Message  From  the  Inspector  General
  
This  report,  submitted  to  Congress  pursuant  to  the  Inspector  General  
Act  of  1978,  as  amended,  summarizes  the  activities  of  the  Office  of  
Inspector  General  (OIG),  Department  of  Health  &  Human  Services  
(HHS),  for  the  6month  period  ending  March  31,  2010.  
The  breadth  and  impact  of  HHS  programs  have  always  resulted  in  a  
robust  agenda  of  OIG  plenary  oversight  responsibilities.   Over  the  
past  year,  these  responsibilities  have  significantly  expanded  as  the  result  of  legislation  
and  of  Administration  and  departmental  initiatives.   Likewise,  OIGs  investigative,  
audit,  evaluative,  and  legal  activities  have  evolved  at  a  remarkable  pace.   With  the  
passage  of  health  care  reform  legislation  and  the  expansion  of  our  health  care  oversight  
resources,  we  are  actively  developing  our  operational  strategy  to  successfully  meet  our  
growing  oversight  responsibilities.  
Our  foremost  challenge  ahead  is  implementation  of  the  Patient  Protection  and  
Affordable  Care  Act.   OIG  is  developing  plans  for  implementing  new  OIG  mandates  and  
enforcement  authorities  and  for  issuing  regulations.   We  also  play  a  key  role  in  oversight  
of  HHSs  implementation  of  its  new  programs  and  responsibilities,  including  reviewing  
departmental  regulations  and  developing  a  plan  for  early  oversight  of  HHSs  health  
care  reform  activities.  
Last  year,  as  HHS  began  awarding  $165.4  billion  in  funds  authorized  by  the  American  
Recovery  and  Reinvestment  Act  of  2009  (Recovery  Act),  OIG  worked  with  HHS  
management  to  minimize  risk  by  reviewing  spending  plans  and  assessing  internal  
controls  to  prevent  fraud,  waste,  and  abuse.   We  are  now  transitioning  to  work  that  
assesses  the  quality  of  data  reported  by  recipients  and  the  appropriate  use  of  Recovery  
Act  funds.   OIG  is  also  investigating  allegations  of  fraud  involving  Recovery  Act  funds;  
overseeing  and  managing  the  exclusions  program  to  prohibit  excluded  individuals  and  
entities  from  participating  in  programs  involving  HHS  Recovery  Act  funds;  and  
coordinating  with  the  Recovery  Accountability  and  Transparency  Board;  the  
Government  Accountability  Office;  and  other  oversight  and  law  enforcement  agencies  at  
the  Federal,  State,  and  local  levels.  
Our  audit  staff  is  also  actively  engaged  in  implementation  of  the  Presidents  Executive  
Order  on  reducing  improper  payments  governmentwide.   Several  HHS  programs  were  
identified  as  being  high  priority.   These  highpriority  HHS  programs  include  Medicare  
feeforservice  programs  and  Parts  C  and  D,  Medicaid,  Childrens  Health  Insurance  
program,  and  the  Temporary  Assistance  for  Needy  Families  program.   
The  entire  office  continues  to  participate  in  the  Health  Care  Fraud  Prevention  &  
Enforcement  Action  Team  (HEAT).   For  example,  Strike  Force  teams  have  continued  to  
expand  to  additional  fraud  hot  spots  to  shut  down  criminals  masquerading  as  health  
care  providers.   The  success  of  HEAT  stems  directly  from  our  close  partnerships  with  
HHS,  the  Department  of  Justice,  and  State  and  local  law  enforcement  agencies.   We  will  
continue  to  capitalize  on  these  relationships  and  utilize  innovative  investigative   techniques  so  that  we  can  build  on  HEAT  successes  and  continue  to  eliminate  sham  
providers  from  bilking  scarce  Federal  health  care  dollars.  
Our  health  care  oversight  activities  also  continue  to  review  Medicare  and  Medicaid  
contractors,  prescription  drug  fraud,  and  Medicare  Advantage.   Our  oversight  of  the  
public  health  programs  during  this  period  includes  conflictofinterest  reviews  at  the  
Centers  for  Disease  Control  and  Prevention  and  the  National  Institutes  of  Health.  
As  we  address  an  expanding  mission  to  protect  HHSs  vital  health  and  human  service  
programs,  I  would  once  again  like  to  express  my  appreciation  to  Congress  and  to  the  
Department  for  their  sustained  commitment  to  supporting  the  important  work  of  our  
Office.  
 
 
Daniel  R.  Levinson  
Inspector  General   Highlights  
Summary  of  Accomplishments  
For  the  first  half  of  fiscal  year  (FY)  2010,  the  Department  of  Health  &  Human  
Services  (HHS)  Office  of  Inspector  General  (OIG)  reported  expected  recoveries  of  
about  $3.1  billion:   $667.3  million  in  audit  receivables  and  $2.5  billion  in  investigative  
receivables,  which  includes  $192.6  million  in  nonHHS  investigative  receivables  
resulting  from  OIG  work  (e.g.,  the  States  share  of  Medicaid  restitution).  
Also  for  this  semiannual  period,  OIG  reported  exclusions  of  1,935  individuals  and  
entities  from  participation  in  Federal  health  care  programs;  293  criminal  actions  against  
individuals  or  entities  that  engaged  in  crimes  against  departmental  programs;  and  164  
civil  actions,  which  included  False  Claims  Act  Amendments  of  1986  (FCA)  and  unjust  
enrichment  lawsuits  filed  in  Federal  district  court,  Civil  Monetary  Penalties  Law  (CMPL)  
settlements,  and  administrative  recoveries  related  to  provider  selfdisclosure  matters.   
The  following  are  highlights  of  some  of  OIGs  efforts  during  this  semiannual  period.  
Health  Care  Fraud  Prevention  &  Enforcement  Action  Team  
Medicare  Fraud  Strike  Force  Activities  
The  interagency  Health  Care  Fraud  Prevention  &  Enforcement  Action  Team  (HEAT),  
which  is  made  up  of  toplevel  law  enforcement  and  professional  staff  from  the  
Department  of  Justice  (DOJ)  and  HHS  and  their  operating  divisions,  builds  on  existing  
partnerships  to  prevent  fraud  and  enforce  current  antifraud  laws  around  the  country.   
The  initiative  is  enhancing  efforts  like  the  Medicare  Fraud  Strike  Force  teams  that  
coordinate  law  enforcement  operations  with  other  Federal,  State,  and  local  law  
enforcement  entities.   Strike  Forces  began  in  March  2007  and  are  operating  in  seven  
major  citiesMiami,  FL;  Los  Angeles,  CA;  Detroit,  MI;  Houston,  TX;  Brooklyn,  NY;  
Baton  Rouge,  LA;  and  Tampa,  FL.   During  this  semiannual  reporting  period,  Strike  
Force  efforts  have  resulted  in  the  filing  of  charges  against  119  individuals  or  entities,  
42  convictions,  and  $16  million  in  investigative  receivables.   (Details  on  p.  34.)    
In  a  recent  example  of  a  Strike  Force  outcome,  two  infusion  therapy  clinic  managers  
were  ordered  to  pay  $1,870,996  in  restitution.  
Managers  at  the  infusion  therapy  clinics  Xpress  Center  Inc.  (XPC),  and  AR  Group  
Services  were  both  sentenced  on  charges  of  conspiracy  to  commit  health  care  fraud.   
XPC  manager  Dulce  Briceno  was  sentenced  to  63  months  incarceration  and  ordered  to  
pay  $1,789,234  in  restitution.   Briceno  recruited  and  paid  patients  $50  per  visit  to  purport  
to  have  received  legitimate  services  at  XPC.   XPC  then  billed  Medicare  for  beneficiary  
medications  and  services  that  were  medically  unnecessary  and/or  not  provided.   
AR  Group  Services  manager  Arturo  Apolinar  was  sentenced  to  63  months  incarceration  
and  ordered  to  pay  $81,762  in  restitution.   Apolinar  stole  a  doctors  provider  enrollment  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   i   Highlights  
Spring  2010   information,  which  he  used  to  apply  for  a  Medicare  provider  number,  and  then  
submitted  false  claims  to  the  Medicare  program  for  infusion  therapy  services  that  were  
never  provided.   In  addition,  one  of  the  beneficiary  patients  involved  in  the  XPC  scheme,  
Darrell  Brown,  pleaded  guilty  to  conspiracy  to  commit  health  care  fraud  and  was  
ordered  to  pay  $173,732  in  restitution.    (Details  on  p.  34.)  
Medicare  and  Medicaid  Contractors  
Independent  Review  of  Claims  From  the  Comprehensive  Error  Rate  
Testing  Program   
We  determined  that  the  Centers  for  Medicare  &  Medicaid  Services  (CMS)  independent  
medical  reviews  of  a  subsample  of  Medicare  claims  from  the  fiscal  year  (FY)  2008  
Comprehensive  Error  Rate  Testing  (CERT)  samples  may  not  have  provided  assurance  
that  the  FY  2008  error  rate  was  accurate.   CMSs  independent  medical  review  found  116  
erroneous  claims  that  CMSs  CERT  contractor  had  not  initially  determined  to  be  in  error.   
Although  we  were  unable  to  quantify  the  statistical  effect  of  these  results  on  the  error  
rate,  the  results  indicate  the  need  for  further  CMS  improvements  in  the  Medicare  error  
rate  process.   We  recommended  that  CMS  clarify  documentation  policies  to  reduce  the  
number  of  differences  in  professional  judgment,  require  the  CERT  contractor  to  obtain  
physician  orders  to  support  the  medical  necessity  for  diagnostic  tests,  and  require  the  
CERT  contractor  to  develop  a  corrective  action  plan  to  reduce  the  number  of  incorrect  
determinations.   CMS  concurred  with  our  recommendations.   (A010900511)    
(Details  on  p.  15.)   
Medicare  Drug  Integrity  Contractors  Identification  of  Potential  Part  D  
Fraud  and  Abuse  
In  our  review  of  potential  Medicare  Part  D  fraud  and  abuse  incidents  identified  by  
Medicare  Drug  Integrity  Contractors  (MEDIC)  in  FY  2008,  we  found  that  87  percent  
were  identified  through  external  sources,  such  as  complaints.   The  remaining  13  percent  
of  potential  fraud  and  abuse  incidents  were  identified  through  proactive  methods,  such  
as  data  analysis.   Additionally,  96  percent  of  investigations  conducted  by  MEDICs  in  
FY  2008  involved  incidents  identified  through  external  sources.   Problems  with  accessing  
and  using  data  hindered  MEDICs  ability  to  identify  and  investigate  potential  fraud  and  
abuse  incidents.   MEDICs  lacked  the  authority  to  directly  obtain  information,  such  as  
prescriptions  and  medical  records  from  pharmacies,  pharmacy  benefit  managers,  and  
physicians.   Also,  MEDICs  may  not  have  been  aware  of  some  potential  fraud  and  abuse  
incidents  because  plan  sponsors  are  not  required  to  refer  them.   MEDICs  did  not  have  
CMS  approval  to  conduct  audits  of  plan  sponsors  compliance  plans  in  FY  2008.  
(OEI030800420)   (Details  on  p.  19.)  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   ii   Highlights  
Spring  2010   Medicare  and  Medicaid  Prescription  Drugs  
Omnicare  and  IVAX  Agree  to  Pay  $112  Million  for  Alleged  Kickback  Scheme   
Pharmacy  services  provider  Omnicare,  Inc.,  and  generic  drug  manufacturer  IVAX  
Pharmaceuticals,  Inc.,  agreed  to  pay  $98  million  plus  interest  and  $14  million  plus  
interest,  respectively,  for  allegedly  engaging  in  kickback  schemes.   Omnicare  allegedly  
engaged  with  several  parties,  including  IVAX,  in  kickback  schemes  that  resulted  in  
submitting  false  or  fraudulent  claims  to  Medicare  Part  D  and  Medicaid.   IVAX  allegedly  
paid  $8  million  to  Omnicare  to  induce  the  company  to  purchase  $50  million  in  drugs  
from  IVAX.   (Details  on  p.  36.)  
Mylan  Pharmaceuticals  and  UDL  Laboratories  Pay  $118  Million  to  Settle  False  
Claims  Violations  
Mylan  Pharmaceuticals,  Inc.,  and  UDL  Laboratories,  Inc.,  agreed  to  pay  $118  million  
plus  interest  to  resolve  allegations  that  the  companies  submitted  false  claims  to  the  
Medicaid  program  by  underpaying  rebates  due  to  the  States  under  the  Medicaid  Drug  
Rebate  Program.   Mylan  and  UDL  allegedly  sold  more  expensive  innovator  drugs  that  
were  manufactured  by  other  companies  and  classified  the  drugs  as  noninnovator  drugs  
for  Medicaid  rebate  purposes.   As  a  result  of  the  improper  classification  of  these  drugs,  
the  companies  underpaid  their  rebate  obligations  under  the  Medicaid  Drug  Rebate  
Program.   (Details  on  p.  36.)  
Rebates  for  BrandName  Drugs  With  Multiple  Versions  
We  calculated  that  from  1993  through  2007,  States  could  have  collected  about  
$2.5  billion  in  additional  rebates  for  65  brandname  drugs  if  the  baseline  average  
manufacturer  prices  (AMP)  of  new  versions  of  those  drugs  had  been  reduced  to  reflect  
price  increases  in  excess  of  inflation  for  the  earliest  versions  of  the  drugs.   For  
manufacturers  covered  outpatient  drugs  to  be  eligible  for  Federal  Medicaid  funding,  
manufacturers  must  enter  into  rebate  agreements  and  pay  quarterly  rebates  to  States.   
Federal  law  requires  manufacturers  to  pay  an  additional  rebate  when  the  AMP  for  a  
brandname  drug  increases  more  than  inflation.   Because  the  Medicaid  program  
calculates  rebates  separately  for  each  version  of  a  drug,  manufacturers  could  develop  
new  versions  of  existing  brandname  drugs  solely  to  avoid  paying  additional  rebates  
when  they  substantially  increase  prices.   Unless  the  rebate  law  is  modified,  
manufacturers  could  take  increasing  advantage  of  this  potential  loophole.   We  
recommended  that  CMS  continue  to  seek  legislative  authority  to  modify  the  rebate  
calculation  to  ensure  that  manufacturers  would  not  be  able  to  circumvent  paying  
additional  rebates  by  bringing  new  versions  of  existing  brandname  drugs  to  market.   
CMS  concurred.   (A060900033)   (Details  on  p.  25.)  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   iii   Highlights  
Spring  2010   Medicare  Clinics  
Infusion  Clinic  Employee  Sentenced  To  Serve  78  Months  in  Prison,  Pay  
$14,051,221  in  Restitution  for  Kickback  Scheme   
Caridad  Perez,  a  former  infusion  clinic  employee,  was  sentenced  to  78  months  
incarceration  and  ordered  to  pay  $14,051,221  in  restitution  for  her  participation  in  a  
health  care  fraud  conspiracy.   Perez  recruited  Medicare  beneficiaries  and  paid  them  cash  
kickbacks  in  exchange  for  allowing  their  Medicare  numbers  to  be  billed  at  numerous  
Miamibased  infusion  therapy  clinics  for  medically  unnecessary  and  nonrendered  
infusion  therapy  medication.   (Details  on  p.  37.)  
Health  Care  Clinic  Operator  Sentenced  to  78  Months  in  Prison  for  Fraud,  Must  
Pay  $1,558,620  in  Restitution  
Vardges  Egiazarian,  who  operated  three  health  care  clinics,  was  sentenced  to  78  months  
incarceration  and  ordered  to  pay  $1,558,620  in  restitution  for  submitting  claims  to  
Medicare  for  office  visits,  physical  therapy,  and/or  other  procedures  and  diagnostic  tests  
that  were  not  needed  and/or  not  rendered.   He  also  paid   kickbacks  to  cappers,  who  
recruited  patients  to  come  to  the  clinics  in  return  for  freebies,  such  as  durable  medical  
equipment  (DME)  and  cash  payments.   Egiazarian  used  false  identification  documents  
to  establish  bank  accounts,  using  aliases  to  launder  fraud  proceeds.   (Details  on  p.  38.)  
Medicare  Part  C  
Beneficiaries  Remain  Vulnerable  to  Sales  Agents  Marketing  of  Medicare  
Advantage  Plans  
In  our  review  of  the  marketing  practices  of  six  Medicare  Advantage  (MA)  plan  sponsors,  
we  found  that  each  sponsor  did  not  follow  at  least  one  of  the  marketing  regulations  
related  to  sales  agent  compensation  and  qualifications.   Five  of  the  selected  plan  
sponsors  in  our  review  that  employ  independent  sales  agents  had  compensation  
practices  that  resulted  in  inappropriate  financial  incentives  for  sales  agents  and  field  
marketing  organizations  (FMO).   FMOs  typically  provide  sales  agents  with  enrollment  
leads  and  marketing  assistance.   Five  of  the  six  selected  plan  sponsors  also  did  not  
ensure  that  all  of  their  sales  agents  were  qualified  under  CMSs  regulations.   We  also  
found  that  the  number  and  types  of  beneficiaries  complaints  remained  unchanged  after  
implementation  of  sales  agent  marketing  regulations.   (OEI050900070)    
(Details  on  p.  18.)  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   iv   Highlights  
Spring  2010   Public  Health  
Compliance  With  Appropriations  and  Acquisition  Requirements  
In  response  to  a  congressional  request,  we  found  that  the  Centers  for  Disease  Control  
and  Prevention  (CDC)  did  not  comply  with  all  appropriations  and  acquisition  
requirements  when  administering  a  contract  and  eight  task  orders  awarded  to  a  small  
business.   CDC  violated  acquisition  regulations  and  circumvented  civil  service  laws  by  
using  contractor  personnel  for  personal  services.   CDC  also  violated  the  bona  fide  needs  
statute  by  extending  periods  of  performance  beyond  1  year  and  expending  $1.1  million  
of  annual  appropriations  outside  their  1year  period  of  availability.   We  recommended  
that  CDC,  among  other  actions,  correct  the  administration  of  any  contracts  or  task  orders  
being  administered  as  personal  service  contracts,  determine  whether  the  $1.1  million  
expended  outside  the  1year  period  of  availability  violated  the  AntiDeficiency  Act  and  
correct  any  such  violations,  and  ensure  compliance  with  requirements  for  the  obligation  
and  expenditure  of  funds.   CDC  disagreed  that  it  had  administered  task  orders  as  
personal  service  contracts  but  agreed  with  most  of  our  recommendations.    
(A040801059)   (Details  on  p.  45.)  
Department  of  Health  &  Human  Services  Conflicts  of  Interest  
In  two  reviews,  we  addressed  conflictofinterest  issues  within  HHS.   Key  findings  
follow.    
 	  Special  Government  Employees  Serving  on  Federal  Advisory  Committees  
at  CDC    We  found  that  CDC  and  its  Special  Government  Employees  (SGE)  did  not  
comply  with  a  number  of  ethics  requirements  in  2007.   That  is,  for  almost  all  SGEs,  
CDC  did  not  ensure  that  Confidential  Financial  Disclosure  Reports  were  complete  in  
2007,  and  most  of  these  forms  contained  multiple  omissions.   CDC  did  not  identify  
or  resolve  conflicts  of  interest  for  64  percent  of  SGEs  in  2007.   Over  onefourth  of  
SGEs  had  both  unidentified  and  unresolved  potential  conflicts  of  interest  on  file.   
CDC  also  did  not  ensure  that  41  percent  of  SGEs  received  required  ethics  training  in  
2007.   Also,  15  percent  of  SGEs  did  not  comply  with  ethics  requirements  during  
committee  meetings  in  2007.   These  SGEs  either  participated  in  meetings  without  
having  a  current,  certified  Confidential  Financial  Disclosure  Report  on  file,  or  they  
voted  on  committee  matters  in  which  they  were  prohibited  from  participating  
because  of  a  documented  conflict  of  interest.   (OEI040700260)   (Details  on  p.  43.)  
 	  Financial  ConflictsofInterest  Reporting  by  Grantee  Institutions  to  the  National  
Institutes  of  Health     We  found  that  a  number  of  vulnerabilities  existed  in  the  
National  Institutes  of  Health  (NIH)  grantee  institutions  identification,  management,  
and  oversight  of  financial  conflicts  of  interest.   For  example,  90  percent  of  the  grantee  
institutions  relied  solely  on  the  researchers  discretion  to  determine  which  of  their  
significant  and  financial  interests  were  related  to  their  research  and  were  therefore  
required  to  be  reported.   We  found  that  because  nearly  half  of  the  grantee  
institutions  did  not  require  researchers  to  provide  specific  amounts  of  equity  or  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   v   Highlights  
Spring  2010   compensation  on  their  financial  disclosure  forms,  specific  financial  interests  of  
NIHfunded  researchers  were  often  unknown.   In  addition,  when  researchers  
submitted  information  about  their  financial  interests,  grantee  institutions  did  not  
routinely  verify  it.   (OEI030700700)   (Details  on  p.  49.)  
Other  Significant  Work  
Pediatric  Dental  Clinic  Chain  Enters  Into  $24  Million  Settlement  for  False  
Claims  Violations  
FORBA  Holdings,  LLC,  which  manages  a  nationwide  chain  of  pediatric  dental  clinics  
commonly  known  as  Small  Smiles  Centers,  agreed  to  pay  $24  million  plus  interest  and  
enter  into  a  5year  qualityofcare  corporate  integrity  agreement  (CIA)  to  resolve  its  
liability  for  violations  of  the  FCA.   FORBA  allegedly  caused  the  submission  of  claims  for  
reimbursement  for  dental  services  that  were  either  not  medically  necessary  or  did  not  
meet  professionally  recognized  standards  of  care.   (Details  on  p.  41.)  
Chiropractor  Excluded  for  60  Years  After  Rape  Conviction  
Chiropractor  Gregory  Dew  was  excluded  for  a  minimum  of  60  years  based  on  his  
conviction  for  rape,  corruption  of  a  minor,  and  gross  sexual  imposition.   Dew  was  
sentenced  to  43  years  incarceration.   The  Ohio  State  Chiropractic  Board  permanently  
revoked  his  license,  and  the  State  Medical  Board  of  Ohio  permanently  revoked  his  
license  to  practice  as  a  physician  assistant.   (Details  on  p.  32.)  
Aberrant  Medicare  Home  Health  Outlier  Payment  Patterns  in  MiamiDade  
County  and  Other  Geographic  Areas  in  2008  
We  found  that  MiamiDade  County  accounted  for  more  home  health  outlier  payments  
in  2008  than  the  rest  of  the  Nation  combined.   More  than  85  percent  of  home  health  
providers  that  received  outlier  payments  over  $100,000  per  beneficiary  and  67  percent  
of  home  health  providers  that  received  total  outlier  payments  over  $1  million  per  
beneficiary  were  in  MiamiDade  County.   We  also  found  that  in  MiamiDade  County  
Medicare  outlier  payments  for  home  health  claims  with  a  primary  diagnosis  related  to  
diabetes  were  eight  times  the  national  average.   More  than  half  of  home  health  providers  
in  MiamiDade  County  and  23  other  counties  that  we  identified  were  paid  at  least  twice  
the  national  average  for  three  or  more  of  the  five  payment  characteristics  we  reviewed.   
(OEI040800570)   (Details  on  p.  7.)  
Departmental  Financial  Statement  Audit  
In  an  audit  of  the  FY  2009  HHS  financial  statements,  independent  external  auditors  
provided  an  unqualified  opinion.   This  is  the  11th  consecutive  year  that  the  statements  
were  deemed  reliable  and  fairly  presented.   However,  the  report  on  internal  controls  
noted  two  material  weaknessesone  pertaining  to  financial  reporting  systems,  analyses,  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   vi   Highlights  
Spring  2010   and  oversight  and  the  other  to  financial  management  information  systems.    
(A170900001)   (Details  on  p.  59.)  
 
