplemented Office of Inspector General Recommendations 
To Put Funds to Better Use...................................................................................53 
Appendix C:  Unimplemented Office of Inspector General Program and 
Management Improvement Recommendations...................................................59 
Appendix D:  Notes to Tables 1 and 2........................................................................67 
Notes to Tables 1..........................................................................................................67 
Notes to Table 2............................................................................................................75 
Appendix E:  Reporting Requirements of the Inspector General Act of 1978, 
as Amended...........................................................................................................77 
Appendix F:  Summary of Sanction Authorities.........................................................79 
Program Exclusions......................................................................................................79 
Patient Dumping...........................................................................................................79 
Civil Monetary Penalties Law......................................................................................80 
Anti-Kickback Statute and Civil False Claims Act Enforcement Authorities...........80 
Please note:  Numerical information in this report is rounded. 
 
xiv   
Centers for Medicare & Medicaid Services 
 
 
The Centers for Medicare & Medicaid Services (CMS) administers the Medicare and 
Medicaid programs.  Financed by the Federal Hospital Insurance Trust Fund, Medicare 
Part A provides hospital and other institutional insurance for individuals 65 years old or 
older  and  for  certain  disabled  persons.    Medicare  Part  B  (Supplementary  Medical 
Insurance) is an optional program that covers most of the costs of medically necessary 
physician and other services and is financed by participants and general revenues.   
Medicare Part C (Medicare Advantage) enables beneficiaries of Medicare Parts A and B 
to choose to receive all of their health care services through a coordinated Medicare 
Advantage (MA) plan, which replaced the previous Medicare+Choice managed care 
plans.  In addition, Medicare Part D is a new, optional program offering prescription drug 
coverage through private drug plans.  Beneficiaries may opt either to enroll in a stand-
alone prescription drug plan and receive their Part A and Part B benefits through fee-for-
service or to enroll in a Medicare Advantage prescription drug plan and receive all 
Medicare benefits, including drug coverage, through an MA plan. 
The Medicaid program provides funding to States for medical care and other support and 
services  for  low-income  individuals.    State  expenditures  for  medical  assistance  are 
matched by the Federal Government using a formula that compares per capita income in 
each  State  relative  to  the  national  average.    The  State  Childrens  Health  Insurance 
Program (SCHIP) expands health coverage to uninsured children whose families earn too 
much for Medicaid but too little to afford private coverage. 
The Office of Inspector General (OIG) devotes significant resources to investigating 
Medicare and Medicaid fraud, waste, and abuse and to monitoring these programs.  These 
activities have helped ensure the cost-effective delivery of Medicare, Medicaid, and 
SCHIP services; safeguarded quality of care to beneficiaries of these programs; and 
reduced the potential for fraud, waste, and abuse.  In addition, these efforts have led to 
criminal, civil, and/or administrative actions against perpetrators of fraud and abuse. 
 
OIG also reports on audits of CMS financial statements, which currently account for 
more than 82 percent of Department of Health and Human Services (HHS) net costs.  In 
addition  to  issuing  an  opinion  on  the  statements,  auditors  assess  compliance  with 
Medicare laws and regulations and the adequacy of internal controls. 
1  Centers for Medicare & Medicaid Services 
 
 
CMS-Related Reports 
 
Review of Services Provided by Inhalation Drug Suppliers   
In conjunction with drug payment cuts mandated by the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA), CMS raised the dispensing fee 
paid to Medicare suppliers of inhalation drugs from $5 to an interim amount of $57 for a 
30-day drug supply, prompted in large part by a report sponsored by the American 
Association  for  Homecare  showing  that  beneficiaries  receive  numerous  important 
services  from  those  suppliers.    This  OIG  report  was  designed  to  identify  services 
provided  by  suppliers  and  thereby  assist  CMS  in  setting  a  new  dispensing  fee  for 
inhalation drugs for 2006.   
 
OIG reviewed services provided to a sample of Medicare beneficiaries in 2003 and found 
that 60 percent of beneficiaries received at least one contact for a monthly drug refill.  
However, 31 percent of beneficiaries who should have been contacted for a refill were 
not contacted, contrary to the Medicare Program Integrity Manual.  Fewer than one-third 
of beneficiaries had their medication compliance reviewed by their suppliers.  Service 
levels dropped off after the first month suppliers billed for drugs.  Few beneficiaries 
received more intensive services such as education, care plan revision, or a respiratory 
assessment,  and  16  percent  of  beneficiaries  received  no  services  at  all.    The  most 
common way beneficiaries received services was by telephone; only 1 in 10 beneficiaries 
received a home visit.  OIG also found that beneficiaries were three times more likely to 
receive  a  service  beyond  a  refill  contact  if  their  drug  supplier  also  provided  their 
respiratory equipment.  (OEI-01-05-00090) 
 
Calculation of Volume-Weighted Average Sales Price for Medicare Part B 
Prescription Drugs  
In 2005, Medicare began paying for most Part B drugs using a new methodology based 
on average sales prices (ASP).  Section 1847A(b)(2)(B) of the Social Security Act (the 
Act) specifies the unit that manufacturers must use when submitting ASP data.  The Act 
also specifies the way to calculate a volume-weighted ASP for a Medicare payment code 
based on manufacturer-reported ASP data.  However, CMS opted to change the unit of 
ASP submission, exercising discretion permitted by section 1847A(b)(2)(B) of the Act.  
It  was  therefore  necessary  for  CMS  to  modify  the  method  for  calculating  volume-
weighted ASP described in the law.  OIG found that the method CMS currently uses to 
calculate  a  volume-weighted  ASP  is  mathematically  incorrect.    Therefore,  CMSs 
equation  may  not  always  yield  a  volume-weighted  ASP  that  is  consistent  with  the 
volume-weighted ASP derived from the calculation set forth in section 1847A(b)(3) of 
the Act.  Because CMS calculates volume-weighted ASPs incorrectly, current and future 
reimbursement amounts may not be accurate.  OIG recommended that CMS change its 
calculation of volume-weighted ASP.   
 
OIG proposed that CMS adopt an alternate equation that produces a volume-weighted 
ASP that is both mathematically correct and consistent with the results of the calculation 
set forth in section 1847A(b)(3) of the Act.  CMS indicated that the reports findings are 
helpful to its ongoing refinement of the ASP payment methodology.  As CMS gains more 
  2 Centers for Medicare & Medicaid Services 
 
 
experience with the ASP data, and as more information becomes available, CMS may 
consider altering the ASP methodology.  (OEI-03-05-00310) 
 
Adequacy of Medicare Part B Drug Reimbursement to Physician Practices 
for the Treatment of Cancer Patients  
The MMA established a new methodology for Medicare Part B reimbursement of drugs 
and  biologicals.    This  report  found  that  physician  practices  in  the  specialties  of 
hematology, hematology/oncology, and medical oncology could generally purchase drugs 
for the treatment of cancer patients at prices below the MMA-established reimbursement 
rates.  This finding was based on a statistical estimate of average prices paid by physician 
practices for 39 payment codes, constituting more than 94 percent of the $4.5 billion in 
total 2004 Medicare-allowed amounts for drugs associated with these three specialties.  
This finding was also based on a statistical estimate of the percentage of months for 
which physician practices were able to purchase drugs at prices below the reimbursement 
amounts.  Overall, OIG estimated that the average prices paid for drugs associated with 
35 of the 39 payment codes were less than the reimbursement amounts.  
 
OIG recommended that Congress consider the results of this review in deliberations 
about the Medicare Part B reimbursement methodology for drugs for the treatment of 
cancer  patients.    CMS  stated  that  the  report  provided  useful  information  about  the 
payment adequacy for Part B drugs used in cancer treatment.  (A-06-05-00024) 
 
Allergen Immunotherapy for Medicare Beneficiaries   
OIG found that approximately 62 percent of allergen immunotherapy and related services 
allowed by Medicare in calendar year (CY) 2001 were not medically necessary (and, 
therefore, not covered by Medicare), were miscoded, and/or were undocumented.  These 
inappropriately  paid  services  potentially  cost  the  program  and  its  beneficiaries 
approximately  $75  million.    Furthermore,  approximately  70  percent  of  Medicare 
beneficiaries who received allergen immunotherapy in CY 2001 received care at some 
point  during  their  course  of  treatment  that  did  not  meet  professionally  recognized 
standards.  Finally, in the absence of national guidance, some carriers have adopted 
policies that diverge from professionally recognized standards of health care.   
 
To address these issues, OIG recommended that CMS instruct its carriers to educate 
physicians who provide allergen immunotherapy about existing coverage, coding, and 
documentation  requirements.    OIG  also  recommended  that  CMS  develop  national 
coverage  criteria  for  allergen  immunotherapy  based  on  professionally  recognized 
standards of health care.  CMS agreed with the recommendations.  (OEI-09-00-00531) 
 
Use of Modifier 25 
Modifier 25 is used to allow additional payment for evaluation and management (E/M) 
services performed by a provider on the same day as a Medicare-covered procedure.  
Such  payments  are  permissible  when  the  E/M  services  are  significant,  separately 
identifiable,  and  above  and  beyond  the  usual  preoperative  and  postoperative  care 
associated with the procedure.  OIG found that 35 percent of claims for E/M services 
allowed by Medicare in FY 2002 did not meet program requirements, resulting 
in $538 million in improper payments.  Modifier 25 was also used unnecessarily on a 
3  Centers for Medicare & Medicaid Services 
 
 
large number of other claims and, although such use may not have led to improper 
payments, the claims failed to meet program requirements.   
 
OIG recommended that CMS work with Medicare carriers to reduce the number of 
claims submitted using modifier 25 that do not meet program requirements.  OIG also 
recommended  that  CMS  stress  to  providers  that  they  must  maintain  appropriate 
documentation of both the E/M services and procedures and remind them that modifier 
25  should  be  used  only  on  claims  for  E/M  services.    CMS  concurred  with  OIGs 
recommendations.  (OEI-07-03-00470) 
 
Use of Modifier 59 To Bypass National Correct Coding Initiative Edits 
Modifier 59 is a coding modifier used to bypass automated edits in Medicare carriers 
claims processing systems.  Modifier 59 indicates that a provider performed a distinct 
procedure or service for a beneficiary on the same day as another procedure or service
so-called code pairsthat normally should not be billed as more than one service. 
 
Based on a review of a sample of code pairs billed with modifier 59 in FY 2003, OIG 
found that 40 percent of code pairs did not meet program requirements, resulting in an 
estimated $59 million in improper payments.  For 15 percent of these code pairs, the 
services were not distinct from each other.  For 25 percent of these code pairs, the 
services were not adequately documented.  Also, separate analysis of 3.4 million code 
pairs billed with modifier 59 showed that 11 percent of code pairs were paid when 
modifier 59 was attached to the incorrect code.  This billing error represented $27 million 
in Medicare paid claims.  In addition, OIG found that most carriers did not conduct 
reviews of modifier 59; those that did found providers who were using modifier 59 
inappropriately.   
 
OIG recommended that CMS encourage carriers to conduct prepayment and postpayment 
reviews of the use of modifier 59 and ensure that carriers claims processing systems pay 
claims with modifier 59 only when the modifier is billed with the correct code.  CMS 
concurred with these recommendations.  (OEI-03-02-00771) 
 
Billings for Home Health Services  
Under  the  Medicare  prospective  payment  system,  home  health  agencies  use  a  data 
instrument called the Outcome and Assessment Information Set (OASIS) to measure the 
care that each beneficiary needs over a 60-day service period known as an episode.  One 
item on the OASIS requires home health agencies to identify all facilities that discharged 
the beneficiary in the 14 days preceding the home health episode.  Medicare pays more 
for an episode preceded only by a discharge from a postacute care facility (a skilled 
nursing or rehabilitation facility) than for the same episode preceded by discharges from 
both an acute care hospital and a postacute care facility. 
 
This review found that home health agencies did not comply with Medicare requirements 
in billing for services that were preceded within 14 days by discharges from both an acute 
care hospital and a postacute care facility.  Specifically, the agencies improperly coded 
all 400 sampled claims as discharges from a postacute care facility only, rather than 
discharges  from  both  an  acute  care  hospital  and  a  postacute  care  facility.    The 
  4 Centers for Medicare & Medicaid Services 
 
 
overpayments occurred because home health agencies had not established the controls 
necessary to identify on the OASIS all facilities that discharged the beneficiary in the 14 
days before the home health episode.  In addition, during the audit period, Medicare had 
not  established  sufficient  controls  to  prevent  or  detect  overpayments  and  initiate 
recovery.  As a result, OIG estimated that Medicare overpaid home health agencies 
approximately $48.1 million during FYs 2002 and 2003.   
 
OIG recommended that CMS (1) instruct its contractors to recover the overpayments;  
(2) emphasize to home health agencies the need to educate their staffs regarding the 
identification on the OASIS of all facilities that discharged the beneficiary within 14 days 
of  the  home  health  episode;  (3)  monitor  the  effectiveness  of  newly  established 
prepayment edits and postpayment controls; and (4) develop data analysis techniques to 
identify home health agencies with significant numbers of claims rejected or adjusted by 
the new payment controls, and then to subject those agencies to corrective action.  CMS 
concurred with the recommendations.  (A-01-04-00527)  
 
Fiscal Year 2005 Hospital Payment Monitoring Program 
CMS developed the Hospital Payment Monitoring Program (HPMP) to establish the 
Medicare fee-for-service paid claims error rate for inpatient hospital services.  Several 
CMS  contractors  operate  the  HPMP  and  conduct  admission-necessity  screenings, 
diagnosis-related group (DRG) validations, and quality control reviews under contracts 
with CMS.  
 
For FY 2005, CMS generally ensured that its HPMP contractors had appropriate controls 
to ensure that admission-necessity and DRG validation screenings and quality control 
reviews followed established procedures and operated effectively.  However, CMS and 
its contractors incorrectly sampled long term care hospital claims and did not complete 
the follow-up process for obtaining medical records.  In addition, CMS did not ensure 
that an HPMP contractor used CMSs software to calculate error amounts and, during the 
audit period, did not calculate and report certain error amounts.  
 
OIG recommended that CMS direct its HPMP contractors to select a long term care 
hospital sample in accordance with established criteria, use the CMS software to reprice 
certain error amounts, and include all error amounts in future error rate calculations.  
CMS said that it would consider incorporating the CMS software into the HPMP process 
and agreed to implement the other recommendations.  (A-03-05-00007) 
 
Fiscal Year 2005 Comprehensive Error Rate Testing Program 
CMS developed the Comprehensive Error Rate Testing (CERT) program to establish the 
Medicare  fee-for-service  paid  claims  error  rate  for  all  types  of  services  other  than 
inpatient hospital services.  In this evaluation of the FY 2005 CERT program, OIG found 
that CMS and the CERT contractor generally had in place appropriate controls to ensure 
that  the  contractor  made  medical  review  decisions  in  accordance  with  established 
procedures and that it adequately maintained, updated, and reported the results of those 
reviews.  The CERT contractor had also implemented previous OIG recommendations to 
improve the completeness of quality assurance reviews.  Finally, OIG found that CMS 
could do more to ensure consistency and coordination of the error rate programs. 
5  Centers for Medicare & Medicaid Services 
 
 
OIG recommended that CMS work to establish CERT and HPMP sample periods that are 
more  consistent  with  each  other  and  more  closely  aligned  with  the  FY.    OIG  also 
recommended that CMS consider centralizing the management of the error rate programs 
under a single office for consistency in methodology and uniformity in reporting.  CMS 
concurred with OIGs recommendations.  (A-03-05-00006) 
 
Hospital Wage Data Used To Calculate Inpatient Prospective Payment 
System Wage Indexes 
Under the acute care inpatient prospective payment system, the Medicare base rate paid 
to hospitals includes a labor-related share.  CMS adjusts the labor-related share by the 
wage  index  applicable  to  the  metropolitan  statistical  area  in  which  each  hospital  is 
located.  The wage index values are based on data on hospitals Medicare cost reports.   
 
OIG determined that a hospital in Connecticut did not fully comply with Medicare 
requirements for reporting wage data.  Specifically, the hospitals FY 2003 Medicare cost 
report overstated wage data by approximately $2 million and 23,221 hours.  If the 
hospital does not revise the wage data, the FY 2007 Connecticut rural wage index will be 
inflated, which will result in overpayments to the hospital and the 14 other hospitals that 
use this wage index. 
 
The hospital concurred with OIGs recommendations to submit a revised FY 2003 cost 
report  and  ensure  that  the  wage  data  reported  on  future  cost  reports  comply  with 
Medicare requirements.  (A-01-05-00506) 
 
Compliance With the Interrupted Stay Provision of the Inpatient 
Rehabilitation Facility Prospective Payment System  
OIG found that inpatient rehabilitation facilities (IRFs) did not always bill claims in 
compliance with Medicare prospective payment system regulations for interrupted stays.  
Specifically, during calendar years 2002 and 2003, Medicare made net overpayments of 
$5.9 million to 589 IRFs for interrupted stays billed as 2 or more claims. 
 
OIG recommended that CMS (1) direct its fiscal intermediaries to recover the  
$5.9 million in net overpayments identified in the review; (2) use the results of this 
review to clarify guidance to IRFs regarding the correct billing of interrupted stays;  
(3) strengthen its system edit to detect all interrupted stays incorrectly billed as two or 
more claims and prevent associated payments; and (4) instruct its fiscal intermediaries to 
conduct matches similar to the one that OIG conducted to identify additional payment 
errors for claims after December 31, 2003. 
 
CMS  agreed  with  OIGs  recommendations  to  recover  the  overpayments  and  clarify 
guidance to the IRFs and stated that it had already implemented the recommended edit.  
CMS did not agree to instruct its fiscal intermediaries to conduct matches for payment 
errors that occurred between January 1, 2004, and the date the edit was implemented.   
(A-01-04-00525) 
 
  6 Centers for Medicare & Medicaid Services 
 
 
Graduate Medical Education for Dental Residents  
The Medicare program makes payments to teaching hospitals to support graduate medical 
education (GME) programs for physicians and other practitioners.  The payments, which 
cover  both  direct  and  indirect  GME,  are  based  in  part  on  the  number  of  full-time 
equivalent (FTE) residents that the hospitals train.  The Balanced Budget Act of 1997 
permitted hospitals to count dental residents who train in nonhospital settings in their 
calculations of indirect, in addition to direct, GME payments.  OIG reviewed hospitals in 
several  States  to  determine  whether  they included the appropriate number of dental 
residents in their FTE counts when computing Medicare GME payments. 
 
 ConnecticutA hospital in Connecticut appropriately included dental residents in the 
FTE counts it used to compute FYs 2000 through 2002 GME payments.  The hospitals 
controls over the accumulation and computation of dental FTEs appeared to be adequate.  
Therefore, OIG did not make any recommendations to the hospital.  (A-04-04-06010) 
 
 IowaA hospital in Iowa generally included the appropriate number of dental residents 
in its FTE counts used to compute FYs 2001 and 2002 GME payments.  However, the 
hospital claimed classroom time for residents working in nonhospital settings.  OIG 
recommended that the hospital work with CMS to resolve about $338,000 associated 
with  classroom  time.    The  hospital  disagreed,  saying  that  the  classroom  time  was 
allowable.  (A-04-04-06011)  
 
 KentuckyA hospital in Kentucky appropriately included dental residents in the FTE 
counts it used to compute FYs 2000 and 2001 GME payments.  However, in FY 2002, 
the hospital inappropriately included a dental resident who did not meet the requirements 
for graduates of foreign dental schools.  As a result, the hospital overstated its GME 
claims by about $16,000.  In addition, the hospital claimed classroom time for residents 
working in nonhospital settings.  OIG recommended that the hospital make a financial 
adjustment for the foreign graduate, establish procedures for FTE counts for foreign 
graduates, and work with CMS to resolve about $140,000 associated with classroom 
time.  The hospital generally agreed.  (A-04-04-06005)   
 
  MassachusettsA  hospital  in  Massachusetts  inappropriately  included  some  dental 
residents  in  the  FTE  counts  used  to  compute  FYs  2001  and  2002  GME  payments.  
Contrary to Federal regulations, the hospital included the residents without incurring all 
of their training costs in nonhospital settings.  As a result, the hospital overstated its GME 
claims by $4.9 million.  OIG recommended that the hospital refund the $4.9 million, 
ensure that FTEs for residents in nonhospital settings include only those for which the 
hospital  has  incurred  all  or  substantially  all  of  the  training  costs,  and  refund  any 
overpayments after FY 2002.  The hospital generally disagreed.  (A-04-04-06003)  
 
 PennsylvaniaA hospital in Pennsylvania generally included the appropriate number 
of dental residents in the FTE counts it used to compute FYs 2001 and 2002 GME 
payments.    However,  the  hospital  claimed  classroom  time  for  residents  working  in 
nonhospital settings.  OIG recommended that the hospital work with CMS to resolve about 
$580,000 associated with classroom time.  The hospital agreed to do so.  (A-04-04-06002) 
7  Centers for Medicare & Medicaid Services 
 
 
Medicare Payments for Ambulance Transports 
Medicare covers and pays for emergency and nonemergency ambulance transports when 
a beneficiarys medical condition, at the time of transport, is such that other means of 
transportationsuch as taxi, private car, wheelchair van, or other type of vehiclewould 
be contraindicated. 
 
OIG found that 25 percent of ambulance transports in calendar year 2002 did not meet 
Medicare program requirements, resulting in an estimated $402 million in improper 
payments.  Despite previous OIG reports indicating that transports for dialysis treatment 
and other nonemergency transports were vulnerable to abuse, the error rates for these 
kinds  of  transports  continued  to  be  high.    Contractor  safeguards  were  found  to  be 
insufficient  to  identify  and  prevent  improper  payments  for  ambulance  transports.  
Contractors used few ambulance-specific prepayment edits consistently and fewer than 
half of the contractors conducted postpayment reviews of ambulance claims.  When 
reviews  were  conducted,  there  was  no  uniform  requirement  regarding  what 
documentation should be reviewed.  Even though almost two-thirds of the coverage 
errors involved transport from a dialysis facility, hospital, or other third-party provider, 
those providers received little education regarding Medicares coverage requirements for 
ambulance transports. 
   
In  this  report,  OIG  recommended  that  CMS  implement  program  integrity  activities 
designed to reduce improper payments for ambulance transports at greatest risk for error.  
The following measures should be included in these activities:  (1) instruct all Medicare 
contractors  to  implement  prepayment  edits  that  target  dialysis  and  nonemergency 
ambulance transport claims; (2) instruct all Medicare contractors conducting postpayment 
medical  reviews  to  obtain  documentation  from  ambulance  suppliers  and  third-party 
providers so as to determine that ambulance transports meet program requirements; and 
(3)  direct  all  Medicare  contractors  to  educate  third-party  providers  responsible  for 
initiating ambulance transports.  CMS generally concurred with the recommendations.   
(OEI-05-02-00590) 
 
Billings for Ambulance Services 
Under the prospective payment system for acute care hospitals, suppliers that render 
Medicare  Part  B  ambulance  services  during  inpatient  stays  are  required  to  bill  the 
hospitals, not the carriers, for those services.  Medicare carriers are responsible for 
ensuring that they do not pay for nonphysician services provided to hospital inpatients. 
OIG found that during calendar years 2001 through 2003, carriers inappropriately made 
Part B payments for 203,377 ambulance services provided to hospital inpatients.  Rather 
than  billing  the  hospitals  for  services,  ambulance  suppliers  billed  the  carriers  and 
received separate payments.  As a result, Medicare potentially overpaid $21.7 million by 
paying twice:  once to the hospital as part of the prospective payment and again to the 
ambulance supplier under Part B.  Furthermore, the Medicaid program, beneficiaries, or 
their supplemental insurers could have paid more than $6.2 million in coinsurance and 
deductibles related to these potential overpayments.  
  8 Centers for Medicare & Medicaid Services 
 
 
OIG recommended that CMS instruct the carriers to recover the $21.7 million in potential 
overpayments,  establish  prepayment  controls  to  detect  and  prevent  such  improper 
payments or postpayment review procedures to identify noncompliant providers, and 
alert the carriers to the most common types of payment errors and help them to educate 
ambulance  suppliers  about  such  improper  billings.    CMS  agreed  with  the 
recommendations.  (A-01-04-00513)  
 
A Review of Nursing Facility Resource Utilization Groups  
In this report, OIG described the extent to which Resource Utilization Groups (RUGs) on 
claims submitted by nursing facilities differ from those generated based on evidence in 
the rest of the medical record.  Medicare pays for Part A skilled nursing facility stays 
using a prospective payment system that classifies residents into RUGs that each are 
weighted  differently  resulting  in  varying  Medicare  payment  rates.    Skilled  nursing 
facilities determine a residents RUG based on an assessment of the resident.  This report 
was based on an independent review of the medical records for 272 skilled nursing 
facility claims.  When reviewers found that a particular resident assessment item was 
inconsistent with the rest of the medical record, they recoded that item based on the entire 
medical record and used this recoded item to generate a new RUG.   
 