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   vii   Highlights
  
Spring  2010 
  Background  
At  all  levels,  the  Office  of  Inspector  General  (OIG)  works  in  close  cooperation  with  the  
Department  of  Health  &  Human  Services  (HHS)  and  its  operating  and  staff  divisions,  
the  Department  of  Justice,  other  agencies  in  the  executive  branch,  Congress,  and  States  
to  bring  about  successful  prosecutions,  negotiated  settlements,  recovery  of  funds,  and  
systemic  improvements,  which  often  include  greater  beneficiary  protections,  improved  
program  oversight,  or  funds  put  to  better  use.   Systemic  results  are  usually  achieved  
through  modifications  to  administrative  policies,  processes,  or  procedures;  changes  to  
existing  regulations  and  law;  or  improvements  in  information  technology.  
Office  of  Inspector  General  Recommendations  
OIG  relies  on  HHS  management  and  other  governmental  policymakers  to  decide  which  
program  recommendations  are  implemented.   Although  many  OIG  recommendations  
are  directly  implemented  by  organizations  within  HHS,  some  are  acted  on  by  States,  
which  collaborate  with  HHS  to  administer,  operate,  and/or  oversee  designated  
programs,  such  as  Medicaid.   HHS  and  the  States  sometimes  do  not  immediately  
implement  OIGs  recommendations  for  various  reasons,  including  administrative  
complexities,  the  current  policy  environment,  or  a  lack  of  statutory  authority.   In  such  
cases,  Congress  may  step  in  to  weave  OIGs  recommendations  into  legislative  actions,  
many  of  which  result  in  substantial  funds  being  made  available  for  better  use  or  in  
program  improvements.    
The  body  of  this  Semiannual  Report  describes  the  results  of  selected  reviews  and  other  
efforts  finalized  during  the  period.   Information  about  the  estimated  current  or  potential  
monetary  impact  of  our  recommendations  is  found  in  the  appendixes.   Some  current  
outcomes  relate  to  reports  issued  and  corresponding  actions  taken  in  prior  periods.   
Specifically,  Appendix  A  includes  data  on  management  decisions  that  were  made  during  
the  period  to  disallow  questioned  costs,  thus  creating  audit  receivables.   Some  of  the  
questioned  costs  disallowed  were  identified  as  findings  in  reports  that  were  issued  in  
prior  semiannual  periods.  
In  addition  to  publishing  the  semiannual  reports  to  Congress,  OIG  annually  publishes  
the  Compendium  of  Unimplemented  Recommendations,  which  consolidates  significant  
unimplemented  monetary  and  nonmonetary  recommendations  that  have  been  
addressed  previously  to  HHS  and  its  pertinent  operating  and  staff  divisions.   The  
Compendium  provides  information  about  outstanding  recommendations  that,  if  
implemented,  have  the  potential  to  result  in  cost  savings  and  improvements  to  program  
efficiency  and  effectiveness.   These  recommendations,  which  are  selected  from  audits  
and  evaluations,  require  one  or  more  of  three  types  of  actions:   administrative,  
regulatory,  or  legislative.   OIG  performs  routine  followup  with  the  Department  to  
determine  the  status  of  actions  being  taken  in  response  to  our  recommendations.   The  
Compendium  is  available  on  OIGs  Web  site  at:   
http://www.oig.hhs.gov/publications/compendium.asp.  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   ix   Background  
Spring  2010   Table  of  Contents  
Centers for Medicare & Medicaid Services ................................................................................ 1
  
Medicare Part A and Part B (Traditional Medicare) ................................................................. 2
  
Hospitals:................................................................................................................................ 2
  
HighDollar  Payments  for  Inpatient  Services ......................................................................2  

HighDollar  Payments  for  Outpatient  Services...................................................................3  

Outpatient  Payments  for  Oxaliplatin.....................................................................................4  

Adverse  Events:   Hospitals  Policies  and  Practices..............................................................4  

Adverse  Events:   Hospitals  Public  Disclosure  of  Information .........................................4  

Adverse  Events:   Hospitals  Methods  for  Identifying  Events ...........................................5  

Nursing  Homes: .................................................................................................................... 6
  
Medicare  Part  B  Services  During  NonPart  A  Nursing  Home  Stays:   Enteral  

Nutrient  Pricing..................................................................................................................6  

Home  Health  Agencies: ....................................................................................................... 7
  
Aberrant  Medicare  Home  Health  Outlier  Payment  Patterns  in  MiamiDade  

County  and  Other  Geographic  Areas  in  2008 ...............................................................7  

Renal  Dialysis  Facilities: ..................................................................................................... 8 
 
Dosage  Protocols  for  Administering  ErythropoiesisStimulating  Agents......................8  

Laboratory  Tests  for  Beneficiaries  With  End  Stage  Renal  Disease ...................................8  

Practitioners  and  Suppliers:................................................................................................ 9
  
Reassignment  of  Medicare  Benefits  to  Third  Parties ..........................................................9  

Organ  Acquisition  Costs  Reported  by  One  Organization  in  Fiscal  Year  2006 .............10  

Medical  Equipment  and  Supplies:   Power  Wheelchair  Claims  Frequently  Did  

Not  Meet  Documentation  Requirements.....................................................................10  

Medical  Equipment  and  Supplies:   Vulnerabilities  in  Medicare  Payments  for  

Pressure  Reducing  Support  Surfaces............................................................................11  

Medical  Equipment  and  Supplies:   Equipment  Claims  With  the  KX  Modifier...........12  

Part  B  Prescription  Drugs: ................................................................................................. 13
  
Comparison  of  Average  Sales  Prices  to  Average  Manufacturer  Prices  and  

Widely  Available  Market  Prices  for  Part  B  Prescription  Drugs:   Impact  on  

Medicare  Reimbursement...............................................................................................13  

Average  Sales  Prices:   Manufacturer  Reporting  and  CMS  Oversight ...........................14  

______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   xi   Table  of  Contents  
Spring  2010   Medicare  Contractors: ........................................................................................................ 15 
 
Independent  Review  of  Claims  From  the  Fiscal  Year  2008  Comprehensive  

Error  Rate  Testing  Program............................................................................................15  

Recovery  Audit  Contractors Fraud  Referrals....................................................................16  

Contractor  Information  Security  Program  Evaluations ...................................................16  

Medicare Part C (Medicare Advantage).................................................................................... 17 
 
Beneficiary Appeals  in  Medicare  Advantage.....................................................................17  

Medicare Part D (Prescription Drug Program)........................................................................ 18 
 
Demonstration  Project  for  Dually  Eligible  Beneficiaries..................................................18  

Potential  Part  D  Fraud  and  Abuse  Identified  by  Medicare  Drug  Integrity  

Contractors ........................................................................................................................19  

Medicare  Part  D  Plan  Sponsor  Electronic  Prescribing  Initiatives...................................20  

Electronic  Prescribing  Standards:   Early  Assessment  Shows  Partial  

Connectivity ......................................................................................................................20  

Midyear  Formulary  Changes  in  Medicare  Prescription  Drug  Plans.............................21  

Medicaid....................................................................................................................................... 23
  
Hospitals............................................................................................................................... 23
  
Supplemental  Rate  Payments  to  a  Massachusetts  Hospital  Company.........................23  

Homeand  CommunityBased  Services......................................................................... 23
  
Connecticuts  CommunityBased  Administrative  Claims...............................................23  

Other  Services,  Equipment,  and  Supplies ..................................................................... 23
  
Claims  for  Family  Planning  Services  in  New  York  State .................................................23  

Missouri  School  District  Administrative  Claims ...............................................................24  

Prescription  Drugs.............................................................................................................. 25 
 
Outlier  Average  Manufacturer  Prices  in  the  Federal  Upper  Limit  Program................25  

Rebates  for  BrandName  Drugs  With  Multiple  Versions ................................................25  

Medicaid  Administration.................................................................................................. 26
  
State  Claims  Under  the  American  Recovery  and  Reinvestment  Act  of  2009 ...............26  

Californias  Payment  Error  Rate  Measurement  Universes ..............................................26  

Legal Activities and Investigative Outcomes Related to Centers for Medicare & Medicaid 

Services Programs................................................................................................................. 29
  
Medicareand  MedicaidRelated  Outreach................................................................... 29
  
Advisory  Opinions..................................................................................................................29  

Provider  SelfDisclosure  Protocol.........................................................................................29  

______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   xii   Table  of  Contents  
Spring  2010   Office  of  Inspector  General  Administrative  Sanctions ............................................... 31 
 
Program  Exclusions ................................................................................................................32  

Civil  Monetary  Penalties  Law...............................................................................................32  

Criminal  and  Civil  Enforcement...................................................................................... 33 
 
Special  Assistant  United  States  Attorney  Program...........................................................34  

Health  Care  Fraud  Prevention  and  Enforcement  Action  Team......................................34  

Pharmaceutical  Companies...................................................................................................35  

Hospitals ...................................................................................................................................37  

Clinics ........................................................................................................................................37  

Home  Health............................................................................................................................38  

Practitioners..............................................................................................................................38  

Durable  Medical  Equipment  Suppliers...............................................................................39  

Transportation  Companies ....................................................................................................39  

Medicaid  Employee  Fraud ....................................................................................................39  

Prescription  Drugs ..................................................................................................................40  

Neuromonitoring  Services.....................................................................................................40  

Identity  Theft............................................................................................................................40  

Medicaid  Fraud  Control  Units.......................................................................................... 41 
 
Joint  Investigations..................................................................................................................41  

Other CMS-Related Reports ...................................................................................................... 42
  
Financial  Statement  Audit .....................................................................................................42  

Public Health, Human Services, and Departmentwide Issues................................................. 43 
 
Public  Health  Reports ........................................................................................................ 43 
 
Ethics  Program  for  Special  Government  Employees  on  Federal  Advisory  
Committees........................................................................................................................43  

CHEMPACK Project:   Nerve Agent Antidote Storage.....................................................44  

Compliance  With  Appropriations  Laws  and  Acquisition  Regulations ........................45  

Food  Facility  Registry.............................................................................................................46  

Adverse  Event  Reporting  for  Medical  Devices..................................................................46  

Implementation  of  the  Core  Medical  Services  Requirement  in  the  Ryan  

White  Program..................................................................................................................47  

Ryan  White  Title  II  Funding  in  Maryland ..........................................................................48  

Fiscal  Year  2005  Cost  Statement  for  the  Indian  Health  Services  Phoenix  Area  

Office...................................................................................................................................49  

How  Grantees  Manage  Financial  Conflicts  of  Interest  in  Research  Funded  by  

the  National  Institutes  of  Health ...................................................................................49  

Internal  Controls  for  Awarding  American  Recovery  and  Reinvestment  Act  

Funds ..................................................................................................................................50  

______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   xiii   Table  of  Contents  
Spring  2010   PublicHealthRelated  Legal  Actions  and  Investigations ........................................... 51
  
Office  of  Inspector  General  Administrative  Sanctions .....................................................51  

PublicHealthRelated  Investigations ..................................................................................52  

HumanServicesRelated  Reports.................................................................................... 52 
 
Administration  for  Children  &  Families  Resolution  of  Audit  

Recommendations............................................................................................................52  

Pennsylvanias  Foster  Care  Claims  on  Behalf  of  Children  Who  Exceeded  the  

Maximum  Eligible  Age ...................................................................................................53  

Californias  Foster  Care  Claims  for  Payments  Made  by  Los Angeles  County.............54  

Title  IVE  LongTerm  Training  Costs  in  Missouri .............................................................54  

Health  and  Safety  at  Head  Start  Grantees ..........................................................................55  

Child  Support  Enforcement.............................................................................................. 56
  
Child  Support  Intergovernmental  Collaboration..............................................................56  

Child  Support  Task  Forces.....................................................................................................56  

Child  Support  Investigations ................................................................................................57  

Misuse  of  Administration  for  Children  &  Families  Grant  Funds ..................................58  

Departmentwide  Issues ..................................................................................................... 58 
 
Processes  for  Performing  Limited  DataQuality  Reviews ...............................................58  

Departmental  Financial  Statement  Audit ...........................................................................58  

NonFederal  Audits ................................................................................................................59  

Employee  Fraud  and  Misconduct........................................................................................60  

Legislative  and  Regulatory  Review .....................................................................................60  

Resolving  Recommendations................................................................................................61  

Appendix A:  Resolving Recommendations ............................................................................. 63
  
Table  1:   Reports  With  Questioned  Costs............................................................................63  

Table  2:   Funds  Recommended  To  Be  Put  to  Better  Use...................................................64  

End  Notes  to  Tables  1  and  2...................................................................................................64  

Appendix B:  Reporting Requirements of the Inspector General Act of 1978, as Amended 71 
 
Appendix C:  Summary of Sanctions Authorities.................................................................... 73
  
Appendix D:  Acronyms and Abbreviations............................................................................. 77
  
 
NOTE:   Summaries  of  OIG  audit  and  evaluation  reports  in  this  publication  contain  
rounded  figures.   Monetary  amounts  in  case  narratives  are  rounded  to  the  next  lower  
dollar,  where  appropriate. 
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   xiv   Table  of  Contents  
Spring  2010   Centers  for  Medicare  &  Medicaid  Services   
The  Office  of  Inspector  General  (OIG)  allocates  about  80  percent  of  its  resources  to  work  
related  to  the  Centers  for  Medicare  &  Medicaid  Services  (CMS),  which  administers  the  
following  programs:    
 	  Medicare,  which  provides  health  insurance  for  people  65  years  of  age  or  older,  
people  younger  than  65  years  old  with  certain  disabilities,  and  people  of  any  age  
with  end  stage  renal  disease.   In  fiscal  year  (FY)  2009,  Medicare  served  an  estimated  
46  million  enrollees  at  a  cost  of  more  than  $503.9  billion.1   Medicare  has  four  parts:   
Part  A  (Hospital  Insurance),  which  helps  cover  inpatient  care  in  hospitals,  including  
critical  access  hospitals,  skilled  nursing  facilities  (SNF),  and  hospice  and  certain  
home  health  care;  Part  B  (Supplementary  Medical  Insurance),  which  helps  pay  for  
physician  services,  outpatient  care,  and  other  medical  services  that  Part  A  does  not  
cover,  such  as  certain  services  offered  by  physical  and  occupational  therapists;  
Part  C  (Medicare  Advantage  (MA)),  which  offers  a  range  of  prepaid  managed  health  
care  choices;  and  Part  D  (the  Medicare  Prescription  Drug  Benefit),  which  provides  an  
optional  prescription  drug  benefit  to  individuals  enrolled  in  Medicare,  generally  
through  private  prescription  drug  plans  (PDP).    
 	  Medicaid,  a  joint  FederalState  program,  supports  States  coverage  of  medical  care  
and  other  support  services  for  lowincome  individuals.   In  FY  2009,  the  enrollment  
for  Medicaid  was  estimated  at  51.7  million  beneficiaries;  total  Federal  and  State  
outlays  were  approximately  $380.9  billion,  of  which  the  Federal  share  was  
$250.9  billion.    
 	  The  Childrens  Health  Insurance  Program  (CHIP),  a  joint  FederalState  program  
established  in  1997  under  Title  XXI  of  the  Social  Security  Act,  provides  health  
insurance  for  children  who  do  not  qualify  for  Medicaid  but  whose  families  are  not  
able  to  afford  private  coverage.   During  FY  2009,  an  estimated  7.7  million  children  
benefited  from  CHIP,  at  a  Federal  cost  of  $7.5  billion.    
OIGs  focus  on  these  health  care  programs  reflects  the  spending  of  the  Department  of  
Health  &  Human  Services  (HHS):   CMS  expenditures  account  for  more  than  80  percent  
of  the  Departments  budget.   OIGs  focus  is  also  rooted  in  legislative  mandates  and  
funding  sources,  including  the  following:    
 	  The  Health  Insurance  Portability  and  Accountability  Act  of  1996  (HIPAA),  which  
established  the  Health  Care  Fraud  and  Abuse  Control  program  (HCFAC)  under  the  
direction  of  the  Attorney  General  and  the  Secretary  of  HHS  to  combat  waste,  fraud,  
and  abuse  in  the  Medicare  and  Medicaid  programs.   HCFAC  funding  constitutes  a  
                                                      