OIG found that 26 percent of claims submitted by skilled nursing facilities had a RUG 
that was different from the one reviewers generated based on evidence in the rest of the 
medical record.  These differences represented a net $542 million in potential Medicare 
overpayments for fiscal year 2002.   
 
OIG recommended that CMS take steps to ensure that skilled nursing facilities complete 
the minimum data set (MDS) accurately and assign each resident to the correct RUG.  
These steps could include (1) continuing the type of analysis conducted by the Data 
Assessment and Verification project and (2) more carefully examining the 11 MDS items 
that OIG found were most often inconsistent with the rest of the medical record.  CMS 
concurred with the recommendation.  (OEI-02-02-00830) 
 
Community Mental Health Center Payments 
A  community  mental  health  center  (CMHC)  may  provide  a  partial  hospitalization 
program, an intensive outpatient program of psychiatric services provided to patients 
instead of inpatient psychiatric care.  Partial hospitalization services are included in the 
Medicare hospital outpatient prospective payment system. 
 
OIG sampled 100 partial hospitalization claims from a CMHC in Louisiana and found 
that  51  did  not  meet  Medicare  reimbursement  requirements,  primarily  because  the 
services were unnecessary or lacked required documentation.  Based on the sample 
results,  OIG  estimated  that  the  CMHC  received  at  least  $3  million  in  unallowable 
payments.   
 
OIG recommended that CMS determine the allowability of the estimated unallowable 
payments.  The CMHC disagreed with the findings.  (A-06-04-00076)  
 
9  Centers for Medicare & Medicaid Services 
 
 
Medicare Contractor Pension Costs  
Since  its  inception,  Medicare  has  paid  a  portion  of  Medicare  contractors  annual 
contributions to their pension plans.  CMS requires that contractors claims for pension 
costs comply with the Medicare contracts.  This review found that a contractor in Indiana 
claimed more than $4.8 million of unallowable pension costs for FYs 1991 through 2002.   
 
OIG recommended that the contractor make a financial adjustment and claim future 
pension costs in accordance with the Medicare contracts.  The contractor agreed.   
(A-07-05-00187) 
 
Dual Eligibles Transition:  Drug Access Under Prescription Drug Plans 
Formularies 
This  study  determined  the  extent  to  which  Medicare  prescription  drug  plan  (PDP) 
formularies  include  drugs  that  the  dual  eligible  populationbeneficiaries  of  both 
Medicare and Medicaidcommonly use under Medicaid.  On January 1, 2006, outpatient 
prescription drug coverage for dual eligibles was transferred from Medicaid to Medicare.  
Differences in coverage of commonly used drugs may present challenges during this 
transition.  OIG identified 200 drugs highly utilized by the dual eligible population in 
2005.  Of these, 178 drugs are eligible for Part D coverage, and 22 fall into categories 
that are statutorily excluded from Part D, but which States may opt to cover through their 
Medicaid programs.   
 
This study found that PDP formularies include an average of 92 percent of the 178 eligible 
drugs OIG reviewed.  Approximately half of these 178 common drugs are covered by  
all formularies.  For the 22 drugs in OIGs review that are excluded from Part D, dual  
eligibles access under Medicaid will not change in 45 of the 47 States OIG interviewed.  
Two States plan to cut Medicaid coverage of some categories of excluded drugs. 
 
Given the variation OIG found in PDP formularies inclusion of 178 common drugs, as 
well as the medical and resource challenges faced by this population, dual eligibles may 
need targeted assistance to navigate the transition from Medicaid to Medicare coverage.  
CMS and States have undertaken efforts to educate and assist dual eligibles and to 
incorporate safeguards into the program to ensure access to needed drugs.  However, 
taking  advantage  of  any  of  the  options  requires  knowledge  and  proactive  effort  by 
beneficiaries and may require additional assistance from CMS and States to ensure a 
smooth transition.  CMS expressed concern with the reports methodologies and scope, 
but came to conclusions similar to those found in OIGs report.  (OEI-05-06-00090) 
 
How Inflated Published Prices Affect Drugs Considered for the Federal 
Upper Limit List  
The Federal upper limit program was established to ensure that the Federal Government 
acts as a prudent payer by taking advantage of current market prices for multiple-source 
drugs (i.e., drugs with generic equivalents).  The Federal upper limit for a drug is set at 
150 percent of the published price for the least costly, therapeutically equivalent product 
found in national compendia plus a reasonable dispensing fee.  The aim of this report was 
to determine the extent to which the mandated method for calculating Medicaid Federal 
  10 Centers for Medicare & Medicaid Services 
 
 
upper limit amounts causes qualified products to be excluded from the Federal upper 
limit list and the potential financial implications of these exclusions for Medicaid. 
 
OIG found that in the first two quarters of 2004, 58 drug products that met all statutory 
and regulatory requirements were not added to the Federal upper limit list because of 
inflated published prices.  On average, the lowest published prices for these 58 drugs 
were almost two-and-a-half times the average manufacturer prices (AMP).  Given that 
Federal regulation requires that these minimum published prices be multiplied by 150 
percent, the difference between Federal upper limit amounts and AMPs has grown even 
wider.  If Medicaid based Federal upper limit amounts on 150 percent of the average 
AMPthe wholesale pricerather than 150 percent of the lowest published price, the 
program might have saved approximately $75 million in the first two quarters of 2004, 
because these excluded drugs would have been added to the Federal upper limit list.  
These savings would have been in addition to the $650 million per year identified in a 
previous report that would have been saved based on similar reductions in the Federal 
upper limit amounts of drugs already included on the list.  The report did not include any 
recommendations for CMS.  (OEI-03-05-00350) 
 
Medicaid Disproportionate Share Hospital Payments 
States are required to make Medicaid disproportionate share hospital (DSH) payments to 
hospitals that serve disproportionate numbers of low-income patients with special needs.  
Section 1923(g) of the Social Security Act (the Act) limits these payments to a hospitals 
uncompensated care costs, which are the annual costs incurred to provide services to 
Medicaid and uninsured patients less payments received for those patients.  The MMA 
implemented annual reporting and audit requirements for the DSH program beginning in 
FY 2004. 
 
In a report summarizing reviews of 10 States DSH programs, OIG noted that 9 of the 10 
States  had  not  complied  with  the  hospital-specific  DSH  limits  imposed  by  section 
1923(g) of the Act.  As a result, DSH payments exceeded the hospital-specific limits by 
approximately $1.6 billion ($902 million Federal share).  Of the $902 million Federal 
share, $679 million resulted from using historical costs rather than actual costs, and  
$223 million resulted from including unallowable costs in the DSH calculations.   
 
Also, three States required hospitals to return DSH payments totaling approximately  
$3.6 billion through intergovernmental transfers.  The use of such transfers does not 
further the intended purpose of the DSH program, which is to cover the uncompensated 
costs of treating Medicaid and uninsured patients at DSH-eligible hospitals.  
 
OIG recommended that CMS ensure that the monetary recommendations to the States are 
resolved; strengthen its review and approval of State plans to ensure consistency with 
Federal requirements; use the results of audits conducted under the MMA as part of this 
review process; and establish regulations requiring States to adjust future DSH payments 
to actual incurred costs, incorporate these adjustment procedures into their approved State 
plans,  and  include  only  allowable  costs  as  uncompensated  care  costs  in  their  DSH 
calculations.  CMS agreed with the recommendations.  (A-06-03-00031)   
 
11  Centers for Medicare & Medicaid Services 
 
 
Family Planning Service Costs 
The  Federal  Government  reimburses  the  costs  of  family  planning  services  provided 
pursuant  to  Medicaid  State  plans  at  an  enhanced  90-percent  matching  rate.    These 
services are intended to prevent or delay pregnancy or to otherwise control family size.  
In two reviews, OIG found that States did not always comply with Federal requirements 
for claiming these costs to Medicaid. 
 
 DelawareOIG could not validate Delawares family planning service rates, which  
were based on claims incurred between July 1991 and June 1994, because Delaware did 
not provide relevant data.  Delaware contended that the Federal Governments right to 
review these data ended in July 2000.  Because Delaware could not justify its calculation, 
it was not entitled to the approximately $2.9 million enhanced Federal share. 
 
OIG recommended that Delaware (1) provide support for family planning service costs 
claimed between October 2000 and June 2004 or refund the overpayment and (2) work 
with CMS to determine the amounts claimed for family planning service costs after the 
audit period, refund the enhanced portion, and discontinue claiming such costs at the 
enhanced rate until it provides adequate support for its family planning rates.  Delaware 
partially concurred with both recommendations.  (A-03-03-00220) 
 
 PennsylvaniaThe State calculated its family planning service costs by multiplying  
a rate, known as the family planning factor, by its managed care capitation payments.  
The family planning factor represented the ratio of family planning expenditures to total 
health  care  expenditures.    However,  the  State  incorrectly  included  family  planning 
service costs for beneficiaries not eligible to enroll in managed care and services that did 
not qualify as family planning.  As a result, Pennsylvania overstated its claim for family 
planning service costs by more than $44 million.  By claiming these costs at the enhanced 
family planning rate, Pennsylvania received about $15.1 million in unallowable Federal 
reimbursement. 
 
OIG recommended that Pennsylvania refund the overpayment, use the audited family 
planning  factors  for  future  claims,  and  refund  any  associated  overpayments.  
Pennsylvania did not concur with the refund, but it agreed to consider the prospective use 
of the audited factors.  (A-03-03-00214) 
 
Medicaid Upper-Payment-Limit Calculations for Hospitals and Nursing 
Facilities in Four States 
The Federal upper payment limit (UPL) is based on an estimate of the amount that would 
be paid for Medicaid services under Medicare payment principles.  Some States make 
supplemental payments based on the difference between the regular Medicaid payment 
and the UPL.  States must consider UPL payments and other payments received on behalf 
of Medicaid and uninsured patients when calculating hospital-specific DSH payment 
limits.   
 
In this reporting period, OIG issued four reports on UPL calculations for hospitals and 
nursing facilities: 
 
  12 Centers for Medicare & Medicaid Services 
 
 
 AlabamaOIG found that for State FY 2003, Alabama generally calculated the State  
and  non-State  government  hospital  outpatient  UPLs  in  compliance  with  Federal 
regulations and its State plan amendment.  However, Alabama did not comply with its 
State plan amendment when calculating the State and non-State government hospital 
inpatient UPLs, nor did it comply with the revised Federal regulations when calculating 
the  non-State  government  nursing  facility  UPL.    As  a  result,  Alabama  made  UPL 
overpayments of nearly $35.7 million ($25.7 million Federal share).  Because Alabama 
did not include all hospital UPL payments in its calculation of hospital-specific DSH 
limits, the State also made potential DSH overpayments of $67.5 million (nearly  
$47.7 million Federal share).  The actual DSH limits and associated overpayments cannot 
be computed until the UPL findings in this report are resolved.   
 
OIG recommended that Alabama (1) refund $25.7 million for UPL overpayments to State 
and  non-State  government  facilities;  (2)  work  with  CMS  to  resolve  potential  DSH 
overpayments currently valued at approximately $47.7 million; and (3) make procedural 
improvements.  The State did not specifically address all of OIGs recommendations.  
Alabama  believed  that  it  had  complied  with  its  State  plan  amendment  in  the  UPL 
calculations for inpatient hospital services and that it had properly calculated the cost of 
uncompensated care.  (A-04-03-02027) 
 
 IndianaThe State overstated the amounts available for UPL payments to non-State  
government hospitals for State FYs 2001 and 2002.  Indiana overstated those amounts 
primarily because it included unpaid Medicaid claims (claims that the State had denied as 
untimely) in its UPL calculations for many of the hospitals.  Indiana made unallowable 
UPL payments to many non-State government hospitals for the 2-year period totaling 
more than $5.1 million (about $3.2 million Federal share). 
 
OIG recommended that Indiana refund the $3.2 million and revise its UPL methodology 
to exclude unpaid Medicaid claims from its calculations.  The State said that Federal 
regulations and the State plan supported the inclusion of Medicaid unpaid claims in the 
UPL calculations.  The State also said that it should not be required to refund the Federal 
share.  (A-05-03-00068) 
 
 MississippiThe State calculated State FYs 2002 and 2003 UPLs for non-State  
government nursing facilities in accordance with Federal regulations and the approved 
State plan amendment.  However, the State did not comply when calculating the inpatient 
and outpatient UPLs for private, State, and non-State government hospitals.  As a result, 
Mississippi potentially overstated hospital inpatient UPL payments by about $183 million 
and hospital outpatient UPL payments by about $41 million. 
 
OIG recommended that Mississippi (1) work with CMS to resolve the potential UPL 
overpayments of approximately $224 million ($171 million Federal share) for hospital 
inpatient and outpatient services; (2) implement procedures to ensure that future UPL 
calculations  comply  with  Federal  regulations;  and  (3)  identify  and  refund  any 
overpayments made subsequent to the audit period.  Mississippi said that because of the  
 
 
13  Centers for Medicare & Medicaid Services 
 
 
Hurricane Katrina disaster, it had asked CMS to waive any requirement for the repayment  
of potential UPL overpayments.  Also, Mississippi said that it had made procedural 
improvements to ensure that future UPL calculations comply with Federal regulations 
and that it was not aware of any overpayments made subsequent to the audit period.   
(A-04-03-02025) 
 
 New YorkOIG found that the State calculated the State FY 2003 category-specific 
UPLs for non-State government hospitals and nursing homes in accordance with Federal 
and State requirements and properly included DSH payments in the limits.  However, 
contrary to Federal regulations, New York based its State FY 2003 transition period 
excess payment on estimated, rather than actual, Medicaid payment data from the base year. 
 
OIG recommended that New York refund to the Federal Government $43.3 million in 
overpayments to non-State government nursing homes for State FYs 2003, 2004, and 
2005.  In response, State officials did not specifically address OIGs recommendations or  
the States use of estimated, rather than actual, Medicaid data in its calculations.  The 
officials took exception to OIGs calculation of the overpayment amount.   
(A-02-03-01021) 
 
Medicaid Services Delivered in Schools 
The  Medicaid  program  allows  Medicaid  reimbursement  for  covered  health-related 
services in a school setting.  Local education agencies (LEAs) bill the costs for these 
services to the States, which in turn bill them to Medicaid.  OIG examined in two states 
reimbursement for Medicaid services provided in schools.   
 KansasThis State used bundled payment rates to reimburse LEAs for health-related 
services if students eligible for Medicaid attended school at least once during the service 
month.  OIG found that Kansas did not reimburse LEAs consistent with the payment 
rates design or pursuant to Federal regulations and the State plan.  Kansas designed the 
monthly payment rates to reimburse LEAs for a full years costs over 9 school months.  
However, Kansas used the rates to reimburse LEAs for 12 months.  As a result, Kansas 
overstated its Federal claim by $13.9 million for State FYs 1998 through 2003.  Pursuant 
to a May 21, 1999, Dear State Medicaid letter, States are no longer permitted to claim 
through a bundled rate methodology. 
OIG recommended that Kansas refund the overpayment and ensure that future claims 
comply with Federal regulations and the State plan.  Kansas agreed to do so.   
(A-07-04-01003) 
 
Another review noted that Kansas claimed some costs that were not in accordance with 
Federal requirements or the State plan.  Of 300 sampled claims in 3 districts, 217 were 
unallowable,  and  many  had  incomplete  documentation.    As  a  result,  the  Federal 
Government overpaid an estimated $5.1 million for FY 2002.  Other claims outside the 
sampled districts may also have been unallowable. 
OIG  recommended  that  Kansas  refund  the  overpayment,  calculate  and  refund 
overpayments from districts outside the sample, provide correct billing instructions, and 
  14 Centers for Medicare & Medicaid Services 
 
 
ensure that LEAs maintain required documentation.  Kansas partly concurred with the 
recommendations.  (A-07-03-00155)  
 TexasOIG found that of 2,175 claims sampled in Texas, 991 did not comply with 
Federal and State requirements and contained 1,146 errors.  The State claimed 
reimbursement for services that were unallowable because of programmatic deficiencies 
(accounting for 804 errors) or that were rendered by unqualified Medicaid providers 
(accounting for 342 errors).  OIG estimated that the State agency inappropriately 
claimed at least $8.7 million in Federal reimbursement during State FY 2000.  OIG 
stated that these errors occurred because the State agency did not adequately monitor the 
LEAs claims and issued improper guidance and because the LEAs did not maintain 
adequate supporting documentation.   
 
OIG recommended that the State refund the overpayment and make several procedural 
improvements;  work  with  CMS  to  determine  the  financial  impact  to  the  Federal 
Government for overpayments made by the State agency for counseling services and 
make  an  appropriate  refund;  review  time  periods  after  the  OIG  audit  and  make 
appropriate financial adjustments for unallowable services; routinely monitor claims from 
LEAs for compliance with Federal and State requirements; direct LEAs to ensure that 
service providers meet licensing requirements; and issue guidance requiring LEAs to bill 
only for allowable Medicaid services rendered by qualified Medicaid providers.  The 
State  replied  that  before  resolving  any  issues,  it  would  need  to  analyze  OIGs 
documentation.  (A-06-02-00047) 
 
In  another  review,  OIG  reported  on  school-based  administrative  costs  claimed  by  a 
consortium of Texas LEAs.  Some of the costs claimed were not reasonable, allowable, 
or  adequately  supported.    The  costs  included  expenditures  for  ineligible  personnel, 
operating costs, and overstated costs.  In addition, the consortium incorrectly allocated 
costs and did not offset costs with revenues received from other sources.  As a result, an 
estimated $2.4 million was unallowable.   
OIG  recommended  that  the  consortium  refund  the  overpayment  and  improve  its 
procedures.    The  consortium  partly  concurred  and  requested  further  information  on 
certain findings.  (A-06-02-00051) 
Determining if Children Classified as SCHIP Medicaid Expansion Meet 
Eligibility Criteria  
OIG  assessed  whether  children  classified  under  Medicaid  expansion  in  the  State 
Childrens Health Insurance Program (SCHIP) met State Medicaid-expansion eligibility 
criteria.  To encourage States to expand child health insurance eligibility, the Federal 
match rate for States SCHIP expenditures, including Medicaid expansion, is greater than 
the rate for traditional Medicaid. 
 
Approximately 7 percent of sampled children did not meet States eligibility criteria, 
based on a simple random sample of 357 cases from 29 of the 30 States that had 
expanded their Medicaid programs as of January 1, 2003.  For 10 percent of sampled 
children, States could not support their Medicaid-expansion eligibility determinations.  
15  Centers for Medicare & Medicaid Services 
 
 
Two  States  had  difficulty  identifying  their  Medicaid-expansion  populations,  raising 
concerns about whether those States claimed the appropriate Federal match rate for some 
children.   
 
OIG recommended that CMS (1) work with States to improve caseworker performance in 
making  eligibility  determinations;  (2)  work  with  States  to  ensure  that  automated 
eligibility  systems  accurately  classify  children  determined  eligible  under  Medicaid-
expansion criteria; (3) ensure that State Medicaid programs conduct redeterminations of 
Medicaid-expansion  eligibility,  as  required;  (4)  remind  States  of  the  requirement  to 
properly maintain case-file documentation; and (5) ensure that all States can accurately 
identify  children  determined  eligible  based  on  Medicaid-expansion  criteria.    CMS 
concurred with these recommendations.  (OEI-07-03-00221) 
 
Medicaid Hospital Outlier Payments  
Some States make outlier payments to hospitals when the cost of treating a Medicaid 
inpatient is extraordinarily high compared with the average cost of treating comparable 
conditions.  OIG reported on three States methods of computing outlier payments.   
  North  CarolinaNorth  Carolinas  formula  allowed  inpatient  hospitals  to  receive 
outlier payments for high charges rather than high costs.  As a result, outlier payments 
increased at a significantly faster rate than Medicaid base payments.  If the State had 
modified its outlier payment policy to achieve budget neutrality, it could have saved 
approximately $89.4 million during the 6-year audit period. 
 
OIG recommended that North Carolina revise its policy to ensure that future outlier 
payments achieve budget neutrality and more closely monitor the payments.  North 
Carolina disagreed with the recommendations.  (A-07-04-04038)  
 
  OhioOhios computation method did not result in reasonable inpatient cost outlier 
payments because the State used outdated fixed ratios rather than recent hospital-specific 
cost-to-charge ratios to convert allowable billed charges to outlier payments.  As a result, 
outlier payments exceeded estimated costs by approximately $24.7 million during the 
3-year audit period. 
OIG recommended that Ohio work with the State legislature to revise the States cost 
outlier payment method.  Ohio agreed.  (A-05-04-00064) 
 PennsylvaniaThe States computation method did not result in reasonable outlier 
payments because the State used an outdated cost-to-charge ratio.  As a result, the 
payments  increased  significantly  and  at  a  faster  rate  than  other  types  of  Medicaid 
payments.  If Pennsylvania had applied a more current cost-to-charge ratio, it could have 
saved approximately $11.4 million at three sampled hospitals during the 5-year audit 
period.  
 
OIG  recommended  that  Pennsylvania  monitor  and  adjust  the  cost-to-charge  ratio  as 
necessary during the year and use the cost-to-charge ratio from the most recent cost 
  16 Centers for Medicare & Medicaid Services 
 
 
reporting  period  to  adjust  payments  retroactively.    Pennsylvania  said  that  it  would 
evaluate its outlier policy to provide more precise payments.  (A-03-04-00211) 
Medicaid Provider Overpayments 
An overpayment is a payment to a provider in excess of the allowable amount.  Federal 
regulations  require  that  State  Medicaid  agencies  refund  the  Federal  share  of 
overpayments at the end of the 60-day period following discovery, whether or not the 
State has recovered the overpayment from the provider, unless the provider has filed for 
bankruptcy  or  gone  out  of  business.    Two  OIG  reviews  focused  on  whether  States 
reported Medicaid overpayments in accordance with Federal requirements. 
 FloridaThe State did not report all adjustments of Medicaid provider overpayments 
to  CMS  in  accordance  with  Federal  requirements  between  October  1,  2001,  and 
December 31, 2002.  Many adjustments were improper or untimely.   
OIG recommended that the State refund $14.5 million and improve its procedures and 
training on relevant Medicaid regulations.  The State generally disagreed with OIGs 
recommendations.  (A-04-03-06003) 
 New JerseyThe State did not report all overpayments in accordance with Federal 
requirements as of March 31, 2004.  In addition, the State did not return the Federal share 
of the overpayment interest collected from providers, which it considered State revenue.  
The States practices resulted in reporting delays ranging from 90 days to more than  
5 years.   
 
OIG recommended that the State refund $6.6 million and ensure that future overpayments 
are reported in accordance with Federal requirements.  The State did not directly address 
OIGs recommendations.  (A-02-04-01009) 
 
State Fees for Nurse Aide Registration 
Federal law prohibits States from imposing on individuals listed in a States Nurse Aide 
Registry any charges related to registration.  This study found that 24 States imposed fees 
that nurse aides may be required to pay for initial or continued placement on nurse aide 
registries.  Of these 24 States, 20 States listed nurse aides as a source of payment for 
initial  placement  fees,  and  14  States  listed  nurse  aides  as  a  source  of  payment  for 
continued placement fees on their registries.  Four additional States imposed fees on 
nurse aides as a requirement to work in long term care facilities.  Also, CMS provided 
inconsistent guidance and limited oversight to States regarding registry fees.   
 