1  The  $503.9  billion  figure  represents  total  outlays  for  Medicare  health  care  and  program  
administrative  overhead  (the  latter  being  in  the  $6.6  billion  range  for  FY  2009).   Lower  Medicare  
outlay  estimates  found  in  budget  documents  typically  subtract  particular  income  items  classified  
as  offsetting  receipts  in  the  Federal  budget,  mainly  from  Part  B  premiums.   Medicare  premiums  
(Parts  A,  B,  and  D)  go  directly  into  one  of  two  pertinent  trust  funds.  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   1   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   major  portion  of  OIGs  annual  operating  budget  and  must  be  used  for  work  related  
to  Medicare  and  Medicaid.  
 	  The  Deficit  Reduction  Act  of  2005  (DRA),  which  provides  OIG  annual  funding  of  
$25  million  in  FYs  20062010  to  undertake  fraud  and  abuse  control  activities  related  
to  the  Medicaid  program.  
 	  The  American  Recovery  and  Reinvestment  Act  of  2009  (Recovery  Act),  which  
provided  OIG  $31.25  million  in  FY  2009,  to  remain  available  through  FY  2011,  for  
activities  that  ensure  the  proper  expenditure  of  Medicaid  funds.  
 	  The  Supplemental  Appropriations  Act  of  2008,  P.L.  No.  110252,  provided  additional  
funding  to  OIG  to  reduce  fraud  and  abuse  in  the  Medicaid  program  under  Title  XIX  
of  the  Social  Security  Act.   This  funding,  which  was  provided  for  FY  2009  in  addition  
to  other  amounts  appropriated  for  Medicaid  oversight,  is  available  until  expended.  
This  chapter  on  CMSrelated  work  summarizes  OIGs  findings  and  recommendations  
related  to  the  Medicare,  Medicaid,  and  CHIP  programs  and  provides  examples  of  our  
outreach  efforts,  administrative  sanctions,  and  criminal  and  civil  enforcement  activities.    
Medicare  Part  A  and  Part  B  (Traditional  Medicare)  
Hospitals:  
HighDollar  Payments  for  Inpatient  Services  
During  the  semiannual  period,  we  issued  two  reports  on  highdollar  payments  that  
fiscal  intermediaries  (FI)  made  to  hospitals  for  inpatient  services  claimed  under  
Medicare  Part  A.   We  defined  highdollar  payments  as  those  that  were  $200,000  or  more  
each.   CMS  contracts  with  FIs  to,  among  other  functions,  process  and  pay  Medicare  
Part  A  (inpatient)  claims  submitted  by  providers.    
The  results  of  our  audits  follow:  
 	  Intermediary  for  Alabama    The  FI  overpaid  Alabama  hospitals  $1.5  million  for  
inpatient  services  during  calendar  years  (CY)  20042006.   Contrary  to  Federal  
guidance,  hospitals  reported  excessive  units  of  service  and  charges  that  resulted  in  
inappropriate  outlier  or  addon  payments  and  failed  to  maintain  documentation  of  
all  charges  filed.   Hospitals  generally  attributed  the  incorrect  claims  to  data  entry  
errors  or  insufficient  documentation.   The  FI  made  these  incorrect  payments  because  
neither  the  FI  Standard  System  nor  the  Common  Working  File  had  sufficient  edits  in  
place  to  detect  and  prevent  the  overpayments.   The  FI  overpaid  one  claim  because  it  
used  an  incorrect  wage  index  when  determining  the  payment.   The  FI  attributed  the  
overpayment  to  a  data  entry  error.  
We  recommended  that  the  FI  (1)  recover  the  $1.5  million  in  identified  overpayments,  
(2)  use  the  results  of  this  audit  in  its  provider  education  activities,  and  (3)  consider  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   2   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   implementing  controls  to  identify  and  review  all  payments  greater  than  $200,000  for  
inpatient  services.   The  FI  agreed  with  our  recommendations.   A-04-08-00039.    
 	  Intermediary  for  All  States  Except  New  York    Of  the  520  highdollar  Medicare  
payments  that  another  FI  made  to  hospitals  for  inpatient  services  for  CYs  2004  
through  2006,  42  were  appropriate.   The  478  remaining  payments  included  net  
overpayments  totaling  $4.7  million,  which  the  hospitals  had  not  refunded  before  the  
start  of  our  audit.   
Contrary  to  Federal  guidance,  hospitals  inaccurately  reported  the  number  of  
billing  units  for  blood  clotting  factor,  reported  incorrect  diagnosis  and  procedure  
codes,  and  reported  excessive  charges  that  resulted  in  inappropriate  outlier  
payments.   Hospitals  attributed  most  of  the  incorrect  claims  to  data  entry  errors  and  
insufficient  documentation.   The  FI  made  these  incorrect  payments  because  neither  
the  Fiscal  Intermediary  Standard  System  nor  the  Common  Working  File  had  
sufficient  edits  in  place  to  detect  and  prevent  the  overpayments.  
We  recommended  that  the  FI  (1)  recover  the  $4.7  million  in  identified  net  
overpayments,  (2)  use  the  results  of  this  audit  in  its  provider  education  activities  
related  to  data  entry  procedures  and  proper  documentation,  and  (3)  consider  
implementing  controls  to  identify  and  review  all  payments  greater  than  $200,000  for  
inpatient  services.   The  FI  described  corrective  actions  that  it  had  taken  or  planned  to  
take  to  implement  our  recommendations.   A-05-08-00051.    
HighDollar  Payments  for  Outpatient  Services   
Our  audit  found  that  all  46  sampled  highdollar  payments  ($50,000  or  more)  that  an  FI  
made  to  the  outpatient  departments  (providers)  of  hospitals  in  Virginia  and  West  
Virginia  during  CYs  20032005  were  inappropriate.   The  46  payments  included  
overpayments  totaling  $3.5  million.   Providers  refunded  $554,000  of  this  amount  before  
our  audit  and  $627,000  as  a  result  of  our  audit.   Providers  had  not  refunded  $2.3  million  
in  overpayments  for  35  claims  at  the  time  of  our  audit.   CMS  contracts  with  fiscal  
intermediaries  to  process  and  pay  Medicare  Part  B  claims  submitted  by  providers.    
Providers  received  these  overpayments  by  billing  for  excessive  units  of  service  or  by  
billing  for  the  wrong  service  or  procedure.   The  FI  made  incorrect  payments  because  
neither  the  Fiscal  Intermediary  Standard  System  nor  the  Common  Working  File  had  
sufficient  edits  in  place  during  CYs  20032005  to  detect  and  prevent  the  overpayments.  
We  recommended  that  the  FI  (1)  recover  the  estimated  $2.3  million,  and  any  additional  
amounts,  for  the  35  identified  overpayments  and  (2)  use  the  results  of  this  audit  in  its  
provider  education  activities.   The  FI  said  that  it  had  recouped  $2.33  million  for  the  
35  identified  overpayments,  $2,000  more  than  originally  estimated,  and  that  it  was  using  
its  data  analysis  reports  to  identify  similar  billing  errors.  
A-03-07-00015.    
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   3   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   Outpatient  Payments  for  Oxaliplatin  
For  all  57  Medicare  outpatient  payments  reviewed,  7  hospitals  billed  the  FI  for  Virginia  
for  the  incorrect  number  of  service  units  of  Oxaliplatin,  which  is  a  chemotherapy  drug  
used  to  treat  colorectal  cancer.   As  a  result  of  the  incorrect  billing,  the  hospitals  received  
overpayments  totaling  $1.4  million  during  calendar  year  2005.   These  overpayments  
occurred  primarily  because  the  hospitals  did  not  update  their  systems  after  a  change  in  
Medicare  billing  guidance.  
We  recommended  that  the  FI  recover  the  $1.4  million  in  overpayments  to  the  hospitals.   
The  FI  agreed  with  our  recommendation.   A-04-09-06103.    
Adverse  Events:   Hospitals  Policies  and  Practices    
During  the  semiannual  period,  we  issued  a  series  of  reports  on  adverse  events  at  
selected  hospitals.   For  purposes  of  this  project,  the  term  adverse  event  refers  to  an  
undesirable  event  that  may  cause  harm  to  a  patient  during  the  delivery  of  health  care.   
Studies  indicate  that  adverse  events  lead  to  thousands  of  patient  deaths  annually  and  
billions  of  dollars  in  increased  health  care  costs  and  lost  productivity.    
To  participate  in  the  Medicare  program,  hospitals  are  required  to  maintain  an  effective  
quality  assessment  and  performance  improvement  program  focused  on  improving  
health  outcomes  and  preventing  and  reducing  medical  errors.   Federal  regulations  allow  
hospitals  to  tailor  their  programs  to  their  specific  needs.   During  this  project,  we  
identified  each  selected  hospitals  policies  and  procedures  to  detect,  report,  and  prevent  
adverse  events  and  tested  whether  the  hospital  had  followed  those  policies  and  
procedures.   We  provided  CMS  with  informational  copies  of  our  reports,  which  are  
considered  sensitive  and  thus  are  not  publicly  available.   
Adverse  Events:   Hospitals  Public  Disclosure  of  Information  
OIG  found  only  limited  public  disclosure  of  information  about  adverse  events  among  
entities  reviewed,  including  State  adverse  event  reporting  systems,  Patient  Safety  
Organizations  (PSO),  and  CMS.   Publicly  disclosing  adverse  event  information  can  
educate  health  care  providers  about  causes  of  events,  compel  providers  to  correct  
vulnerabilities  that  lead  to  adverse  events,  and  assist  patients  in  making  decisions  about  
their  care.   All  of  the  reviewed  entities  maintain  policies,  practices,  and  legal  provisions  
to  protect  patient  privacy.   
This  memorandum  report  is  one  in  a  series  to  fulfill  the  requirements  of  the  Tax  Relief  
and  Health  Care  Act  of  2006  (TRHCA),  which  requires  that  OIG  report  to  Congress  on  
never  events  among  Medicare  beneficiaries.   The  term never  events refers  to  a  specific  
list  of  28  serious  reportable  events  developed  by  the  National  Quality  Forum.   For  this  
series  of  reports,  we  expand  beyond  never  events  to  address adverse  events, defined  as  
harm  experienced  by  a  patient  as  a  result  of  medical  care.   This  memorandum  report  
examines  17  State  adverse  event  reporting  systems,  8  PSOs  overseen  by  the  Agency  for  
Healthcare  Research  and  Quality  (AHRQ),  and  CMS  regarding  its  Medicare  claims  data  
to  analyze  policies,  practices,  and  plans  for  publicly  disclosing  information  about  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   4   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   adverse  events  and  protecting  patient  privacy.   We  selected  these  entities  because  many  
State  systems  have  a  history  of  collecting  and  analyzing  adverse  event  data;  PSOs  
represent  a  significant,  recent  Federal  effort  to  collect  national  adverse  event  data;  and  
CMS  has  claims  data  that  document  hospital  stays  of  Medicare  beneficiaries,  a  specific  
population  of  interest  identified  in  the  TRHCA.   
Among  these  State  systems,  seven  disclosed  more  extensive  information  than  others.   
Such  disclosure  included  analysis  of  the  causes  of  adverse  events,  guidance  for  reducing  
future  occurrences,  and  information  about  improvements  made  by  hospitals.   Three  
other  State  systems  disclosed  less  extensive  information  about  adverse  events.   AHRQ  
plans  to  disclose  information  about  adverse  events  from  PSO  data  once  its  Network  of  
Patient  Safety  Databases  (NPSD)  is  operational.   AHRQ  expects  NPSD  to  become  
available  in  early  2011,  although  it  has  no  timeline  for  its  additional  plans  to  expand  data  
collection.   In  addition,  possible  barriers  to  submission  of  adverse  event  information  
exist,  including  that  some  hospitals  questioned  the  value  of  participating  with  a  PSO.   
CMS  is  considering  public  disclosure  of  information  about  hospitalacquired  conditions  
experienced  by  Medicare  beneficiaries  during  hospital  stays,  a  subset  of  adverse  events.   
The  more  extensive  disclosure  practices  of  the  seven  State  systems  can  serve  as  models  
for  other  entities.   Although  PSOs  are  expected  to  provide  AHRQ  with  national  data  that  
can  be  used  to  improve  patient  safety,  AHRQ  will  want  to  address  barriers  that  could  
limit  PSO  data.   CMSs  plans  to  supplement  Medicare  claims  data  that  have  potential  to  
generate  new  and  useful  information  about  hospitalacquired  conditions.  
OEI-06-09-00360.    
Adverse  Events:   Hospitals  Methods  for  Identifying  Events  
Overall,  the  methods  that  we  reviewed  were  found  to  be  useful  for  identifying  events  
that  harmed  Medicare  beneficiaries  in  hospitals.   These  methods  include:   nurse  reviews  
of  medical  records,  interviews  of  Medicare  beneficiaries,  two  types  of  analysis  of  
hospital  billing  data,  and  reviews  of  internal  hospital  incident  reports.   For  
hospitalizations  with  possible  events  identified  by  the  five  screening  methods,  
physicians  reviewed  medical  records  to  determine  whether  actual  events  occurred.   
However,  physician  reviewers  determined  that  62  percent  of  the  possible  events  
identified  by  the  five  screening  methods  were  not  associated  with  actual  events.   
For  this  project,  the  term  never  events  refers  to  a  specific  list  of  28  serious  reportable  
events  developed  by  the  National  Quality  Forum.   For  the  series  of  reports,  we  expand  
beyond  never  events  to  address  adverse  events,  defined  as  harm  experienced  by  a  
patient  as  a  result  of  medical  care.   This  report  provides  an  indepth  examination  of  the  
five  methods  used  in  a  twocounty  case  study  for  identifying  possible  adverse  events  
experienced  by  Medicare  beneficiaries.   
We  also  found  that  shortcomings  in  two  of  the  methods  have  implications  for  Medicare  
payments  and  Federal  initiatives  to  identify,  track,  and  monitor  events.   First,  patient  
diagnosis  codes  were  inaccurate  or  absent  for  7  of  the  11  Medicare  hospitalacquired  
conditions  (HAC)  identified  by  physician  reviewers.   These  problems  would  prevent  
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HHS  OIG  Semiannual  Report  to  Congress   5   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   Medicare  from  identifying  HACs,  result  in  Medicare  overpayments,  and  inhibit  use  of  
billing  data  to  monitor  quality  of  care  in  hospitals.   Second,  reviewed  hospitals  did  not  
generate  incident  reports  for  93  percent  of  the  events,  including  some  of  the  most  serious  
events  involving  death  or  permanent  disability  to  the  patient.   The  lack  of  such  reports  
could  prevent  hospitals  from  tracking  events  as  required  by  Federal  regulation  and  
suggests  that  hospital  incidentreporting  systems  may  be  an  unreliable  source  of  
information  for  PSOs,  entities  that  aggregate  and  analyze  hospital  data  about  events.   
We  recommend  that  CMS  and  AHRQ  explore  opportunities  to  identify  adverse  events  
when  conducting  medical  record  reviews  for  other  purposes.   Additionally,  CMS  should  
(1)  ensure  that  hospitals  code  claims  accurately  and  completely  to  allow  for  
identification  of  Medicare  HACs  and  (2)  provide  guidelines  for  State  survey  agencies  
that  assess  hospital  compliance  with  requirements  to  track  and  monitor  adverse  events.   
Finally,  AHRQ  should  inform  PSOs  that  internal  hospital  incidentreporting  systems  
may  be  insufficient  for  providing  information  about  events  to  PSOs.   AHRQ  concurred  
with  the  report  as  written.   CMS  agreed  with  each  recommendation  addressed  to  CMS.  
OEI-06-08-00221   
Nursing  Homes:  
Medicare  Part  B  Services  During  NonPart  A  Nursing  Home  Stays:   Enteral  
Nutrient  Pricing   
This  report  presents  findings  based  on  our  review  of  Part  B  enteral  nutrient  payments  
during  nonPart  A  nursing  home  stays  in  2006.   We  found  that  Medicares  fee  schedule  
amounts  for  nutrients  provided  during  nonPart  A  stays  exceeded  prices  available  to  
nursing  home  suppliers  and  other  purchasers  by  more  than  double.    
Medicare  Part  A  covers  nursing  home  care  for  up  to  100  days  in  a  SNF.   If  nursing  home  
care  is  still  needed  after  the  100  days  or  the  beneficiary  did  not  qualify  for  a  Part  A  SNF  
stay,  Medicare  Part  B  may  provide  coverage  for  certain  medical  and  other  health  
services.   In  these  situations,  the  stays  are  termed  nonPart  A  nursing  home  stays,  and  
Medicare  Part  B  coverage  during  such  stays  includes  enteral  nutrition  therapy  (ENT),  as  
well  as  equipment  and  supplies  necessary  for  ENT  administration.    
To  control  Part  B  expenditures  for  ENT,  we  recommended  that  CMS  take  steps  to  adjust  
the  Medicare  fee  schedule  amounts  for  enteral  nutrients  to  more  accurately  reflect  
supplier  prices.   CMS  agreed  with  our  recommendation  and  cited  the  resumption  of  the  
competitive  bidding  program  and  consideration  of  adjustment  of  the  Medicare  fee  
schedule  for  enteral  nutrients,  once  sufficient  data  are  available  from  the  bidding  
process,  as  its  opportunities  to  address  enteral  pricing  concerns.   OEI-06-07-00590.    
 
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HHS  OIG  Semiannual  Report  to  Congress   6   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   Home  Health  Agencies:  
Aberrant  Medicare  Home  Health  Outlier  Payment  Patterns  in  MiamiDade  
County  and  Other  Geographic  Areas  in  2008   
We  found  that  MiamiDade  County  accounted  for  more  home  health  outlier  payments  in  
2008  than  the  rest  of  the  Nation  combined.   Twentythree  other  counties  nationwide  also  
exhibited  aberrant  home  health  payment  patterns  similar  to  that  of  MiamiDade  County,  
but  to  a  lesser  extent.  
In  October  2000,  CMS  adopted  a  prospective  payment  system  that  pays  a  predetermined  
rate  for  60day  episodes  of  home  health  care.   The  payments  are  adjusted  for  
beneficiaries  health  conditions  and  care  needs,  as  well  as  for  geographical  wage  
differences.   There  are  no  limits  to  the  number  of  60day  episodes  eligible  beneficiaries  
may  receive.   Medicare  makes  other  payments,  known  as  outlier  payments,  to  home  
health  providers  that  make  services  available  to  beneficiaries  who  incur  unusually  high  
costs.   There  is  no  limit,  or  cap,  on  outlier  payments  to  individual  home  health  
providers,  but  total  outlier  payments  for  home  health  services  may  not  exceed  5  percent  
of  annual  projected  total  home  health  payments.  
We  found  that  more  than  85  percent  of  home  health  providers  that  received  outlier  
payments  over  $100,000  per  beneficiary  were  in  MiamiDade  County.   In  addition,  
67  percent  of  home  health  providers  that  received  total  outlier  payments  over  $1  million  
were  in  MiamiDade  County.   We  also  found  that  in  MiamiDade  County  Medicare  
outlier  payments  for  home  health  claims  with  a  primary  diagnosis  related  to  diabetes  
were  eight  times  the  national  average.   More  than  half  of  home  health  providers  in  
MiamiDade  and  the  23  other  counties  we  identified  were  paid  at  least  twice  the  national  
average  for  three  or  more  of  the  five  payment  characteristics  we  reviewed.   
We  recommended  that  CMS  (1)  continue  efforts  to  institute  a  cap  on  the  total  outlier  
payments  an  individual  home  health  provider  may  receive  annually,  (2)  review  home  
health  providers  that  show  aberrant  outlier  payment  patterns  and  respond  
appropriately  based  on  the  findings,  and  (3)  continue  efforts  to  strengthen  enrollment  
standards  for  home  health  providers  to  prevent  illegitimate  home  health  agencies  from  
obtaining  billing  privileges.   
CMS  concurred  with  all  three  recommendations.   At  the  time  of  its  comments,  CMS  was  
analyzing  public  comments  on  a  proposed  rule  that  would,  among  other  things,  cap  
outlier  payments  at  10  percent  per  agency.   The  final  rule  was  published  in  the  Federal  
Register  on  November  10,  2009,  and  were  effective  January  1,  2010.   CMS  has  also  taken  
steps  to  address  widespread  abuse  of  Medicare  outlier  payments  to  home  health  
agencies  in  MiamiDade  County.   OEI-04-08-00570.    
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HHS  OIG  Semiannual  Report  to  Congress   7   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   Renal  Dialysis  Facilities:  
Dosage  Protocols  for  Administering  ErythropoiesisStimulating  Agents    
We  found  that  93  percent  of  Medicarecertified  dialysis  facilities  had  protocols  in  place  
for  administering  erythropoiesisstimulating  agents  (ESA),  but  only  56  percent  of  the  
facilities  protocols  explicitly  address  the  target  hemoglobin  range  found  on  the  Food  
and  Drug  Administration  (FDA)  boxed  warning  and  in  Medicare  guidance.   We  could  
not  determine  whether  the  remaining  44  percent  of  protocols  were  consistent  with  the  
boxed  warning  on  FDAapproved  labeling  and  Medicares  benefit  policy  because  they  
do  not  specify  a  target  hemoglobin  range.   Of  the  protocols  that  state  a  target  
hemoglobin  range,  94  percent  are  consistent  with  the  boxed  warning  and  the  Medicare  
benefit  policy  for  ESAs.  
While  they  are  not  required  to  do  so,  dialysis  facilities  may  develop  their  own  protocols  
for  administering  ESAs  to  patients  with  chronic  kidney  failure.   The  protocols  may  
define  target  hemoglobin  levels  and  dosage  instructions  for  administering  ESAs.   
According  to  the  boxed  warning  on  ESAs  labels,  maintaining  higher  rather  than  lower  
hemoglobin  levels  in  a  patient  with  chronic  kidney  failure  can  adversely  affect  the  
patients  health  and  increase  the  risk  of  death.   The  boxed  warning  states  that  providers  
should  administer  ESAs  to  achieve  and  maintain  hemoglobin  levels  within  the  range  of  
10  to  12  g/dL.   The  Medicare  benefit  policy  for  ESAs  reflects  the  target  hemoglobin  
range  specified  in  the  boxed  warning.   A  separate  Medicare  policy  for  monitoring  ESA  
payments  states  that  CMS  will  reduce  reported  dosages  upon  which  ESA  claims  are  paid  
when  patients  hemoglobin  levels  exceed  13g/dL.  
Members  of  Congress  have  raised  concerns  that  dialysis  facilities  protocols  for  
administering  ESAs  may  not  be  consistent  with  the  boxed  warning  for  these  drugs.    
Our  review  of  protocols  to  determine  whether  they  are  consistent  with  selected  
guidelines  on  ESAs  labels  revealed  that  some  protocols  contain  information  that  differs  
from  labeling  guidelines  for  starting  doses,  dose  adjustments,  and  withholding  ESA  
doses.   We  also  found  that  all  of  the  protocols  that  include  a  target  hemoglobin  range  or  
level  at  which  to  increase  ESA  doses  conform  with  CMSs  monitoring  policy.  
We  concluded  that  although  our  review  does  not  address  the  amount  of  ESAs  that  
providers  actually  administer  to  patients  at  their  dialysis  facilities,  it  does  demonstrate  
that  just  over  half  of  facilities  protocols  for  administering  ESAs  are  consistent  with  the  
boxed  warning  and  Medicares  benefit  policy  for  ESAs.   However,  since  almost  half  of  
the  dialysis  facilities  did  not  have  protocols  or  did  not  specify  a  target  hemoglobin  range  
in  their  protocols,  we  cannot  determine  whether  these  facilities  policies  target  the  
hemoglobin  range  outlined  in  the  boxed  warning  that  FDA  requires  on  ESA  labels.  
OEI-03-09-00010.    
Laboratory  Tests  for  Beneficiaries  With  End  Stage  Renal  Disease  
We  estimated,  based  on  our  sample  results,  that  Medicare  overpaid  a  laboratory  
$5.4  million  for  separately  billed  laboratory  tests  provided  to  end  stage  renal  disease  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   8   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   (ESRD)  beneficiaries  at  one  companys  dialysis  facilities  during  CYs  20042006.   The  
laboratory  is  a  wholly  owned  subsidiary  of  the  company.   Federal  regulations  require  
that  all  tests  covered  by  Medicare  be  ordered  by  the  physician  who  is  treating  the  
beneficiary  and  that  the  physician  who  ordered  the  tests  maintain  documentation  of  
medical  necessity  in  the  beneficiarys  medical  record.   However,  of  the  100  beneficiary  
quarters  that  we  sampled,  24  beneficiary  quarters  contained  errors  for  separately  billed  
tests  that,  based  on  an  independent  medical  review  by  a  Medicare  contractor,  were  not  
reasonable  and  necessary  and  12  beneficiary  quarters  contained  errors  for  separately  
billed  tests  that  were  not  reasonable  and  necessary  because  they  were  not  ordered  by  the  
treating  physician.   
We  recommended  that  (1)  the  laboratory  refund  to  the  Medicare  program  $5.4  million  in  
overpayments  for  CYs  20042006  and  (2)  both  the  laboratory  and  the  companys  dialysis  
facilities  strengthen  their  policies  and  procedures  to  ensure  that  all  tests  billed  are  
reasonable  and  necessary  in  compliance  with  Medicare  requirements.   The  company  
disagreed  with  our  recommendations.   We  maintain  that  our  findings  and  
recommendations  are  valid.   A-01-08-00511.    
Practitioners  and  Suppliers:  
Reassignment  of  Medicare  Benefits  to  Third  Parties    
Seventyseven  percent  of  practitioners,  or  517,936  practitioners,  had  reassigned  
Medicare  benefits  to  at  least  1  third  party.   Thirtyseven  percent  of  the  833,016  Medicare  
reassignments  of  benefits  in  2007  should  not  have  been  active.   We  identified  $140,488  
in  payments  through  16  sampled  reassignments  that  should  not  have  been  active.   
Medicare  regulations  require  that  contractors  distribute  payments  directly  to  
practitioners  who  render  services,  unless  those  practitioners  benefits  are  reassigned  to  
third  parties.   Reassignment  of  benefits  is  a  mechanism  by  which  Medicare  practitioners  
allow  third  parties  to  bill  and  receive  payment  for  services  that  they  rendered.   
Contractors  process  reassignments,  adhering  to  the  safeguards  established  in  the  
Medicare  Program  Integrity  Manual  and  may  employ  more  safeguards,  as  needed.    
For  92  percent  of  the  reassignments  that  should  not  have  been  active,  practitioners  
were  once  employed  with  the  third  parties  to  which  their  reassignments  were  made,  
but  had  since  terminated  their  employment.   For  the  remaining  8  percent  of  
reassignments  that  should  not  have  been  active,  practitioners  had  no  knowledge  of  the  
third  parties  to  which  their  benefits  had  been  reassigned  or  indicated  that  they  had  
applied  for  positions  with  the  third  parties  but  had  never  been  employed  there.   
However,  Medicare  payments  made  through  reassignments  that  should  not  have  been  
active  were  low.   We  identified  $140,488  in  Medicare  payments  in  2007,  made  through  
16  sampled  reassignments  that  should  not  have  been  active.   We  also  found  that  CMS  
contractors  reported  using  safeguards  to  ensure  correct  processing  of  reassignments,  but  
several  factors  may  limit  their  effectiveness.   These  limitations  include  (1)  failure  of  
many  practitioners  to  update  their  contact  information  with  CMS,  (2)  failure  of  many  
practitioners  to  review  claims  that  were  billed  on  their  behalf,  and  (3)  failure  of  Provider  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   9   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   Transaction  Access  Numbers  to  automatically  deactivate  when  reassignments  are  
deactivated.  
Based  on  these  findings  and  CMSs  recent  efforts,  we  recommended  that  CMS  
(1)  implement  its  plans  to  revalidate  practitioner  enrollment  information;  (2)  educate  
practitioners  on  the  need  to  provide  current  information;  (3)  implement  plans  to  update  
the  Provider  Enrollment,  Chain,  and  Ownership  System  (PECOS)  from  the  Multiple  
Carrier  System;  and  (4)  follow  up  with  practitioners  for  whom  payments  were  made  
through  reassignments  that  should  not  have  been  active.    
After  we  completed  data  collection,  CMS  staff  members  told  us  of  new  policies  that  
might  address  the  limitations  that  we  identified.   These  policies  include  periodic  
revalidation  of  practitioner  contact  information  and  implementing  communication  from  
the  Multiple  Carrier  System  to  PECOS.   CMS  described  actions  it  has  taken  or  plans  to  
take  to  address  all  four  recommendations.   OEI-07-08-00180.    
Organ  Acquisition  Costs  Reported  by  One  Organization  in  Fiscal  Year  2006   
An  independent  organ  procurement  organization  (OPO)  in  California  did  not  fully  
comply  with  Medicare  requirements  for  reporting  selected  organ  acquisition  overhead  
costs  and  administrative  and  general  costs  in  its  FY  2006  Medicare  cost  report.   Of  the  
$3.2  million  of  costs  we  reviewed,  $2.6  million  was  allowable.   The  remaining  $531,000  
represents  $291,000  of  unallowable  costs  and  $240,000  of  unsupported  costs.   As  a  result,  
the  OPO  overstated  its  Medicare  reimbursement  in  the  FY  2006  Medicare  cost  report  by  
an  estimated  $297,000.  
We  recommended  that  the  OPO  (1)  submit  a  revised  FY  2006  Medicare  cost  report  to  
the  FI  to  correct  the  estimated  Medicare  overstatement  of  $297,000  and  (2)  develop  and  
implement  procedures  to  ensure  that  costs  reported  in  future  Medicare  cost  reports  are  
allowable,  supportable,  and  in  compliance  with  Medicare  requirements.   The  OPO  
partly  agreed  and  partly  disagreed  with  our  findings.   The  OPO  stated  that  it  was  unable  
to  implement  the  first  recommendation  because  the  FI  has  never  allowed  OPOs  to  
reopen  closed  reports.   The  OPO  agreed  with  the  second  recommendation.   
After  reviewing  the  OPOs  comments  and  additional  documentation,  we  revised  our  
findings  and  modified  our  first  recommendation.   Nothing  in  the  comments  and  
additional  documentation  caused  us  to  revise  our  other  findings.   The  FI  informed  us  
that  it  could  reopen  the  cost  report  at  the  providers  request.   A-09-08-00033.    
Medical  Equipment  and  Supplies:   Power  Wheelchair  Claims  Frequently  Did  
Not  Meet  Documentation  Requirements   
Three  out  of  five  claims  for  standard  and  complex  rehabilitation  power  wheelchairs  
did  not  meet  Medicare  documentation  requirements  during  the  first  half  of  2007.   
Power  wheelchair  claims  that  did  not  meet  all  documentation  requirements  accounted  
for  $112  million  in  improper  Medicare  payments,  out  of  $189  million  total  allowed  by  
Medicare  during  the  6month  period.   Beneficiaries  were  responsible  for  paying   
$22  million  of  this  amount.    
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   10   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   For  any  item  to  be  covered  by  Medicare,  it  must  meet  all  applicable  Medicare  statutory  
and  regulatory  requirements.   Medicare  requires  power  wheelchair  suppliers  to  
maintain  specific  documentation  to  support  the  beneficiarys  need  for,  and  the  
appropriateness  of,  a  power  wheelchair.    
We  found  that  60  percent  of  Medicare  claims  for  standard  and  complex  rehabilitation  
power  wheelchairs  in  the  first  half  of  2007  did  not  meet  one  or  more  documentation  
requirements.   Two  out  of  five  power  wheelchair  claims  had  multiple  errors.   In  
addition,  suppliers  submitted  incomplete  documents  almost  three  times  as  often  as  they  
failed  to  submit  required  documents.   The  specialty  evaluation  report  was  one  of  the  
documents  most  often  not  submitted  by  complex  rehabilitation  power  wheelchair  
suppliers.   We  also  found  that  Medicare  documentation  error  rates  varied  by  power  
wheelchair  type  and  supplier  volume.   Complex  rehabilitation  power  wheelchair  claims  
had  a  higher  documentation  error  rate  than  standard  power  wheelchair  claims.   
Standard  power  wheelchair  claims  submitted  by  lowvolume  suppliers  had  a  higher  
documentation  error  rate  than  those  submitted  by  highvolume  suppliers.    
Based  on  the  results  of  our  review,  we  recommended  that  CMS  improve  compliance  
with  Medicares  power  wheelchair  documentation  requirements  and  suggested  the  
following  methods  for  improving  compliance:   (1)  conduct  additional  reviews  of  
standard  and  complex  rehabilitation  power  wheelchair  claims,  (2)  recover  overpayments  
and  consider  further  actions  against  suppliers  that  do  not  meet  documentation  
requirements,  and  (3)  increase  education  for  suppliers  and  prescribing  physicians  about  
documentation  requirements.    
We  also  recommended  that  CMS  take  appropriate  action  on  sampled  claims  found  to  be  
in  error.   CMS  concurred  with  both  of  our  recommendations.   CMS  noted  that  it  has  
multiple  efforts  underway  or  planned  that  align  with  each  suggested  method  to  improve  
compliance  with  Medicares  power  wheelchair  documentation  requirements.   CMS  will  
also  forward  to  contractors  the  sampled  claims  we  found  to  be  in  error  to  identify  and  
recover  overpayments.   We  will  forward  information  on  these  claims  to  CMS  under  
separate  cover.   OEI-04-07-00401.    
Medical  Equipment  and  Supplies:   Vulnerabilities  in  Medicare  Payments  for  
Pressure  Reducing  Support  Surfaces   
We  found  that  in  2007,  Medicare  paid  for  72  percent  of  all  pressure  reducing  support  
surface  (support  surface)  claims  with  GA  or  GZ  modifiers.   Suppliers  use  these  modifiers  
when  they  expect  that  Medicare  will  deny  the  claim  as  not  reasonable  and  necessary.   
Medicare  potentially  inappropriately  paid  $4.4  million  for  such  claims.   Support  surfaces  
are  used  for  the  care  or  prevention  of  pressure  ulcers  and  are  covered  under  the  
Medicare  Part  B  benefit.  
Suppliers  also  use  GA  and  GZ  modifiers  when  they  are  providing  an  upgrade.   An  
upgrade  is  an  item  of  durable  medical  equipment  that  contains  a  component,  such  as  an  
equipment  feature,  that  is  in  excess  of  the  beneficiarys  medical  needs.   We  found  that  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   11   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   suppliers  submitted  only  four  claims  for  support  surfaces  upgrades  in  2007,  indicating  
that  they  may  not  be  using  the  appropriate  modifiers  when  providing  upgrades.  
Further,  for  a  number  of  other  claims,  Medicare  inappropriately  paid  for  more  than  one  
support  surface  for  the  same  beneficiary  on  the  same  service  date.   These  claims  
amounted  to  $68,785  in  inappropriate  payments  in  2007.   In  several  other  instances,  
Medicare  paid  for  a  higherpriced  support  surface,  as  opposed  to  a  lowerpriced  support  
surface.   These  claims  amounted  to  an  additional  $73,022  in  potentially  inappropriate  
payments.  
Taken  together,  these  results  indicate  that  Medicare  contractors  may  not  have  
appropriate  safeguards  in  place  to  pay  for  Part  B  claims  with  GA  or  GZ  modifiers.   They  
also  show  that  Medicare  contractors  do  not  have  controls  in  place  to  flag  claims  for  
multiple  support  surfaces  for  the  same  beneficiary  on  the  same  service  date.   The  results  
also  demonstrate  that  suppliers  may  need  further  instructions  on  the  appropriate  use  of  
these  modifiers  when  they  provide  upgraded  items  to  beneficiaries.   OEI-02-07-00421.    
Medical  Equipment  and  Supplies:   Equipment  Claims  With  the  KX  Modifier  
The  KX  modifier  was  not  effective  in  ensuring  that  suppliers  of  durable  medical  
equipment,  prosthetics,  orthotics,  and  supplies  (DMEPOS)  that  submitted  claims  to  a  
DME  regional  carrier  (carrier)  during  2006  had  the  required  supporting  documentation  
on  file.   Of  the  100  items  in  our  sample,  suppliers  did  not  have  the  required  
documentation  on  file  for  54.   As  a  result,  the  carrier  made  unallowable  payments  
totaling  $4,600  for  the  54  sampled  items.   Based  on  our  sample  results,  we  estimated  that  
the  carrier  paid  about  $127  million  to  suppliers  that  did  not  have  the  required  
documentation  on  file  to  support  the  DMEPOS  items  with  calendar  year  2006  dates  of  
service.  
These  errors  occurred  because  the  carriers  electronic  edits  could  determine  only  
whether  the  required  KX  modifier  was  on  the  claim.   
We  recommended  that  the  Medicare  administrative  contractor  (MAC)  that  replaced  the  
carrier  (1)  recover  $4,400  ($150  was  repaid  during  fieldwork)  in  payments  for  specific  
DMEPOS  items  claimed  for  which  the  suppliers  did  not  have  the  required  
documentation,  (2)  review  other  payments  for  DMEPOS  related  to  our  unallowable  
sample  items  and  recover  any  other  unallowable  payments,  (3)  notify  CMS  of  the  
23  suppliers  that  did  not  meet  the  supplier  standard  for  maintaining  proof  of  delivery  
so  that  CMS  can  take  appropriate  action,  and  (4)  develop  a  corrective  action  plan  to  
improve  the  effectiveness  of  the  KX  modifier  and  potentially  save  an  estimated  
$127  million.   The  MAC  acknowledged  the  facts  presented  in  the  report  and  listed  
actions  that  it  intended  to  take  in  response  to  our  recommendations.    
A-04-08-04020.    
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   12   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   Part  B  Prescription  Drugs:  
Comparison  of  Average  Sales  Prices  to  Average  Manufacturer  Prices  and  
Widely  Available  Market  Prices  for  Part  B  Prescription  Drugs:   Impact  on  
Medicare  Reimbursement  
From  April  2006  through  February  2010,  we  issued  17  reports  related  to  our  continuing  
work  comparing  average  sales  prices  (ASP)  with  average  manufacturer  prices  (AMP)  
and  widely  available  market  prices  (WAMP)  for  Medicare  Part  B  prescription  drugs.   
The  Social  Security  Act,     1847A(d)(2)(B),  mandates  that  OIG  perform  these  
comparisons.   For  instances  in  which  the  ASP  for  a  drug  exceeds  the  AMP  or  WAMP  by  
a  certain  threshold  (currently  5  percent),  section  1847A(d)(3)  provides  that  the  Secretary  
of  HHS  may  disregard  the  ASP  pricing  methodology  for  that  drug  and  that  the  Secretary  
of  HHS  substitute  the  payment  amount  for  the  drug  code  with  the  lesser  of  the  WAMP  
(if  any)  or  103  percent  of  the  drugs  AMP.  
In  December  2007,  the  Medicare,  Medicaid,  and  SCHIP  Extension  Act  of  2007  (the  
Extension  Act)  amended  the  Social  Security  Act,    1847A(b),  and  changed  the  way  that  
CMS  calculates  volumeweighted  ASPs,  effective  April  1,  2008.   Analyzing  CMSs  
Healthcare  Common  Procedure  Coding  System  (HCPCS)  codes  for  drugs  covered  under  
Medicare  Part  B,  we  identified  in  both  of  the  previous  comparisons  and  those  issued  
during  this  semiannual  period  instances  in  which  drug  codes  met  the  threshold  for  price  
adjustments.   We  determined  that  such  adjustments,  if  implemented  by  the  Secretary  of  
HHS,  would  save  Medicare  millions  of  dollars  in  Part  B  drug  costs.    
During  this  semiannual  reporting  period,  we  issued  an  overview  of  our  reviews  for  the  
first  four  quarters  of  2008  (based  on  individual  reports  for  each  quarter  of  20082)  and  two  
reports  of  our  reviews  of  the  first  two  quarters  of  2009.    
 	  Comparison  of  Average  Sales  Prices  and  Average  Manufacturer  Prices:   An  Overview  of  
2008    In  2008,  ASPs  for  80  HCPCS  codes  exceeded  AMPs  by  at  least  5  percent  in  one  
or  more  quarters.   If  reimbursement  amounts  for  these  80  codes  had  been  lowered  to  
103  percent  of  the  AMPs  for  the  applicable  quarter(s),  Medicare  expenditures  would  
have  been  reduced  by  an  estimated  $21.9  million  from  the  third  quarter  of  2008  
through  the  second  quarter  of  2009.  
Of  the  80  HCPCS  codes  that  were  eligible  for  price  adjustment  in  2008,  over  
40  percent  met  the  5percent  threshold  during  multiple  quarters.   According  to  
manufacturers  associated  with  drugs  that  met  the  threshold  in  every  quarter,  ASPs  
can  exceed  AMPs  as  a  result  of  many  factors,  including  the  way  in  which  AMPs  are  
weighted,  the  types  of  sales  included  in  ASPs  and  AMPs,  differential  pricing  
arrangements  among  purchasers,  and  errors  in  the  calculation  of  AMPs.   Because  
some  drug  products  had  missing  or  unavailable  AMPs,  between  12  and  14  percent  of  
HCPCS  codes  were  excluded  from  our  pricing  comparison  in  each  quarter.   
                                                      