This report recommended that CMS (1) ensure that States cease imposing on nurse aides 
fees that violate Federal statute; (2) clarify prohibitions on the charging of fees related to 
nurse aide registries; and (3) conduct appropriate oversight to stop States from charging 
inappropriate fees.  CMS concurred with all OIG recommendations.  (OEI-07-05-00070)  
 
CMS Financial Statement Audit  
The CMS FY 2005 financial statements received an unqualified audit opinion, which 
means that the statements were fairly presented in accordance with generally accepted 
17  Centers for Medicare & Medicaid Services 
 
 
accounting  principles.    However,  auditors  identified  a  material  weakness  in  CMSs 
managed care benefits payment cycle.  (A-17-05-02005) 
 
Outreach 
As part of its ongoing effort to promote the highest level of ethical and lawful conduct by 
the  health  care  industry,  OIG  has  continued  to  issue  advisory  opinions  and  other 
guidance. 
  
Advisory Opinions 
In accordance with section 205 of the Health Insurance Portability and Accountability 
Act  of  1996,  OIG,  in  consultation  with  the  Department  of  Justice,  issues  advisory 
opinions to outside parties regarding the interpretation and applicability of certain statutes 
relating to the Federal health care programs.  This authority allows OIG to provide case-
specific formal guidance regarding the application of the anti-kickback statute and safe 
harbor provisions and other OIG health care fraud and abuse sanctions.  For the period 
October 1, 2005, through March 31, 2006, OIG received 33 advisory opinion requests 
and issued 4 advisory opinions. 
 
Provider Self-Disclosure Protocol 
In keeping with a longstanding commitment to assist providers and suppliers in detecting 
and preventing fraudulent and abusive practices, OIG established a set of comprehensive 
guidelines  for  voluntary  self-disclosure,  entitled  Provider  Self-Disclosure  Protocol, 
available on the Internet at http://oig.hhs.gov in the Fraud Prevention & Detection 
section.  
 
The  protocol  guides  providers  and  suppliers  through  the  process  of  structuring  a 
disclosure to OIG of matters that appear to constitute potential violations of Federal laws 
(as opposed to honest mistakes that may have resulted in overpayments).  After making 
an initial disclosure, the provider or supplier is expected to undertake a thorough internal 
investigation of the nature and cause of the matters uncovered and make a reliable 
assessment of their economic impact (e.g., an estimate of the losses to Federal health care 
programs).  OIG evaluates the reported results of each internal investigation to determine 
the appropriate course of action.   
 
To date, OIG has received 295 submissions.  Self-disclosure cases have resulted in 60 
recoveries and 63 settlements, totaling $104.2 million collectively in HHS receivables.  
For example: 
 
  DelawareFollowing a voluntary self-disclosure filed pursuant to OIGs Provider 
Self-Disclosure Protocol, Delaware Bay Surgical Service, P.A., and a physician agreed to 
pay  the  Government  $881,000  and  enter  into  a  comprehensive  3-year  Integrity 
Agreement.  The settlement agreement resolved their liability for allegedly submitting 
improper  claims,  i.e.,  billing  Medicare  for  both  the  professional  and  technical 
components of vascular studies when only the professional component was performed, 
between 1995 and January 2001.   
 
  18 Centers for Medicare & Medicaid Services 
 
 
 VirginiaFollowing a voluntary self-disclosure filed pursuant to OIGs Provider Self-
Disclosure Protocol, Inova Health Care Services, doing business as Inova Fair Oaks 
Hospital,  agreed  to  pay  the  Government  more  than  $713,000  and  enter  into  a 
comprehensive 3-year Certification of Compliance Agreement.  The settlement agreement 
resolved its liability for allegedly subleasing space in one of the hospitals medical office 
buildings to physician subtenants at rental rates significantly below the fair market value 
of the spaces the physicians occupied between 1998 and 2004, in potential violation of 
the Stark law and anti-kickback statute. 
Federal and State Partnership:  Joint Audits of Medicaid 
Another major OIG outreach initiative has been to work more closely with State auditors 
in reviewing the Medicaid program.  To this end, a partnership plan was developed to 
foster  joint  reviews  and  provide  broader  coverage  of  the  Medicaid  program.    The 
partnership approach has been an overwhelming success in ensuring more effective use 
of scarce audit resources by both the Federal and the State audit sectors.  To date, 
partnerships have been developed in 25 States. 
 
Reports issued to date have resulted in identification of more than $262 million in Federal 
and State savings and have led to joint recommendations for savings at the Federal and 
State  levels,  as  well  as  improvements  in  internal  controls  and  computer  system 
operations. 
 
OIG Administrative Sanctions 
During this reporting period, OIG administered 1,560 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.  A brief explanation 
of these sanction authorities can be found in Appendix F. 
 
Program Exclusions 
During  this  reporting  period,  OIG  excluded  1,540  individuals  and  entities  from 
participating in 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.  Examples include the 
following: 
 
  FloridaOIG  excluded  South  Beach  Community  Hospital  (formerly  South  Shore 
Hospital  and  Medical  Center)  from  participation  in  Medicare,  Medicaid,  and  other 
Federal  health  care  programs.    The  exclusion  resulted  from  South  Beachs  material 
breach of the terms of a CIA the hospital negotiated with OIG in 2002 as part of the 
resolution of a False Claims Act case against the hospital.  OIG determined that South 
Beach was in material breach for its repeated failure to submit timely, complete, and 
accurate required reports, and its failure to implement fully the Independent Review 
Organization requirements of the CIA.  South Beach also neglected to notify OIG, as 
required under the CIA, of its sale to new owners, who are also subject to the terms of the 
CIA.  OIG determined that South Beachs repeated and egregious failure in this case to 
abide by the terms of its CIA [required the] OIG for the first time to seek exclusion for 
such a violation. 
19  Centers for Medicare & Medicaid Services 
 
 
 ColoradoA registered nurse was excluded for a minimum of 60 years based on her 
conviction for deliberately and intentionally causing the death of a home health patient 
under her care, and for using the victims credit card to obtain cash and make purchases.  
The registered nurse was ordered to serve a life sentence without parole for first-degree 
homicide.  In addition, she was sentenced to 30 years for aggravated robbery against an 
at-risk adult, 6 years for theft, and 3 years for unauthorized use of a credit card.  
 IllinoisA laboratory owner was excluded for a minimum of 30 years based on his 
conviction for knowingly directing his employees to submit claims for laboratory tests 
that were not actually conducted, or that otherwise did not qualify for payment from 
health  care  benefit  programs,  including  Medicare  and  Medicaid.    The  owner  was 
sentenced to 5 years in jail and ordered to pay $2.5 million in restitution for mail fraud.   
 MarylandA psychiatrist was excluded for a minimum of 25 years for his conviction 
related to a health care fraud scheme.  The psychiatrist caused an estimated loss of 
$1.7 million to the Medicaid program.  He was sentenced to 18 months home detention 
and ordered to pay $305,000 in restitution. 
 New YorkA clinic owner/operator was excluded for a minimum of 15 years as a 
result of his conviction for filing false claims to the Medicaid program.  The subject was 
already excluded based on a previous conviction for conspiracy to commit health care 
fraud involving private health insurers.  The owner/operator was sentenced to 1 year in 
jail and ordered to pay $245,000 in restitution.  
Also in New York, a pediatrician was excluded for an indefinite period.  The pediatrician 
surrendered  his  New  York  license  after  he  was  convicted  for  possession  of  child 
pornography.    
Civil Monetary Penalties 
The Civil Monetary Penalties Law (CMPL) authorizes OIG to impose administrative 
penalties and assessments against a person who, among other things, submits claims to a 
Federal  health  care  program  that  the  person  knows  or  should  know  are  false  or 
fraudulent.  Among the Civil Monetary Penalties actions resolved during this reporting 
period were: 
 
 New JerseyUniversity of Medicine and Dentistry of New Jersey (UMDNJ) agreed to 
pay $2 million and enter into an Annual Certification Agreement to resolve its liability 
under the CMPL for two cases in which UMDNJ billed for services provided by excluded 
individuals.  In the first case, OIG alleged that from November 1999 through October 
2000, UMDNJ knowingly presented claims to Medicare for payment of medical items or 
services  that  were  provided  by  a  cardiac  surgeon  who  had  been  excluded  from 
participation in Federal health care programs in July 1997.  The cardiac surgeon did not 
know that he had been excluded because he left the country in 1997.  OIGs evidence 
against UMDNJ demonstrated that UMDNJ knew or should have known that the surgeon 
was  an  excluded  individual  based  on  the  results  of  UMDNJs  two  inquiries  to  the 
National  Practitioner  Data  Bank  in  September  1999  and  April  2000.    Both  reports 
specifically stated that the surgeon was excluded.  In the second case, OIG alleged that 
  20 Centers for Medicare & Medicaid Services 
 
 
from 1985 through 2000, UMDNJ presented claims for reimbursement to Medicare and 
to the New Jersey Medicaid program for prescriptions that were dispensed and supervised 
by a pharmacist who had also been excluded from participation in Federal health care 
programs. 
  WyomingInterim  HealthCare  of  Wyoming,  Inc.  (Interim  HealthCare),  Interim 
HealthCare  of  Southern  Wyoming,  Inc.,  and  the  home  health  agencies  owner 
(collectively, Interim) agreed to pay $250,000 to resolve allegations that Interim violated 
the CMPL by submitting claims for Medicare services that were not provided as claimed 
and/or were false or fraudulent.  In addition, Interim HealthCare and its owner agreed to 
enter into 5-year Corporate and Individual Integrity Agreements.  Specifically, Interim 
and its former co-owner/chief financial officer (CFO) allegedly claimed his salary as 
CFO  in  cost  reports  for  fiscal  years  1994  through  1998,  when  at  the  time  he  was 
otherwise employed full time.  The settlement also resolved allegations that between 
January 1999 and December 2000, Interim submitted claims for medical services that 
were false or fraudulent, or not medically necessary.  In a separate settlement agreement 
with OIG, the former CFO agreed to pay $20,000 and to be permanently excluded. 
 IowaA chiropractor agreed to pay $48,000 to resolve his liability under the CMPL for 
allegedly submitting claims for chiropractic services that were not provided as claimed 
and/or were false or fraudulent.  OIG alleged that between August 2000 and November 
2004, the chiropractor submitted claims for chiropractic services consisting of the manual 
manipulation of the spine to treat subluxations.  However, his documentation allegedly 
did not support the existence of subluxations that required treatment, nor did it establish 
that  he  actually  performed  services  for  which  he  billed.    As  part  of  the  settlement 
agreement, he agreed to a 7-year exclusion. 
Patient Dumping 
Of the total civil monetary penalties OIG collected in the semiannual period ending 
March 31, 2006, $345,000 represents collections from 12 hospitals and 1 physician under 
the Emergency Medical Treatment and Labor Act, a statute designed to ensure patient 
access  to  appropriate  emergency  medical  services.    The  following  are  examples  of 
settlements involving alleged violations of this statute: 
 
 CaliforniaQueen of the Valley Hospital agreed to pay $80,000 to resolve its liability.  
OIG alleged that the hospital failed to accept transfer of a critical patient who needed the 
specialized capabilities of the hospitals intensive care unit and also failed to provide a 
medical screening exam to a pregnant woman who presented to its maternity ward. 
 MissouriPoplar Bluff Regional Medical Center, formerly Three Rivers Healthcare, 
Inc., agreed to pay $60,000 to resolve its liability.  OIG alleged that the hospital failed to 
provide appropriate medical screening examinations or stabilizing treatment to several 
patients who presented to the hospitals emergency department requesting evaluation and 
treatment for several potentially serious medical conditions. 
 FloridaEnglewood Community Hospital agreed to pay $38,000 to resolve its liability.  
OIG  alleged  that  the  hospital  refused  to  provide  an  appropriate  medical  screening 
21  Centers for Medicare & Medicaid Services 
 
 
examination and stabilizing treatment to a known patient with a psychiatric history who 
presented by ambulance seeking help for a medical condition. 
 IllinoisPekin Memorial Hospital agreed to pay $35,000 to resolve its liability.  OIG 
alleged that the hospital failed to provide appropriate screening, stabilizing treatment, 
and/or appropriate transfer to a pregnant patient, who presented for an evaluation of the 
progress of her labor, and to a teenager exhibiting symptoms of mental illness who 
sought help for chemical dependency.   
Criminal and Civil Enforcement 
One of the most common types of fraud perpetrated against Medicare, Medicaid, and 
other Federal health care programs involves the filing of false claims for reimbursement.  
False claims may be pursued under the civil False Claims Act and, in appropriate cases, 
under Federal and State criminal statutes.  A description of these enforcement authorities 
can be found in Appendix F.  The successful resolution of these matters often involves 
the  combined  investigative  efforts  and  resources  of  OIG,  the  Federal  Bureau  of 
Investigation,  Medicaid  Fraud  Control  Units  (MFCUs),  and  a  variety  of  other  law 
enforcement agencies. 
 
OIG has the responsibility of assisting the Department of Justice in bringing and settling 
cases under the civil False Claims Act.  Many providers elect to settle their cases prior to 
litigation.  As part of their settlements, providers often agree to enter integrity agreements 
with OIG to avoid exclusions and to be permitted to continue participation in Medicare, 
Medicaid, and other Federal health care programs.  These agreements are monitored by 
OIG and require the providers to enhance existing compliance programs or establish new 
ones.  The compliance programs are designed, in part, to prevent a recurrence of the 
underlying fraudulent activities. 
 
In  the  semiannual  period  ending  March  31,  2006,  the  Governments 
enforcement  efforts  resulted  in  $544  million  in  HHS  investigative  receivables, 
representing civil and administrative settlements or civil judgments related to Medicare, 
Medicaid, and other Federal health care programs.  Some of these successful actions, as 
well  as  notable  criminal  enforcement  actions,  are  described  below.    Summaries  are 
organized by the sector of the health care industry involved or by the nature of the 
offense. 
 
Prescription Drugs 
 
 MassachusettsSerono Laboratories, Inc., along with its Swiss parent Serono, S.A., 
entered into a civil False Claims Act settlement with the Government totaling  
$567 million.  The civil settlement was part of a global criminal, civil, and administrative 
settlement relating to Seronos promotion of Serostim, a drug used to treat AIDS-wasting 
syndrome, a condition involving profound involuntary weight loss in AIDS patients.  
Serono Laboratories, Inc., a subsidiary of Serono Holdings, Inc., pled guilty in December 
2005  to  two  criminal  conspiracy  charges.    One  relates  to  the  illegal  promotion  of 
Serostim for non-FDA approved indications through the use of an adulterated misbranded 
medical device and related software.  The second charge relates to the payment of 
  22 Centers for Medicare & Medicaid Services 
 
 
kickbacks to physicians in order to induce them to prescribe Serostim.  The kickbacks 
took the form of an all-expense-paid trip to an HIV conference held in Cannes, France, in 
1999.  The guilty plea was accepted, and Serono Laboratories, Inc., was ordered to pay a 
$136.9-million criminal fine.  Including interest, the total resolution for this case was 
more than $716 million.  Through the settlement, the Medicaid program will recover all 
monies paid for Serostim during the time period 1996 through 2004.  
 
As a result of its criminal conviction, Serono Laboratories, Inc., will be excluded from all 
Federal health care programs for at least 5 years.  In addition, Serono Holdings, Inc., the 
U.S. parent of Serono Laboratories, Inc., agreed to enter into a comprehensive 5-year 
Corporate Integrity Agreement (CIA) that will cover Serono Laboratories, Inc., and all 
other  U.S.  subsidiaries  of  Serono  Holdings,  Inc.  The  CIA  contains  several  unique 
provisions, including provisions focusing on Seronos sponsorship of continuing medical 
education and provisions relating to off-label promotion issues.   
 
Also  in  Massachusetts,  SmithKline  Beecham  Corporation,  doing  business  as 
GlaxoSmithKline, agreed to pay the Government $149 million plus interest to resolve its 
liability associated with certain pricing and marketing practices for Zofran and Kytril, 
two antiemetic drugs used primarily in conjunction with oncology and radiation treatment 
to prevent nausea.  The Government alleged that during different times between 1994 and 
2002, GlaxoSmithKline engaged in a scheme to set and maintain fraudulent and inflated 
prices  for  the  drugs  knowing  that  Federal  health  care  programs  established 
reimbursement rates based on those prices.  The inflated prices were substantially higher 
than the prices paid by the majority of GlaxoSmithKlines customers, and the company is 
alleged to have used the spread between the inflated prices and actual acquisition costs in 
marketing and selling the drugs to customers, causing the customers to submit false and 
fraudulent  claims.    The  Government  also  alleged  that,  with  regard  to  Kytril, 
GlaxoSmithKline engaged in a scheme to encourage customers to pool leftover product 
from multiple vials of Kytril to create an extra dose of the drug.  The extra doses were 
then allegedly administered to patients and rebilled to Federal health care programs.  As 
part of the settlement, GlaxoSmithKline agreed to enter into a 5-year addendum to its 
existing CIA with OIG.   
 
Hospitals 
 
 IllinoisRush University Medical Center agreed to pay $1 million to settle allegations 
that it filed false claims between September 1997 and September 2003.  In July 2003, 
Rush voluntarily disclosed that it received overpayments related to billings for Medicare 
and  Medicaid  patients  enrolled  in  clinical  cancer  treatment  trials  conducted  by  its 
Division of Hematology and Oncology.  To correct billing issues related to clinical trials, 
Rush has taken extensive actions, including the establishment of a clearinghouse to 
oversee all clinical trial billings.  In exchange for a release from OIGs permissive 
exclusion authority, Rush entered into a 3-year Certification of Compliance Agreement.  
 
23  Centers for Medicare & Medicaid Services 
 
 
Durable Medical Equipment Supplier 
 
 TexasA durable medical equipment company owner was ordered to pay $546,000 
in  restitution.    The  company  billed  Medicare  for  power  wheelchairs  provided  to 
beneficiaries who either did not receive a power wheelchair or for whom a power 
wheelchair was not medically necessary.   
Ambulance Company 
 
 South DakotaSioux Falls Ambulance, Inc., agreed to pay the Government $500,000 
and  entered  into  a  5-year  Corporate  Integrity  Agreement  to  resolve  its  liability  for 
submitting improper claims to Medicare and TRICARE.  The Government alleged that 
from April 1996 through December 2000 the ambulance provider submitted claims for 
emergency ambulance services that should have been billed as nonemergency ambulance 
services. 
Practitioners  
 
 West VirginiaAn osteopathic physician agreed to pay the Government $311,000 and 
to be excluded from all Federal health care programs for 10 years.  Between May 1998 
and  June  2004,  the  osteopath  allegedly  submitted  improper  claims  to  Medicare  and 
Medicaid for office visits for established patients, debridements, and new patient office 
visits that were not supported in the patients records.   
 MaineA physician agreed to pay the Government $203,000 to settle allegations that 
he violated the physician self-referral (Stark) prohibition.  Between 1999 and 2004, he 
allegedly referred Medicare patients to an oxygen supply company he owned at the time.  
In addition, the settlement requires the physician, who will be working outside the United 
States, to submit an Annual Certification for 3 years, attesting that he has no involvement 
in the billing or coding of claims submitted to Federal health care programs, and that he 
is not receiving reimbursement for treating Federal health care program beneficiaries.   
Nursing Homes 
 
 IllinoisThe owner of a company that employed nurses and nurse practitioners to 
treat wounds of nursing home patients was sentenced to 1 year and 1 day in prison, and 
ordered to pay a total of $187,000 in restitution for health care fraud and bank fraud.  The 
owner billed for nursing home patients wound care services under a physicians provider 
number without the physicians knowledge or consent.  He billed as if the physician 
performed the services when nurses and nurse practitioners actually performed them.  In 
addition, he provided false information on a bank loan that he had secured for his 
company. 
 
Medicaid Fraud Control Units 
Currently, 48 States and the District of Columbia have MFCUs, which investigate and 
prosecute,  or  refer  for  prosecution,  providers  charged  with  defrauding  the  Medicaid 
program  or  abusing,  neglecting,  or  financially  exploiting  beneficiaries  in  Medicaid-
  24 Centers for Medicare & Medicaid Services 
 
 
sponsored facilities.  In FY 2005, OIG provided oversight for and administration of 
approximately $149 million in Federal grant funds to the units.   
 
Examples of cases worked jointly by OIG with MFCUs during this semiannual period 
include: 
 
 MarylandThe founder and owner of a company that provided nutritional counseling 
to high risk pregnant women and the person in charge of billing pled guilty to Medicaid 
fraud.  Both were given a 5-year suspended sentence and paid a total of $412,000 in 
restitution and penalties.  The two billed Medicaid for prenatal nutritional counseling not 
provided.  This investigation involved OIG and the Maryland MFCU.   
 OregonA podiatrist agreed to pay the Government $150,000 for allegedly submitting 
false  claims  to  Medicare  and  Medicaid  from  January  1998  to  September  2003  for 
podiatric services that misrepresented the beneficiaries medical conditions.  Specifically, 
the  Government  alleged  that  in  order  to  support  his  improper  billings  for  nail 
debridements, the podiatrist falsified his medical records to reflect diagnoses of fungal 
infections and patient complaints of pain.  As part of the settlement, the podiatrist agreed 
to be excluded from participation in Federal health care programs for 5 years.  Prior to 
the settlement, he was convicted of making false statements related to health care matters 
for the same conduct and was ordered to pay a fine and special assessment totaling 
$1,700.  This investigation involved OIG, the Oregon MFCU, and the FBI.     
  IndianaThe  former  director  of  eight  drug  and  alcohol  rehabilitation  clinics  was 
sentenced to 14 months imprisonment for health care fraud (to run concurrently with the 
State sentence he received) and ordered to pay $118,000 in restitution.  He must also 
forfeit monies totaling approximately $132,000 and property valued at approximately 
$165,000.  The director billed the Indiana Medicaid program for psychotherapy services 
he did not provide.  This investigation involved OIG and the Indiana MFCU.   
 
 
25    
Public Health Agencies 
 
 
The activities conducted and supported by HHS public health agencies represent this 
countrys primary defense against acute and chronic diseases and disabilities.  These 
programs provide the foundation for the Nations efforts in promoting and enhancing the 
health of the American people.  Public health agencies within the Department include: 
 
  National Institutes of Health (NIH) 
  Food and Drug Administration (FDA) 
  Centers for Disease Control and Prevention (CDC) 
  Health Resources and Services Administration (HRSA) 
  Indian Health Service (IHS) 
  Agency for Toxic Substances and Disease Registry (ATSDR) 
  Agency for Healthcare Research and Quality (AHRQ) 
  Substance Abuse and Mental Health Services Administration (SAMHSA) 
 
OIG continues to examine the policies and procedures of these agencies to determine 
whether appropriate controls are in place to guard against fraud, waste, and abuse.  These 
activities  include  preaward  and  recipient  capability  audits  and  evaluations.    This 
oversight  work  has  provided  valuable  recommendations  to  program  managers  for 
strengthening the integrity of agency policies and procedures and improving program 
performance. 
27  Public Health Agencies 
 
 
Public Health Agency-Related Reports 
 
HHS Agencies Compliance With the National Practitioner Data Bank 
Malpractice Reporting Policy 
The National Practitioner Data Bank (NPDB) maintains a listing of medical malpractice 
cases  and  makes  the  information  available  to  hospitals,  licensure  boards,  and  other 
designated  health  care  organizations.    HHS  agencies  are  required  to  report  medical 
malpractice cases to the data bank.  Failure to report such cases to the NPDB deprives 
health care organizations, such as hospitals and State licensure boards, of potentially 
useful information for their credentialing and regulatory activities, respectively.   
 