2  (1)  OEI-03-08-00530,  (2)  OEI-03-09-00050,  (3)  OEI-03-09-00150,  and  (4)  OEI-03-09-00340.   
   
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   13   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   Manufacturers  for  almost  60  percent  of  drug  products  without  AMPs  had  Medicaid  
rebate  agreements  in  2008  and  were  therefore  generally  required  to  submit  AMP  
data.    
Consistent  with  statutory  requirements,  we  recommend  that  CMS  (1)  develop  a  
process  to  adjust  payment  amounts  based  on  the  results  of  OIGs  pricing  
comparisons,  (2)  lower  Medicare  reimbursement  amounts  for  drugs  that  meet  the  
5percent  threshold,  and  (3)  ensure  that  drug  manufacturers  are  submitting  the  
required  AMP  data  in  a  timely  manner.   CMS  concurred  with  our  first  
recommendation  but  does  not  currently  concur  with  our  second  recommendation.   
CMS  outlined  steps  it  has  already  taken  to  address  our  third  recommendation  and  
expressed  support  for  adequate  enforcement  action  against  noncompliant  
manufacturers.   OEI-03-09-00350.    
 	  Comparison  of  FirstQuarter  2009  Average  Sales  Prices  and  Average  Manufacturer  Prices:   
Impact  on  Medicare  Reimbursement  for  Third  Quarter  2009    We  identified  a  total  of  
23  HCPCS  codes  with  ASPs  that  exceeded  AMPs  by  at  least  5  percent  in  the  first  
quarter  of  2009.   If  reimbursement  amounts  for  these  23  codes  had  been  based  on  
103  percent  of  the  AMPs,  Medicare  expenditures  would  have  been  reduced  by  
$3.7  million  during  the  third  quarter  of  2009.   OEI-03-09-00490.    
 	  Comparison  of  SecondQuarter  2009  Average  Sales  Prices  and  Average  Manufacturer  Prices:   
Impact  on  Medicare  Reimbursement  for  Fourth  Quarter  2009    We  identified  a  total  of   
24  HCPCS  codes  with  ASPs  that  exceeded  AMPs  by  at  least  5  percent  in  the  second  
quarter  of  2009.   If  reimbursement  amounts  for  these  24  codes  had  been  based  on  
103  percent  of  the  AMPs,  Medicare  expenditures  would  have  been  reduced  by  
$3.1  million  during  the  fourth  quarter  of  2009.   OEI-03-09-00640.    
Average  Sales  Prices:   Manufacturer  Reporting  and  CMS  Oversight   
We  found  that  for  each  quarter  under  review,  over  40  percent  of  manufacturers  
submitted  ASPs  late.   However,  at  least  95  percent  of  manufacturers  submitted  ASP  
data  to  CMS  within  10  days  after  the  deadline.   Further,  no  more  than  2  percent  of  
manufacturer  submissions  each  quarter  were  more  than  30  days  late.   
CMS  continues  to  cover  a  limited  number  of  outpatient  prescription  drugs  under  its  
Part  B  benefit.   Since  January  2005,  CMS  has  been  paying  for  most  Part  Bcovered  drugs  
using  a  reimbursement  methodology  based  on  ASP.   ASP  is  defined  as  a  manufacturers  
sales  of  a  drug  to  all  purchasers  in  the  United  States  in  a  calendar  quarter  divided  by  the  
total  number  of  units  of  the  drug  sold  by  the  manufacturer  in  that  same  quarter.   
Pursuant  to  the  Social  Security  Act,    1927,  manufacturers  with  a  Medicaid  drug  rebate  
agreement  in  effect  must,  among  other  things,  provide  CMS  with  pricing  information,  
including  the  ASPs  for  their  Part  Bcovered  drugs.   
Manufacturers  that  report  ASPs  are  required  to  submit  them  to  CMS  no  later  than  
30  days  after  the  close  of  the  previous  quarter.   As  a  result,  there  is  a  twoquarter  lag  
between  the  time  when  sales  reflected  in  the  ASP  occur  and  the  time  when  these  sales  
become  the  basis  for  Medicare  payment  amounts.    
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   14   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   We  found  that  CMS  implemented  several  oversight  procedures  related  to  payment  for  
Part  Bcovered  drugs;  however,  CMSs  methods  still  may  inhibit  efficiency  and  result  in  
potential  errors.   For  example,  CMS  relies  on  an  inefficient  manual  processes  for  
collecting  ASP  data.   Also,  almost  onefifth  of  labeler  codes  with  ASP  submissions  were  
associated  with  manufacturers  that  were  not  required  to  provide  these  prices  under  the  
Medicaid  drug  rebate  requirements.   In  fact,  the  Medicare  payment  amounts  for  some  
drugs  were  based  solely  on  submissions  from  manufacturers  that  did  not  have  rebate  
agreements  in  effect.   If  these  manufacturers  chose  not  to  report  ASPs,  CMS  would  be  
unable  to  calculate  ASPbased  Medicare  payment  amounts  for  these  drugs.   
We  recommended  that  CMS  develop  an  automated  system  for  the  collection  of  ASP  
data.   We  also  recommended  that  CMS  seek  a  legislative  change  to  directly  require  all  
manufacturers  of  Part  Bcovered  drugs  to  submit  ASPs.   In  comments  on  the  draft  
report,  CMS  concurred  with  our  recommendation  to  develop  an  automated  system  for  
the  collection  of  ASP  data;  CMS  did  not  concur  with  our  recommendation  to  seek  a  
legislative  change  to  directly  require  all  manufacturers  of  Part  Bcovered  drugs  to  
submit  ASPs.   However,  CMS  said  that  it  will  consider  this  recommendation  as  it  
continues  to  monitor  the  effects  of  current  payment  policies.   OEI-03-08-00480.    
Medicare  Contractors:  
Independent  Review  of  Claims  From  the  Fiscal  Year  2008  Comprehensive  Error  
Rate  Testing  Program   
An  independent  medical  review  contractor  complied  with  its  CMS  contract  in  
performing  medical  reviews  of  a  subsample  of  claims  from  FY  2008  Comprehensive  
Error  Rate  Testing  (CERT)  samples.   To  help  determine  the  annual  Medicare  error  rate,  
CMSs  CERT  contractor  conducts  medical  reviews  of  a  sample  of  paid  claims.   CMS  
requires  the  CERT  contractor  to  make  medical  review  decisions  in  accordance  with  
CMSs  written  policies.    
The  medical  review  contractors  results  may  not  have  provided  CMS  with  assurance  that  
the  CERT  contractors  FY  2008  FI  and  carrier  error  rates  were  accurate.   The  medical  
review  found  116  erroneous  claims  that  the  CERT  contractor  had  not  initially  
determined  to  be  in  error.   We  were  unable  to  quantify  the  statistical  effect  of  the  medical  
review  contractors  results  on  the  FY  2008  FI  and  carrier  error  rates.   However,  the  
medical  review  contractor  identified  enough  incorrect  determinations  by  the  CERT  
contractor  to  warrant  further  CMS  corrective  action  to  improve  the  Medicare  error  rate  
process.    
We  recommended  that  CMS  (1)  clarify  documentation  policies  to  reduce  the  number  of  
differences  in  professional  judgment,  (2)  require  the  CERT  contractor  to  obtain  physician  
orders  to  support  the  medical  necessity  for  diagnostic  tests  in  accordance  with  Medicare  
requirements,  and  (3)  require  the  CERT  contractor  to  develop  a  corrective  action  plan  to  
reduce  the  number  of  incorrect  determinations.   CMS  concurred  with  our  findings  and  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   15   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   recommendations  and  outlined  the  steps  it  had  taken  to  implement  our  
recommendations.   A-01-09-00511.    
Recovery  Audit  Contractors Fraud  Referrals   
We  found  that  between  March  2005  and  March  2008,  recovery  audit  contractors  (RAC)  
referred  two  cases  of  potential  fraud  to  CMS.   However,  CMS  reported  that  it  received  
no  potential  fraud  referrals  from  RACs  during  this  period.   
RACs  are  contracted  by  CMS  and  are  responsible  for  identifying  improper  payments  of  
Medicare  Part  A  and  Part  B  claims.   They  are  not  responsible  for  reviewing  claims  for  
fraudulent  activity;  however,  they  are  responsible  for  referring  to  CMS  any  cases  of  
potential  fraud  that  are  identified  during  their  reviews.   A  3year  RAC  demonstration  
project  conducted  from  March  2005  through  March  2008  was  designed  to  detect  and  
correct  past  improper  payments  in  the  Medicare  feeforservice  (FFS)  program  and  
provide  information  to  CMS  and  to  the  Medicare  claimsprocessing  contractors  that  
could  help  protect  the  Medicare  trust  funds  by  preventing  future  improper  payments.   
We  also  found  that  during  the  demonstration  project,  RACs  received  no  formal  training  
from  CMS  regarding  the  identification  and  referral  of  potential  fraud.   However,  CMS  
did  provide  permanent  RACs  with  a  presentation  about  fraud.   CMS  is  planning  to  
provide  the  permanent  RACs  with  further  education  and  training  on  the  identification  
and  referral  of  potential  fraud,  although  no  date  or  agenda  has  been  determined.    
Having  a  RAC  staff  that  is  trained  and  knowledgeable  about  fraud  will  increase  
awareness  and  detection  of  potential  fraud  during  the  claims  review  process.   Therefore,  
we  recommended  the  following  to  CMS:   (1)  conduct  followup  to  determine  the  
outcomes  of  the  two  referrals  made  during  the  demonstration  project,  (2)  implement  a  
system  to  track  fraud  referrals,  and  (3)  require  RACs  to  receive  mandatory  training  on  
the  identification  and  referral  of  fraud.   
CMS  concurred  with  all  three  of  our  recommendations.   In  regard  to  our  first  
recommendation,  CMS  stated  that  it  researched  the  two  cases  identified  by  the  RAC  
for  potential  referral  and  determined  that  they  should  be  referred  to  OIG  for  further  
development.   CMS  is  forwarding  these  two  cases  to  OIG.   Regarding  our  second  
recommendation,  CMS  stated  that  it  is  developing  a  system  to  track  the  RAC  claims  
review  process.   Finally,  in  response  to  our  third  recommendation,  CMS  stated  that  it  has  
already  provided  two  training  sessions  to  the  RACs  and  is  in  discussions  with  OIG  and  
the  Department  of  Justice  on  additional  training.   OEI-03-09-00130.    
Contractor  Information  Security  Program  Evaluations  
The  Medicare  Prescription  Drug,  Improvement,  and  Modernization  Act  of  2003  (MMA)  
requires  that  each  Medicare  contractor  have  its  information  security  program  evaluated  
annually  by  an  independent  entity.   To  comply  with  this  provision,  CMS  contracted  with  
a  certified  public  accounting  firm  to  evaluate  information  security  programs  at  the  
MACs,  FIs,  and  carriers.   CMS  also  contracted  with  another  firm  to  perform  technical  
assessments  at  Medicare  data  centers.  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   16   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   The  accounting  firms  reviews  of  the  Medicare  contractor  information  security  program  
evaluations  were  adequate  in  scope  and  sufficiency.   We  could  not  determine  the  extent  
and  sufficiency  of  the  work  done  for  the  data  center  technical  assessments  because  of  
several  issues  with  the  working  papers.  
We  recommended  that  CMS  review  all  contractor  documentation  related  to  future  data  
center  technical  assessments  and  ensure  that  the  work  performed  complies  with  CMS  
contractual  requirements.   At  a  minimum,  this  should  include  a  review  of  test  plans  to  
ensure  that  the  contractor  has  completed  all  required  testing  procedures  and  a  review  of  
contractor  working  papers  to  verify  that  reported  gaps  have  been  adequately  supported,  
identified,  and  included  in  the  technical  assessment  reports.   CMS  concurred  with  our  
recommendation.   A-18-07-30290.    
Medicare  Part  C  (Medicare  Advantage)  
Beneficiary  Appeals  in  Medicare  Advantage   
We  found  that  Medicare  Advantage  Organizations  (MAO)  decided  most  organization  
determinations  in  favor  of  beneficiaries;  they  denied  few.   Of  those  denials,  called  
adverse  determinations,  few  were  appealed  by  beneficiaries,  and  upon  appeal,  
MAOs  overturned  more  than  half  of  their  own  denials.  
MAOs  must  have  a  procedure  to  determine  whether  a  beneficiary  is  entitled  to  receive  
health  services  and  the  amount,  if  any,  a  beneficiary  is  required  to  pay  for  the  services.   
The  outcome  is  called  an  organization  determination.   MAOs  also  must  offer  
beneficiaries  the  right  to  appeal  an  adverse  determination.   Further,  the  Secretary  of  
HHS  must  contract  with  an  Independent  Review  Entity  (IRE)  to  review  secondlevel  
appeals  in  cases  in  which  MAOs  have  returned  decisions  that  are  adverse  to  
beneficiaries  initial  appeals.   CMS  oversees  MAO  compliance  through  audits.  
We  also  found  that  MAOs  decided  23  percent  of  adverse  expedited  determinations,  and  
18  percent  of  appeals,  late.   At  the  second  level  of  appeal,  an  IRE  overturned  about  one  
in  five  adverse  MAO  decisions.   It  overturned  25  percent  of  adverse  expedited  service  
reconsiderations,  compared  with  16  percent  of  standard  service  reconsiderations.   CMS  
identified  many  MA  contracts  that  failed  to  meet  appealsrelated  audit  elements.  
Our  review  raises  questions  and  concerns.   We  found  that  beneficiaries  appealed  fewer  
than  1  in  10  adverse  determinations.   Although  no  rate  of  appeal  is  expected  or  correct,  
further  study  could  examine  factors  that  might  explain  the  rate  and  could  also  identify  
differences  between  denials  that  beneficiaries  appeal  and  those  they  do  not.   Also  of  
particular  concern  are  the  problems  with  timeliness  in  processing  adverse  expedited  
determinations  and  the  higher  IRE  overturn  rate  of  expedited  cases.   Because  expedited  
cases  concern  timesensitive  care,  it  is  important  that  such  care  be  delivered  with  
minimal  delays.   OEI-01-08-00280.    
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   17   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   Beneficiaries  Remain  Vulnerable  to  Sales  Agents Marketing  of  Medicare  
Advantage  Plans  
Each  of  the  six  selected  plan  sponsors  we  reviewed  did  not  follow  at  least  one  of  the  
marketing  regulations  concerning  sales  agent  compensation  and  qualifications.   These  
marketing  regulations  are  critical  to  protecting  Medicare  beneficiaries  because  they  
address  sales  agents financial  motivation  and  their  qualifications  to  market  MA  plans.   
In  July  2008,  the  Medicare  Improvements  for  Patients  and  Providers  Act  of  2008,  which  
prohibited  or  limited  certain  marketing  activities  by  plan  sponsors  or  sales  agents,  was  
enacted.   Later  in  2008,  CMS  promulgated  regulations  implementing  these  prohibitions  
and  limitations,  including  specific  regulations  concerning  sales  agent  compensation  and  
qualifications.   Five  of  the  selected  plan  sponsors  in  our  review  that  employ  independent  
sales  agents  had  compensation  practices  that  resulted  in  inappropriate  financial  
incentives  for  sales  agents  and  field  marketing  organizations  (FMO).   FMOs  typically  
provide  sales  agents  with  enrollment  leads  and  marketing  assistance.   In  addition,  five  
of  the  six  selected  plan  sponsors  did  not  ensure  that  all  of  their  sales  agents  were  
qualified  under  CMSs  regulations.   We  also  found  that  the  number  and  types  of  
beneficiaries complaints  remained  unchanged  after  implementation  of  sales  agent  
marketing  regulations.   
We  recommended  that  CMS  (1)  take  appropriate  actions  regarding  the  specific  instances  
of  noncompliance  documented  in  this  report,  (2)  audit  plan  sponsors  and  include  an  
assessment  of  the  vulnerabilities  identified  in  this  report,  (3)  issue  additional  regulations  
concerning  FMO  payments,  (4)  issue  regulations  requiring  plan  sponsors  to  contact  all  
new  enrollees  to  ensure  that  they  understand  plan  rules,  and  (5)  issue  guidance  
clarifying  that  plan  sponsors  should  terminate  unlicensed  sales  agents  immediately  
upon  discovery.   
CMS  concurred  with  our  first  recommendation.   CMS  concurred  in  part  with  our  second  
recommendation,  stating  that  it  would  conduct  audits  or  other  oversight  activities  of  
plan  sponsors  posing  the  greatest  risk  to  Medicare  beneficiaries.   As  such,  we  have  
amended  the  wording  of  the  recommendation.   CMS  did  not  concur  with  our  final  three  
recommendations.   We  continue  to  recommend  that  CMS  issue  additional  regulations  
and  guidance  to  protect  Medicare  beneficiaries  from  inappropriate  sales  agent  
marketing.   However,  we  have  modified  the  wording  of  two  of  our  recommendations  to  
reflect  alternative  approaches  that  are  consistent  with  CMSs  comments.   
OEI-05-09-00070.    
Medicare  Part  D  (Prescription  Drug  Program)  
Demonstration  Project  for  Dually  Eligible  Beneficiaries   
Massachusetts  complied  with  certain  provisions  of  the  Reimbursement  of  State  Costs  
for  Provision  of  Part  D  Drugs  Medicare  demonstration  application  when  claiming  drug  
costs  for  fullbenefit,  dually  eligible  beneficiaries  (fully  eligible  for  both  Medicare  and  
Medicaid).   The  demonstration  project  reimbursed  States  for  drug  costs  and  related  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   18   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   administrative  costs  incurred  during  the  transition  to  Medicare  Part  D.   However,  we  
found  that  the  State  submitted  claims  for  some  drug  costs  to  both  the  Medicaid  program  
and  the  Medicare  demonstration  project.   When  we  initiated  our  audit  in  November  
2008,  the  State  had  not  adjusted  its  Medicaid  Forms  CMS64  to  reflect  $15.2  million  
($7.6  million  Federal  share)  in  drug  costs  for  which  the  State  was  reimbursed  through  
the  Medicare  demonstration  project  in  August  and  December  2006  and  in  June  2007  for  
the  quarter  ended  March  31,  2006.    
During  our  audit,  the  State  adjusted  its  Forms  CMS64  for  the  quarters  ended        
December  31,  2008,  and  March  31,  2009,  to  account  for  almost  all  of  the  $7.6  million  in  
drug  costs  reimbursed  through  the  Medicare  demonstration  project.   State  officials  told  
us  that  they  planned  to  adjust  the  Form  CMS64  for  the  quarter  ended  June  30,  2009,  for  
the  remaining  $17,000.  
We  recommended  that  the  State  refund  $17,000  to  the  Federal  Government  and  make  
future  refunds  to  the  Medicaid  program  in  a  timely  fashion.   The  State  agreed  with  our  
recommendations.   A-01-09-00601.    
Potential  Part  D  Fraud  and  Abuse  Identified  by  Medicare  Drug  Integrity  
Contractors   
Of  the  4,194  potential  fraud  and  abuse  incidents  that  Medicare  Drug  Integrity  
Contractors  (MEDIC)  identified  in  FY  2008,  87  percent  were  identified  through  external  
sources,  such  as  complaints.   The  remaining  13  percent  were  identified  proactively,  
including  through  data  analysis.   Of  the  1,320  investigations  that  MEDICs  conducted  in  
FY  2008,  96  percent  involved  incidents  identified  through  external  sources.   Before  
implementing  the  Part  D  benefit,  CMS  developed  a  strategy  to  help  combat  Part  D  fraud  
and  abuse.   A  key  aspect  of  the  strategy  was  MEDICs  use  of  innovative  data  analysis  
techniques.   Beginning  in  FY  2007,  CMS  awarded  contracts  to  three  regional  MEDICs  to  
address  potential  fraud  and  abuse  in  the  Part  D  benefit.  
Problems  accessing  and  using  data  hindered  MEDICs  ability  to  identify  and  investigate  
potential  fraud  and  abuse  incidents.   MEDICs  reported  that  they  needed  prescription  
drug  event  (PDE)  data  and  Part  B  data  to  identify  and  investigate  potential  fraud  and  
abuse.   However,  MEDICs  did  not  receive  access  to  PDE  data  until  August  2007,  nearly  a  
year  after  their  contracts  began.   Two  MEDICs  were  not  given  access  to  Part  B  data  until  
fall  2008,  and  the  third  MEDIC  did  not  receive  access  to  Part  B  data  before  its  contract  
ended.   Once  they  received  access  to  PDE  data,  MEDICs  found  that  important  variables  
were  not  available  or  were  stored  incorrectly.  
MEDICs  lack  of  authority  to  directly  obtain  information  such  as  prescriptions  and  
medical  records  from  pharmacies,  pharmacy  benefit  managers,  and  physicians  hindered  
them  in  investigating  potential  fraud  and  abuse  incidents.   MEDICs  may  not  have  been  
aware  of  some  potential  fraud  and  abuse  because  plan  sponsors  are  not  required  to  refer  
them.   Also,  CMS  did  not  give  MEDICs  approval  to  conduct  audits  of  plan  sponsors  
compliance  plans  in  FY  2008.       
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   19   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   We  recommended  that  CMS  ensure  that  MEDICs  have  access  to  accurate  and  
comprehensive  data  to  assist  in  identifying  and  investigating  potential  fraud  and  abuse  
and  conducting  data  analysis.   We  also  recommended  that  CMS  authorize  MEDICs  to  
directly  obtain  information  that  they  need  to  identify  and  investigate  potential  fraud  and  
abuse  from  entities  such  as  pharmacies,  pharmacy  benefit  managers,  and  physicians  
even  if  statutory  or  regulatory  change  is  required  to  do  so.   We  also  recommended  that  
CMS  (1)  require  plan  sponsors  to  report  to  MEDICs  all  potential  fraud  and  abuse  
incidents  that  are  referred  to  law  enforcement  agencies  and  (2)  ensure  that  MEDICs  have  
approval  to  conduct  compliance  plan  audits  for  which  they  are  responsible.  
In  response  to  our  final  report,  CMS  indicated  that  the  MEDICs  currently  have  access  to  
prescription  drug  event  data  and  Parts  A  and  B  claims  data  through  the  integrated  data  
repository.   By  mid2010,  CMS  anticipates  providing  benefit  integrity  contractors  full  
user  access  to  a  data  system,  One  PI,  containing  data  on  Part  D,  Part  A,  and  Part  B  claims.   
CMS  noncurred  with  our  recommendation  to  seek  statutory  authority  and  make  the  
regulatory  changes  necessary  to  allow  CMS  to  obtain  information  from  downstream  
entities  and  indicated  that  it  goes  against  the  structure  of  the  Part  D  program.   CMS  
concurs  with  OIGs  recommendation  that  when  referring  fraud  and  abuse  incidents  to  
law  enforcement,  sponsors  should  also  report  that  same  information  to  the  MEDICs.   
While  CMS  did  not  indicate  concurrence  or  nonconcurrence  in  its  final  comments,  it  did  
indicate  that  MEDICs  have  approval  to  conduct  compliance  plan  audits  in  FY  2010  for  
Medicare  Advantage  Organizations  and  plan  sponsors.   OEI-03-08-00420.    
Medicare  Part  D  Plan  Sponsor  Electronic  Prescribing  Initiatives   
We  found  that  plan  sponsors  have  launched  voluntary  electronic  prescribing  
(eprescribing)  initiatives  to  increase  prescriber  adoption  of  eprescribing.   At  the  time  
of  our  data  collection  in  September  2008,  about  20  percent  of  plan  sponsors  had  an  
eprescribing  initiative  and  another  18  percent  reported  that  they  were  planning  one.   
Initiatives  included  at  least  one  of  the  following:   free  or  discounted  software,  hardware,  
training,  Internet  connectivity,  or  financial  incentives.   More  than  half  of  plan  sponsors  
with  an  initiative  reported  average  or  high  prescriber  participation.    
Finally,  75  percent  of  plan  sponsors  with  an  initiative  could  not  report  a  quantifiable  
benefit  because  they  did  not  measure  outcomes.   The  remaining  25  percent  reported  that  
they  measured  for  and  saw  a  quantifiable  benefit.   These  plan  sponsors  most  commonly  
reported  that  the  initiative  resulted  in  an  increase  in  generic  substitutions  and  an  
increase  in  formulary  compliance.   OEI-05-08-00322.    
Electronic  Prescribing  Standards:   Early  Assessment  Shows  Partial  
Connectivity    
Nearly  80  percent  of  plan  sponsors  reported  at  least  partial  implementation  of  standards  
governing  communication  between  plan  sponsors  and  prescribers,  but  few  reported  
complete  implementation.   Problems  implementing  the  formulary  and  benefits  
standard,  one  of  the  plantoprescriber  standards,  limit  complete  plantoprescriber  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   20   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   connectivity.   Plan  sponsors  reported  incomplete  implementation  of  the  formulary  and  
benefits  standard  because  their  systems  are  not  fully  compatible  with  the  standard.    
The  MMA  established  the  Medicare  Part  D  eprescribing  program,  which  stipulates  that  
plan  sponsors  must  implement  eprescribing  standards  specified  by  the  Secretary  of  
HHS.   On  behalf  of  the  Secretary,  CMS  established  eprescribing  standards.   These  
standards  facilitate  the  communication  of  prescription  information  among  prescribers  
(e.g.,  doctors),  plan  sponsors,  and  dispensers  (e.g.,  pharmacies).   Three  of  these  
standards  enable  communication  between  plans  and  prescribers  of  eligibility,  
medication  history,  and  formulary  and  benefits  information.   A  fourth  standard  address  
eligibility  and  copayment  information  between  plans  and  dispensers.   We  surveyed  all  
plan  sponsors  for  plan  year  2008  between  August  and  September  2008  to  determine  the  
extent  of  implementation  of  the  standards.  
Most  plan  sponsors  had  complete  plantodispenser  connectivity.   Only  5  percent  of  plan  
sponsors  reported  no  plantodispenser  connectivity.    
Based  on  these  findings,  we  recommended  that  CMS  ensure  that  plan  sponsors  fully  
implement  the  plantoprescriber  and  plantodispenser  standards.   We  also  
recommended  that  CMS  collaborate  with  plan  sponsors  and  industry  representatives  to  
address  barriers  to  full  implementation  of  the  formulary  and  benefits  standard.     
CMS  concurred  with  each  of  our  recommendations.   To  address  them,  CMS  will  
continue  to  educate  plan  sponsors  about  eprescribing  requirements.   If  necessary,  CMS  
will  also  use  available  mechanisms  to  bring  plan  sponsors  into  compliance.   CMS  plans  
to  continue  collaboration  with  the  National  Council  for  Prescription  Drug  Programs  to  
update  and  develop  new  eprescribing  standards.   OEI-05-08-00320.    
Midyear  Formulary  Changes  in  Medicare  Prescription  Drug  Plans   
All  sponsors  of  Medicare  PDPs  made  formulary  changes  in  2008.   Most  of  the  changes  
(64  percent)  were  positive  and  improved  formularies  by  adding  new  drugs,  reducing  
cost  sharing,  or  removing  utilization  controls.   Of  the  negative  changeswhich  require  
CMS  approval  and  restrict  the  formulary  by  removing  drugs,  increasing  cost  sharing,  or  
adding  utilization  controls62  percent  promoted  generic  drug  substitution.  
Sponsors  identify  the  list  of  drugs  they  cover  in  their  formularies.   CMS  sets  guidelines  
for  when  and  how  sponsors  may  make  formulary  changes.   Sponsors  must  provide  
written  notice  to  beneficiaries  taking  affected  drugs  before  implementing  negative  
changes.   CMS  also  requires  sponsors  to  post  updated  formularies  on  their  Web  sites  at  
least  monthly  and  to  list  formulary  changes  60  days  before  they  take  effect.  
We  found  that  with  few  exceptions,  sponsors  met  beneficiary  notification  requirements  
for  formulary  changes.   We  found,  too,  that  CMSs  monitoring  processes  detected  most,  
though  not  all,  noncompliance.  
We  concluded  that  sponsors  and  CMS  are  managing  midyear  formulary  changes  
without  major  problems.   Part  D  regulations  require  sponsors  to  promote  costeffective  
use  of  prescription  drugs  where  medically  appropriate,  and  it  appears  that  sponsors  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   21   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   adhered  to  these  rules.   We  made  no  recommendations  to  CMS.   CMS  generally  agreed  
with  our  findings.   OEI-01-08-00540.    
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   22   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   Medicaid   
Hospitals  
Supplemental  Rate  Payments  to  a  Massachusetts  Hospital  Company  
Of  the  $337  million  that  Massachusetts  claimed  in  Medicaid  supplemental  rate  payments  
to  one  hospital  company  during  FYs  2004  and  2005,  $11.5  million  ($5.75  million  Federal  
share)  was  not  claimed  in  accordance  with  Federal  and  State  plan  requirements.   We  
identified  an  additional  $5.6  million  ($2.8  million  Federal  share)  in  supplemental  
payments  to  a  medical  school  affiliated  with  the  company  on  which  we  were  unable  to  
express  an  opinion.   
We  recommended  that  the  State  (1)  make  a  financial  adjustment  of  $11.5  million  
($5.75  million  Federal  share),  (2)  work  with  CMS  to  determine  the  appropriateness  of  
$5.6  million  ($2.8  million  Federal  share)  in  supplemental  payments  to  the  medical  
school,  and  (3)  follow  State  plan  requirements  when  submitting  claims  for  supplemental  
payments.   The  State  disagreed  with  $8.5  million  of  our  $11.5  million  finding  but  agreed  
to  work  with  CMS  in  resolving  our  finding  related  to  payments  to  the  medical  school.   
A-01-07-00013.    
Home and  CommunityBased  Services  
Connecticuts  CommunityBased  Administrative  Claims   
In  our  review  of  communitybased  Medicaid  administrative  costs  that  Connecticut  
claimed  for  State  FYs  2005  and  2006,  we  found  that  claims  totaling  $19.8  million  may  
not  have  fully  complied  with  Federal  requirements.   The  State  claimed  reimbursement  
from  CMS  for  administrative  case  management  activities  provided  by  contracted  
organizations.   Because  the  State  made  omissions  and  deviations  from  acceptable  
practices  when  calculating  its  claims  and  was  unable  to  provide  adequate  
documentation,  we  were  unable  to  express  an  opinion  on  whether  the  claims  should  
be  allowed.   
We  recommended  that  the  State  work  with  CMS  to  determine  what  portion  of  the     
$19.8  million  was  allowable  under  Federal  requirements.   The  State  agreed  to  do  so.       
A-01-08-00003.    
Other  Services,  Equipment,  and  Supplies  
Claims  for  Family  Planning  Services  in  New  York  State   
New  York  State  improperly  claimed  enhanced  90percent  Federal  reimbursement  for  
Medicaid  family  planning  services  claims  submitted  by  selected  providers.   Of  the  
105  claims  in  our  sample,  50  qualified  as  family  planning  services  and  could  be  claimed  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   23   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   at  the  enhanced  90percent  Federal  reimbursement  rate.   However,  the  remaining  55  
could  not  be  claimed  as  family  planning  services.   Of  those  55  claims,  51  were  for  
services  unrelated  to  family  planning  and  4  lacked  documentation.   Based  on  our  sample  
results,  we  estimate  that  the  State  received  $3.8  million  in  unallowable  Federal  Medicaid  
reimbursement.   This  overpayment  occurred  because  the  selected  providers  incorrectly  
claimed  services  as  family  planning  and  the  States  Medicaid  Management  Information  
System  (MMIS)  edit  routines  did  not  adequately  identify  claims  unrelated  to  family  
planning.  
We  recommended  that  the  State  (1)  refund  $3.8  million  to  the  Federal  Government  and  
(2)  consider  the  results  of  this  review  in  its  evaluation  of  our  previous  recommendations  
to  ensure  that  providers  bill  as  family  planning  only  those  services  directly  related  to  
family  planning  and  ensure  that  MMIS  edits  identify  claims  that  are  ineligible  for  
enhanced  90percent  Federal  reimbursement.   The  State  agreed  with  our  
recommendations  and  described  corrective  actions  that  it  planned  to  take.    
A-02-09-01015.    
Missouri  School  District  Administrative  Claims  
Of  the  $15.3  million  (Federal  share)  that  Missouri  claimed  in  Medicaid  administrative  
costs  for  the  St.  Louis  Public  and  Springfield  school  districts  for  FYs  2004  through  2006,  
$4.2  million  was  unallowable  for  Federal  reimbursement  because  the  State  did  not  
correctly  calculate  and  claim  administrative  costs  for  the  School  District  Administrative  
Claiming  (SDAC)  program.   In  addition,  because  of  errors  identified  during  our  review  
of  the  St.  Louis  and  Springfield  school  districts,  the  other  Missouri  school  districts  
received  $16.3  million  in  unallowable  Medicaid  payments  for  FYs  2004  through  2006.   
We  set  aside  for  CMS  adjudication  $1.5  million  for  administrative  costs  claimed  for  the  
St.  Louis  Public  and  Springfield  school  districts  and  $3.9  million  for  administrative  costs  
claimed  for  all  other  Missouri  school  districts.   The  SDAC  program  permits  children  to  
receive  healthrelated  services,  generally  without  having  to  leave  school.   States  may  be  
reimbursed  for  the  administrative  activities  that  directly  support  identifying  and  
enrolling  potentially  eligible  children  in  Medicaid.    
We  recommended  that  Missouri  (1)  refund  $20.5  million  to  the  Federal  Government  for  
unallowable  SDAC  expenditures;  (2)  work  with  CMS  to  determine  what  portion  of  the  
school  district  administrative  costs  claimed  for  the  quarter  ending  December  2004  was  
allowable;  (3)  review  all  school  district  Medicaid  administrative  claims  that  the  State  
paid  after  March  2006  to  determine  whether  it  included  nonresponses  in  the  sample  and,  
if  so,  recalculate  the  administrative  claims  and  refund  to  the  Federal  Government  the  
amount  overpaid;  and  (4)  strengthen  policies  and  procedures  to  ensure  that  SDAC  
expenditures  submitted  for  Federal  reimbursement  are  accurate  and  reasonable.   
Missouri  partly  agreed  and  partly  disagreed  with  our  recommendations.   Nothing  in  the  
States  comments  caused  us  to  change  our  findings  or  recommendations.   
A-07-08-03107.    
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HHS  OIG  Semiannual  Report  to  Congress   24   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   Prescription  Drugs  
Outlier  Average  Manufacturer  Prices  in  the  Federal  Upper  Limit  Program   
We  found  that  about  20  percent  of  AMPs  reported  for  the  242  outlier  drugs  were  
inaccurate.    When  the  new  AMPbased  Federal  upper  limit  (FUL)  provisions  are  
implemented,  CMS  will  exclude  the  lowest  AMP  from  the  FUL  calculation  if  it  is  more  
than  60  percent  below  the  secondlowest  AMP  to  ensure  that  at  least  two  drug  products  
are  available  at  or  below  the  FUL  amount.   In  January  2008,  the  lowest  AMPs  for  
242  FUL  drugs  met  this  criterion.   This  study  examined  the  accuracy  of  the  AMP  data  
submitted  by  manufacturers  that  would  be  used  in  the  new  FUL  calculation,  pending  
the  lifting  of  the  Federal  courts  injunction  on  its  implementation.    
Inaccuracies  in  the  reported  data  resulted  in  part  from  discrepancies  in  the  unit  of  AMP  
submission  that  created  the  appearance  of  outliers.   Furthermore,  some  outlier  AMPs  are  
not  accurate  and  would  no  longer  be  outliers  if  revised  data  were  used.   Also,  several  
outlier  drug  products  are  no  longer  sold  by  manufacturers  and  therefore  should  not  be  
included  in  FUL  calculations.   
OIG  supports  CMSs  continuing  efforts  to  ensure  the  integrity  of  future  FUL  amounts  
based  on  AMPs  and  further  recommended  that  CMS  (1)  examine  the  units  of  AMP  
submission  for  all  FUL  drugs  before  establishing  FUL  amounts,  (2)  direct  manufacturers  
to  periodically  examine  their  monthly  AMP  calculations  to  ensure  accurate  reporting  of  
data,  and  (3)  continue  directing  manufacturers  to  report  termination  dates  for  
discontinued  drug  products  as  soon  as  they  are  known.   
CMS  concurred  with  our  first  and  third  recommendations  but  did  not  explicitly  concur  
or  not  concur  with  our  second  recommendation.   CMS  believes  it  would  not  be  
beneficial  to  instruct  manufacturers  to  reexamine  their  AMPs  without  more  information  
from  OIG  about  the  causes  of  the  inaccurate  AMPs.   OIG  will  provide  details  about  
inaccurate  AMPs  directly  to  CMS,  along  with  any  explanations  voluntarily  offered  by  
manufacturers  for  their  AMP  revisions.   OEI-03-07-00740.    
Rebates  for  BrandName  Drugs  With  Multiple  Versions  
Our  review  found  that  of  the  top  150  brandname  drugs  for  CY  2007  ranked  by  Medicaid  
reimbursement,  114  had  more  than  1  version.   For  65  of  the  114,  the  prices  of  the  earliest  
versions  of  the  drugs  exceeded  their  inflationadjusted  prices  when  the  new  versions  
entered  the  market.   We  calculated  that  for  CYs  19932007,  States  could  have  collected  
about  $2.5  billion  in  additional  rebates  for  the  65  brandname  drugs  if  the  baseline  AMPs  
of  the  new  versions  had  been  adjusted  (i.e.,  reduced)  to  reflect  price  increases  in  excess  
of  inflation  for  the  earliest  versions.  
For  a  manufacturers  covered  outpatient  drug  to  be  eligible  for  Federal  Medicaid  
funding,  the  manufacturer  must  enter  into  a  rebate  agreement  that  is  administered  by  
CMS  and  pay  quarterly  rebates  to  the  States.   Federal  law  requires  manufacturers  to  pay  
an  additional  rebate  when  the  AMP  for  a  brandname  drug  increases  more  than  
inflation.    
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HHS  OIG  Semiannual  Report  to  Congress   25   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   We  did  not  evaluate  the  drug  manufacturers  bases  for  developing  the  new  versions  of  
existing  drugs  identified  in  our  review.   Because  the  Medicaid  drug  rebate  program  
calculates  rebates  separately  for  each  version  of  a  drug,  manufacturers  could  develop  
new  versions  of  existing  brandname  drugs  solely  to  avoid  paying  additional  rebates  
when  they  substantially  increase  prices.   Without  some  modification  to  the  rebate  law,  
the  risk  that  manufacturers  will  take  advantage  of  this  potential  loophole  may  increase  
over  time.    
We  recommended  that  CMS  continue  to  seek  legislative  authority  to  modify  the  present  
rebate  formula  calculation  to  ensure  that  manufacturers  cannot  circumvent  paying  
additional  rebates  by  bringing  new  versions  of  existing  brandname  drugs  to  market.   
CMS  concurred  with  our  findings  and  recommendation.   A-06-09-00033.    
Medicaid  Administration  
State  Claims  Under  the  American  Recovery  and  Reinvestment  Act  of  2009  
During  the  semiannual  period,  we  conducted  audits  of  four  States  Medicaid  claims  
associated  with  the  increased  Federal  medical  assistance  percentage  (FMAP)  under  the  
American  Recovery  and  Reinvestment  Act  of  2009,  P.L.  No.  1115  (Recovery  Act).   The  
Recovery  Act  provides,  among  other  initiatives,  fiscal  relief  to  States  to  protect  and  
maintain  State  Medicaid  programs  in  a  period  of  economic  downturn.   For  the  recession  
adjustment  period  (October  1,  2008,  through  December  31,  2010),  the  Recovery  Act  
provides  an  estimated  $87  billion  in  additional  Medicaid  funding  based  on  temporary  
increases  in  States  FMAPs.   The  Federal  Government  pays  its  share  of  a  States  medical  
assistance  expenditures  under  Medicaid  based  on  the  FMAP,  which  varies  depending  on  
the  States  relative  per  capita  income.    
Our  audits  found  that  the  four  States  claims  associated  with  the  temporarily  increased  
FMAP  were  computed  using  the  Medicaid  expenditure  base  specified  in  the  Recovery  
Act.   These  claims  totaled  $174  million  in  Alabama,  $817  million  in  Florida,  $276  million  
in  Maryland,  and  $273  million  in  Missouri.   In  all  four  States,  expenditures  were  
supported  by  accounting  records  and  policies  and  procedures  were  in  place  to  segregate  
Medicaid  expenditures  that  qualified  for  the  temporarily  increased  FMAP  and  to  ensure  
that  those  Medicaid  expenditures  that  did  not  qualify  were  not  claimed  for  
reimbursement  at  the  temporarily  increased  FMAP.    
Our  reports  on  Alabama,  Florida,  and  Maryland  contained  no  recommendations.   Our  
report  on  Missouri  recommended  that  the  State  document  its  policies  and  procedures  
for  claiming  the  temporary  increase  in  the  FMAP.   Missouri  concurred  and  said  that  it  
would  update  its  written  procedures.   A-04-09-06111,  A-04-09-06110,  A-03-09-00203,  and      
A-07-09-02762.    
Californias  Payment  Error  Rate  Measurement  Universes  
California  was  unable  to  reconcile  the  FY  2007  Payment  Error  Rate  Measurement  
(PERM)  universes  to  the  quarterly  Forms  CMS64  and  CMS21.   CMS  developed  the  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   26   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   PERM  program  to  comply  with  Federal  requirements  for  measuring  improper  payments  
made  in  the  FFS,  managed  care,  and  eligibility  components  of  the  Medicaid  and  State  
Childrens  Health  Insurance  programs  in  FY  2007  and  future  years.   The  Office  of  
Management  and  Budget  (OMB)  requires  CMS  to  include  the  PERM  results  in  its  annual  
accountability  report.  
We  could  not  determine  whether  Californias  managed  care  and  FFS  universes  were  
complete  and  accurate  because  we  were  unable  to  reconcile  these  universes  to  Forms  
CMS64  and  CMS21.   CMS  regional  officials  stated  that  they  had  reconciled  the  forms  to  
the  accounting  records  that  the  State  used  to  support  the  forms.   However,  those  
accounting  records  did  not  include  detailed  claim  information.   State  officials  said  that  
they  could  not  reconcile  the  forms  to  the  managed  care  or  FFS  universes,  and  the  
California  State  Auditor  found  that  Form  CMS64  was  not  traceable  to  individual  claims.  
We  recommended  that  CMS  (1)  instruct  the  State  to  reconcile  its  PERM  universes  to  
Forms  CMS64  and  CMS21  and  ensure  that  its  universes  are  complete  and  accurate,  
(2)  instruct  the  State  to  implement  a  payment  system  that  produces  readily  available  
information,  and  (3)  annually  reconcile  various  expenditures  on  Forms  CMS64  and  
CMS21  to  detailed  claim  information.   CMS  did  not  agree  with  our  first  two  
recommendations  and  did  not  specifically  address  our  third  recommendation.   Without  
reconciling  the  PERM  universe  to  Forms  CMS64  and  CMS21,  CMS  is  unable  to  show  
that  it  has  complied  with  the  requirements  to  produce  a  statistically  valid  estimate  of  
improper  payments.   A-06-08-00050.    
 