OIG found that three HHS agenciesthe Health Resources and Services Administration 
(HRSA), the National Institutes of Health (NIH), and the Indian Health Service (IHS)
underreported  as  many  as  474  medical  malpractice  cases  to  the  NPDB.    Individual 
agency underreporting was as follows:  IHS, 290 cases; HRSA, 179 cases; and NIH, 5 
cases.  This departmentwide underreporting was caused by a number of factors, including 
lost medical malpractice files; incomplete information in medical malpractice files; a 
1998 decision by the HHS peer review entity, the Quality Review Panel, to not identify 
practitioners who meet the standard of care; and the failure to replace a key Program 
Support Center claims official or to reassign his NPDB reporting duties.   
 
OIG  recommended  that  HRSA,  IHS,  and  NIH  each  take  steps  to  (1)  implement  a 
corrective action process that would address the unreported cases, (2) improve internal 
controls involving case files management, and (3) assign staff to assume responsibility 
for addressing practitioner questions/complaints and data entry of reports to the NPDB.  
In response to the report, the Secretary indicated that the Department is working to 
develop a final action plan, including policy decisions relating to future reporting.  The 
response noted that revised procedures have been implemented to track new reports of 
malpractice  payments  to  help  prevent  future  backlogs.    The  reply  also  stated  that 
recommendations would be made to the Secretary to ensure greater compliance in the 
future.  IHS responded that it is addressing the issues and recommendations identified in 
the report.  (OEI-12-04-00310) 
 
Use of Departmental Alert List by CDC 
The Alert List is a tool used by an awarding HHS agency to safeguard Department funds 
by alerting other agencies to a particular grantees potential risks, such as the grantees 
financial instability or inadequate management systems. 
 
An  OIG  study  found  that  CDC  did  not  consistently  follow  Alert  List  policies.    In 
particular, CDC did not always place grantees on the Alert List, check the Alert List prior 
to award and document when a grantee was found on the Alert List, consult with the 
agency that placed the grantee on the Alert List, complete certain monitoring activities 
when attaching a special award condition to a grant, or provide justification for retaining 
grantees on the Alert List after 2 years.  OIG also found that competing priorities, 
misunderstandings, and concerns about several aspects of the Alert List may explain why 
grants officers are not following Alert List policies.   
  28 Public Health Agencies 
 
 
OIG  recommended  that  CDC  ensure  that  grants  officers  follow  Alert  List  policies, 
develop  methods  to  ensure  accountability  to  Alert  List  policies,  and  improve  file 
maintenance to meet third-party review policies.  The CDC took no exception to the 
report.  (OEI-02-03-00010) 
 
National Institute of Environmental Health Sciences Superfund 
The National Institute of Environmental Health Sciences receives Superfund money to 
carry out training and research functions mandated by the Comprehensive Environmental 
Response,  Compensation,  and  Liability  Act.    Pursuant  to  the  Act,  OIG  audited  the 
Institutes Superfund obligations and disbursements for FY 2004.  The audit determined 
that these funds were administered in accordance with applicable laws and regulations. 
(A-04-05-01019) 
 
Ryan White Title II Funds in Puerto Rico 
Pursuant to Title II of the Ryan White Comprehensive AIDS Resources Emergency Act 
(CARE  Act),  HRSA  makes  grants  to  States  and  territories  to  fund  comprehensive 
treatment services and drug therapies for people with HIV/AIDS.  The CARE Act Title II 
program is the payer of last resort for people with no or limited health care coverage. 
 
This review found that Puerto Rico claimed unallowable Title II costs, did not have 
procedures to ensure that the program was the payer of last resort, and did not always 
purchase drugs at the lowest prices available.  These deficiencies resulted in $2.7 million 
in unallowable claims and excessive drug payments. 
 
OIG  recommended  that  Puerto  Rico  refund  the  overpayments  and  make  procedural 
changes  to  comply  with  Federal  requirements.    Puerto  Rico  neither  concurred  nor 
nonconcurred with the recommendations.  (A-02-03-02002) 
 
Health Education Assistance Loan Defaults 
Through the Health Education Assistance Loan (HEAL) program, HRSA guarantees 
commercial loans to students seeking education in health-related fields of study.  The 
students are allowed to defer repayment of these loans until after they have graduated and 
begun to earn an income.  Although the Departments Program Support Center (PSC) 
takes all steps it can to ensure repayment, there are some loan recipients who ignore their 
indebtedness. 
 
After PSC has exhausted efforts to secure repayment of a debt, it declares the individual 
in default.  Thereafter, the Social Security Act permits, and in some instances mandates, 
exclusion  from  Medicare,  Medicaid,  and  all  Federal  health  care  programs  for 
nonpayment  of  these  loans.    Exclusion  means  that  the  individual  may  not  receive 
reimbursement under these programs for professional services rendered.  During the 
period covered by this report, 34 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 exclusion is stayed while they pay specified amounts each 
29  Public Health Agencies 
 
 
month to satisfy the debt.  If they default on these settlement agreements, the individuals 
can then be excluded until the entire debt is repaid and cannot appeal these exclusions.  
Some health professionals, upon being notified of their exclusion, immediately repay 
their HEAL debts.  
 
After being excluded for nonpayment of their HEAL debts, a total of 1,989 individuals 
have  taken  advantage  of  the  opportunity  to  enter  into  settlement  agreements  or 
completely repay their debts.  This figure includes the 50 individuals who have entered 
into such a settlement agreement or completely repaid their debts during this reporting 
period.  The amount of money being repaid through settlement agreements or through 
complete repayment totals $141.9 million.  Of that amount, $3.3 million is attributable to 
this reporting period.   
 
In the following examples, each individual entered into a settlement agreement to repay 
the amount indicated: 
 
  A Pennsylvania physician$165,000 
  A Texas podiatrist$164,000 
  A Minnesota psychologist$122,000 
  A Michigan podiatrist$96,000 
 
Public Health-Related Investigations 
OIG also investigates cases involving the misuse of public health agency funds and 
threats to public health and safety, such as the improper use of select agents.   
 
The following are examples of cases involving improper use of HHS grant funds resolved 
during this reporting period: 
 
 MassachusettsThe National Coalition of Advocates for Students (NCAS) agreed to 
pay the Government $100,000 to settle allegations that it improperly used CDC grant 
funds.  In 2001, CDC awarded NCAS a 5-year grant to provide HIV education to migrant 
youths.  NCAS, acting through an employee, allegedly misused the funds by charging 
inappropriate expenses to the grant, including certain entertainment and travel expenses.  
NCAS is no longer in business.    
  UtahA  pediatrician  who  operated  an  immunization  program  utilizing  Federal 
Vaccines for Children program funds agreed to pay the Government $65,000.  The 
pediatrician allegedly administered 3,851 vaccine doses to children who were not eligible 
to receive the free immunizations.  He also allegedly administered expired vaccines to 
children in at least two cases.    
 
With regard to investigating the improper use of select agents, Section 201 of the Public 
Health  Security  and  Bioterrorism  Preparedness  and  Response  Act  of  2002,  Section 
351A(a) of the Public Health Service Act, 42 U.S.C.  262a(a), grants the Secretary 
authority to establish and maintain a list of each biological agent and toxin that has the 
potential to pose a severe threat to public health and safety.  Section 351A(i) of the Public 
  30 Public Health Agencies 
 
 
Health  Service  Act,  42  U.S.C.    262a(i),  permits  the  imposition  of  civil  monetary 
penalties on individuals or entities for failure to abide by regulations pertaining to the 
transfer,  use,  and  possession  of  those  agents  and  toxins  (Select  Agent  regulations) 
promulgated by the Secretary, set forth in 42 C.F.R. part 73. 
 
The following case resolved in this reporting period involved the improper use of select 
agents: 
 
 MarylandAn entity agreed to pay $150,000 to settle allegations that it violated the 
Select Agent regulations by making an unauthorized transfer of a select agent to an 
unregistered research facility.  OIG alleged that in March 2004 the entity shipped the 
select agent to a research facility that was not registered with CDC to possess the select 
agent.  In addition, OIG alleged that the entity never obtained authorization from CDC to 
ship the select agent to the research facility. 
 
31    
Administration for Children and Families and 
Administration on Aging 
 
 
The Administration for Children and Families (ACF) provides direction and funding for 
programs  designed  to  promote  stability,  economic  security,  responsibility,  and  self-
support for the Nations families.  Some of the major programs include Temporary 
Assistance for Needy Families (TANF), Child Support Enforcement, Foster Care, Family 
Preservation and Support, Head Start, and the Child Care and Development Block Grant.  
OIG reviews these programs to focus on ways to increase the efficient use of program 
dollars; to implement programs more effectively; to better coordinate programs among 
the  Federal,  State,  and  local  governments;  and  to  strengthen  States  financial 
management practices. 
 
The  Administration  on  Aging  (AoA)  awards  grants  to  States  for  establishing 
comprehensive  community-based  systems  that  assist  the  elderly  in  maintaining  their 
independence  and  in  remaining  in  their  homes  as  long  as  possible.    Socially  and 
economically disadvantaged elderly and low-income minority elderly are targeted for 
assistance, including supportive and nutrition services, education and training, low-cost 
transportation, and health promotion.  Over the years, OIG has reported opportunities for 
program improvements to target the neediest for services, expand available financial 
resources, upgrade data collection and reporting, and enhance program oversight.  
33  Administration for Children and Families and Administration on Aging 
 
 
Administration for Children and Families-Related Reports 
 
State Standards and Capacity To Track Frequency of Caseworker Visits 
With Children in Foster Care  
A critical element in maintaining the safety and well-being of children in foster care is 
face-to-face visits with caseworkers.  There is no Federal requirement regarding how 
often children in foster care are visited by caseworkers.  However, the Administration for 
Children and Families (ACF) reviews caseworker visits as part of its Child and Family 
Service Reviews (CFSRs). 
 
The objectives of this evaluation were to determine (1) whether States have implemented 
written standards for frequency of caseworker visits with children in foster care, (2) the 
extent  to  which  States  could  generate  statewide  automated  reports  reflecting  the 
frequency of caseworker visits, and (3) the extent to which statewide reports indicate that 
children were visited.  Forty-three States had written standards calling for caseworkers to 
visit children in foster care at least monthly.  Fifty of fifty-one States (including the 
District  of  Columbia)  had  statewide  minimum  standards  regarding  the  frequency  of 
caseworker visits covering the majority of children in foster care placed in-State.  Twenty 
States demonstrated their ability to produce statewide reports detailing the extent to 
which visits occurred during fiscal year (FY) 2003.  Seven of the twenty statewide 
reports indicated on average that fewer than half of children in foster care were visited 
monthly in FY 2003. 
 
OIG recommended that ACF promote the development of automated systems such as the 
Statewide Automated Child Welfare Information System and work with States with 
automated system capacity to record the frequency of caseworker visits to ensure that 
visitation data are recorded in automated systems.  ACF concurred with the reports 
recommendations.  (OEI-04-03-00350) 
 
State Standards and Practices for Content of Caseworker Visits With 
Children in Foster Care  
Caseworker visits are a critical element in maintaining the safety and well-being of 
children in foster care.  There are no Federal requirements regarding specific activities 
that caseworkers must perform during visits with children in foster care.  However, ACF 
reviews caseworker visits as part of its CFSRs. 
 
The objective of this evaluation was to identify the written standards that States have 
implemented for the content of caseworker visits with children in foster care and the 
practices of States without written standards.  Forty-one out of fifty-one States (including 
the District of Columbia) reported having statewide written standards addressing the 
content of caseworker visits.  Thirty-eight of these States had written standards specific to 
caseworker visits.  Three of the forty-one States reported having written documents 
addressing the content of caseworker visits, but as part of broader program areas such as 
case planning and family service plans.  Ten States did not have written standards, but 
eight of these States provided information about the content of caseworker visits. 
 
  34 Administration for Children and Families and Administration on Aging 
 
 
OIGs report provides a national picture of State written standards and practices that 
could  assist  ACF  as  it  conducts  CFSRs  and  the  States  as  they  consider  program 
enhancements.  (OEI-04-03-00351) 
 
Title IV-E Training Costs  
Pursuant to Title IV-E of the Social Security Act, the Federal Government shares in the 
costs of training State caseworkers who service foster and adoptive children meeting 
Federal eligibility requirements.  OIG determined whether two States claims for Title 
IV-E administrative and training costs complied with their approved plans for allocating 
costs between Federal and State programs.  
 MarylandMaryland claimed costs for activities that were not included in its cost 
allocation plan or that were identified as State-funded activities.  As a result, Maryland 
overstated its Federal claims by $4.3 million during 19992001.  Maryland later adjusted 
its claims by about $3.2 million. 
OIG  recommended  that  Maryland  refund  the  remaining  overpayments  and  review 
subsequent claims to identify any further overpayments.  Maryland agreed to do so.   
(A-03-04-00580)   
 
 New HampshireContrary to Federal requirements, New Hampshire did not allocate 
its training costs between Federal and State programs.  As a result, New Hampshire 
overstated Federal claims by $1.76 million during State FYs 2001 through 2003. 
OIG recommended that New Hampshire make a financial adjustment and ensure that it 
follows  allocation  requirements  in  the  future.    New  Hampshire  disagreed  with  the 
recommendations.  (A-01-05-02500) 
Undistributable Child Support Collections in Ohio 
ACFs Office of Child Support Enforcement (OCSE) requires States to offset Child 
Support Enforcement program costs by recognizing and reporting program income from 
undistributable child support collections and interest earned on program funds.   
 
In this report, OIG found that Ohio did not report over $2.8 million ($1.8 million Federal 
share)  in  program  income  for  undistributed  collections  for  the  quarters  that  ended 
December 1998 through September 2004.  The State also did not recognize program 
income  of  more  than  $500,000  (over  $330,000  Federal  share)  for  unclaimed  and 
undistributable  collections  that  should  have  been  considered  abandoned.    These 
deficiencies happened because the State and certain county personnel were unaware of 
the reporting requirement and because the State did not provide sufficient oversight of 
county  reporting  of  undistributable  collections  and  county  and  State  recognition  of 
unclaimed collections. 
 
OIG recommended that the State make financial adjustments and strengthen program 
oversight.  The State agreed and said that the proper systems were in place to assist the 
State and counties in following regulations and OIGs recommendations.   
(A-05-04-00075) 
35  Administration for Children and Families and Administration on Aging 
 
 
Administration on Aging-Related Report 
 
Performance Data for the Senior Medicare Patrol Projects:  December 2005 
Performance Report  
The Senior Medicare Patrol Projects receive grants from the Administration on Aging to 
recruit retired professionals to serve as educators and resources to assist beneficiaries in 
detecting and reporting fraud, waste, and abuse in the Medicare program.  A total of 57 
projects operated from January through June 2005.  The objectives of this report were to:  
(1)  track  performance  data,  (2)  perform  comparative  data  analysis,  and  (3)  verify 
documentation of overpayments recovered as a result of this project. 
 
The  projects  educated  more  than  192,000  beneficiaries  in  more  than  64,000  group 
training sessions, and documented $83,200 returned to the Medicare program.  The 
projects also reported $44,500 in savings to beneficiaries.  All of the projects provided 
descriptions of out-of-pocket expenses being returned to beneficiaries and savings due to 
the resolution of billing errors.  (OEI-02-04-00362) 
 
Child Support Enforcement  
The detection, investigation, and prosecution of noncustodial parents who fail to pay 
court-ordered child support is a priority for OIG.  Working with OCSE, the Department 
of Justice, U.S. Attorneys Offices, U.S. Marshals Service, and other Federal, State, and 
local partners, OIG develops ways to expedite the collection of child support.  Since 
1995, OIG has opened 3,085 investigations of child support cases nationwide, resulting in 
1,165 convictions and court-ordered restitution and settlements of $60.8 million.  
 
Task Forces 
In 1998, OIG and OCSE initiated Project Save Our Children, a child support initiative 
made up of multiagency, multijurisdictional investigative task forces for child support 
enforcement.    The  task  forces  are  designed  to  identify,  investigate,  and  prosecute 
egregious criminal nonsupport cases on both the Federal and State levels by coordinating 
law enforcement, criminal justice, and child support office resources.  The child support 
Task Forces Table appears on the following page. 
  36 Administration for Children and Families and Administration on Aging 
 
 
Task Force Table 
 
Task Force Regions  Task Force Headquarters  Task Force States 
     
Great Plains  Topeka, Kansas     Iowa, Kansas, Missouri, Nebraska, 
  North Dakota, South Dakota 
 
Mid-Atlantic  Baltimore, Maryland  Delaware, District of Columbia, 
Maryland, Pennsylvania, Virginia, 
West Virginia 
 
Midwest  Columbus, Ohio  Illinois, Indiana, Michigan, Minnesota, 
Ohio, Wisconsin 
 
New England  Boston, Massachusetts  Connecticut, Maine, Massachusetts, 
     New Hampshire, Rhode Island, 
Vermont 
 
Northeast  New York, New York   New Jersey, New York, Puerto Rico, 
Virgin Islands 
 
Pacific North  Olympia, Washington   Alaska, Idaho, Oregon, Washington 
 
Rocky Mountains  Denver, Colorado   Colorado, Montana, Utah, Wyoming 
 
Southeast  Atlanta, Georgia  Alabama, Florida, Georgia, Kentucky, 
       North Carolina, South Carolina, 
Tennessee 
 
Southwest  Dallas, Texas  Arkansas, Louisiana, Mississippi, 
    New Mexico, Oklahoma, Texas 
 
West Coast  Sacramento, California     Arizona, California, Hawaii, Nevada 
 
 
Central to the task forces are the screening units located in each task force region and 
staffed by investigative analysts from OIG and OCSE.  The units receive child support 
cases from the States, conduct pre-investigative analyses of these cases through the use of 
databases, and forward the cases to the investigative task force units, wherein they are 
assigned and investigated.  The task force approach streamlines the process by which the 
cases best suited for criminal prosecution are identified, investigated, and resolved. 
 
To date, the task force units have received over 10,006 cases from the States.  As a result 
of  the  work  of  the  task  forces,  605  Federal  arrests  have  been  executed  and  586 
individuals  sentenced.    The  total  ordered  amount  of  restitution  related  to  Federal 
investigations is $26.8 million.  There have been 380 arrests at the State level and 364 
convictions or civil adjudications to date, resulting in $20.2 million in restitution being 
ordered as a result of State investigations.  
 
37  Administration for Children and Families and Administration on Aging 
 
 
Investigations 
Nationwide, OIG investigations of child support cases resulted in 59 convictions and 
court-ordered restitution and settlements of $3.6 million during this semiannual period.  
Examples of the Federal  arrests, convictions, and sentences for failure to pay child 
support include the following: 
 
  WashingtonA  man  was  sentenced  to  5  years  probation,  250  hours  community 
service, and was ordered to pay $69,000 in restitution for failure to pay child support.  He 
had  three  separate  child  support  orders  from  Indiana.    The  man,  who  works  as  a 
phlebotomist at a hospital, was also ordered to cease identifying himself as a Federal 
agent and medical doctor.     
 OhioA man was sentenced to 5 years probation and ordered to pay $45,000 in 
restitution  for  failure  to  pay  child  support.    The  man  held  various  positions  in  the 
telecommunications industry and evaded his child support obligation by receiving cash 
payments for his work and/or by moving from job to job within the industry. 
 MaineA man was sentenced to 3 months in prison, 3 months home confinement, and 
1 year probation for failure to pay child support.  He was also ordered to pay $43,000 in 
restitution for three separate child support obligations.  Although the man inherited a 
significant amount of money, he never voluntarily paid any of his obligations.      
 South DakotaA woman was sentenced to 5 years supervised probation and ordered 
to  pay  $11,000  in  restitution  for  failure  to  pay  child  support.    After  her  arrest  in 
November 2004 and prior to sentencing, she paid $1,000 toward her arrearage.  In 1999, 
she was ordered to pay $260 per month in support of her children.   
  
  38  
General Oversight 
 
 
The Office of the Assistant Secretary for Budget, Technology and Finance (ASBTF) is 
responsible for developing and executing the Department of Health and Human Services 
(HHS)  budget;  ensuring  that  HHS  performance  measurement  and  reporting  are  in 
compliance  with  the  Government  Performance  and  Results  Act;  establishing  and 
monitoring  departmental  policy  for  financial  management  (including  debt  collection, 
audit resolution, cost policy, and financial reporting); and developing and monitoring 
HHS information technology policy (including information technology security).  The 
Assistant  Secretary  is  the  Departments  Chief  Financial  Officer  and  oversees  the 
Departments Chief Information Officer.  The Department also has the responsibility, by 
virtue of the magnitude of its funding, to negotiate the payment rates and methods that 
many outside entities, such as State and local governments, charge for administering 
HHS and other Federal programs. 
 
The Office of the Assistant Secretary for Administration and Management (ASAM) is 
responsible  for  HHS  policies  regarding  human  resources,  grants,  and  acquisition 
management.  This office also oversees the Program Support Center, which provides a 
range of administrative services, such as human resources, financial management, and 
administrative operations. 
 
OIG  has  general  oversight  responsibility  for  these  activities.    A  related  major 
responsibility derives from Office of Management and Budget (OMB) Circular A-133, 
under which HHS is the cognizant agency to audit the majority of Federal funds awarded 
to major research schools and State and local government cost allocation plans.  OIG also 
oversees the work of non-Federal auditors of Federal money at some 6,700 entities, such 
as community health centers and Head Start grantees, as well as at State and local 
governments, colleges and universities, and other nonprofit organizations.  OIG also is 
responsible for auditing the Departments financial statements. 
 
OIG  reviews  audits,  evaluations,  and  studies  performed  by  others,  such  as  OMBs 
Program Assessment and Rating Tool and reports of the Government Accountability 
Office.  It takes these studies into account when planning its own work and examines 
management actions designed to correct the deficiencies cited in these prior studies. 
39  General Oversight 
 
 
General Oversight-Related Reports 
 
Departmental Financial Statement Audit 
The Chief Financial Officers Act (the Act) of 1990, as amended, requires OIG or an 
independent  external  auditor,  as  determined  by  OIG,  to  audit  the  HHS  financial 
statements in accordance with applicable standards.  Auditors provided an unqualified 
opinion on the FY 2005 HHS consolidated/combined financial statements.  This means 
that for the seventh consecutive year, the statements were reliable and fairly presented.  
However, the report on internal controls noted two material weaknesses:  
 
 Financial Systems and ProcessesAlthough HHS made some progress in preparing 
financial  statements,  the  lack  of  an  integrated  financial  management  system(s)  and 
weaknesses in internal controls made it difficult for HHS to prepare timely and accurate 
financial statements.  Substantial manual processes, significant adjustments to reported 
balances, and numerous accounting entries recorded outside HHSs general ledger system 
were necessary.  In addition, deficiencies were noted in regional office oversight of 
States Medicaid and SCHIP programs and data analyses and reconciliations.  
 Managed Care PaymentsCMS lacked comprehensive controls over the managed 
care benefits payment cycle, including oversight of managed care organizations.  CMS 
implemented the Medicare Managed Care System despite known deficiencies in the 
system that led to erroneous payments.  In addition, CMS failed to establish a process to 
ensure  that  accounting  and  operational  issues  were  addressed  throughout  the  new 
payment system implementation process.  Although the majority of the payment errors 
were identified and corrected, policies and procedures did not adequately reduce the risk 
that material benefit payment errors would occur and not be detected and corrected in a 
timely manner.  These material weaknesses represented departures from certain Federal 
laws and regulations.  (A-17-05-00001) 
Departmental Service Organizations 
To support the audit of the Departments FY 2005 financial statements, OIG contracted 
for examinations of several service organizations that provide common administrative, 
data processing, and accounting services to the operating divisions.  In accordance with 
the Statement on Auditing Standards No. 70, independent certified public accounting 
firms examined the organizations controls and tested their operating effectiveness.  The 
results follow: 
 
  Division  of  Payment  Management,  Program  Support  CenterControls  were 
suitably designed and operating with sufficient effectiveness.  No significant exceptions 
were noted.  (A-17-05-00009) 
 Division of Financial Operations, Program Support CenterControls were suitably 
designed and operating with sufficient effectiveness, with the exceptions of application 
software development and change controls, logical access controls, and system software 
controls.  (A-17-05-00011) 
  40 General Oversight 
 
 
  Human  Resources  Service,  Program  Support  CenterControls  were  suitably 
designed and operating with sufficient effectiveness, with the exceptions of application 
software development and change controls and certain deficiencies in the transaction 
processing system.  (A-17-05-00012) 
 Center for Information Technology, National Institutes of HealthControls were 
suitably designed and operating with sufficient effectiveness, with the exceptions of 
documentation and logging of change requests, authorizations, testing, and approval on 
mainframe and Windows host platforms.  (A-17-05-00010) 
North Carolina Internal Service Fund 
North Carolinas Office of Information Technology Services (ITS) operates an internal 
service fund that provides centrally managed computing services to State agencies and 
some county and city governments.  The Federal Government shares in the costs of ITS 
services when the user agencies claim reimbursement for those costs under Federal 
programs. 
 
This review found that the State failed to return the $8.2 million Federal share of excess 
revenues transferred from its internal service fund.  The State did not return the funds 
because ITS did not have procedures to ensure that the Federal Government received its 
share of all revenues in excess of costs. 
 
OIG recommended that the State refund the $8.2 million and implement procedures to 
ensure that the Federal Government receives its share of future excess revenues.  The 
State generally disagreed with OIGs computation.  (A-04-04-03503) 
 
Non-Federal Audits 
OMB Circular A-133 establishes audit requirements for State and local governments, 
colleges and universities, and nonprofit organizations receiving Federal awards.  Under 
this circular, covered entities are required to have an annual organization-wide audit 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 entitys management of Federal funds.  In the first half of 
FY 2006, OIGs National External Audit Review Center reviewed 1,191 reports that 
covered $473.2 trillion in audited costs.  Federal dollars covered by these audits totaled 
$118.5 billion, about $61.5 billion of which was HHS money. 
 
OIGs oversight of non-Federal audit activity informs Department managers about the 
soundness of management of Federal programs and identifies any significant areas of 
internal  control  weakness,  noncompliance,  and  questioned  costs  that  require  formal 
resolution by Federal officials.  OIG identifies entities for high-risk monitoring, alerts 
program officials to any trends that could indicate problems in HHS programs, and 
profiles  non-Federal  audit  findings  of  a  particular  program  or  activity  over  time  to 
identify  systemic  problems.    OIG  also  provides  training  and  technical  assistance  to 
grantees and the auditing profession. 
41  General Oversight 
 
 
OIG maintains a quality control review process to assess the quality of the non-Federal 
reports received and the audit work that supports selected reports.  The non-Federal audit 
reports reviewed and issued during this reporting period are categorized in the box below: 
 
   
Reports issued: 
 
Without changes or with minor changes  1,015
With major changes  117
With significant inadequacies  59
Total:  1,191
 
 
The 1,191 reports included recommendations for HHS program officials to take action on 
cost  recoveries  totaling  $522,000,  as  well  as  4,333  recommendations  for  improving 
management operations.  In addition, these audit reports provided information for 95 
special memoranda that identified concerns for increased monitoring by departmental 
management. 
 
Resolving Recommendations 
The following tables are provided in accordance with section 5 of the Inspector General 
Act and indicate the dollar value of actions taken on OIGs recommendations. 
  42 General Oversight 
 
 
Table 1:  Reports With Questioned Costs 
Reports Number of  Dollar Value  Dollar Value 
  Reports  Questioned  Unsupported 
   
Section 1       
For which no management decision 
had been made by the beginning of 
the reporting period1  334 $2,122,383,000 $259,718,000 
Issued during the reporting period  62 $563,007,000 $701,000 
Total Section 1  396 $2,685,390,000 $260,419,000 
       
Section 2   
For which a management decision 
was made during the reporting 
period2,3   
     Disallowed costs  124 $288,034,000 $1,472,000 
     Costs not disallowed  10 $64,163,000 $1,839,000 
Total Section 2  134 $352,197,000 $3,311,000 
       
Section 3   
For which no management decision 
had been made by the end of the 
reporting period   
Total Section 1 
minus Total Section 2  262 $2,333,193,000 $257,108,000 
   
Section 4   
For which no management decision 
was made within 6 months of 
issuance4  198 $1,764,715,000 $176,471,000 
                                                 
 Details concerning footnotes can be found in Appendix D. 
43  General Oversight 
 
 
Table 2:  Funds Recommended To Be Put to Better Use 
Reports  Number of       Dollar Value 
   Reports 
Section 1 
For which no management decision had been made by the 
beginning of the reporting period1  37 $533,880,000
Issued during the reporting period  8 $132,739,000
Total Section 1  45 $666,619,000
   
Section 2 
For which a management decision was made during the 
reporting period  9 $58,128,000
   Value of recommendations agreed to by management 
      Based on proposed management action 
      Based on proposed legislative action 
   Value of recommendations not agreed to by management  1 $5,705,000
Total Section 2  10 $63,833,000
   
Section 3 
For which no management decision had been made by the end 
of the reporting period2 
Total Section 1 minus Total Section 2  35 $602,786,000
                                                 
 Details concerning footnotes can be found in Appendix D. 
  44 General Oversight 
 
 
Legislative and Regulatory Review and Development 
 
Regulatory Review Functions 
Section 4(a) of the Inspector General Act of 1978 requires that the Inspector General 
review existing and proposed legislation and regulations and make recommendations in 
this report concerning the impact on the economy and efficiency of the administration of 
the Departments programs and on the prevention of fraud and abuse.  In reviewing 
regulations and legislative proposals, OIG uses as the primary basis for its comments the 
audits, evaluations, investigations, and other activities highlighted in this and previous 
semiannual reports. 
 
During the first half of FY 2006, OIG was involved in the review and clearance of the 
implementing regulations and other policy guidance resulting from the various Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) provisions.  
OIG reviewed and provided comments on potential fraud and abuse issues arising in 
connection  with  implementation  of  the  Medicare  Part  D  Prescription  Drug  Benefit, 
establishment of the Medicare Advantage program, and e-prescribing standards for the 
prescription drug program.   
 
Regulatory Development 
OIG  is  responsible  for  the  development  and  publication  of  a  variety  of  sanction 
regulations  addressing  civil  money  penalty  and  program  exclusion  authorities 
administered by the Inspector General, as well as regulations promulgating safe harbors 
related to the anti-kickback statute.  During this semiannual reporting period, OIG did the 
following: 
 
 In accordance with the MMA, published proposed rulemaking that would establish a 
new safe harbor under the anti-kickback statute for certain arrangements involving the 
provision  of  electronic  prescribing  technology.    Specifically,  the  safe  harbor  would 
protect certain arrangements involving hospitals, group practices, and prescription drug 
plan sponsors and Medicare Advantage organizations that provide to specified recipients 
certain nonmonetary remuneration in the form of hardware, software, or information 
technology and training services necessary for and used solely to receive and transmit 
electronic prescription drug information.  (70 FR 59015; October 11, 2005)  
 In accordance with section 205 of the Health Insurance Portability and Accountability 
Act, published a Federal Register notice soliciting proposals and recommendations for 
developing new and modifying existing safe harbor provisions under the anti-kickback 
statute, as well as new OIG Special Fraud Alerts.  (70 FR 73186; December 9, 2005) 
 Continued to develop proposed rulemaking that would reorganize and revise 42 CFR 
part 1003 by establishing separate subparts to address OIGs authority to propose the 
imposition  of  civil  money  penalties  and  assessments  for  false  or  fraudulent  claims, 
violations by managed care organizations, and other violations. 
 
45  General Oversight 
 
 
In addition, OIG published a number of Federal Register notices that offer guidance to 
alert health care providers and program beneficiaries about potential problems or areas of 
special interest.  During this semiannual period, OIG guidance included: 
 
 A Federal Register notice setting forth OIGs Special Advisory Bulletin on patient 
assistance programs for Medicare Part D enrollees.   
(70 FR 70623; November 22, 2005) 
 
  A  Federal  Register  notice  seeking  public  comment  on  draft  compliance  program 
guidance for recipients of extramural research awards from the National Institutes of 
Health and other agencies of the U.S. Public Health Service.  The guidance is intended to 
set forth OIGs general views on the value and fundamental principles of compliance 
programs for colleges and universities and other recipients of PHS awards for biomedical 
and behavioral research and the specific elements that these award recipients should 
consider when developing and implementing an effective compliance program.   
(70 FR 71312; November 28, 2005)  
 
 A Federal Register notice setting forth an adjustment in the fees charged for each query 
submitted  by  authorized  entities  to  access  the  data  bank,  in  accordance  with  the 
implementing regulations for the Healthcare Integrity and Protection Data Bank.   
(71 FR 12368: March 10, 2006)  
 
Employee Fraud and Misconduct 
Most individuals employed by HHS are dedicated, honest civil servants.  Occasionally, 
however, individuals violate their ethical and fiduciary responsibilities.  OIG conducts or 
oversees investigations of serious allegations of wrongdoing by Department employees, 
as in the following examples: 
 
 MarylandA former NIH employee was ordered to pay $49,000 in restitution for theft 
of Government property.  The employee recorded unauthorized overtime she did not 
work into the time and attendance system, resulting in her obtaining fraudulent payments. 
Also in Maryland, a former NIH employee was ordered to pay $12,000 in restitution for 
theft of Government property.  The employee used her Government-issued credit card in 
an unauthorized manner, including to pay her monthly apartment rent, college tuition fees 
for her daughter, and kennel services for her dog.   
Prosecutions 
During this semiannual reporting period, OIG investigations resulted in 226 successful 
criminal actions.  Also during this semiannual period, 595 cases were presented for 
criminal prosecution to the Department of Justice and, in some instances, to State and 
local prosecutors.  Prosecutors brought criminal charges against 263 individuals and 
entities. 
 
In addition to terms of imprisonment and probation imposed in the judicial processes, 
$732.4  million  was  ordered  to  be  returned,  or  was  returned,  as  a  result  of  OIG 
  46 General Oversight 
 
 
investigations  during  this  reporting  period.    Civil  settlements  from  investigations 
resulting from audit findings are included in this figure. 
 
47    
APPENDIXES 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
49    
Appendix A:  Savings Achieved Through Implementation of 
Recommendations in Audits and Evaluations and Investigative 
Recoveries October 1, 2005, Through March 31, 2006 
 
The Congressional Budget Office (CBO) estimates annual Federal savings expected to 
result from the enactment of legislation as part of the process of informing Congress of 
the  potential  impact  of  legislation  under  consideration.    After  laws  involving  HHS 
programs  have  been  enacted,  OIG  analyzes  them  to  identify  provisions  that  were 
recommended  in  OIG-issued  reports.    A  similar  process  occurs  with  respect  to 
administrative changes recommended by OIG and implemented by HHS operating or 
staff divisions.  When this occurs, the savings estimated to accrue are developed by the 
relevant HHS operating or staff division or by OIG. 
Savings of this kind depend greatly on the contributions of others, such as other HHS 
divisions and the Department of Justice.  The amounts claimed represent funds that will 
be available for better use as a result of documented actions taken, including reductions 
in budget outlays, deobligations of funds, reductions in costs incurred, preaward grant 
reductions, and reductions and/or withdrawal of the Federal portion of interest subsidy 
costs of loans or loan guarantees, insurance, or bonds. 
Total estimated savings from implemented recommendations and other actions to put 
funds to better use were $32.6 billion for the fiscal year ended September 30, 2005. 
Effective with this semiannual report, OIG will report savings in the Fall issue only.  In 
doing  this,  OIGs  presentations  of  savings  will  be  consistent  with  the  annualized 
estimates reported by CBO. 
 
 
51    
Appendix B:  Unimplemented Office of Inspector General 
Recommendations To Put Funds to Better Use 
 
This schedule represents potential annual savings or one-time recoveries that could be 
realized if OIG recommendations were enacted by Congress or the Department through 
legislation, regulation, or management action.  In some cases, these recommendations 
are  beyond  the  direct  authority  of  the  respective  departmental  operating  division.  
Congress develops savings over a 5- or 10-year budget cycle that result in far greater 
dollar impact than the annual estimates shown in the table below.  The same can be said 
for regulations issued and management actions taken by the Department.  Savings are 
based on preliminary OIG estimates and reflect economic assumptions that are subject to 
change.    The  magnitude  of  the  savings  may  increase  or  decrease  because  of 
interactive effects if changes are enacted together. 
More detailed information may be found in OIGs Red Book.  (See http://oig.hhs.gov.) 
Savings 
OIG Recommendation  Status  (millions) 
 
Centers for Medicare & Medicaid Services 
Clinical Laboratory Tests:    CMS has taken corrective actions to reduce  $1,130* 
CMS should develop a methodology and legislative  payments for laboratory services.  A proposal 
proposal to pay for tests ordered as custom panels at  to reduce payment updates from FY 2003 
substantially less than the full price for individual  through 2005 was included in the Presidents 
tests and study reinstating the beneficiary  FY 2001 budget, as well as was a proposal to 
coinsurance and deductible provisions for laboratory  reinstate laboratory cost sharing.  Neither of 
services as a means of controlling utilization.    these proposals was enacted.  The Balanced 
(A-09-89-00031, A-09-93-00056)  Budget Act (BBA) required the Secretary to 
request that the Institute of Medicine (IOM) 
study Part B laboratory test payments.  As a 
result of IOMs recommendations, the 
Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) 
mandates that CMS conduct a demonstration 
that applies competitive bidding for clinical 
laboratory services.  The MMA also set the 
laboratory fee schedule updates at 0 percent 
for 2004 through 2008. 
Outpatient Surgery Rates:  CMS agreed to consider seeking authority to  $1,100 
CMS should seek authority to set rates that are  set rates that are consistent across sites as it 
consistent across sites and reflect only the costs  develops its legislative program.  CMS 
necessary for the efficient delivery of health  published the Medicare Program; Updated 
services and remove the procedure codes that  ASC List of Covered Procedures on  
meet its criteria for removal from the Ambulatory  May 4, 2005.  The MMA requires CMS to 
Surgery Center (ASC) list of covered procedures.   implement a revised payment system for ASCs 
(A-14-89-00221, A-14-98-00400,   between January 2006 and January 2008. 
OEI-09-88-01003, OEI-05-00-00340) 
                                                 
* This savings estimate would result from the copayment; the savings estimate for fee schedule adjustments 
has yet to be determined. 
53  Appendix B 
 
 
Savings 
OIG Recommendation  Status  (millions) 
Medicaid Reimbursement for Brand-Name Drugs:  CMS concurred with OIGs recommendation  $1,080 
CMS should encourage States to bring pharmacy  and is working with States to review their   
reimbursement in line with pharmacies actual  estimates of acquisition costs in light of OIGs 
acquisition costs of brand-name drugs.  OIG  findings.  OIG will continue to monitor the 
recommended a four-tier approach to reimbursement:   pricing of Medicaid reimbursement for brand-
single-source innovator drugs, all drugs without  name drugs. 
Federal upper limits (FUL), multiple-source drugs 
without FULs, and multiple-source drugs with 
FULs.  (A-06-00-00023, A-06-02-00041) 
Medicare Payments for Mental Health Services:  CMS concurred and has initiated some efforts,  $676 
CMS should ensure that mental health services are  particularly regarding community mental 
medically necessary, reasonable, accurately billed,  health centers.  OIG is reviewing this area to 
and ordered by an authorized practitioner by using a  determine if substantial errors are still present. 
comprehensive program of targeted medical 
reviews, provider education, improved 
documentation requirements, and increased 
surveillance of mental health services.  
(OEI-02-99-00140, OEI-03-99-00130,  
A-04-98-02145, A-01-99-00507, A-01-99-00530) 
Medicaid Reimbursement for Generic Drugs:  CMS concurred with OIGs recommendation.   $470 
CMS should encourage States to bring pharmacy  The agency is working with States to strongly   
reimbursement more in line with pharmacies actual  encourage them to review their estimates of 
acquisition costs of generic drugs.  OIG  acquisition costs and will follow up to ensure 
recommended a four-tier approach to  that they take OIGs findings into account.  
reimbursement:  single-source innovator drugs, all  The Deficit Reduction Act (DRA) changed the 
drugs without FULs, multiple-source drugs without  Medicaid reimbursement rate for generic 
FULs, and multiple-source drugs with FULs.    drugs, whereby the Federal Government will 
(A-06-01-00053, A-06-02-00041)  set a FUL on Medicaid drug payment that is 
equal to 250 percent of the average 
manufacturers price (AMP) for a generic 
version of the drug.  The DRA redefined AMP 
as the average price at which manufacturers 
sell their drugs to wholesalers.  The Presidents 
FY 2007 Budget would build on the DRA 
with changes to the FULs for multiple source 
drugs and would limit reimbursement for 
multiple source drugs to 150 percent of AMP.  
OIG will continue to monitor the pricing of 
Medicaid reimbursements for generic drugs.   
Payment Policy for Medicare Bad Debts:  The BBA provided for some reduction of bad  $340 
OIG presented options for CMS to consider:  the  debt payments to providers.  The Benefits 
elimination of a separate payment for bad debts, the  Improvement Protection Act of 2000 (BIPA) 
offset of Medicare bad debts against beneficiary  subsequently adjusted upwards the percentage 
Social Security payments, the limitation of bad debt  of total hospital bad debt that would be 
payments to prospective payment system hospitals  reimbursed.  Medicare now pays 70 percent of 
that are profitable, and the inclusion of a bad debt  allowable bad debts.  Additional legislative 
factor in the diagnosis- related group rates.  CMS  changes are required to implement the 
should seek legislative authority to further modify  modifications OIG recommended. 
bad debt policies.  (A-14-90-00339) 
                                                 
 The Presidents FY 2007 budget proposal phases out bad debt payments over 4 years. 
54  Appendix B 
 
 
Savings 
OIG Recommendation  Status  (millions) 
Cost Effectiveness of Pay and Chase  CMS agreed with the recommendation and has  $185 
Methods for Medicaid Pharmacy Third-Party  worked to improve its oversight of the cost 
Liability Recoveries:  avoidance waiver process.  The 
CMS should determine whether States cost- recommendation was discussed with CMSs 
avoidance waivers for pharmacy claims are meeting  regional offices in February 2005 to assess 
the cost-effectiveness criterion.  CMS can ascertain  whether States are appropriately paying and 
cost-effectiveness by requiring States to track dollars  chasing claims.  In addition, CMS provided 
that they pay and chase and the amounts that they  training for staff to ensure that appropriate cost 
recover.  CMS should also review States policies to  avoidance waiver criteria are being applied in 
determine if they are paying and chasing pharmacy  granting any such waivers.  In addition, CMS 
claims without waivers.    is currently planning to survey and update 
(OEI-03-00-00030, OEI-03-00-00031)  State progress in cost avoiding several major 
claim types.  The Presidents FY 2007 Budget 
proposes to discontinue all waivers that permit 
pay and chase of pharmacy claims. 
Graduate Medical Education:   CMS did not concur with the  $157.3 
CMS should revise the regulations to remove from a  recommendations.  Although the BBA and the 
hospitals allowable graduate medical education  Balanced Budget Refinement Act of 1999 
(GME) base-year costs any cost center with little or  (BBRA) contained provisions to slow the 
no Medicare utilization and submit a legislative  growth in Medicare spending on GME, OIG 
proposal to compute Medicares percentage of  believes that its recommendations should be 
participation under the former, more comprehensive  implemented and that further savings can be 
system.  (A-06-92-00020)  achieved.  
Medicaid Drug Rebate Program:  CMS continues to disagree with the  $123 
The best-price calculation in the Medicaid drug  recommendation.  OIG continues to monitor 
rebate program should be indexed to the consumer  the drug rebate program; audits will continue 
price index-urban.  (A-06-94-00039)  to focus on enhancing the collection of rebates 
and providing potential savings to the rebate 
program.  OIG has issued rebate reports to 
each State Medicaid agency as it relates to the 
States internal control. 
Inappropriate Payments for Nail  CMS concurred; the agency plans to continue  $96.8 
Debridement:  to maximize the effectiveness of its medical 
CMS should require Medicare carriers to recoup the  review strategy, collect the overpayments 
overpayments found in OIGs sample and to  identified in OIGs sample, and educate 
carefully scrutinize payments for nail debridement  podiatrists on Medicare policy for paying nail 
services through medical reviews, require podiatrists  debridement claims.  The agency planned to 
to adequately document the medical necessity of all  continue to maximize the effectiveness of its 
nail debridement services, and require CMS regional  medical review strategy and collect the 
offices and carriers to educate podiatrists on  overpayments identified in our sample.  CMS 
Medicare payment policies for nail debridement  prepared a provider education article to 
claims.  (OEI-04-99-00460)  educate podiatrists on Medicare policy for 
paying nail debridement claims. 
Medical Equipment/Supply Claims Lacking  CMS concurred and implemented an edit to  $91 
Valid, Active Unique Physician Identification  reject claims listing a deceased physicians 
Numbers:  UPIN beginning in April 2002.  CMS decided 
CMS should create edits to identify medical  not to implement edits for inactive and invalid 
equipment and supply claims that do not have a  UPINs.  Instead, the agency initiated provider 
valid and active unique physician identification  education efforts and issued two program 
number (UPIN) listed for the ordering physician.   memorandums. 
(OEI-03-01-00110) 
55  Appendix B 
 
 
Savings 
OIG Recommendation  Status  (millions) 
Expansion of the Diagnosis Related Group  CMS concurred with OIGs recommendation;  $37 
Payment Window:   however, CMS noted that some additional 
CMS should propose legislation to expand the  factors would have to be considered before a 
diagnosis related group payment window to at least  legislative change could be advanced. 
7 days immediately before the day of admission.  
(A-01-92-00521, A-01-02-00503) 
End-Stage Renal Disease Payment Rates:   CMS agreed that the composite payment rates  $22 
CMS should reduce the payment rates for outpatient  should reflect the costs of outpatient dialysis 
dialysis treatments to reflect current efficiencies and  treatment in efficiently operated facilities, and 
economies in the marketplace.  (A-14-90-00215)  the BBA required the Secretary of the 
Department of Health and Human Services to 
audit the cost reports of each dialysis provider 
at least once every 3 years.  The BBRA 
increased each composite rate payment for 
dialysis services furnished during 2000 by 
1.2 percent above the payment for services 
provided on December 31, 1999.  The BIPA of 
2000 increased the payment rate for services 
provided in 2001 by 2.4 percent and required 
the Secretary to develop a composite rate that 
includes, to the maximum extent feasible, 
payment for clinical diagnostic laboratory tests 
and drugs that are routinely used in dialysis 
treatments but are currently separately billable 
by dialysis facilities.  The MMA, title VI, 
section 623, increased the composite rate by 
1.6 percent for 2005, restored the composite 
rate exception for pediatric facilities, and 
required the Secretary to establish a basic case-
mix adjusted prospective payment system for 
dialysis services. 
Indirect Medical Education:  CMS agreed with the recommendation.  The  To Be 
CMS should continue to pursue legislation to reduce  BBA, as amended by the BBRA, reduced the  Determined 
the indirect medical education (IME) adjustment  IME adjustment to 5.5 percent in 2002 and  (TBD) 
factor to the level supported by CMSs empirical  thereafter.  OIG believes that the factor should 
data and initiate further studies to determine whether  be further reduced to eliminate overlap with 
different adjustment factors are warranted for  the disproportionate share adjustment. 
different types of teaching hospitals.   
(A-07-88-00111) 
Inpatient Psychiatric Care Limits:    CMS initially agreed with OIGs findings but  TBD 
CMS should develop new limits to deal with the  stated that further analysis would be required 
high cost and changing utilization patterns of  before any legislative changes could be 
inpatient psychiatric services and apply a 60-day  supported. 
annual and a 190-day lifetime limit to all psychiatric 
care regardless of the place of service.   
(A-06-86-62045) 
56  Appendix B 
 