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HHS  OIG  Semiannual  Report  to  Congress   27   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   Legal  Activities  and  Investigative  Outcomes  
Related  to  Centers  for  Medicare  &  Medicaid  
Services  Programs  
Medicare and  MedicaidRelated  Outreach  
As  part  of  OIGs  continuing  efforts  to  promote  the  highest  level  of  ethical  and  lawful  
conduct  by  the  health  care  industry,  we  issue  advisory  opinions  and  other  guidance  to  
educate  industry  and  other  stakeholders  on  how  to  avoid  fraud,  waste,  and  abuse.  
Advisory  Opinions  
In  accordance  with  section  205  of  the  Health  Insurance  Portability  and  Accountability  
Act  of  1996  (HIPAA),  OIG,  in  consultation  with  DOJ,  issues  advisory  opinions  to  outside  
parties  regarding  the  interpretation  and  applicability  of  certain  statutes  relating  to  
Federal  health  care  programs.   This  authority  allows  OIG  to  provide  casespecific  formal  
guidance  on  the  application  of  the  antikickback  statute  and  safe  harbor  provisions  and  
other  OIG  health  care  fraud  and  abuse  sanctions.   From  October  1,  2009,  through  March  
31,  2010,  OIG  received  23  advisory  opinion  requests  and  issued  3  advisory  opinions.   
OIG  advisory  opinions  are  available  at  http://oig.hhs.gov/fraud/advisoryopinions.asp.  
Provider  SelfDisclosure  Protocol  
OIG  is  committed  to  assisting  health  care  providers  and  suppliers  in  detecting  and  
preventing  fraudulent  and  abusive  practices.   Since  1998,  we  have  made  available  
comprehensive  guidelines  describing  the  process  for  providers  to  voluntarily  submit  to  
OIG  selfdisclosures  of  fraud,  waste,  or  abuse.   The  Provider  SelfDisclosure  Protocol,  
gives  providers  an  opportunity  to  minimize  the  potential  costs  and  disruption  that  a  
fullscale  OIG  audit  or  investigation  might  entail  if  fraud  is  uncovered.   In  doing  so,  the  
selfdisclosure  also  enables  the  provider  to  negotiate  a  fair  monetary  settlement  and  
potentially  avoid  being  excluded  from  participation  in  Federal  health  care  programs.   
The  protocol  guides  providers  and  suppliers  through  the  process  of  structuring  a  
disclosure  to  OIG  about  matters  that  constitute  potential  violations  of  Federal  laws  (as  
opposed  to  honest  mistakes  that  may  have  resulted  in  overpayments).   After  making  an  
initial  disclosure,  the  provider  or  supplier  is  expected  to  thoroughly  investigate  the  
nature  and  cause  of  the  matters  uncovered  and  make  a  reliable  assessment  of  their  
economic  impact  (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.    
In  addition,  OIG  issued  an  Open  Letter  to  Health  Care  Providers  in  2006  to  promote  the  
use  of  the  selfdisclosure  protocol  to  resolve  civil  monetary  penalty  (CMP)  liability  
under  the  physician  selfreferral  and  antikickback  statutes  for  financial  arrangements  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   29   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   between  hospitals  and  physicians.   The  selfdisclosure  guidelines  are  available  on  the  
OIG  Web  site  at  http://www.oig.hhs.gov/fraud/selfdisclosure.asp.   
On  April  15,  2008,  OIG  published  another  Open  Letter  to  Health  Care  Providers.   The  
letter  sets  forth  certain  refinements  to  the  October  1998  SelfDisclosure  Protocol.   To  
improve  the  selfdisclosure  process,  OIG,  among  other  steps,  streamlined  its  internal  
selfdisclosure  procedures.   In  addition,  OIG  explained  that  it  will  generally  not  require  
a  selfdisclosing  entity  to  enter  into  a  CIA  or  certification  of  compliance  agreement  
(CCA)  when  a  resolution  has  been  negotiated  pursuant  to  the  protocol.   A  CIA  is  an  
agreement  between  the  provider  and  OIG  that  is  entered  into  in  exchange  for  OIGs  
agreement  not  to  seek  an  exclusion  of  that  provider  from  participation  in  Medicare,  
Medicaid,  and  other  Federal  health  care  programs.   CIAs  are  monitored  by  OIG  and  
require  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  conduct.   OIG  may  also  negotiate  a  CCA  in  lieu  of  a  comprehensive  CIA,  
under  appropriate  circumstances.   The  CCA  requires  that  the  provider  maintain  its  
existing  compliance  program  and  agree  to  certain  compliance  obligations  that  mirror  
those  found  in  a  comprehensive  CIA.  
OIG  published  its  most  recent  Open  Letter  to  Health  Care  Providers  on  March  24,  2009,  
that  narrowed  the  scope  of  the  selfdisclosure  protocol  in  regard  to  violations  of  the  
physician  selfreferral  (Stark)  law  and  explained  that  OIG  will  no  longer  accept  
disclosure  of  a  matter  that  involves  only  liability  under  the  physician  selfreferral  law  in  
the  absence  of  a  colorable  antikickback  statute  violation.   The  Open  Letter  also  
established  a  minimum  settlement  amount  for  antikickback  disclosures  of  $50,000.  
The  selfdisclosure  guidelines  are  available  on  the  OIG  Web  site  at  
http://www.oig.hhs.gov/fraud/selfdisclosure.asp.    
During  this  reporting  period,  selfdisclosure  cases  resulted  in  $27.1  million  in  HHS  
receivables.   The  following  are  examples:   
 	  Michigan    Meijer,  Inc.,  agreed  to  pay  $3  million  to  resolve  its  liability  under  the  
FCA.   Meijer  selfdisclosed  to  OIG  and  the  United  States  Attorneys  Office  that  
between  1997  and  2006  it  employed  four  pharmacists  who  were  excluded  from  
participating  in  Federal  health  care  programs.   
 	  New  York    Oswego  Hospital  (Oswego)  agreed  to  pay  $2,134,037  to  settle  its  liability  
under  the  CMP  provisions  applicable  to  physician  self  referrals  and  kickbacks  and  
applicable  under  New  York  State  statutes.   As  reported  under  OIGs  Provider  Self
Disclosure  Protocol,  Oswego  initially  disclosed  a  physician  recruitment  arrangement  
that  failed  to  meet  the  applicable  Stark  Law  exception.   Following  the  disclosure,  
Oswego  submitted  five  more  reports  detailing  financial  arrangements  with  more  
than  20  physicians  between  1999  and  2007.   The  reports  disclosed  several  violations  
of  law  that  involved  failure  to  meet  requirements  of  exceptions  for  recruitment  
arrangements,  office  leases,  and  professional  service  arrangements.   Another  
violation  involved  the  provision  of  discounted  employee  benefit  plan  premiums  to  
nonemployed  physicians.   OIG  contended  that  many  of  the  arrangements  also  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   30   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   created  liability  under  the  antikickback  statute.   Because  Oswego  selfdisclosed  its  
violations  and  cooperated  throughout  the  investigation,  no  CIA  was  imposed.   
 	  Ohio    Medina  General  Hospital  (Medina)  agreed  to  pay  $240,298  for  allegedly  
violating  the  Civil  Monetary  Penalties  Law  (CMPL)  provisions  applicable  to  
kickbacks  and  physician  selfreferrals.   Medina  selfdisclosed  that  it  failed  to  meet  
Stark  Law  requirements  in  its  financial  relationships  with  a  family  practice  
physician,  occupational  health  services  physicians,  and  a  cardiologist.   Specifically,  
the  financial  relationships  were  during  periods  when  there  were  no  written  service  
agreements  and  payments  were  not  made  consistent  with  the  contracts.   
 	  North  Carolina    The  Neurological  Institute,  P.A.,  formerly  known  as  Neurology  
Consultants  of  the  Carolinas,  P.A.  (Institute),  agreed  to  pay  $181,851  to  resolve  its  
CMPL  liability.   The  Institute  disclosed  to  OIG  that  from  October  1,  2003,  through  
June  30,  2006,  it  improperly  submitted  claims  to  Medicare  and  Medicaid  for  (1)  a  
physicians  services  (or  an  item  or  service  incident  to  a  physicians  service)  when  the  
individual  who  furnished  the  service  was  not  a  physician,  (2)  services  provided  by  
Dr.  T.  Hemanth  Rao  when  the  services  were  not  actually  provided  by  Dr.  Rao,  and  
(3)  services  provided  based  on  codes  that  the  Institute  knew  or  should  have  known  
would  result  in  greater  payments  than  were  appropriate.    
 	  New  York    Margaretville  Memorial  Hospital  and  Margaretville  Nursing  Home,  
Inc.,  (collectively,  Margaretville)  agreed  to  pay  $80,000  to  resolve  its  liability  under  
the  CMPL.   Pursuant  to  the  OIG  Provider  SelfDisclosure  Protocol,  Margaretville  
reported  that  from  January  1,  2006,  through  April  30,  2008,  it  inappropriately  billed  
Medicare  Part  D  and  State  health  care  plans  for  drugs  provided  by  Margaretville  
Hospital  to  Margaretville  Nursing  Home  residents  when  the  drugs  were  already  
paid  for  as  part  of  the  beneficiaries  Medicare  Part  A  coverage.   After  the  self
disclosure,  OIG  conducted  an  investigation  that  revealed,  among  other  things,  a  lack  
of  specific  billing  protocols  or  training,  a  lack  of  internal  controls  over  the  
pharmaceutical  billings  in  question,  and  minimal  adherence  to  the  compliance  
program  in  place  at  the  hospital  and  at  the  nursing  home.   
Office  of  Inspector  General  Administrative  Sanctions  
OIG  has  the  authority  to  impose  administrative  sanctions  for  fraud  or  abuse  or  other  
activities  that  pose  a  risk  to  Federal  health  care  programs  and  their  beneficiaries  (see  
Appendix  E  for  an  explanation  of  OIGs  sanction  authorities).   These  sanctions  include  
the  exclusion  of  individuals  and  entities  from  Federal  health  care  programs  and  the  
imposition  of  CMPs  for  submitting  false  or  fraudulent  claims  to  a  Federal  health  care  
program  or  for  violating  the  antikickback  statute,  the  Stark  Law,  or  the  patient  
dumping  provision  of  the  Social  Security  Act.   
During  this  reporting  period,  OIG  administered  1,963  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.   Details  and  
examples  follow.   
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HHS  OIG  Semiannual  Report  to  Congress   31   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   Program  Exclusions  
During  this  semiannual  reporting  period,  OIG  excluded  1,935  individuals  and  entities  
from  Medicare,  Medicaid,  and  other  Federal  health  care  programs.   Most  of  the  
exclusions  resulted  from  convictions  for  crimes  relating  to  Medicare  or  Medicaid,  for  
patient  abuse  or  neglect,  or  as  a  result  of  license  revocation.   For  example:  
 	  Ohio    Chiropractor  Gregory  Dew  was  excluded  for  a  minimum  of  60  years  based  
on  his  conviction  for  rape,  corruption  of  a  minor,  and  gross  sexual  imposition.    
The  Ohio  State  Chiropractic  Board  permanently  revoked  his  license,  and  the  State  
Medical  Board  of  Ohio  permanently  revoked  his  license  to  practice  as  a  physician  
assistant.   In  addition,  the  Ohio  Department  of  Job  and  Family  Services  terminated  
his  Medicaid  Provider  Agreement.   Dew  was  sentenced  to  43  years  incarceration.    
 	  California    Haroutyun  Gulderyan,  owner  of  an  independent  diagnostic  testing  
facility,  was  excluded  for  a  minimum  of  45  years  based  on  his  healthcarerelated  
conviction.   Over  a  4year  period,  Gulderyan  was  involved  in  a  fraud  scheme  that  
caused  Medicare  to  pay  for  tests  that  were  unnecessary  or  were  never  performed.   
As  part  of  the  scheme,  individuals  known  as  cappers  were  paid  cash  to  recruit  
Medicare  patients  to  receive  services  at  medical  clinics  and  diagnostic  testing  
facilities  owned  and  operated  by  Gulderyan  and  his  coconspirators.   Gulderyan  was  
sentenced  to  24  months  incarceration  and  ordered  to  pay  $11,011,523  in  joint  and  
several  restitution.  
 	  Oregon    Mohammed  Salah  Mohammed,  a  medical  doctor,  was  excluded  
indefinitely  based  on  the  Oregon  Medical  Boards  revocation  of  his  license  to  practice  
medicine.   His  license  to  practice  was  revoked  based  on  allegations  that  he  engaged  
in  a  series  of  unprofessional  interactions  with  sexual  overtones  with  several  female  
patients  and  a  hospital  nurse.   He  also  allegedly  falsified  a  patients  medical  record.    
 	  Virginia    Midwife  Kristina  Zittle  was  excluded  for  an  indefinite  period  based  on  the  
suspension  of  her  license  to  practice  midwifery  by  the  Virginia  Board  of  Medicine.   
The  Board  found  that  Zittle  provided  negligent  care  to  two  patients  during  the  
course  of  their  home  births.   She  allegedly  made  numerous  clinical  and  professional  
misjudgments,  which  resulted  in  the  infants  being  stillborn.        
 	  Nebraska    Pharmacist  Randall  Paulsen  was  excluded  for  an  indefinite  period  based  
on  the  revocation  of  his  license  by  the  Nebraska  Department  of  Health  and  Human  
Services,  Division  of  Public  Health.   The  State  revoked  his  license  based  on  code  of  
ethics  violations.   Paulsen  exchanged  free  prescription  drugs  for  sexual  favors  with  
two  female  customers  over  a  4to  6year  period.   In  addition,  he  failed  to  maintain  
complete  and  accurate  records  of  his  controlled  substance  inventory.  
Civil  Monetary  Penalties  Law  
The  CMPL  authorizes  OIG  to  impose  administrative  penalties  and  assessments  against  a  
person  who,  among  other  things,  submits  or  causes  to  be  submitted  claims  to  a  Federal  
health  care  program  that  the  person  knows  or  should  know  are  false  or  fraudulent.   
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   32   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   During  this  reporting  period,  OIG  concluded  cases  involving  more  than  $5.1  million  in  
CMPs  and  assessments.   The  following  are  among  the  CMP  actions  resolved  during  this  
reporting  period:  
 	  Florida    Dr.  Robert  Diaz  agreed  to  pay  $65,000  and  enter  into  a  3year  period  of  
exclusion  to  resolve  his  liability  under  the  CMPL  for  receiving  kickbacks  from  
medical  device  manufacturers.   Diazs  liability  arises  from  his  solicitation  and  receipt  
of  remuneration  in  the  form  of  consulting  payments  from  Biomet  Orthopedics,  Inc.  
(Biomet),  and  Zimmer,  Inc.  (Zimmer),  in  exchange  for  using  their  orthopedic  hip  and  
knee  products.   OIG  alleged  that  the  compensation  paid  under  consulting  
agreements  with  Biomet  and  Zimmer  were  received,  in  part,  in  return  for  Diaz  
ordering,  or  causing  to  order,  Biomet  and  Zimmer  orthopedic  products,  respectively,  
to  be  paid  for,  in  whole  or  in  part,  by  Federal  health  care  programs.  
 	  California    Michael  Bakst,  former  Executive  Director  of  Community  Memorial  
Hospital  (CMH),  agreed  to  pay  $64,000  to  resolve  his  liability  under  the  CMPL  and  
the  CMP  provisions  of  the  Stark  Law.   From  May  29,  2002,  through  September  23,  
2003,  Bakst  allegedly  orchestrated  a  scheme  involving  CMH  remunerating  doctors  
and  cardiac  surgeons  for  referrals  to  CMH.   In  December  2007,  CMH  agreed  to  pay  
the  United  States  over  $1.5  million  to  resolve  CMHs  liability  for  more  than  17  
different  arrangements  with  physicians  and  physician  family  members  that  allegedly  
violated  the  Stark  Law  and  the  False  Claims  Act.   
Criminal  and  Civil  Enforcement  
One  of  the  most  common  types  of  fraud  perpetrated  against  Medicare,  Medicaid,  and  
other  Federal  health  care  programs  involves  filing  false  claims  for  reimbursement.   False  
claims  may  be  pursued  under  Federal  and  State  criminal  statutes  and,  in  appropriate  
cases,  under  the  civil  FCA.   A  description  of  these  enforcement  authorities  can  be  found  
in  Appendix  E.    
The  successful  resolution  of  false  claims  often  involves  the  combined  investigative  
efforts  and  resources  of  OIG,  the  Federal  Bureau  of  Investigation  (FBI),  Medicaid  Fraud  
Control  Units  (MFCU),  and  other  law  enforcement  agencies.   OIG  is  responsible  for  
assisting  DOJ  in  bringing  and  settling  cases  under  the  FCA.   Many  providers  elect  to  
settle  their  cases  prior  to  litigation.   As  part  of  their  settlements,  providers  often  agree  to  
enter  into  corporate  integrity  agreements  (CIA)  with  OIG  to  avoid  exclusions  from  
Medicare,  Medicaid,  and  other  Federal  health  care  programs.   Such  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  conduct.  
During  this  semiannual  reporting  period,  the  Governments  enforcement  efforts  resulted  
in  242  criminal  actions  and  158  civil  actions  against  individuals  or  entities  that  engaged  
in  healthcarerelated  offenses.   These  efforts  resulted  in  $2.3  billion  in  HHS  and  
$188.7  million  in  nonHHS  investigative  receivables,  including  civil  and  administrative  
settlements  or  civil  judgments  related  to  Medicare;  Medicaid;  and  other  Federal,  State,  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   33   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   and  private  health  care  programs.   Some  of  the  notable  enforcement  actions  are  
described  below.   Summaries  are  organized  by  the  sector  of  the  health  care  industry  
involved  or  by  the  nature  of  the  offense.  
Special  Assistant  United  States  Attorney  Program  
DOJ  and  OIG  launched  a  program  in  which  OIG  attorneys  serve  as  Special  Assistant  
United  States  Attorneys.   OIG  attorneys  are  detailed  fulltime  to  DOJs  Criminal  
Division,  Fraud  Section,  for  temporary  assignments,  such  as  with  the  Medicare  Fraud  
Strike  Force  described  below;  others  prosecute  matters  on  a  casebycase  basis.   Both  
arrangements  offer  excellent  litigation  training  for  OIG  attorneys  and  enhance  
collaboration  between  the  departments  in  fighting  fraud.   Under  this  program,  OIG  
attorneys  have  successfully  litigated  important  criminal  cases  relating  to  DME,  infusion  
therapy,  physical  therapy,  and  other  types  of  Medicare  and  Medicaid  fraud.    
Health  Care  Fraud  Prevention  and  Enforcement  Action  Team  
On  May  20,  2009,  Secretary  of  HHS  Kathleen  Sebelius  and  Attorney  General  Eric  Holder  
announced  the  creation  of  the  Health  Care  Fraud  Prevention  and  Enforcement  Action  
Team  (HEAT),  an  interagency  effort  focused  specifically  on  combating  health  care  fraud.   
HEAT  includes  senior  officials  from  DOJ  and  HHS  who  are  strengthening  programs,  as  
well  as  investing  in  new  resources  and  technologies,  to  prevent  and  combat  fraud,  
waste,  and  abuse.   A  key  component  of  HEAT  task  force  efforts  is  expansion  of  Medicare  
Fraud  Strike  Force  operations.   Strike  Forces  began  in  March  2007  and  are  operating  in  
seven  major  citiesMiami,  FL;  Los  Angeles,  CA;  Detroit,  MI;  Houston,  TX;  Brooklyn,  
NY;  Baton  Rouge,  LA;  and  Tampa,  FL.   The  Strike  Force  teams  coordinate  law  
enforcement  operations  with  other  Federal,  State,  and  local  law  enforcement  entities.  
 These  teams  have  a  proven  record  of  success  analyzing  realtime  data  to  quickly  
identify  and  prosecute  fraud  almost  as  it  occurs.  
During  this  reporting  period,  Strike  Force  efforts  have  resulted  in  the  filing  of  charges  
against  119  individuals  or  entities,  42  convictions,  and  $16  million  in  investigative  
receivables.   Examples  of  Strike  Force  efforts  during  this  reporting  period  follow:  
	   Michigan    Two  managers  at  separate  infusion  therapy  clinics  have  been  sentenced  
to  more  than  75  months  incarceration  and  ordered  to  pay  a  combined  $1,870,996  in  
restitution  for  conspiracy  to  commit  health  care  fraud.   Dulce  Briceno,  manager  and  
part  owner  of  Xpress  Center  Inc.  (XPC),  was  sentenced  to  63  months  incarceration  
and  ordered  to  pay  $1,789,234  in  restitution  after  pleading  guilty  to  conspiracy  to  
commit  health  care  fraud.   Briceno,  along  with  other  owners  of  the  infusion  therapy  
clinic,  recruited  and  paid  patients  $50  per  visit  to  purport  to  have  received  legitimate  
services  at  XPC.   XPC  then  billed  Medicare  for  beneficiary  medications  (primarily  
Cosyntropin  and  Interferon)  and  services  that  were  medically  unnecessary  and/or  
not  provided.   Arturo  Apolinar,  manager  of  AR  Group  Services,  was  sentenced  to  
1  year  and  1  day  of  incarceration  and  ordered  to  pay  $81,762  in  restitution  for  health  
care  fraud.   Apolinar  obtained  a  doctors  provider  enrollment  information,  without  
the  doctors  knowledge,  to  apply  for  and  obtain  a  Medicare  provider  number.   He  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   34   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   then  used  this  information  to  submit  false  claims  to  the  Medicare  program  for  
infusion  therapy  services  that  were  never  provided.  
In  addition  to  the  sentences  for  Briceno  and  Apolinar,  one  of  the  beneficiary  patients  
involved  in  the  XPC  scheme,  Darrell  Brown,  pleaded  guilty  to  conspiracy  to  commit  
health  care  fraud  and  was  ordered  to  pay  $173,732  in  restitution.   Brown  visited  the  
clinic  three  times  per  week,  was  paid  $50  per  visit,  and  provided  his  Medicare  card  
and  signed  medical  forms,  which  were  used  to  bill  the  Medicare  program  for  
injections  and/or  infusion  treatment  that  he  did  not  receive.  
 	  California    Gevork  Kartashyan  and  Eliza  Shubaralyan,  owners  of  CHH  Medical  
Supply,  were  each  sentenced  to  2  years  incarceration  and  ordered  to  pay  $400,000  in  
restitution,  jointly  and  severally,  for  health  care  fraud.   Kartashyan  and  Shubaralyan,  
who  are  married,  billed  Medicare  nearly  $1  million  for  medically  unnecessary  power  
wheelchairs  and  wheelchair  accessories.   During  trial,  elderly  Medicare  beneficiaries  
testified  that  Kartashyan  and  Shubaralyan  recruited  them  to  visit  Los  Angelesarea  
medical  clinics,  where  they  turned  over  their  Medicare  numbers  and  other  personal  
identifying  information  in  exchange  for  promised  vitamins,  diabetic  shoes,  and  other  
items  that  were  never  received.   The  clinics  used  this  information  to  create  
fraudulent  power  wheelchair  prescriptions  that  could  be  sold  to  DME  company  
owners,  who  then  billed  Medicare  for  the  wheelchairs.   Many  of  the  beneficiaries  did  
not  know  they  were  getting  a  power  wheelchair  until  it  was  delivered  by  CHH  
Medical  Supply.   All  of  the  beneficiaries  testified  that  they  did  not  need  or  use  the  
power  wheelchairs.   Five  physicians  testified  that  they  never  authorized  or  approved  
the  power  wheelchair  prescriptions  written  under  their  names.   
 	  Florida    Miriam  Hernandez,  owner  of  M&A  Medical  Services  Plus,  Inc.  (M&A),  was  
sentenced  to  32  months  incarceration  and  ordered  to  pay  $760,197  in  restitution  after  
pleading  guilty  to  health  care  fraud.   M&A  billed  Medicare  for  services  and  products  
that  it  never  provided.   
 	  Florida    Yessenia  DOleo,  owner  of  Radiant  Medical  Supply,  Inc.  (Radiant  Medical),  
was  sentenced  to  12  months  and  1  day  of  incarceration  and  ordered  to  pay  
restitution  of  $415,270  for  health  care  fraud.   From  August  2007  through  November  
2007,  Radiant  Medical,  a  DME  provider,  submitted  claims  to  Medicare  for  enteral  
formula,  infusion  supplies,  ostomy  pouches,  and  other  DME  that  was  neither  
prescribed  by  the  referring  physicians  nor  received  by  the  beneficiaries.  Radiant  
Medical  also  submitted  claims  to  Medicare  for  deceased  beneficiaries.  
Pharmaceutical  Companies  
 	  Massachusetts    As  an  update  to  the  summary  of  the  global  criminal,  civil,  and  
administrative  resolution  with  Pfizer,  Inc.  (Pfizer),  from  the  previous  Semiannual  
Report  to  Congress  (April  1,  2009  through  September  30,  2009),  Pharmacia  &  Upjohn  
Company,  Inc.  (Pharmacia),  a  subsidiary  of  Pfizer,  was  sentenced  and  ordered  to  pay  
criminal  fines  and  forfeiture  of  $1.3  billion.   As  noted  in  the  last  Semiannual  Report,  
the  global  resolution  with  the  United  States  addressed  Pfizers  and  Pharmacias  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   35   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   marketing  and  promotion  practices  associated  with  the  antiinflammatory  drug  
Bextra  and  several  other  drugs.   Pfizer  also  entered  into  a  comprehensive  5year  CIA  
with  OIG.  
 	  New  Hampshire    Mylan  Pharmaceuticals,  Inc.  (Mylan),  and  UDL  Laboratories,  Inc.  
(UDL),  agreed  to  pay  $118  million  plus  interest  to  resolve  allegations  that  the  
companies  submitted  false  claims  to  the  Medicaid  program  by  underpaying  rebates  
due  to  the  States  under  the  Medicaid  Drug  Rebate  Program.   The  amounts  of  the  
rebates  are  determined  in  part  by  whether  a  drug  is  considered  an  innovator  
drug  or  a  noninnovator  drug.   The  rebate  that  must  be  paid  for  innovator  drugs  is  
higher  than  the  rebate  for  noninnovator  drugs.   Mylan  and  UDL  allegedly  sold  
innovator  drugs  that  were  manufactured  by  other  companies  and  classified  the  
drugs  as  noninnovator  drugs  for  Medicaid  rebate  purposes.   As  a  result  of  the  
improper  classification  of  the  drugs,  the  companies  underpaid  their  rebate  
obligations  under  the  Medicaid  Rebate  Program.   
	   Massachusetts    Omnicare,  Inc.,  a  provider  of  pharmacy  services  to  longtermcare  
(LTC)  facilities,  agreed  to  pay  $98  million  plus  interest  to  resolve  its  FCA  liability  for  
allegedly  engaging  with  several  parties  in  kickback  schemes  that  resulted  in  false  or  
fraudulent  claims  being  submitted  to  Medicare  Part  D  and  Medicaid.   One  of  the  
kickback  schemes  involved  generic  drug  manufacturer  IVAX  Pharmaceuticals,  Inc.,  
and  IVAX  Corporation  (collectively,  IVAX).   IVAX  also  entered  into  a  settlement  
agreement  with  the  Government,  under  which  it  agreed  to  pay  $14  million  plus  
interest  to  resolve  its  FCA  liability  for  a  kickback  violation  involving  an  $8  million  
payment  to  induce  Omnicare  to  purchase  $50  million  in  drugs  from  IVAX.   As  a  
result  of  the  kickback,  Omnicare  submitted  false  or  fraudulent  claims  to  Medicaid  
from  January  2000  through  June  2004.   Omnicares  settlement  also  resolved  liability  
related  to  kickback  schemes  it  had  with  SNFs  Mariner  Health  Care,  Inc.,  and  
SavaSeniorCare  Administrative  Services,  LLC,  and  with  pharmaceutical  
manufacturer  Johnson  &  Johnson.   The  settlement  with  Omnicare  resolves  
allegations  made  in  five  separate  qui  tam  complaints.   Omnicare  also  entered  into  a  
5year  Amended  and  Restated  CIA,  which  consolidates  the  terms  set  out  in  
Omnicares  preexisting  CIA  and  First  Amendment  to  the  CIA  effective  in  November  
2006  and  October  2007,  respectively.   IVAX  also  entered  into  a  5year  CIA.    
 	  Massachusetts    As  part  of  a  global  criminal,  civil,  and  administrative  settlement,  
Biovail  Corporation  (Biovail)  agreed  to  pay  $24,775,172  to  resolve  its  liability  related  
to  the  marketing  and  promotion  of  the  drug  Cardizem,  L.A.,  an  extendedrelease  
version  of  a  heart  medication  to  control  high  blood  pressure.   From  2003  to  2004,  
Biovail  Pharmaceuticals,  Inc.  (BPI),  a  U.S.  subsidiary  of  Canadabased  Biovail,  
allegedly  paid  physicians  and  other  medical  prescribers  up  to  $1,000  each  to  induce  
them  to  recommend  and/or  write  prescriptions  for  Cardizem,  L.A.,  thereby  causing  
false  and/or  fraudulent  claims  for  payment  to  be  submitted  to  Medicaid.   Under  the  
civil  resolution,  Biovail  agreed  to  pay  $2,528,782  plus  interest  to  settle  its  potential  
FCA  liability.   Under  the  criminal  resolution,  BPI  pleaded  guilty  to  conspiracy  and  
kickback  charges  and  was  ordered  to  pay  an  assessment  of  $2,800  and  a  criminal  fine  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   36   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   of  $22,243,590  (total  $22,246,390).   In  addition  to  the  monetary  settlement,  Biovail  
agreed  to  enter  a  5year  CIA  with  OIG.    
Hospitals  
 	  Texas    South  Texas  Health  System  (STHS)  agreed  to  pay  $27.5  million  and  enter  into  
a 5year  CIA  to  resolve  its  liability  for  violations  of  the  Stark  Law,  antikickback  
statute,  and  the  FCA.   STHS  allegedly  engaged  in  improper  financial  relationships,  
including  medical  directorships  and  leases,  with  seven  doctors  during  various  
periods  from  January  1,  1999,  to  December  31,  2006.   STHS  submitted  claims  to  
Medicare  and  Medicaid  for  services  rendered  to  patients  referred  by  these  doctors  to  
its  hospitals.   
 	  New  Jersey    The  University  of  Medicine  and  Dentistry  of  New  Jersey  (UMDNJ)  
agreed  to  pay  $8,333,212  to  resolve  its  civil  liability  under  the  FCA,  the  Stark  Law,  
other  statutory  liability  laws,  and  certain  common  law  causes  of  action.   UMDNJ,  the  
State  of  New  Jerseys  Health  Sciences  University,  operates  eight  medical  schools  and  
two  acutecare  hospitals.   In  2005,  UMDNJ  entered  into  a  Deferred  Prosecution  
Agreement  (DPA)  with  the  United  States  Attorneys  Office.   The  DPA  required  
UMDNJ  to  install  a  Federal  monitor  to  oversee  its  business  operations.   While  
conducting  his  duties,  the  monitor  discovered  that  local  cardiologists  were  being  
paid  for  no  show  jobs  in  exchange  for  referring  cardiology  patients  to  UMDNJs  
acutecare  hospitals.   The  contracts  with  these  cardiologists  purportedly  required  
them  to  perform  academic  and  clinical  duties,  when,  in  fact,  they  were  being  hired  to  
refer  patients  to  UMDNJs  cardiology  program.   To  date,  10  cardiologists  involved  in  
the  scheme  have  entered  into  settlements  with  the  United  States.  
In  addition,  UMDNJ  entered  into  a  5year  CIA  under  which  it  must  maintain  and/or  
revise  as  necessary  its  Code  of  Conduct  and  Policies  and  Procedures;  provide  annual  
training  to  its  employees,  medical  staff,  and  agents;  submit  Implementation  and  
Annual  Reports  to  OIG;  and  hire  an  Independent  Review  Organization  to  conduct  
Focus  Arrangements  Reviews,  Claims  Reviews,  and  an  Unallowable  Costs  Review.  
 	  Michigan    SCCI  Hospitals  of  America,  Inc.,  which  operates  a  chain  of  longterm  
acutecare  hospitals  (LTACH),  agreed  to  pay  $830,166  to  resolve  its  liability  under  
the  FCA.   Between  October  1,  2004,  and  September  2,  2005,  SCCI  allegedly  
(1)  improperly  admitted  patients  to  its  Michigan  facility  who  did  not  meet  LTACH  
criteria,  (2)  held  and  treated  patients  who  no  longer  needed  hospitalization  in  order  
to  increase  Medicare  reimbursement,  (3)  requested  referring  physicians  to  modify  
original  orders  to  circumvent  medicalnecessity  requirements,  (4)  inappropriately  
discharged  patients  who  were  not  well  enough  for  discharge,  and  (5)  upcoded  
diagnosisrelated  group  (DRG)  classifications.   
Clinics  
 	  Florida    Caridad  Perez  was  sentenced  to  78  months  incarceration  and  ordered  to  
pay  $14,051,221  in  restitution  for  her  participation  in  a  health  care  fraud  conspiracy.   
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   37   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   While  an  employee  at  an  infusion  clinic,  Perez  recruited  and  paid  cash  kickbacks  to  
Medicare  beneficiaries  in  exchange  for  allowing  their  Medicare  numbers  to  be  billed  
at  numerous  Miamibased  infusion  therapy  clinics  for  medically  unnecessary  and  
nonrendered  infusion  therapy  medication.   
 	  California    Vardges  Egiazarian  was  sentenced  to  78  months  incarceration  and  
ordered  to  pay  restitution  of  $1,558,620  for  health  care  fraud.   Egiazarian,  who  
operated  three  health  care  clinics,  submitted  claims  to  Medicare  for  office  visits,  
physical  therapy,  and/or  other  procedures  and  diagnostic  tests  that  were  not  needed  
and/or  not  rendered.   Egiazarian  and  others  entered  into  illegal  relationships  with  
physicians  and  laboratories  to  establish  medical  practices  using  the  providers  names  
and  operated  the  practices  as  if  they  were  run  by  the  providers  when,  in  fact,  they  
were  not.   Once  established,  Egiazarian,  acting  alone  or  with  others,  controlled  the  
practices  and  often  paid  physicians  a  relatively  small  flat  fee  to  bill  Medicare  under  
their  provider  numbers.   Kickbacks  were  given  to  cappers  who  recruited  patients  
to  come  to  the  clinics  in  return  for  freebies,  such  as  DME  and  cash  payments.   
Egiazarian  also  used  false  identification  documents  to  establish  bank  accounts  using  
aliases  to  launder  fraud  proceeds.   
Home  Health  
Michigan    Visitingphysicians  practices  VPA,  PC,  and  VPA  of  Texas,  PLLC  (collectively,  
VPA),  agreed  to  pay  $9.5  million  and  enter  into  a  5year  CIA  to  resolve  allegations  under  
the  FCA  for  submitting  claims  for  unnecessary  services  to  Medicare,  TRICARE,  and  the  
Michigan  Medicaid  program.   VPA  allegedly  improperly  billed  for  unnecessary  home  
visits  and  care  plan  oversight  services,  unnecessary  tests  and  procedures,  and  more  
complex  evaluation  and  management  services  than  were  actually  provided.  
Practitioners  
 	  New  York    Podiatrist  Steven  Ginsberg  was  sentenced  to  36  months  incarceration  
and  ordered  to  pay  $5,434,143  in  restitution  for  health  care  fraud  and  making  false  
statements.   Ginsberg  systematically  billed  Medicare  for  routine  foot  care  not  
covered  by  Medicare  and  billed  for  services  not  rendered,  such  as  costly  nerve  
conduction  tests  and  abscess  drainages.   Ginsberg  also  billed  several  private  
insurance  companies  for  surgeries  that  were  never  performed.   In  addition  to  his  
sentencing,  Ginsberg  surrendered  his  license  to  practice  podiatry  in  the  State  of  New  
York.  
 	  West  Virginia    Dr.  John  Sharp  was  sentenced  to  36  months  incarceration  and  
ordered  to  pay  $542,275  in  restitution  for  health  care  fraud.   From  May  1998  to  
January  2006,  Sharp  defrauded  the  Medicare,  Medicaid,  and  West  Virginia  Workers  
Compensation  programs  by  billing  for  services  that  were  not  rendered  and  also  
causing  the  programs  to  pay  higher  rates  of  reimbursement  than  were  warranted.   
The  investigation  found  that  Sharp  was  given  notice  on  several  occasions  that  his  
billing  practices  were  improper,  yet  he  continued  the  fraudulent  billings.   
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HHS  OIG  Semiannual  Report  to  Congress   38   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010      Maryland    Podiatrist  Leon  Booker  agreed  to  pay  $100,629  to  resolve  his  liability  
under  the  FCA.   An  OIG  investigation  determined  that  from  January  1,  2005,  to  
March  30,  2008,  Booker  falsely  submitted  claims  for  payment  to  Medicare  and  
Medicaid  by  billing  for  Evaluation  and  Management  (E&M)  services  even  though  no  
significant,  separately  identifiable  E&M  service  was  performed.   Booker  also  billed  
for  multiple  procedures  on  the  same  day  even  though  he  performed  no  distinct  and  
separate  procedure  on  that  day.   
Durable  Medical  Equipment  Suppliers  
Louisiana    Positive  Home  Oxygen,  L.L.C.  (Positive),  its  owner,  Jeffrey  McElveen,  and  
the  companys  medical  director,  Dr.  Robert  Cleveland,  were  sentenced  related  to  a  DME  
fraud  scheme.   Positive  was  ordered  to  pay  $809,169  in  restitution  and  was  permanently  
excluded  from  the  Medicare  program.   McElveen  was  sentenced  to  18  months  
incarceration  and  ordered  to  pay  $200,000  in  restitution,  and  Cleveland  was  sentenced  to  
3  months  home  detention  and  ordered  to  pay  $200,000  in  restitution.   Investigators  
determined  that  McElveen  and  his  company  fraudulently  billed  Medicare  for  providing  
motorized  wheelchairs  to  beneficiaries  who  did  not  qualify  for  the  chairs.   Cleveland  
signed  certificates  of  medical  necessity  for  the  chairs  in  exchange  for  referrals  to  his  
practice  and  cash.    
Transportation  Companies   
Maine    Ambulance  Service,  Inc.  (ASI)  and  Northern  Maine  Medical  Center  (NMMC)  
agreed  to  pay  a  total  settlement  amount  of  $1,032,000  to  resolve  their  liability  under  the  
FCA.   ASI  also  entered  into  a  5year  CIA  with  OIG.   The  settlement  resolves  ASIs  and  
NMMCs  liability  for  allegedly  submitting  improper  Advanced  Life  Support  transport  
claims  to  Medicare  and  Medicaid  between  January  1,  2003,  and  December  31,  2005.   
Investigators  found  that  an  ASI  employee  was  improperly  billing  and  coding  for  ASIs  
services  in  2003  and  2004.   In  2005,  NMMC  took  over  the  billing  and  coding  functions  for  
ASI,  and  in  doing  so,  hired  the  same  ASI  biller  who  had  been  improperly  billing  and  
coding.   OIG  concluded  that  ASI  and  NMMC  failed  to  adequately  supervise  the  
employee  or  ensure  that  she  was  properly  trained.   As  a  result  of  the  investigation,  
NMMC  terminated  the  employee.    
Medicaid  Employee  Fraud  
Minnesota    Kim  Austen  was  sentenced  to  42  months  incarceration  and  ordered  to  pay  
$903,896  in  restitution  to  the  Minnesota  Department  of  Human  Services  (DHS)  after  her  
guilty  plea  to  health  care  fraud.   An  investigation  revealed  that  Austen,  a  unit  supervisor  
at  DHS,  embezzled  State  and  Federal  Medicaid  funds  between  August  5,  2003,  and  
September  10,  2008.   Austen  created  a  fictitious  vendor  number  in  the  States  electronic  
accounting  system  under  the  name  of  her  boyfriend.   Using  this  vendor  number,  Austen  
caused  23  paper  checks  and/or  warrants  to  be  manually  drafted  with  her  boyfriend  as  
the  payee.   The  payments  were  taken  from  an  expense  account  set  aside  to  make  
advance  payments  to  Medicaid  providers.   Austen  was  authorized  to  approve  these  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   39   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   types  of  payments  as  part  of  her  responsibilities  at  DHS.   Austen  picked  up  the  checks  
drafted  to  her  boyfriend  directly  from  the  Minnesota  Department  of  Finance  and  
deposited  them  into  two  personal  bank  accounts,  a  joint  savings  account  in  her  and  her  
boyfriends  names  and  a  checking  account  in  her  name  only.   
Prescription  Drugs  
Pennsylvania    Robert  Mark  Reilly  was  sentenced  to  60  months  incarceration  and  
ordered  to  pay  $250,828  in  restitution  for  conspiracy  to  commit  mail,  wire,  and  health  
care  fraud.   Reilly  was  responsible  for  financial  arrangements  in  a  conspiracy  in  which  
he  and  numerous  individuals  based  in  Canada  solicited  and  received  money  from  
thousands  of  elderly  American  victims  on  the  false  promise  of  receiving  free  
Government  grants  or  discount  prescription  drug  coverage  through  an  insurance  plan  
purportedly  affiliated  with  Medicare.   The  investigation  revealed  that  telemarketers  
contacted  Medicare  beneficiaries  to  get  them  to  enroll  in  a  bogus  discount  drug  benefit  
program.   Some  beneficiaries  were  told  that  they  would  lose  their  Medicare  benefit  if  
they  did  not  enroll.   The  telemarketers  were  able  to  persuade  some  Medicare  
beneficiaries  to  provide  their  bank  account  information,  after  which  Reilly  and  his  co
conspirators  withdrew  money  from  the  victims  bank  accounts.   
Neuromonitoring  Services  
Colorado    Surgical  Concepts,  LLC  (Surgical  Concepts),  agreed  to  pay  $242,528  to  settle  
its  liabilities  under  the  FCA.   From  January  1,  2006,  through  December  31,  2007,  Surgical  
Concepts  submitted  claims  to  Medicare,  TRICARE,  and  the  Federal  Employees  Health  
Benefits  Program  for  physician  time  and  effort  reviewing  neurological  test  data  before  
surgery  and  providing  realtime  intraoperative  neuromonitoring  services.   However,  the  
test  results  were  not  reviewed  by  a  physician  before  surgery,  and  no  physician  provided  
realtime  monitoring  services  during  surgery.   Instead,  a  physician  conducted  a  
posthoc  review  of  the  data  in  the  days  or  weeks  after  the  surgeries.   
Identity  Theft  
Iowa    Dr.  Douglas  Dvorak  was  sentenced  to  85  months  incarceration  and  ordered  to  
pay  $71,375  in  restitution  for  mail  fraud,  aggravated  identity  theft,  and  money  
laundering.   Dvorak  obtained  names  and  dates  of  birth  of  Medicaid  beneficiaries  
(primarily  children)  through  family  members  and  friends  and  used  this  information  to  
bill  the  maximum  number  of  chiropractic  manipulation  services  allowed  by  Medicaid  
for  each  beneficiary  per  year.   In  one  example  in  2006,  Dvorak  billed  the  annual  
maximum  chiropractic  services  (24)  on  nearly  consecutive  days  for  premature  twin  
newborns  who  were  patients  in  a  neonatal  intensive  care  unit  at  the  time  of  the  
purported  services.   According  to  his  friends  and  family  members  who  provided  the  
names  and  dates  of  birth  to  Dvorak,  this  information  was  provided  as  potential  referrals  
and  not  as  part  of  a  criminal  scheme.   The  beneficiaries  had  never  heard  of  Dvorak  or  
received  chiropractic  services  from  him  or  any  other  chiropractor.  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   40   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   Medicaid  Fraud  Control  Units  
MFCUs  are  key  partners  in  the  fight  against  fraud,  waste,  and  abuse  in  State  Medicaid  
programs.   In  FY  2009,  HHS  awarded  $189.9  million  in  Federal  grant  funds  to  50  State  
MFCUs,  which  employed  a  total  of  1,835  individuals.   
 