 
Savings 
OIG Recommendation  Status  (millions) 
Hospital Capital Costs:  CMS did not agree with the recommendation.   TBD 
CMS should determine the extent to which capital  Although the BBA reduced capital payments, 
reductions are needed to fully account for hospitals  it lacked certain measures concerning excess 
excess bed capacity and report the percentage to  bed capacity and other elements in the base-
Congress.   (A-09-91-00070, A-14-93-00380)  year historical costs.  The Presidents FY 2001 
  budget proposed reducing capital payments 
and savings $630 million from FY 2001 
through FY 2005. 
Connection Between the Calculation of  CMS agreed to pursue a change in the  TBD 
Medicaid Drug Rebates and Drug  Medicaid drug rebate program similar to that 
Reimbursement:  recommended.  No changes have yet been 
CMS should seek legislation to require participating  made.  However, committees in both the 
manufacturers to pay Medicaid drug rebates based  Senate and House have proposed language 
on average wholesale price (AWP) or study other  establishing a better connection.  The 
alternatives to the current program of using average  Presidents FY 2007 Budget proposed to 
manufacturer price to calculate the rebates.  This  eliminate best price and revise the rebate 
legislation would have resulted in $1.15 billion in  percentage, in a budget neutral manner, to help 
additional rebates for 100 brand-name drugs with the  offset the cost. 
highest total Medicaid reimbursements in calendar 
years 1994-1996.  (A-06-97-00052) 
Home Health Agencies:  Although the BBA included provisions to  TBD 
CMS should revise Medicare regulations to require  restructure home health benefits, CMS still 
the physician to examine the patient before ordering  needs to revise Medicare regulations to require 
home health services.  that physicians examine Medicare patients 
(OEI-12-94-00180, OEI-02-94-00170,  before ordering home health services.  
OEI-04-93-00260, OEI-04-93-00262,  Subsequent to the BBA, OIGs four-State 
A-04-94-02078, A-04-94-02087, A-04-95-01103,  review found that unallowable services 
A-04-95-01106, A-04-95-01104, A-04-95-01105,  continued to be provided because of 
A-04-95-01107, A-03-95-00011, A-04-96-02121,  inadequate physician involvement.   
A-02-97-01026, A-04-97-01166, A-04-97-01169,   
A-04-97-01170, A-02-97-01034, A-04-98-01184,  CMS agreed in principle and recognized the 
A-04-99-01194, A-04-99-01195)  need for physician involvement in home health 
care planning.  CMS also provided additional 
payments for physician care plan oversight and 
education for physicians and beneficiaries.  
Payments Returned by Public Providers:    In April 2004, CMS testified before the House  TBD   
CMS should propose legislation to require that  Energy and Commerce Committee and 
Medicaid payments that public providers return to  indicated that it supported declaring returned 
States be declared a refund to be used to offset or  funds as credits or refunds to offset the 
credit the Federal financial participation that the  original State payment.  The Federal share 
original payment generated.  would then be calculated based on the net 
(A-03-00-00216)  Medicaid payment that the provider retained.  
The Presidents FY 2007 Budget proposes an 
administrative change that builds on past CMS 
efforts to curb questionable financing practices 
by (1) recovering Federal funds diverted from 
Government providers and retained by the 
State and (2) capping payments to 
Government providers to no more than the 
cost of furnishing services to Medicaid 
beneficiaries. 
57  Appendix B 
 
 
Savings 
OIG Recommendation  Status  (millions) 
Definitive Guidance on Calculating Upper  CMS partially concurred with OIGs  TBD 
Payment Limits and Use of Facility-Specific  recommendations.  CMS agreed that it should 
Limits Based on Actual Costs:  provide more guidance on calculating the 
CMS should provide States with definitive guidance  UPL.  The Presidents FY 2007 budget 
on calculating UPLs so that a uniform standard is  contains a proposal to limit payments to 
applied to all States.  This guidance could be  Government providers to no more than the 
provided through a letter to the Medicaid Directors.   cost of providing services. 
States should use facility-specific UPLs that are   
based on actual cost report data.  (A-03-00-00216) 
Excessive Medicaid Disproportionate Share  CMS has begun taking action in individual  TBD 
Hospital Payments:  States to recover overpayments.  On March 
CMS should ensure that the monetary  26, 2004, CMS published a notice in the 
recommendations made to individual States  Federal Register on the Medicaid DSH 
regarding Disproportionate Share Hospital (DSH)  program. 
payments that exceeded the hospital-specific limits 
have been resolved.  CMS should also establish 
regulations requiring States to (1) implement 
procedures to ensure that future DSH payments are 
adjusted to actual incurred costs, (2) incorporate the 
procedures into their approved State plans, and  
(3) include only allowable costs as uncompensated 
care costs in their DSH calculations.   
CMS should also strengthen its review and approval 
of State plans to ensure consistency with Federal 
requirements and use the results of MMA-required 
audits as part of its review process.   
(Various audit reports) 
Compliance With Requirements for Medicaid  CMS has begun taking action in individual  TBD 
School-Based Health Services:  States to recover overpayments.  CMS has 
CMS should recover the overpayments identified  recently undertaken a significant effort to 
during OIGs individual State audits of school-based  bring State plans into compliance with Federal 
health claims.  In addition, States should disseminate  law, regulations, and policy in the coverage 
CMS guidance and other information to local  areas that pertain to Medicaid services 
education agencies in a timely manner, monitor local  delivered in school settings.  The Presidents 
education agencies to ensure compliance with  FY 2007 Budget proposes to prohibit Federal 
Federal and State requirements, and assist local  Medicaid reimbursement for school-based 
education agencies in developing written policies  administrative or transportation costs. 
and procedures that require service providers to 
document all health services and to retain those 
records for review.   
(Various audit reports) 
Eliminate or Reduce Transition Periods for  CMS did not concur with OIGs  TBD 
Compliance With Revised Medicaid Upper  recommendation.  According to CMS, the 
Payment Limits:  transition periods were established pursuant to 
CMS should seek authority to eliminate or reduce  either notice-and-comment rulemaking or 
the 8-year transition period included in the revised  legislation, and offering new proposals at this 
UPL regulation.  (A-03-00-00216)  time would undermine the consensus reached 
through those processes.  CMS anticipates no 
further action on OIGs recommendation.  
Five States remain with transition periods 
through September 1, 2008. 
58   
Appendix C:  Unimplemented Office of Inspector General 
Program and Management Improvement Recommendations 
 
This schedule represents OIG findings and recommendations that, if implemented, would 
result in substantial benefits.  The benefits relate primarily to effectiveness, rather than 
cost efficiency. 
 
More detailed information can be found in OIGs Orange Book.  (See http://oig.hhs.gov.) 
 
OIG Recommendation  Status 
 
Centers for Medicare & Medicaid Services 
Accountability Over Billing and Collection of  CMS concurred with the recommendation and set up a 
Medicaid Drug Rebates:  reporting mechanism to capture rebate information.  
The Centers for Medicare & Medicaid Services  The agency still needs to ensure that States establish 
(CMS) should ensure that States implement  adequate accounting and internal control systems to 
accounting and internal control systems in  obtain reliable information.  Current audit results have 
accordance with Federal regulations for the Medicaid  shown that this remains a problem in most States. 
drug rebate program.  Such systems must provide for 
accurate, current, and complete disclosure of drug 
rebate transactions and provide CMS with the 
financial information it needs to effectively monitor 
and manage the Medicaid drug rebate program.   
(A-06-92-00029, A-06-03-00048) 
Fairly Presenting the Medicare Accounts  CMS hired consultants to assist in validating accounts 
Receivable Balance:  receivable reported by Medicare contractors and 
CMS should require Medicare contractors to  provided comprehensive instructions to contractors.  
implement or improve internal controls and systems  For the long term, CMS is developing an integrated 
to ensure that reported accounts receivable are valid  general ledger system as the cornerstone of its financial 
and documented.    management controls. 
(A-17-95-00096, A-17-97-00097, A-17-98-00098, 
A-17-00-00500, A-17-00-02001, A-17-01-02001,  
A-17-02-02002, A-17-03-03003) 
Guidance to Drug Manufacturers To Better  CMS did not concur, stating that the drug law and the 
Implement the Medicaid Drug Rebate  rebate agreements already established a methodology 
Program:  for computing the AMP.  OIG disagrees because the 
CMS should survey manufacturers to identify the  rebate law and agreements defined the AMP but did not 
various calculation methods used to determine  provide specific written methodology for computing it. 
average manufacturer price (AMP).  In addition, 
CMS should develop a more specific policy for 
calculating this price that would both protect the 
interests of the Government and be equitable to the 
manufacturers.   
(A-06-91-00092)  
59  Appendix C 
 
 
OIG Recommendation  Status 
Accuracy of Carrier Payment Date:  CMS stated that a review is under way to compare data 
CMS should conduct a review of carriers claims   contained in the National Claims History File with data 
processing data to examine the scheduled date of   at the carrier level.  CMS has also approved two new 
payment entered on claims sent to the Common  edits, which will enforce the payment floor standards 
Working File (CWF).  If there is no correlation  on claims sent to the CWF. 
between the claims payment date variable and the 
actual date of payment, CMS should define what data 
should be entered into this field and how the data 
should be calculated, and/or revise the current 
variable definition to clarify for National Claims 
History data users that the scheduled date of payment 
is not an accurate reflection of the actual claim 
payment date.  CMS should also review the carriers 
claims processing data to determine the accuracy of 
the information contained in the Contractor 
Reporting of Operational and Workload Data system. 
(OEI-03-00-00350) 
Resident Assessment Instruments:  CMS generally concurred with OIGs 
CMS should more clearly define minimum data set  recommendations for improved data definitions and 
(MDS) elements and work with States to train  training, but did not concur with the recommendation to 
nursing home staff.  OIG recommended that CMS  establish an audit trail.  In 1998, CMS devoted 
establish an audit trail to validate the 108 MDS  significant resources to the development of an accuracy 
elements that impact facility reimbursement by  improvement program by letting a contract to develop 
Medicare.  (OEI-02-99-00040, OEI-02-99-00041)  MDS accuracy review protocols.  Once the protocols 
were developed, CMS funded a program safeguard 
contractor in September 2001, known as the data 
assessment and verification system (DAVE), to audit 
and verify MDS data.  In January 2004, CMS 
developed and implemented the DAVE project onsite 
and offsite audit process of the MDS in long term care 
facilities to assess the accuracy and reliability of 
assessment data submitted. 
Assessments of Mental Illness:  CMS concurred with most of OIGs recommendations 
CMS should work with States to improve the  and has made revisions to its training curriculum for 
assessment of persons with serious mental illness and  nursing home surveyors.  In addition, CMS offered 
use survey and certification to monitor compliance.   several national satellite broadcasts in 2001 and 2004 to 
OIG also recommended that CMS define specialized  increase surveyor knowledge and ability to recognize 
services that are to be provided by the State to  mental illness, to educate surveyors on Pre-Admission 
nursing home residents with mental illness.   Screening and Resident Review (PASRR) 
 (OEI-05-99-00700)  implementation and oversight, and to improve 
surveyors abilities to determine facility compliance 
with assessment and care requirements.  CMS has also 
held several training conferences for Resident 
Assessment Instrument coordinators to improve the 
identification of mental illness symptoms in patients in 
nursing facilities.  CMS is also exploring the role State 
surveyors may have in identifying compliance with 
PASRR Level II assessment requirements. 
60  Appendix C 
 
 
OIG Recommendation  Status 
Nursing Home Residents With Serious Mental  CMS concurred with most of OIGs recommendations, 
Illness:  except for reporting the MDS records by primary, 
CMS should improve the quality and usefulness of  secondary, and tertiary diagnoses.  In February 2005, 
its data sources by requiring the use of a unique  CMS issued a letter to State Medicaid directors 
provider number across systems, requiring reporting  indicating that it will begin to release MDS data to 
of resident data by age and diagnosis, and  States with Americans with Disabilities Act compliance 
encouraging States to use these data in demonstrating  activities.  CMS will also require States to evaluate the 
their progress in placing disabled persons in the most  PASRR outcomes, further obligating States to develop 
integrated settings.  OIG also recommended training  accurate data systems useful for identifying serious 
to improve data collection and accurate coding.   mental illness in nursing facility residents.  In addition, 
(OEI-05-99-00701)   CMS is planning to implement the use of a unique 
provider number on or before May 2007. 
Payments for Mental Health Services:  CMS generally concurred with OIGs 
CMS should promote provider awareness of  recommendations.  It plans to explore a variety of 
documentation and medical necessity requirements,  educational efforts and will refer the reports to the 
develop a comprehensive list of psychological testing  carrier clinical workgroup on psychiatric services.  
tools that can be correctly billed, target problematic  Carriers will conduct data analysis of psychological 
services for prepayment edits or postpayment  testing and psychotherapy claims and will conduct 
medical review, and encourage carriers to take  medical reviews, if indicated.  CMS provided training 
advantage of the MDS, especially for its assessment  for providers concerning Medicare payments for Part B 
of patient cognitive level.    mental health services via Medlearn in April 2003. 
(OEI-03-99-00130, OEI-02-99-00140) 
Organ Donation:  CMS concurred with the recommendations and 
CMS should revise the Medicare conditions for  indicated that it will explore ways in which additional 
coverage for organ procurement organizations  data can be used to assess OPO effectiveness and 
(OPOs) to make them more accountable for  hospital compliance with the donation rule.  CMS 
implementing the new donation rule and require  published a Notice of Proposed Rulemaking on 
OPOs to provide hospital-specific data on referrals  February 4, 2005, establishing new conditions of 
and on organ recovery.  The Health Resources and  coverage regarding OPOs.  That proposed regulation 
Services Administration (HRSA) should require that  requires OPOs to report hospital-specific organ 
OPOs submit hospital-specific data on referrals and  donation, including organ donor potential and the 
on organ recovery and support demonstration  number of actual donors, at least annually to the public.  
projects on how to effectively train and make use of  HRSA, through its contract for operation of the Organ 
designated requestors.    Procurement and Transplantation Network, requires 
(OEI-01-99-00020)  OPOs to submit hospital-specific data on organ 
recovery.   
Outpatient Surgery Rates:  Section 626 of Public Law 108-173 mandates that the 
CMS should (1) seek authority to set rates that are  Government Accountability Office conduct a study that 
consistent across sites and reflect only the costs  compares the relative costs of procedures furnished in 
necessary for the efficient delivery of health services  ambulatory surgical centers with the relative costs of 
and (2) remove the procedure codes that meet its  procedures furnished in hospital outpatient 
criteria for removal from the Ambulatory Surgery  departments.  The report will include recommendations 
Center list of covered procedures.    that advise CMS regarding payments to ambulatory 
(OEI-05-00-00340)  surgical centers and CMS will implement a new 
  payment system for ambulatory surgical centers 
beginning on or after January 1, 2006, and not later 
than January 1, 2008.  CMS issued a proposed rule on 
November 26, 2004, to update the list  
continued 
61  Appendix C 
 
 
OIG Recommendation  Status 
Outpatient Surgery Rates (continued):   
  of Medicare-approved ambulatory surgical centers 
procedures in 2005.  CMS proposed to remove from the 
ambulatory surgical centers list a number of the codes 
recommended for deletion by OIG.  Nearly 500 
comments were submitted timely and CMS is 
reviewing those comments and preparing a final rule 
for implementation. 
Medicare-Approved Heart Transplant Centers:  On February 4, 2005, CMS published proposed rule (70 
CMS should develop standards for continuing  FR 6140), Hospital Conditions of Participation:  
approved centers as well as guidelines for what levels  Requirements for Approval and Reapproval of 
of performance trigger specific responses from CMS.   Transplant Centers to Perform Organ Transplant.  The 
In the short term, OIG also recommends that CMS  notice of proposed rulemaking established the 
improve its oversight of centers by entering into an  requirements for approval and reapproval of transplant 
arrangement with HRSA for the regular exchange of  centers to perform organ transplants.  The approval 
volume and survival rate data.  (OEI-01-02-00520)  requirements include data submission, outcome 
  measures, and process requirements.  CMS expects to 
publish the final rule within 18 months.  HRSA has 
partnered with CMS in developing outcome measures 
for the proposed rule and will continue to act as a 
liaison between CMS and the Scientific Registry of 
Transplant Recipients to provide assistance to review 
data on transplant center(s) performance. 
Quality Improvement Processes in Dialysis  CMS concurred with most of OIGs recommendations.  
Facilities:  The Conditions of Coverage proposed rule was 
CMS should revise the Conditions of Coverage,  published in February 2005.  The proposed conditions 
examine ways to foster the commitment of attending  would require a facility-level data driven Quality 
physicians to performance measures, develop more  Assessment and Performance Improvement program 
effective intervention strategies for facilities, and  (QAPI), an increased participation of attending 
work with the corporations to share experiences and  physicians in patient care and in supporting the facility 
minimize reporting burdens on dialysis facilities.  QAPI program, increased medical director role, and 
(OEI-01-99-00052)  electronic clinical measure reporting. 
End-Stage Renal Disease Data Management:  CMS concurred with OIGs recommendations.  As of 
CMS should develop a strategic plan for addressing  February 15, 2005, CMS, the ESRD networks, its 
End-Stage Renal Disease (ESRD) data management,  contractors, and the renal community worked together 
including creating short- and long-term remedies for  to consolidate its three ESRD systems, known as the 
current data problems, reassessing the data needs of  Consolidated Renal Operations in a Web-enabled 
users, improving the efficiency of data distribution,  Network (CROWN).  The three systems include the 
improving ongoing communication with users and  Renal Management Information System (REMIS), the 
data contributors, and coordinating better with the  Standard Information Management System (SIMS), 
Social Security Administration.    and the Vital Information System to Improve Outcomes 
(OEI-07-01-00250)   in Nephrology.  SIMS went into production on January 
1, 2000, and REMIS went into production on July 13, 
2003.  The REMIS application directly addresses 
concerns raised by OIG.  The CROWN is the 
automated system that combines all of CMSs 
electronic data on ESRD benefits and utilization; it 
provides for the collection, validation, and storage of 
information about the national ESRD program, its 
beneficiaries, and the services provided to them. 
62  Appendix C 
 
 
OIG Recommendation  Status 
Accuracy of Nursing Home Compare:  CMS agreed with the first recommendation.  CMS will 
CMS should require State agencies to verify that the  consider adding regional office contact information to 
most recent inspection results are in CMS databases  the Nursing Home Compare to facilitate corrections to 
and establish a single point of contact for reporting  the Web site.  CMS is currently working with the Web 
discrepancies on the Web site.  (OEI-01-03-00130)   site designers and the regional offices to develop the 
  most efficient means of providing CMS oversight over 
State survey agency data entry. 
Variation in State Medicaid Drug Prices:  CMS plans to follow up with States that paid higher 
CMS should share more accurate drug pricing  relative drug prices, particularly States with prices 
information with States, conduct further research on  above the UPL. 
the factors that affect States drug prices, and 
annually review States reimbursement data to target 
technical assistance to higher paying States.  
 (OEI-05-02-00681) 
CMS Oversight of Cost-Avoidance Waivers:  CMS concurred with OIGs recommendation that it 
CMS should approve only waivers that meet the  approve only cost-effective waivers.  CMS continues to 
criteria for cost-effectiveness as set forth by Federal  address the oversight of and/or need for cost-avoidance 
regulations, strengthen oversight activities through  waivers.  CMS central and regional offices continue to 
improved document retention, and collect  work closely with States to identify circumstances for 
information from States regarding recovery rates  which cost-avoidance waivers are not necessary (i.e., 
from pay-and-chase activities.  Cost avoidance  Medicaid services not covered by third parties or 
involves returning claims to providers so that the  benefits not directly available to the provider).  CMS 
providers can bill the liable third parties.    has also worked with States to diminish the need for 
(OEI-03-00-00031)   waivers by frequently encouraging States to eliminate 
  paying and chasing of claims and relying instead on 
cost-avoidance.  CMS has made substantial progress on 
Medicaid pharmacy claims.  In August 2001, OIG 
reported that only 17 States were cost-avoiding (in part 
or whole) pharmacy claims.  A recent CMS survey 
indicated that 40 States currently meet that description 
and an additional 4 States are planning systems 
conversions.  CMS plans to follow up with remaining 
States to consider what further assistance should be 
offered.  Where waivers continue to be necessary, CMS 
will continue to emphasize cost-effectiveness and 
proper document retention. 
Uninsured Children Through State Childrens  CMS concurred with several of OIGs specific 
Health Insurance Programs:  recommendations and has already implemented steps to 
CMS should resolve the inconsistency between the  improve the integrity of the State Annual Report 
requirement that States report on changes in the  submissions.  In addition, CMS has taken steps to 
number of uninsured children and the practice of  enhance technical assistance (TA) to States to improve 
accepting enrollment data as a proxy, and ensure the  their measurement capabilities and has held a TA 
integrity, validity, and usefulness of the State  session at the National Academy for State Health 
Childrens Health Insurance Program (SCHIP)  Policys annual conference in August 2004.  CMS is 
Annual Report and SCHIP enrollment data.    currently reviewing all State reports on progress 
(OEI-05-03-00280)  towards covering the uninsured and providing State-
  specific TA to the States not measuring progress. 
63  Appendix C 
 
 
OIG Recommendation  Status 
 
Public Health Agencies 
Oversight of Tissue Banking:  The Deputy Secretary concurred that FDA should 
The Food and Drug Administration (FDA) should  expedite its planned rulemaking activities related to 
expedite publication of its regulatory agenda  tissues, specifically the final rule to require registration 
requiring registration of tissue banks, enhanced donor  of tissue banks.  The Department also found 
suitability screening, and testing the use of good  considerable merit in OIGs recommendation for an 
tissue practices.  FDA should set a realistic yet  intensified inspection program directed toward entities 
aggressive date by which it would complete an initial  that procure, process, and store human tissues.  In 
inspection of all tissue banks.  It should determine the  congressional testimony, FDA said that all three of the 
appropriate minimum cycle for tissue bank  proposed rules have been published and one rule 
inspections and work with States and professional  (Establishment Registration and Listing) was finalized.  
associations to determine in what areas oversight  FDA contacted all 36 uninspected tissue banks.  The 
activities could be coordinated.    results were:  31 inspections were completed, 3 firms 
(OEI-01-00-00441)  were out of business, 1 firm could not be located, and 1 
firm was not an FDA obligation because it handled 
only vascularized organs.  In 2004, FDA finalized 
donor eligibility and good tissue practices regulations, 
which became effective on May 25, 2005.  This 
completes the rulemaking activities related to human 
tissues. 
Effectiveness of FDAs Adverse Event  In response, the Center for Food Safety and Applied 
Reporting System for Dietary Supplements:  Nutrition (CFSAN) developed a single system for 
FDA should:  (1) facilitate greater detection of  entering adverse events and product quality complaints 
adverse events by requiring dietary supplement  reports involving foods, cosmetics, and dietary 
manufacturers to report serious events to FDA,   supplements:  the CFSAN Adverse Event Reporting 
(2) obtain more information on adverse event reports  System (CAERS).  CAERS became partially 
by requiring manufacturers to register themselves  operational in June 2003.  The new system incorporates 
and their products with FDA, (3) notify  all existing adverse event reporting systems into one 
manufacturers when FDA receives a serious adverse  state-of-the-art reporting and monitoring system.  FDA 
event report and develop a new computer database to  routinely notifies manufacturers regarding adverse 
track and analyze adverse event reports,   events associated with the use of their products.  A 
(4) expedite the development and implementation of  proposed final rule for good manufacturing practices 
good manufacturing practices for dietary supplement  for dietary supplements was submitted to the Office of 
manufacturers, and (5) disclose more useful  Management and Budget (OMB) on October 25, 2005.  
information to the public about dietary supplement  In response to the food facility registration in the Public 
adverse events.  (OEI-01-00-00180)  Health Security and Bioterrorism Preparedness Act of 
2002, FDA requires facilities that manufacture, process, 
pack, or hold dietary supplements to be registered with 
the FDA.  FDA informs the public of developments 
through its dietary supplements Web site. 
Protection for Research Subjects in Foreign  OHRP concurred with OIGs recommendations and a 
Clinical Trials:  variety of national, regional, and international 
FDA should examine ways to obtain more  organizations with a goal of establishing effective  
information about the performance of non-U.S.   continued 
64  Appendix C 
 
 
OIG Recommendation  Status 
Protection for Research Subjects in Foreign   
Clinical Trials (continued):  education and review processes around the world.  In 
Institutional Review Boards (IRBs) and help  2004, OHRP sponsored capacity-building workshops 
inexperienced IRBs build their capacities, encourage  for IRB members, gave presentations at international 
all non-U.S. investigators participating in research to  conferences, and began translating key guidance 
sign attestations upholding human subject  documents into foreign languages.  FDA published a 
protections, and develop a database to track the  proposed rule in 2004, Human Subject Protection:  
growth and location of foreign research.  The Office  Foreign Clinical Studies Not Conducted Under an 
for Human Research Protections  (OHRP) should  Investigational New Drug Application (21 CFR 
exert leadership in developing strategies to ensure  312.120), to promote good clinical practice regardless 
adequate human subject protections for non-U.S.  of the location of the clinical trial.  FDA also 
clinical trials funded by the Federal Government and  contributed to the HHS/OHRP/National Institutes of 
those that contribute data to new drug applications.   Health Working Group for Equivalent Protections in 
(OEI-01-00-00190)  developing a HHS report and Federal Register Notice 
announcing proposed criteria for clinical trials 
conducted outside of the United States.   
 