Collectively,  in  FY  2009,  MFCUs  reported  26,744  investigations,  of  which  17,090  were  
related  to  Medicaid  fraud  and  9,654  were  related  to  patient  abuse  and  neglect,  including  
patient  funds  cases.   The  cases  resulted  in  1,539  individuals  being  indicted  or  criminally  
charged,  including  960  for  fraud  and  579  for  patient  abuse  and  neglect,  including  patient  
funds  cases.   In  total,  1,331  convictions  were  reported  in  FY  2009,  of  which  19  were  
related  to  Medicaid  fraud  and  512  were  related  to  patient  abuse  and  neglect,  including  
patient  funds  cases.  
Joint  Investigations  
 	  Tennessee    FORBA  Holdings,  LLC  (FORBA),  agreed  to  pay  $24  million  plus  interest  
and  enter  into  a  5year  qualityofcare  CIA  to  resolve  its  liability  for  violations  of  the  
FCA.   FORBA  manages  a  chain  of  68  pediatric  dental  clinics  in  22  States  and  the  
District  of  Columbia  commonly  known  as  Small  Smiles  Centers.   The  settlement  
resolves  allegations  that  FORBA  caused  false  claims  to  be  submitted  to  Medicaid  
programs  for  dental  services  performed  on  lowincome  children  insured  by  
Medicaid.   The  investigation  revealed  that,  among  other  things,  FORBA  allegedly  
caused  the  submission  of  claims  for  reimbursement  for  dental  services  that  were  
either  not  medically  necessary  or  did  not  meet  professionally  recognized  standards  
of  care.   The  services  billed  to  the  Medicaid  programs  included  performing  
pulpotomies  (baby  root  canals),  placing  crowns,  administering  anesthesia,  
performing  extractions,  and  providing  fillings  and/or  sealants.   The  investigation  
involved  the  OIG,  the  FBI,  and  the  National  Association  of  Medicaid  Fraud  Control  
Units  (NAMFCU).  
 	  Florida    Sachin  Amin,  owner  and  managing  pharmacist  of  The  Rx  Shop,  was  
sentenced  to  18  months  incarceration  and  ordered  to  pay  $738,000  in  restitution  after  
pleading  guilty  to  submitting  false  claims  to  Medicare  and  Medicaid.   From  2005  
through  2007,  Amin  submitted  false  claims  for  prescription  medications  that  were  
never  dispensed.   The  investigation  involved  OIG,  the  FBI,  the  Defense  Criminal  
Investigative  Service,  the  Office  of  Personnel  Management,  the  Drug  Enforcement  
Agency,  the  Florida  Department  of  Law  Enforcement,  and  the  Florida  MFCU.  
 	  South  Carolina    Lalendra  DeSilva  and  Carolina  Pennington,  coowners  of  the  DME  
company  Helex,  Inc.  (Helex),  were  sentenced  for  conspiracy  to  commit  income  tax  
fraud.   DeSilva  was  sentenced  to  30  months  incarceration  and  ordered  to  pay  
$201,984  in  restitution,  of  which  $112,000  is  owed  to  the  Medicaid  program.   
Pennington  was  sentenced  to  1  year  and  1  day  of  incarceration  and  ordered  to  pay  
$86,123  in  restitution.   The  investigation  revealed  that  Helex  billed  Medicaid  for  
volume  ventilators  that  beneficiaries  never  received.   DeSilva  and  Pennington  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   41   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   bought  a  $415,000  home  in  cash  without  filing  tax  returns  during  Helexs  first  2  years  
in  operation.   The  investigation  involved  OIG,  the  Internal  Revenue  Service  (IRS),  
and  the  South  Carolina  MFCU.  
 	  Georgia Dr.  Randy  Lentz  and  physical  therapist  Scott  Bowlin  were  sentenced  after  
their  guilty  pleas  to  conspiracy  to  commit  health  care  fraud.   Lentz  was  sentenced  to  
34  months  incarceration  and  ordered  to  pay  $248,755  in  restitution,  and  Bowlin  was  
sentenced  to  19  months  incarceration  and  ordered  to  pay  $19,839  in  restitution.   
Lentz  owned  and  operated  a  gym  in  Jesup  which  was  in  financial  difficulty.   To  keep  
the  gym  in  operation,  Lentz  and  Bowlin  devised  a  scheme  to  bill  Medicare  and  
Medicaid  for  physical  therapy  services  that  were  not  provided;  their  alleged  patients  
were  simply  working  out  in  the  gym.   The  investigation  involved  OIG,  the  FBI,  and  
the  Georgia  MFCU.  
 	  Rhode  Island    Drs.  Frank  Lafazia  and  James  Gallo  entered  into  a  settlement  and  
release  agreement  with  the  Rhode  Island  MFCU.   Lafazia  and  Gallo  agreed  to  pay  
$40,300  and  $34,700,  respectively,  to  settle  allegations  that  they  charged  patients  
between  $100  and  $175  in  cash  for  office  visits  in  order  to  obtain  prescriptions  for  
Suboxone,  despite  the  fact  that  the  patients  were  enrolled  in  Medicare  and/or  
Medicaid.   The  investigation  determined  that  the  physicians  told  beneficiaries  that  if  
they  did  not  pay  cash  for  each  office  visit,  which  typically  lasted  only  a  few  minutes,  
they  would  not  receive  a  prescription  for  Suboxone,  which  is  used  to  help  treat  
Opioid  drug  addiction.   Lafazia  and  Gallo  also  required  Suboxone  patients  to  sign  
agreements  that  stated  the  physicians  would  not  bill  any  Suboxonerelated  visits  to  
Medicare  or  Medicaid,  despite  the  fact  that  both  physicians  billed  Medicare  and  
Medicaid  for  services  such  as  laboratory  tests  related  to  Suboxone  treatment  and  
office  visits  unrelated  to  Suboxone  treatment.   There  was  no  technical  loss  to  the  
Medicare  or  Medicaid  programs,  and  both  physicians  agreed  to  fully  refund  the  
beneficiaries  who  paid  money  out  of  pocket  for  the  Suboxone  prescriptions.   The  
settlement  amount  also  included  expenses  incurred  in  the  joint  OIGRhode  Island  
MCFU  investigation.  
Other  CMSRelated  Reports  
Financial  Statement  Audit  
The  CMS  FY  2009  financial  statements  received  an  unqualified  audit  opinion,  which  
means  that  the  statements  were  fairly  presented  in  accordance  with  generally  accepted  
accounting  principles.   However,  auditors  identified  a  material  weakness  in  CMSs  
information  systems  controls.   The  weakness  is  related  primarily  to  CMSs  oversight  of  
information  security,  access  to  financial  systems,  and  control  over  application  
configuration  management.   (CMS  Financial  Report,  Fiscal  Year  2009.   Audit  Opinion  
Section.   Daniel  R.  Levinson,  Inspector  General,  Report  on  the  Financial  Statement  Audit  of  
the  Centers  for  Medicare  &  Medicaid  Services  for  Fiscal  Year  2009.   OAS170902009  (pp.  86,  
96,  102)   Report  )  
 