In addition, FDA has assisted other countries with 
capacity-building activities, including Singapore and 
Australia, for international good clinical practices 
(GCP) inspectorates.  An ongoing FDA initiative to 
develop better communication with the European 
Medicines Agency will improve coordination between 
the respective European and FDA programs involving 
clinical trials.  FDA has also provided staff as faculty to 
professional associations for outreach training 
programs, as well as creating a GCP Web site for 
current information about FDA clinical trial 
requirements. 
 
Administration for Children and Families 
Childrens Use of Health Care Services While in  CMS and ACF generally concurred with the 
Foster Care:  recommendations and in many cases are actively 
OIG conducted a series of inspections examining the  working with the State and local entities to improve 
access of foster care children in several States to  access, clarify obligations, and educate all the parties 
Medicaid health care services.  OIG found that access  involved regarding Medicaid health care services. 
varied in each state and generally recommended that 
CMS and the Administration for Children and 
Families (ACF) work with the States to increase 
access to health care services for eligible foster care 
children and educate foster parents on available 
services.  
(OEI-02-00-00360, OEI-02-00-00363, 
OEI-07-00-00640, OEI-07-00-00642,  
OEI-07-00-00643) 
65  Appendix C 
 
 
OIG Recommendation  Status 
 
General Oversight 
Cost Principles for Federally Sponsored  The Department circulated several draft iterations of the 
Research Activities:  hospital cost principles to internal users for comment.  
The Department should modernize and strengthen  Many of the policies in the outdated document have 
cost principles applicable to hospitals by either  been updated in a draft regulation.  As of March 2006, 
revising existing guidelines to conform with Office  the draft regulation had not been issued. 
of Management and Budget (OMB) Circular A-21 or 
working with OMB to extend Circular A-21 
coverage to all hospitals.  (A-01-92-01528) 
 
 
66   
Appendix D:  Notes to Tables 1 and 2 
 
Notes to Tables 1 
 
1The opening balance was adjusted upward $ 82.4 million  
 
2During the period, revisions to previously reported management decisions included: 
 
Central Identification Number (CIN): A-02-91-01006 BLUE SHIELD OF WESTERN NYFinal 
settlement of an audit resulted in a decrease in the original concurrence amount of  $1.5 million. 
 
CIN: A-06-92-00043 MEDICARE GME COSTS TEXASThe fiscal intermediary determined that original 
amount as recommended should be reduced by $1.7 million. 
 
CIN: A-07-02-03023 TITLE XIX CLAIMED FOR FAMILY SERVICESCMS reviewed findings 
covering claims that Iowa disputed, and determined that $1.0 million in previously disallowed claims was 
allowable. 
 
Not detailed are revisions to previously disallowed management decisions totaling $2.5 million. 
   
3Included are management decisions to disallow $68.6 million that was identified in nonfederal audit 
reports. 
 
4Due to administrative delays, many of which are beyond management control, resolution of the following 
98 audits was not completed within 6 months of issuance; however, based upon discussions with 
management, resolution is expected before the end of the next semiannual reporting period: 
 
CIN: A-02-02-01029  REVIEW OF SPEECH SCHOOL HEALTH CLAIMS - NYCDE, JUN 2005, 
$435,903,456 
CIN: A-02-02-01030  REVIEW OF SPEECH SCHOOL HEALTH CLAIMS - REST OF STATE, 
FEB 2004, $172,553,831 
CIN: A-05-01-00099  U OF I HOSPITAL-DSH PAYMENT LIMITS, OCT 2004, $140,281,912 
CIN: A-09-02-00054  AUDIT OF STATE OF CALIFORNIA DSH PROGRAM FOR FY 1998, MAY 
2003, $128,269,448 
CIN: A-02-03-01023  REVIEW OF TRANSPORTATION SCHOOL HEALTH CLAIMS - NYC 
DEPT. OF EDUCATION, SEP 2005,  $108,241,199 
CIN: A-04-99-05561  AUDIT ADMIN COST PROPOSALS FY95-98, BCBSFL, JAX, JUL 2002, 
$101,671,328 
CIN: A-09-02-00071  AUDIT OF CA DSH PROGRAM FOR FY 1998 - LA COUNTY, MAY 2003, 
$98,190,042 
CIN: A-04-04-03000  COMPLIANCE WITH MEDICARES POSTACUTE CARE TRANSFER 
POLICY - FY 01 & 02, APR 2005, $72,369,964 
CIN: A-02-03-01008  REVIEW OF TRANSPORTATION SCHOOL HEALTH CLAIMS - REST OF 
STATE, AUG 2004, $53,037,302 
CIN: A-05-01-00058  OHIO MEDICAID HOSPITAL-SPECIFIC DSH PAYMENT LIMITS, JUN 
2004, $47,000,000 
CIN: A-04-01-02006  MEDICAID DISPROPORTIONATE SHARE PAYMENTS IN ALABAMA, 
JUN 2004, $45,763,327 
CIN: A-07-01-02093  MISSOURI DSH - UNALLOWABLE COSTS, AUG 2002, $36,200,000 
CIN: A-01-02-00006  REVIEW OF RATE SETTING METHODOLOGY FOR MEDICAID 
SCHOOL BASED HEALTH SERVICES - CT, MAY 2003, $32,780,146 
67  Appendix D 
 
 
CIN: A-03-01-00224  MEDICAID SCHOOL-BASED SERVICES/MARYLAND, MAR 2003, 
$19,954,944 
CIN: A-09-01-00098  AUDIT OF KERN MEDICAL CENTER DISPROPORTIONATE SHARE 
HOSPITAL PAYMENTS FOR FY 1998, SEP 2002, $19,446,435 
CIN: A-01-02-00509  REVIEW OF MEDICARE ADMINISTRATIVE COSTS - PART A & B - 
UNITED HEALTHCARE INSURANCE COMPANY, MAR 2005, $12,991,420 
CIN: A-06-03-00046  REVIEW OF OKLAHOMAS MEDICAID ADMINISTRATIVE COSTS, APR 
2005, $10,875,782 
CIN: A-02-03-01019  UPPER PAYMENT LIMIT CALCULATIONS - NEW JERSEY, MAR 2005, 
$10,698,309 
CIN: A-06-03-00027  REVIEW OF HUMANAS BIPA MODIFICATIONS, JUL 2005, $10,500,000 
CIN: A-06-02-00034  REV OF COST REPORTS & MEDICARE FEE-FOR-SERVICE PYMTS @ 
SCOTT & WHITE, MAY 2003,  $8,229,574 
CIN: A-09-01-00085  AUDIT OF UCSDMC DISPROPORTIONATE SHARE HOSPITAL 
PAYMENTS FOR SFYE 1998, SEP 2002,  $7,999,212 
CIN: A-09-97-44262  STATE OF CALIFORNIA, APR 1997, $7,300,000 
CIN: A-07-02-03033  CAREFIRST SEGMENTATION AUDIT, MAY 2003, $6,788,644 
CIN: A-03-91-00552  INDEPENDENT LIVING PROGRAM - NATIONAL, MAR 1993, $6,529,545 
CIN: A-05-02-00049  MEDICAL SERVICE COSTS UNDER ILLINOIS SCHOOL-BASED 
MEDICAID, DEC 2003, $6,067,669 
CIN: A-03-03-00562  DELAWARE TITLE IV-E TRAINING AND ADMIN COSTS, JUL 2005, 
$5,912,733 
CIN: A-04-00-02161  MEDICAID SCHOOL-BASED SERVICES IN NORTH CAROLINA, NOV 
2001, $5,344,160 
CIN: A-01-02-00016  MEDICAID SCHOOL-BASED HEALTH SERVICE ADMINISTRATIVE 
CLAIMING REVIEW-MASSACHUSETTS, SEP 2004, $5,312,447 
CIN: A-09-03-00042  REVIEW OF HHA PRECEEDING HOSPITAL STAY UNDER PPS - UGS, 
FEB 2004, $5,306,825 
CIN: A-09-04-00049  WEDGE:  REVIEW OF FEDERAL MATCHING FUNDS CLAIMED BY 
CALIFORNIA FOR SKILLED PROFESSIONAL MEDICAL PERSONNEL, 
AUG 2005, $5,295,373 
CIN: A-06-02-00060  REVIEW PACIFICARE OK BIPA MODIFICATIONS TO CY 2001 ACRP, 
JUN 2004, $5,204,042 
CIN: A-05-03-00096  REVIEW OF ADMINISTRATIVE COSTS FOR ADMINASTAR FEDERAL, 
AUG 2004, $5,000,598 
CIN: A-09-03-00051  REVIEW OF BLUE SHIELD CALIFORNIA BIPA MODIFICATIONS TO CY 
2001 ACRP, OCT 2004, $4,555,992 
CIN: A-05-01-00102  MT. SINAI HOSPITAL-DSH PAYMENT LIMITS, OCT 2004, $4,516,112 
CIN: A-02-00-01047  DEMO BSWNY - FINANCIAL, MAR 2002, $4,505,051 
CIN: A-07-02-00144  IV-E FOSTER CARE ADMINISTRATIVE COSTS CLAIMED, AUG 2003, 
$4,335,542 
CIN: A-01-04-02503  REVIEW OF MAINES ADOPTION ASSISTANCE SUBSIDY PAYMENTS, 
APR 2005, $4,200,000 
CIN: A-01-02-00015  REVIEW OF MA MEDICAID USE OF REVISED FEE SCHEDULES FOR 
CLINICAL DIAGNOSTIC LABORATORY SERVICES, JAN 2004, 
$4,100,000 
CIN: A-07-04-03053  REVIEW OF CAHABAS UNFUNDED PENSION COSTS, FEB 2004, 
$4,006,541 
CIN: A-03-01-00225  VIRGINIA IMD UNDER 21, MAR 2004, $3,948,532 
68  Appendix D 
 
 
CIN: A-09-03-00053  AUDIT OF ORGAN ACQUISITION COSTS AT CPMC, JAN 2005, 
$3,731,752 
CIN: A-09-04-00023  AUDIT OF OREGONS MEDICAID UPPER PAYMENT LIMITS FOR NON-
STATE GOVERNMENT INPATIENT HOSPITALS FOR STATE FISCAL 
YEAR 2003, FEB 2005, $3,412,987 
CIN: A-01-02-00525  MAINE ANTHEM BCBS - MEDICARE ADMINISTRATIVE COSTS, APR 
2004, $3,389,716 
CIN: A-04-01-00005  MEDICAID FFS PAYMENTS TO LEAS IN NORTH CAROLINA, MAY 
2004, $3,066,806 
CIN: A-01-04-00004  REVIEW OF MAINES MEDICAID RETROACTIVE CLAIMS FOR 
SCHOOL-BASED HEALTH SERVICES - JANUARY 2001 THROUGH 
JUNE 2003, JAN 2005, $3,044,211 
CIN: A-09-98-50183  STATE OF CALIFORNIA, MAR 1998, $3,000,000 
CIN: A-03-04-00207  MEDICAID OVERPAYMENTS - WEST VIRGINIA, JUN 2005, $2,940,469 
CIN: A-01-02-00508  REVIEW OF MEDICARE CONTRACT TERMINATION COSTS - UNITED 
HEALTHCARE, NOV 2003, $2,894,010 
CIN: A-05-02-00085  MEDICAID FFS PAYMENTS FOR OHIO BENEFICARIES ENROLLED IN 
MEDICARE MCOS, JUN 2004, $2,700,000 
CIN: A-01-04-78839  STATE OF NEW HAMPSHIRE, JUN 2004, $2,631,648 
CIN: A-07-03-03039  CAREFIRST OF MARYLAND UNFUNDED PENSION COSTS, MAY 2003, 
$2,611,100 
CIN: A-01-04-00523  REVIEW OF ADMINISTRATIVE COSTS - PART A & B AT RHODE 
ISLAND BLUE CROSS AND BLUE SHIELD, SEP 2005, $2,582,664 
CIN: A-09-02-72300  STATE OF CALIFORNIA, JUL 2002, $2,400,000 
CIN: A-07-04-03050  PENSION SEGMENTATION REVIEW AT HIGHMARK, INC. OF PA, JAN 
2005, $2,394,501 
CIN: A-10-02-00008  REVIEW OF WASHINGTON STATES MEDICAL ASSISTANCE COSTS 
CLAIMED FOR SCHOOL-BASED HEALTH SERVICES, JUL 2003, 
$2,279,752 
CIN: A-03-03-00222  MEDICAID ACCOUNTS RECEIVABLE OVERPAYMENTS IN 
WASHINGTON, DC, AUG 2005, $2,195,049 
CIN: A-07-04-00173  REVIEW OF UNFUNDED PENSION COSTS FOR PENNSYLVANIA BLUE 
SHIELD, NOV 2004, $2,154,481 
CIN: A-05-03-00063  REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE 
ADMINISTRATIVE RESPONSIBILITY OF MEDICARE NORTHWEST 
(BLUE CROSS BLUE SHIELD OF OREGON), OCT 2003, $2,100,000 
CIN: A-05-02-00048  REVIEW OF MEDICAID DME CLAIMS - TEXAS, SEP 2002, $1,969,704 
CIN: A-01-02-00516  REVIEW OF POTENTIALLY EXCESSIVE MEDICARE PAYMENTS FOR 
OUTPATIENT SERVICES UNITED GOVERNMENT SERVICES, MAR 
2003, $1,768,783 
CIN: A-03-01-00228  PENNSYLVANIA IMD UNDER 21, JUL 2005, $1,694,148 
CIN: A-09-00-00127  BLUE CROSS OF CALIF - MEDICARE ADMIN COSTS, DEC 2002, 
$1,677,822 
CIN: A-02-04-01010  REVIEW OF PHYSICIAN PLACE OF SERVICE CODING FOR 
AMBULATORY SURGICAL AND RELATED PROCEDURES, JAN 2005,  
$1,467,318 
CIN: A-04-01-05011  REVIEW OF FLORIDA MEDICAID PAYMENTS FOR SERVICES 
PROVIDED TO INMATES, OCT 2002,  $1,450,077 
69  Appendix D 
 
 
CIN: A-03-04-00209  VIRGINIA MEDICAID MANAGED CARE FAMILY PLANNING FACTOR 
VALIDATION AUDIT, JUN 2005, $1,388,506 
CIN: A-07-02-03021  ANTHEM BCBS OF CT - PENSION SEGMENT CLOSING, FEB 2004, 
$1,351,284 
CIN: A-04-03-02024  REVIEW OF BCBSFL RESPONSE TO SET-ASIDE COSTS IN PRIOR FACP 
AUDIT, APR 2003, $1,277,247 
CIN: A-07-04-00169  PENSION SEGMENTATION REVIEW AT PBS, NOV 2004, $1,214,985 
CIN: A-04-02-72903  STATE OF TENNESSEE, SEP 2002, $1,213,353 
CIN: A-04-03-01000  REVIEW OF HOME HEALTH SERVICES CLAIMED BY LIFELINE 
HEALTH GROUP, INC, JUN 2004, $1,173,330 
CIN: A-05-04-00039  IL-UNDISTRIBUTED CHILD SUPPORT COLLECTIONS, AUG 2005, 
$1,095,077 
CIN: A-09-02-01004  USC GRANTS MANAGEMENT REVIEW, JUL 2004, $1,082,554 
CIN: A-09-94-01010  CLOSEOUT AUDIT - CONT NO. N01-ES-75196 (STRATAGENE), MAR 
1994, $983,208 
CIN: A-07-04-02016  HEAD START KCMC CHILD DEVELOPMENT CORP. - KANSAS CITY, 
MO (DIRECTORS PAY), APR 2005, $953,245 
CIN: A-05-04-77356  TRI-VALLEY OPPORTUNITY COUNCIL INC., FEB 2004, $866,666 
CIN: A-04-01-05004  REVIEW MEDICARE CLAIMS FOR DEPORTED BENEFICIARIES, MAR 
2002, $836,711 
CIN: A-06-03-00013  MEDICARE ADMINISTRATIVE COST PROPOSAL-ARKANSAS BCBS, 
OCT 2003, $759,748 
CIN: A-05-02-00041  INDIANA MEDICAID HOSPITAL PATIENT TRANSFERS, JAN 2003, 
$730,061 
CIN: A-09-03-00046  AUDIT OF ORGAN ACQUISITION COSTS AT ST VINCENT, JUL 2004, 
$683,315 
CIN: A-09-04-00027  MEDICAID FAMILY PLANNING SERVICES - ARIZONA, JUL 2005, 
$658,093 
CIN: A-06-03-00032  AUDIT OF ADMIN COSTS PART A & PART B OF MEDICARE 
PROGRAM-TRAILBLAZERS, APR 2004, $622,078 
CIN: A-04-00-00138  MEDICAID ESCHEATED WARRANTS - FLORIDA, JAN 2002, $613,891 
CIN: A-07-04-00170  REVIEW OF PENSION COSTS CLAIMED FOR MEDICARE 
REIMBURSEMENT FOR VERITUS, AUG 2004, $594,806 
CIN: A-02-03-01024  MEDICAID DRUG REBATE COLLECTIONS - NEW JERSEY, OCT 2004, 
$567,186 
CIN: A-05-04-00054  STATE AGENCY USE OF CONTRACTED SERVICES - OHIO, MAY 2005, 
$560,249 
CIN: A-07-02-03015  BCBS OF MN PENSION COSTS CLAIMED FOR MEDICARE 
REIMBURSEMENT, FEB 2003, $550,083 
CIN: A-05-02-72811  COMMUNITY ACTION OF GREATER INDIANAPOLIS INC., AUG 2002, 
$547,899 
CIN: A-01-04-00008  AUDIT OF MEDICAID PAYMENTS FOR SKILLED PROFESSIONAL 
MEDICAL PERSONNEL REIMBURSED AT ENHANCED RATES 
OCTOBER 1, 2002 THROUGH SEPTEMBER 30, 2003 OFFICE OF 
VERMONT HEALTH ACCESS, MAR 2005, $534,438 
CIN: A-03-92-16229  STATE OF PENNSYLVANIA, MAR 1992, $496,876 
CIN: A-02-02-01004  MEDICAID PPS TRANSFERS, MAY 2003, $493,158 
CIN: A-03-04-00205  MEDICAID PROVIDER OVERPAYMENTS - DELAWARE, OCT 2004, 
$437,592 
70  Appendix D 
 
 
CIN: A-01-04-00506  REVIEW OF DISPROPORTIONATE SHARE HOSPITAL PAYMENTS 
CLAIMED BY SAINT MARYS HOSPITAL FOR FISCAL YEAR ENDING 
DECEMBER 31, 2002, MAY 2004, $433,502 
CIN: A-05-03-00053  ESRD PRICING ERRORS AT INDEPENDENT FACILITIES, NOV 2003, 
$407,300 
CIN: A-10-04-00003  MEDICAID OVERPAYMENTS IN WASHINGTON, SEP 2005, $396,941 
CIN: A-02-01-67912  STATE OF NEW YORK, MAR 2001, $389,536 
CIN: A-01-02-73084  STATE OF MAINE, SEP 2002, $362,326 
CIN: A-09-04-00058  REVIEW OF ALASKAS CLAIM FOR FEDERAL MATCHING FUNDS FOR 
REIMBURSABLE SERVICE EXPENDITURES CLAIMED AS OTHER 
FINANCIAL PARTICIPATION, OCT 2004, $346,217 
CIN: A-02-04-01003  ORGAN ACQUISITION COST SURVEY - REGION II, DEC 2004, $343,272 
CIN: A-05-01-00096  PAYMENTS TO INTER VALLEY FOR INSTITUTIONAL BENEFICIARIES, 
MAY 2002, $319,355 
CIN: A-09-03-00032  BLUE CROSS OF CALIFORNIA, MEDICARE, TERMINATION COSTS, 
OCT 2003, $319,187 
CIN: A-05-02-00023  SCHOOL-BASED MEDICAID ADMIN & SERVICE COSTS - WISCONSIN, 
MAR 2003, $315,474 
CIN: A-03-04-00204  SKILLED PROFESSIONAL MEDICAL PERSONNEL (SPMP) - WEST 
VIRGINIA, DEC 2004, $299,360 
CIN: A-01-04-00522  THE MID COAST HOSPITAL IN MANIE DSH PAYMENT, SEP 2004, 
$289,936 
CIN: A-01-04-01505  UNIVERSITY OF MASSACHUSETTS MEDICAL SCHOOL REVIEW OF 
NIH GRANT NO. 5 R01 GM30626-22, AUG 2005, $281,993 
CIN: A-01-04-00003  APPLICATION CONTROLS AT NEW HAMPSHIRE MEDICAID STATE 
AGENCY, FEB 2005, $274,370 
CIN: A-09-94-30178  STATE OF ARIZONA, JUN 1994, $267,021 
CIN: A-07-04-00175  REVIEW OF UNFUNDED PENSION COSTS AT VERITUS, INC., OCT 
2004, $266,052 
CIN: A-05-02-00047  UNITED GOVERNMENT SERVICES, MEDICARE PART A ADMIN. 
COSTS FY 1999-2001, JUN 2003, $260,831 
CIN: A-07-03-02662  REVIEW OF MULTIPLE ASC PROCEDURES IN THE SAME SESSION 
NORDIAN, DEC 2002, $258,112 
CIN: A-01-05-00508  REVIEW OF FISCAL YEAR-END BILLING AT MAINE GENERAL 
MEDICAL CENTER, AUG 2005, $254,915 
CIN: A-03-04-00353  ACCOUNTABILITY OVER CDC BT FUNDS, JUN 2005, $238,537 
CIN: A-05-01-00094  PAYMENTS TO KAISER OF OAKLAND FOR INSTITUTIONAL 
BENEFICIARIES, OCT 2002, $229,656 
CIN: A-02-01-01019  DEMO BSWNY - CASH MANAGEMENT, OCT 2002, $208,271 
CIN: A-05-04-00058  REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE 
ADMINISTRATIVE RESPONSIBILITY OF ANTHEM HEALTH PLANS OF 
NEW HAMPSHIRE, INC., JUL 2004, $206,495 
CIN: A-01-05-00509  REVIEW OF MEDICARE CONTRACT TERMINATION/SEVERANCE 
COSTS CLAIMED BY BLUE CROSS & BLUE SHIELD OF RHODE 
ISLAND (RIBCBS), SEP 2005, $205,384 
CIN: A-01-04-01501  NORTHEASTERN UNIVERSITY DHHS GRANT COSTS GRANT #S 9274, 
4000 AND 4111, JAN 2005, $194,890 
CIN: A-05-05-81921  ILLINOIS COMMUNITY ACTION ASSOCIATION, MAY 2005, $187,395 
71  Appendix D 
 
 
CIN: A-07-01-02094  SURVEY OF OUTPATIENT OBSERVATION SERVICES, OCT 2002, 
$165,125 
CIN: A-09-02-00083  REVIEW MEDICAID PAYMENTS FOR RESIDENT UNDER 21/22 IN 
PRIVATE IMDS, NOV 2004, $155,133 
CIN: A-07-05-03072  MEDICAID PROVIDER OVERPAYMENTS IN SOUTH DAKOTA, JUN 
2005, $154,741 
CIN: A-07-04-03051  MEDICAID PROVIDER OVERPAYMENTS IN UTAH, AUG 2004, $132,749 
CIN: A-05-03-00067  ADMINISTRATIVE COSTS - WI MEDICAID WAIVERS, JUN 2004, 
$129,663 
CIN: A-01-03-00010  MEDICAID SCHOOL-BASED HEALTH SERVICES ADMINISTRATIVE 
CLAIMING REVIEW - RHODE ISLAND, JUN 2004, $123,010 
CIN: A-05-01-00069  MERITER - MC/MA CREDIT BALANCES, JUL 2002, $122,713 
CIN: A-05-01-00091  PAYMENTS TO UNITED HC OF FLA FOR INSTITUTIONAL 
BENEFICIARIES, SEP 2002, $121,023 
CIN: A-02-96-02001  INTERNATIONAL RESCUE COMMITTEE - REFUGEE PROGRAM, JAN 
1998, $114,631 
CIN: A-05-05-00044  DUPLICATE MEDICARE PAYMENTS TO COST-BASED HEALTH 
MAINTENANCE ORGANIZATION PLAN- ARNETT HEALTH PLANS, 
INC. FOR FISCAL YEARS 2000, THROUGH 2003, SEP 2005, $111,862 
CIN: A-01-02-00527  REVIEW OF ANTHEM BLUE CROSS/BLUE SHIELD MEDICARE 
CONTRACT TERMINATION AND SEVERANCE COSTS, SEP 2003, 
$104,468 
CIN: A-05-01-00079  PAYMENTS TO BLUE CARE MID-MI FOR INSTITUTIONAL 
BENEFICIARIES, JUN 2002, $100,692 
CIN: A-04-03-06007  NURSING HOME QUALITY OF CARE SANCTIONS - FLORIDA, FEB 
2004, $99,957 
CIN: A-04-04-01002  USE OF CDC BIOTERRORISM GRANT FUNDS, JUL 2005, $98,929 
CIN: A-05-02-00067  REVIEW OF MEDICARE FEE-FOR-SERVICE PAYMENTS & COST 
REPORTS @ WELBORN, JUN 2003, $97,623 
CIN: A-10-05-80407  FIRST A.M.E. CHILD & FAMILY CENTER, MAR 2005, $96,803 
CIN: A-09-97-00066  WALTER MCDONALD - INDIRECT COST RATE AUDIT, MAR 1998, 
$95,733 
CIN: A-05-05-00042  DUPLICATE MEDICARE PAYMENTS TO COST-BASED HEALTH 
MAINTENANCE ORGANIZATION PLAN- DEAN HEALTH PLANS, INC. 
FOR FISCAL YEARS 2000, THROUGH 2003, AUG 2005, $91,710 
CIN: A-05-02-00074  IL PARTNERSHIP PLAN - TRANSPORTATION DURING AN INPATIENT 
STAY, APR 2003, $89,147 
CIN: A-05-01-00090  PAYMENTS TO AETNA OF FOR INSTITUTIONAL BENEFICIARIES, JUL 
2002, $87,516 
CIN: A-01-04-77722  STATE OF RHODE ISLAND & PROVIDENCE PLANTATIONS, JAN 2004, 
$86,792 
CIN: A-05-05-00043  DUPLICATE MEDICARE PAYMENTS TO COST-BASED HEALTH 
MAINTENANCE ORGANIZATION PLAN - JOHN DEERE HEALTH 
PLANS, INC. FOR FISCAL YEARS 2000 THROUGH 2003, SEP 2005, 
$78,799 
CIN: A-05-04-00061  REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE 
ADMINISTRATIVE RESPONSIBILITY OF BLUE CROSS BLUE SHIELD 
OF NEBRASKA, DEC 2004, $78,352 
72  Appendix D 
 
 
CIN: A-05-01-00089  ADDITIONAL BENEFITS REVIEW ON MANAGED CARE 
ORGANIZATION, OCT 2002, $77,000 
CIN: A-05-03-00085  NURSING HOME QUALITY OF CARE SANCTIONS - ILLINOIS, MAY 
2004, $69,892 
CIN: A-03-05-79945  BOARD OF EDUCATION OF PRINCE GEORGES COUNTY MARYL, 
DEC 2004, $67,937 
CIN: A-01-03-75448  STATE OF NEW HAMPSHIRE, APR 2003, $65,917 
CIN: A-07-05-82237  NORTHEAST IOWA COMMUNITY ACTION CORP., JUL 2005, $65,855 
CIN: A-08-03-74429  PORCUPINE CLINIC, JUL 2003, $65,027 
CIN: A-04-05-02000  AUDIT OF HHA THERAPY BILLINGS, SEP 2005, $63,425 
CIN: A-05-01-00086  PAYMENTS TO HMO OF NE PA FOR INSTITUTIONAL BENEFICIARIES, 
MAY 2002, $62,432 
CIN: A-09-04-00029  REVIEW OF AIR AMBULANCE SERVICES FOR CALENDAR YEAR 2002, 
JUL 2005, $62,408 
CIN: A-04-02-68936  STATE OF TENNESSEE, JUN 2002, $50,717 
CIN: A-05-02-00054  UNITED GOVERNMENT SERVICES, Y2K COSTS FY 1998 & 1999, APR 
2003, $49,923 
CIN: A-02-99-58263  PUERTO RICO OFFICE OF THE GOVERNOR OFFICE OF CHILD, JUL 
1999, $49,684 
CIN: A-08-05-79580  PORCUPINE CLINIC, OCT 2004, $45,688 
CIN: A-03-02-00373  REVIEW OF US HELPING US, DEC 2003, $45,558 
CIN: A-01-03-01500  REVIEW OF CDC HIV PROGRAMS AT GREATER BRIDGEPORT 
ADOLESCENT PREGNANCY PROGRAM, JUL 2003, $41,088 
CIN: A-05-03-00105  AUDIT OF MEDICAID NURSING FACILITY ADMINISTRATIVE COSTS, 
OCT 2004, $39,104 
CIN: A-01-04-01506  DARTMOUTH COLLEGE REVIEW OF NIH GRANT COSTS 5 P01 
GM1630-06, SEP 2005, $37,780 
CIN: A-07-04-04035  REVIEW OF MEDICARE OUTLIER PAYMENTS TO FOUNDATION 
CMHC, APR 2005, $36,000 
CIN: A-02-00-65502  ABYSSINIAN DEVELOPMENT CORP., AUG 2000, $34,737 
CIN: A-06-03-74833  AMIGOS VOLUNTEERS IN EDUCATION & SERVICES INC. (AV, APR 
2003, $31,180 
CIN: A-05-02-69155  STATE OF WISCONSIN, DEC 2001, $30,900 
CIN: A-08-03-73541  SOUTH DAKOTA FOUNDATION FOR MEDICAL CARE, JAN 2003, 
$28,573 
CIN: A-03-98-03301  AAUAP - INCURRED COST REVIEW - HHS 105-95-7011, APR 1998, 
$28,289 
CIN: A-05-03-00097  MEDICARE OUTPATIENT CARDIAC REHAB - NORTHFIELD 
HOSPITAL, NOV 2003, $27,013 
CIN: A-04-03-01004  OUTPATIENT CARDIAC REHAB SERVICES - HEALTHSOUTH SEA 
PINES REHAB HOSPITAL, DEC 2003, $26,279 
CIN: A-07-02-00150  PAYMENTS TO COVENTRY-PITTSBURG FOR INSTITUTIONAL 
BENEFICIARIES, JUN 2003, $26,000 
CIN: A-09-05-80636  SOUTH COUNTY ECONOMIC DEVELOPMENT COUNCIL, FEB 2005, 
$25,000 
CIN: A-01-04-78952  STATE OF CONNECTICUT, AUG 2004, $24,457 
CIN: A-05-01-00078  PAYMENTS TO HEALTH NET-TUCSON, AZ.- FOR INSTITUTIONAL 
BENEFICIARIES, APR 2002, $21,233 
73  Appendix D 
 
 
CIN: A-05-02-72480  HANSEL NEIGHBORHOOD SERVICE CENTER INC., SEP 2002, $20,266 
CIN: A-05-02-70624  STATE OF OHIO, JAN 2002, $19,970 
CIN: A-04-01-67441  CATAWBA INDIAN NATION, APR 2001, $19,204 
CIN: A-08-04-76779  COLORADO FOUNDATION FOR MEDICAL CARE, DEC 2003, $18,925 
CIN: A-05-01-00100  PAYMENTS TO FALLON HEALTH FOR INSTITUTIONALIZED 
BENEFICIARIES, MAY 2002, $18,842 
CIN: A-05-01-00095  PAYMENTS TO HUMANA OF ARIZONA FOR INSTITUTIONAL 
BENEFICIARIES, JUN 2002, $18,645 
CIN: A-07-03-00151  REVIEW OF MEDICARE PAYMENTS FOR BENEFICIARIES WITH 
INSTITUTIONAL STATUS, JUN 2003, $18,400 
CIN: A-10-04-76879  STATE OF ALASKA, DEC 2003, $18,226 
CIN: A-01-02-01504  REVIEW OF CDCS HIV PROGRAMS AT FENWAY COMMUNITY 
HEALTH CENTER, JUN 2003, $18,028 
CIN: A-05-03-00037  NURSING HOME QUALITY OF CARE SANCTIONS - OHIO, MAY 2004, 
$17,796 
CIN: A-07-04-01011  PAYMENTS FOR UNITED HEALTHCARE FOR INSTITUTIONAL 
BENEFICIARIES, MAR 2005, $13,128 
CIN: A-08-03-74361  PORCUPINE CLINIC, JUL 2003, $12,611 
CIN: A-05-03-00012  FROEDTERT MEDICAID CREDIT BALANCES, FEB 2003, $12,066 
CIN: A-05-01-00070  PAYMENTS TO GHP MCO/ST LOUIS FOR INSTITUTIONAL 
BENEFICIARIES, JAN 2002, $11,089 
CIN: A-08-05-81400  RURAL AMERICA INITIATIVES, JUN 2005, $8,000 
CIN: A-05-01-68270  LAKE COUNTY COMMUNITY ACTION PROJECT, MAY 2001, $7,614 
CIN: A-06-97-48062  SER-JOBS FOR PROGRESS NATIONAL INC., MAY 1997, $5,924 
CIN: A-15-02-20006  REVIEW OF CDC COOPERATIVE AGREEMENT AND HRSA RYAN 
WHITE ACTIVITIES AT HEALTH EDUCATION RESOURCE 
ORGANIZATION (HERO), INC. (BALTIMORE EMA/BALTIMORE CITY 
HEALTH DEPT), MAR 2003, $5,010 
CIN: A-05-04-00030  PAYMENTS FOR SERVICES TO DECEASED MEDICAID 
BENEFICIARIES - MASSACHUSETTS, FEB 2005, $4,696 
CIN: A-04-03-01006  OUTPATIENT CARDIAC REHAB SERVICES AT MORTON PLANT 
HOSPITAL, JAN 2004, $4,426 
CIN: A-02-02-01035  EVALUATION OF BID PROPOSAL - MEDICARE HELP LINE, AUG 2002, 
$3,760 
CIN: A-05-03-00084  MEDICARE OUTPATIENT CARDIAC REHAB - NORTHERN MICHIGAN 
HOSPITAL, OCT 2003, $3,738 
CIN: A-03-95-03318  TRANS-MANAGEMENT SYSTEMS 105-92-1527 (CCO), MAY 1996, $3,016 
CIN: A-04-03-01002  OUTPATIENT HOSPITAL CARDIAC REHAB - MEMORIAL HOSPITAL 
JACKSONVILLE, NOV 2003, $2,123 
CIN: A-04-03-01005  OUTPATIENT CARDIAC REHAB SERVICES CENTRAL FL REGIONAL 
HOSPITAL, NOV 2003, $2,003 
CIN: A-02-03-01026  MEADOWLANDS HOSPITAL MEDICAL CENTER CARDIAC REHAB 
SERVICES, JAN 2004, $1,703 
CIN: A-06-02-00032  CMS FY 01 MEDICARE ERROR RATE - ARK BC/BS REPORT, NOV 2002, 
$1,311 
CIN: A-05-03-00070  MEDICARE OUTPATIENT CARDIAC REHAB - ST. CHARLES MERCY 
HOSP, OCT 2003, $1,158 
74  Appendix D 
 
 
CIN: A-03-03-00393  AUDIT OF CDC HIV/AIDS GRANT TO SEXUAL MINORITY YOUTH 
ASSISTANCE LEAGUE, OCT 2003, $1,155 
 
Total CINs:  198 
TOTAL AMOUNT:  $1,764,717,748 
 
B. The following audit is open pending the resolution of the contractors termination audit related    
termination agreements and pending lawsuits:   
 
CIN: 04-01-67441 CATAWBA INDIAN NATION. UNABLE TO DETERMINE WHEN THE 
REPORT WILL BE CLOSED. THE REPORT HAS 1 MONETARY FINDING FOR $19,204.   
 
Notes to Table 2 
 
1The opening balance was adjusted downward by $416 million. 
 
2Management decision has not been made within 6 months on 29 reports.  Discussions with management 
are on going and it is expected that the following audits will be resolved by the next semiannual reporting 
period. 
 
CIN: A-06-01-00041  AUDIT OF THE TX DISPROPORTIONATE SHARE HOSP PROG 
PAYMENT METHODLOGY,  FEB 2003,  $319,200,000 
CIN: A-07-04-04031  MEDICAID HOSPITAL OUTLIER PAYMENTS IN ILLINOIS,  MAY 2005,  
$56,449,668 
CIN: A-01-02-00503  FURTHER EXPANSION OF THE DRG PAYMENT WINDOW,  AUG 2003,  
$37,000,000 
CIN: A-05-02-00078  ROLLUP OF MEDICARE PAYMENTS FOR BENEFICIARIES WITH 
INSTITUTIONAL STATUS,  FEB 2004,  $12,764,202 
CIN: A-03-91-00552  INDEPENDENT LIVING PROGRAM - NATIONAL, MAR 1993,  
$10,161,742 
CIN: A-05-03-00019  PAYMENTS FOR SERVICES TO DECEASED RECIPIENTS - NEW YORK,  
OCT 2004,  $6,707,623 
CIN: A-05-04-00073  ROLL-UP ON ADDITIONAL GPOS,  MAY 2005,  $6,600,000 
CIN: A-05-02-00077  MICHIGAN MEDICAID/SCHIP REVIEW,  NOV 2003,  $5,908,350 
CIN: A-03-02-00203  VIRGINIA - SCHIP/TITLE IV - D  SURVEY,  JUL 2004,  $5,402,491 
CIN: A-06-00-00073  REV OF MGR CARE ADDTL BENEFITS FOR CY 00 OF NYLCAR,  MAR 
2002,  $4,000,000 
CIN: A-01-04-02503  REVIEW OF MAINES ADOPTION ASSISTANCE SUBSIDY PAYMENTS,  
APR 2005,  $1,900,000 
CIN: A-05-02-00075  INDIANA MEDICAID/SCHIP REVIEW,  NOV 2003,  $1,885,708 
CIN: A-05-04-00025  REVIEW OF MEDICARE PHYSICIAN PLACE OF SERVICE CODING FOR 
AMBULATORY SURGICAL AND RELATED PROCEDURES,  OCT 2004,  
$742,510 
CIN: A-05-02-00082  BID PROPOSAL FOR 1-800 MEDICARE HOTLINE ADMINISTRATION,  
AUG 2002,  $609,950 
CIN: A-05-03-00021  CIMRO PRO PRE-AWARD AUDIT FOR NEBRASKA,  NOV 2002,  
$504,650 
CIN: A-05-04-00030  PAYMENTS FOR SERVICES TO DECEASED MEDICAID 
BENEFICIARIES - MASSACHUSETTS,  FEB 2005,  $503,715 
CIN: A-05-04-00054  STATE AGENCY USE OF CONTRACTED SERVICES - OHIO,  MAY 2005,  
$277,243 
75  Appendix D 
 
 
CIN: A-07-04-01008  FAMILY PLANNING - FEE-FOR-SERVICE - COLORADO,  JAN 2005,  
$269,024 
CIN: A-05-00-00006  MEDICAID MUTUALLY EXCLUSIVE CODES - MI,  JUN 2000,  $240,000 
CIN: A-05-04-00023  HEAD START COMPENSATION REVIEW - CEOGC,  JAN 2005,  $178,000 
CIN: A-01-02-73084  STATE OF MAINE,  SEP 2002,  $149,082 
CIN: A-05-02-00023  SCHOOL-BASED MEDICAID ADMIN & SERVICE COSTS - WISCONSIN,  
MAR 2003,  $144,909 
CIN: A-05-03-00059  ESRD #9 PRE-AWARD AUDIT (RFP-CMS-03-001/JAC),  MAY 2003,  
$139,816 
CIN: A-04-03-08013  ESRD NETWORK COST PROPOSAL,  MAY 2003,  $116,085 
CIN: A-05-03-00060  ESRD #10 PREAWARD AUDIT (RFP-CMS-03-001/JAC),  MAY 2003,  
$114,289 
CIN: A-05-01-00070  PAYMENTS TO GHP MCO/ST LOUIS FOR INSTITUTIONAL 
BENEFICIARIES,  JAN 2002,  $98,698 
CIN: A-02-96-02001  INTERNATIONAL RESCUE COMMITTEE - REFUGEE PROGRAM,  JAN 
1998,  $90,528 
CIN: A-05-02-00084  MEDICARE OUTPATIENT CARDIAC REHAB - ST.LUKES MEDICAL 
CENTER,  JUL 2003,  $47,247 
CIN: A-05-04-00051  ALLOWABILITY OF CDC BIOTERRORISM COSTS - OHIO 
DEPARTMENT OF HEALTH,  FEB 2005,  $4,154 
 
TOTAL CINS : 29 
TOTAL AMOUNT: $472,209,684 
 
 
 
76   
Appendix E:  Reporting Requirements of the Inspector 
General Act of 1978, as Amended 
 
The reporting requirements of the Inspector General Act of 1978, as amended, are listed 
below with reference to the page in the semiannual report on which each is addressed.  
Where  there  are  no  data  to  report  under  a  particular  requirement,  the  word  none 
appears in the column.  A complete listing of audit and inspection reports is being 
furnished to Congress under separate cover.  Copies are available upon request. 
 
Section of the Act   Requirement  Page 
Section 4(a)(2)  Review of legislation and regulations  p. 45 
     
Section 5     
  (a)(1)  Significant problems, abuses, and deficiencies  Throughout 
  (a)(2)  Recommendations with respect to significant  Throughout 
problems, abuses, and deficiencies 
  (a)(3)  Prior significant recommendations on which  Appendixes B and C 
corrective action has not been completed  
  (a)(4)  Matters referred to prosecutive authorities  p. 46 
  (a)(5)  Summary of instances in which information was  None 
refused   
  (a)(6)  List of audit reports  Under separate cover 
  (a)(7)  Summary of significant reports  Throughout 
  (a)(8)  Statistical Table 1Reports With Questioned Costs  p. 43 
  (a)(9)  Statistical Table 2Funds Recommended To Be Put  p. 44 
to Better Use 
  (a)(10)  Summary of previous audit reports without  Appendix D 
management decisions 
  (a)(11)  Description and explanation of revised management  Appendix D 
decisions 
  (a)(12)  Management decisions with which the Inspector  None 
General is in disagreement 
 
77    
Appendix F:  Summary of Sanction Authorities 
 
The Inspector General Act of 1978 (Public Law 95-452), as amended, sets forth specific 
requirements  for  semiannual  reports  to  be  made  to  the  Secretary  for  transmittal  to 
Congress.  A selection of other authorities appears below: 
 
Program Exclusions 
Section 1128 of the Social Security Act (42 U.S.C.  1320a-7) provides several grounds 
for excluding individuals and entities from participation in Medicare, Medicaid, and other 
Federal  health  care  programs.    Exclusions  are  required  for  individuals  and  entities 
convicted of the following types of criminal offenses:  (1) Medicare or Medicaid fraud; 
(2) patient abuse or neglect; (3) felonies for other health care fraud; and (4) felonies for 
illegal manufacture, distribution, prescription, or dispensing of controlled substances.  
OIG has the discretion to exclude individuals and entities on several other grounds, 
including misdemeanors for other health care fraud (other than Medicare or Medicaid) or 
for illegal manufacture, distribution, prescription, or dispensing of controlled substances; 
suspension or revocation of a license to provide health care for reasons bearing on 
professional competence, professional performance, or financial integrity; provision of 
unnecessary or substandard services; submission of false or fraudulent claims to a Federal 
health care program; or engaging in unlawful kickback arrangements. 
 
Providers subject to exclusion are granted due process rights (including a hearing before 
an HHS administrative law judge and appeals to the HHS Departmental Appeals Board 
and Federal district and appellate courts) regarding whether the basis for the exclusion 
exists and the length of the exclusion is reasonable. 
 
Patient Dumping 
Section 1867 of the Social Security Act (42 U.S.C.  1395dd) provides that when an 
individual  presents  to  the  emergency  room  of  a  Medicare-participating  hospital,  the 
hospital  must  provide  an  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 civil monetary penalties of up to $25,000 against small 
hospitals (less than 100 beds) and up to $50,000 against larger hospitals (100 beds or 
more) for each instance in which the hospital negligently violated any of the section 1867 
requirements.  In addition, OIG may collect a penalty of up to $50,000 from a responsible 
79  Appendix F 
 
 
physician for each negligent violation of any of the section 1867 requirements and, in 
some circumstances, may exclude a responsible physician. 
 
Civil Monetary Penalties Law 
Under the Civil Monetary Penalties Law (CMPL), section 1128A of the Social Security 
Act (42 U.S.C.  1320a-7a), a person is subject to penalties, assessments, and exclusion 
from participation in Federal health care programs for engaging in certain activities.  For 
example, a person who submits to a Federal health care program a claim for items and 
services that the person knows or should know is false or fraudulent is subject to a 
penalty of up to $10,000 for each item or service falsely or fraudulently claimed, an 
assessment  of  up  to  three  times  the  amount  falsely  or  fraudulently  claimed,  and 
exclusion. 
 
For the purposes of the CMPL, should know is defined to mean that the person acted in 
reckless disregard or deliberate ignorance of the truth or falsity of the claim.  The CMPL 
also authorizes actions for a variety of other violations, including submission of claims 
for items or services furnished by an excluded person; requests for payment in violation 
of  an  assignment  agreement;  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)). 
 
Anti-Kickback Statute and Civil False Claims Act Enforcement Authorities 
 
The  Anti-Kickback  StatuteThe  anti-kickback  statute  authorizes  penalties  against 
anyone who knowingly and willfully solicits, receives, offers, or pays remuneration, in 
cash or in kind, to induce or in return for (1) referring an individual to a person or entity 
for the furnishing, or arranging for the 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 (Section 1128B(b) of the Social 
Security Act, 42 U.S.C.  1320a-7b). 
 
Individuals and entities that engage in unlawful referral or kickback schemes may be 
subject  to  criminal  penalties  under  the  general  criminal  anti-kickback  statute,  civil 
monetary penalties under OIGs CMPL authority (Section 1128A(a)(7) of the Social 
Security Act, 42 U.S.C.  1320a-7a), and/or program exclusion under OIGs permissive 
exclusion authority (Section 1128(b)(7) of the Social Security Act, 42 U.S.C.  1320a-
7(b)(7)). 
 
False Claims ActUnder the Federal civil False Claims Act (FCA) (31 U.S.C.  3729-
3733), a person or entity is liable for up to treble damages and 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 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. 
 
80  Appendix F 
 
 
The  FCA  defines  knowing  to  include  not  only  the  traditional  definition,  but  also 
instances in which the person acted in deliberate ignorance of the truth or falsity of the 
information or in reckless disregard of the truth or falsity of the information.  Under the 
FCA, no specific intent to defraud is required.  Further, the FCA contains a qui tam or 
whistleblower provision that allows a private individual to file suit on behalf of the 
United States and entitles that whistleblower to a percentage of any fraud recoveries. 
81