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HHS  OIG  Semiannual  Report  to  Congress   42   Centers  for  Medicare  &  Medicaid  Services  
Spring  2010   Public  Health,  Human  Services,  and  
Departmentwide  Issues  
Public  Health  Reports  
Ethics  Program  for  Special  Government  Employees  on  Federal  Advisory  
Committees   
We  found  that  CDC  had  a  systemic  lack  of  effective  oversight  of  the  ethics  program  for  
Special  Government  Employees  (SGE)  on  Federal  advisory  committees  (committees).   
Committees  play  an  influential  role  in  decisionmaking  for  the  Federal  Government.   At  
CDC,  committees  address  important  public  health  topics.   For  example,  in  2007,  one  
committee  recommended  routine  vaccination  of  young  females  in  the  United  States  to  
prevent  cervical  cancer.   In  2009,  this  same  committee  recommended  that  H1N1  
influenza  vaccination  efforts  focus  on  five  target  groups  in  the  United  States.    
To  protect  the  committees  integrity  and  credibility,  SGEs  with  conflicts  of  interest  must  
not  inappropriately  influence  their  committees work.   Before  permitting  SGEs  to  
participate  in  committee  meetings,  CDC  must  ensure  that  SGEs  disclose  complete  
financial  information  on  a  Confidential  Financial  Disclosure  Report  and  identify  and  
resolve  all  SGEs  conflicts  of  interest.   Finally,  CDC  must  provide  ethics  training  to  SGEs  
and  monitor  their  compliance  with  ethics  requirements  during  committee  meetings.   We  
reviewed  Confidential  Financial  Disclosure  Reports  and  related  documents  for  246  SGEs  
serving  on  17  CDC  committees  in  2007.   
We  found  that  CDC  and  its  SGEs  on  committees  did  not  comply  with  a  number  of  ethics  
requirements  in  2007.   That  is,  for  almost  all  SGEs,  CDC  did  not  ensure  that  Confidential  
Financial  Disclosure  Reports  were  complete  in  2007,  and  most  of  these  forms  contained  
multiple  omissions.   CDC  did  not  identify  or  resolve  conflicts  of  interest  for  64  percent  of  
SGEs  in  2007.   More  than  onefourth  of  SGEs  had  unidentified  and  unresolved  potential  
conflicts  of  interest  on  file.   CDC  also  did  not  ensure  that  41  percent  of  SGEs  received  
required  ethics  training  in  2007.   Finally,  15  percent  of  SGEs  did  not  comply  with  ethics  
requirements  during  committee  meetings  in  2007.   These  SGEs  participated  in  meetings  
without  having  a  current,  certified  Confidential  Financial  Disclosure  Report  on  file,  or  
they  voted  on  committee  matters  in  which  they  were  prohibited  from  participating  
because  of  a  documented  conflict  of  interest.    
We  recommended  that  CDC  ensure  that  SGEs  Confidential  Financial  Disclosure  Reports  
are  complete  and  identify  and  resolve  all  SGEs conflicts  of  interest  before  permitting  
them  to  participate  in  committee  meetings.   Further,  CDC  should  require  SGEs  to  
disclose  their  involvement  in  grants  and  other  interests  that  could  pose  conflicts,  which  
are  not  disclosed  on  the  Confidential  Financial  Disclosure  Report.   CDC  should  also  
increase  collaboration  among  CDC  officials  and  with  the  HHS  Office  of  the  General  
Counsel  to  ensure  that  SGEs  conflicts  of  interest  are  identified  and  resolved.   Also,  CDC  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   43   Public  Health  and  Human  Services
  
Spring  2010     and  Departmentwide  Issues 
  should  ensure  that  SGEs  and  CDC  employees  receive  ethics  training.   CDC  should  
monitor  and  track  SGE  compliance  with  ethics  requirements.  
CDC  concurred  with  all  seven  of  our  recommendations.   CDC  indicated  that  since  the  
time  of  our  review,  it  has  begun  or  plans  to  implement  improvements  that  coincide  with  
our  recommendations.   OEI040700260.    
CHEMPACK  Project:   Nerve  Agent  Antidote  Storage    
We  found  that  CDCs  procedures  did  not  ensure  that  nerve  agent  antidotes  stockpiled  in  
States  to  respond  to  a  nerve  agent  release  were  stored  to  ensure  the  highest  level  of  
quality.   While  this  finding  is  specific  to  the  CHEMPACK  project,  it  raises  concerns  about  
whether  a  similar  vulnerability  exists  with  other  CDC  assets,  i.e.,  nonCHEMPACK  
drugs  in  the  $3.5  billion  Strategic  National  Stockpile,  because  all  assets  share  the  same  
quality  system  and  similar  Shelf  Life  Extension  Program  (SLEP)  procedures.   
In  2004,  CDC  established  the  CHEMPACK  project  as  part  of  the  Strategic  National  
Stockpile  to  assist  States  in  protecting  communities  against  the  potentially  deadly  effects  
of  chemical  agents  that  attack  the  human  nervous  system  (i.e.,  nerve  agents).   While  
nerve  agent  antidotes  in  the  CHEMPACK  Project  (CHEMPACK  drugs)  are  part  of  the  
Strategic  National  Stockpile,  they  are  not  placed  with  other  federally  stockpiled  drugs.   
Through  this  voluntary  project,  CDC  has  put  more  than  1,900  containers  of  CHEMPACK  
drugs  in  multiple  locations  in  participating  States,  enabling  States  to  quickly  respond  to  
a  nerve  agent  release.   Each  container  is  stocked  with  CHEMPACK  drugs  to  treat  454  or  
1,000  people,  depending  on  the  containers  configuration.  
As  a  holder  of  CHEMPACK  drugs,  CDC  is  subject  to  current  good  manufacturing  
practices  (CGMP)  provisions  in  the  Food,  Drug,  and  Cosmetic  Act  (FDCA).   The  FDA  
considers  CGMP  provisions  of  the  FDCA  to  be  met  if  drugs  are  stored  under  conditions  
required  by  their  FDAapproved  labels.   FDA  also  requires  entities  that  perform  
activities  regulated  by  CGMP  to  establish  and  maintain  a  system  to  ensure  the  quality  of  
their  products.   CDC  participates  in  SLEP  for  CHEMPACK  drugs.   SLEP  defers  drug  
replacement  costs  by  extending  expiration  dates.    
We  found  that  almost  onequarter  of  CHEMPACK  containers  did  not  have  at  least  three  
daily  temperature  readings  in  accordance  with  CDC  procedures.   We  also  found  that  
CDCs  storage  requirements  for  CHEMPACK  drugs  were  not  consistent  with  FDAs  
requirements  and  that  9  percent  of  CHEMPACK  containers  with  at  least  three  daily  
temperature  readings  were  not  stored  according  to  FDAs  requirements  for  at  least  
1  month.   Also,  CDC  did  not  consistently  implement  quality  system  procedures.   We  
found  that  CDCs  procedures  allowed  CHEMPACK  drugs  to  inappropriately  receive  
extended  expiration  dates  under  SLEP.    
We  recommended  that  CDC  (1)  seek  FDA  guidance  on  whether  CHEMPACK  drugs  that  
have  received  extended  expiration  dates  under  SLEP  are  appropriate  for  use,  (2)  revise  
its  CHEMPACK  project  SLEP  procedures  to  comply  with  FDA  requirements,  (3)  revise  
its  CHEMPACK  drug  storage  temperature  requirements  to  comply  with  FDA  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   44   Public  Health  and  Human  Services
  
Spring  2010     and  Departmentwide  Issues 
  requirements,  and  (4)  ensure  that  the  CHEMPACK  projects  quality  system  meets  CGMP  
requirements  for  drug  storage.  
CDC  concurred  with  all  four  of  our  recommendations  and  noted  several  actions  it  has  
taken  or  plans  to  take.   For  example,  CDC  has  retroactively  calculated  mean  kinetic  
temperature  for  the  same  period  as  our  evaluation  and  identified  three  CHEMPACK  
containers  that  FDA  suggests  may  require  more  testing  to  ensure  potency.   However,  it  is  
unclear  from  CDCs  comments  how  it  accounted  for  CHEMPACK  containers  that  were  
missing  temperature  readings  and  documentation  of  temperaturerecording  device  
calibrations.   CDC  also  said  that  our  report  did  not  evaluate  the  overall  Strategic  
National  Stockpile  program  and  that  the  report  should  not  imply  that  problems  exist  
with  Strategic  National  Stockpile  nonCHEMPACK  assets.   Nevertheless,  CDC  has  
begun  to  assess  how  best  to  start  an  independent  review  of  its  quality  system  and  other  
procedures  for  CHEMPACK  containers,  and  the  rest  of  the  Strategic  National  Stockpile  
assets,  to  ensure  compliance  with  FDA  requirements.   OEI040800040.    
Compliance  With  Appropriations  Laws  and  Acquisition  Regulations  
Our  audit,  initiated  in  response  to  a  congressional  request,  found  that  a  CDC  service  
contract  and  eight  sampled  task  orders  awarded  to  a  small  business  referred  to  as  
Contractor  A  did  not  always  comply  with  appropriations  laws  and  acquisition  
regulations  with  respect  to  personal  service  contracts  and  contract  funding.   By  using  
contractor  personnel  for  personal  services,  CDC  violated  the  Federal  Acquisition  
Regulation,  which  states  that  obtaining  personal  services  by  contract  circumvents  civil  
service  laws.   CDC  also  violated  the  bona  fide  needs  statute  by  extending  periods  of  
performance  beyond  1  year  and  expending  $1.1  million  of  annual  appropriations  outside  
their  1year  period  of  availability.   CDC  complied  with  appropriations  laws  and  
acquisition  regulations  with  respect  to  competition,  inherently  governmental  functions,  
and  pricing.   
We  recommended  that  CDC  (1)  identify  any  active  contracts  or  task  orders  being  
administered  as  personal  service  contracts  and  take  action  to  correct  their  
administration,  (2)  develop  and  implement  policies  and  procedures  to  prevent  CDC  
officials  from  administering  task  orders  as  personal  service  contracts,  (3)  determine  
whether  the  $1.1  million  expended  outside  the  1year  period  of  availability  violated  the  
AntiDeficiency  Act  and  take  action  to  correct  any  such  violations,  and  (4)  develop  and  
implement  policies  and  procedures  to  ensure  compliance  with  appropriations  statutes  
and  acquisition  regulations  regarding  obligating  and  expending  funds.  
CDC  disagreed  that  it  administered  the  task  orders  awarded  to  Contractor  A  as  personal  
service  contracts  and  did  not  directly  address  our  first  recommendation.   Nevertheless,  
CDC  described  actions  that  it  had  taken  or  planned  to  take  in  response  to  our  second  
recommendation.   CDC  agreed  with  our  last  two  recommendations.   We  maintain  that  
CDC  should  identify  any  contracts  or  task  orders  being  administered  as  personal  service  
contracts  and  take  corrective  action.   A040801059.    
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HHS  OIG  Semiannual  Report  to  Congress   45   Public  Health  and  Human  Services
  
Spring  2010     and  Departmentwide  Issues 
  Food  Facility  Registry    
We  found  that  7  percent  of  selected  domestic  food  facilities  failed  to  register  or  failed  to  
cancel  their  registration  with  FDA,  as  required.   We  also  found  that  48  percent  of  
selected  facilities  failed  to  provide  accurate  information  when  they  registered  or  failed  to  
provide  accurate  information  after  the  facilities  information  changed,  as  required.   For  
each  of  these  facilities,  FDA  was  missing  information  or  had  inaccurate  information,  
which  could  hinder  its  ability  to  identify  food  facilities  that  might  be  linked  to  an  
outbreak  of  foodborne  illness.    
In  December  2003,  FDA  began  requiring  facilities  that  manufacture,  process,  pack,  or  
hold  food  for  consumption  in  the  United  States  to  register  with  FDA  so  that  the  agency  
would  have  sufficient  and  reliable  information  about  them.   This  enables  FDA  to  quickly  
find  facilities  during  an  outbreak  of  foodborne  illness  or  for  inspection.    
We  also  found  that  FDAs  regulations  do  not  ensure  that  the  registry  contains  
information  that  might  be  needed  in  an  emergency.   In  many  cases,  facilities  failed  to  
provide  information  that  could  be  useful  to  FDA  in  an  emergency  because  providing  
certain  information  in  the  FDA  registry  is  optional.   We  found  that  52  percent  of  the  
managers  of  the  selected  food  facilities  reported  that  they  were  unaware  of  registry  
requirements.  
Our  review  raises  questions  about  the  accuracy  and  utility  of  the  registry.   We  
recommended  that  FDA  develop  strategies  to  ensure  that  the  information  in  the  registry  
is  accurate,  including  seeking  statutory  authority  to  require  food  facilities  to  reregister  
routinely.   FDA  should  also  consider  seeking  statutory  authority  to  impose  civil  
penalties  through  administrative  proceedings  against  facilities  that  fail  to  register  or  fail  
to  provide  accurate  information.   FDA  also  should  consider  making  some  of  the  optional  
fields  in  the  registry  mandatory.   FDA  should  work  with  the  food  industry  to  conduct  
more  education  and  outreach  to  inform  food  facilities  about  registry  requirements.   FDA  
generally  agreed  with  our  recommendations,  noting  that  the  study  confirms  problems  
the  agency  has  encountered,  as  well  as  the  need  for  additional  statutory  authority.    
OEI020800060.    
Adverse  Event  Reporting  for  Medical  Devices   
We  found  that  the  Center  for  Devices  and  Radiological  Health  (CDRH),  within  FDA,  
does  not  use  adverse  event  reports  systematically  to  detect  and  address  safety  concerns  
about  medical  devices.    
The  adverse  event  reporting  system  provides  CDRH  and  manufacturers  with  a  means  to  
identify  and  monitor  adverse  events  involving  medical  devices.   Regulations  require  that  
manufacturers  and  user  facilities  submit  reports  to  FDA  within  specific  timeframes  after  
an  adverse  event  occurs.   These  events  include  deaths,  serious  injuries,  malfunctions,  
and  events  that  require  remedial  action  to  prevent  an  unreasonable  risk  of  substantial  
harm  to  the  public.    
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HHS  OIG  Semiannual  Report  to  Congress   46   Public  Health  and  Human  Services
  
Spring  2010     and  Departmentwide  Issues 
  We  found  that  CDRH  has  not  documented  followup  on  adverse  events,  nor  does  it  
consistently  read  adverse  event  reports  for  the  first  time  in  a  timely  manner.   CDRH  
rarely  acts  when  manufacturers  and  user  facilities  submit  reports  late.   We  also  found  
that  the  inability  to  obtain  complete  and  usable  information  in  adverse  event  reports  
hinders  analysts  review  of  reports  and  that  CDRH  makes  limited  use  of  annual  reports.   
Overall,  FDA  received  twice  as  many  adverse  event  reports  for  medical  devices  in  2007  
as  in  2003;  however,  the  number  of  some  types  of  adverse  event  reports,  such  as  5day  
reports,  decreased.   We  also  found  that  manufacturers  submitted  most  adverse  event  
reports  on  time,  but  that  many  5day  manufacturer  and  user  facility  reports  were  late.  
We  recommended  that  FDA  develop  a  protocol  for  reviewing  adverse  event  reports  that  
addresses  the  following  needs:   documenting  followup  on  adverse  events,  ensuring  and  
documenting  that  CDRH  is  meeting  its  own  guidelines  for  reviewing  highpriority  
adverse  event  reports,  following  up  with  manufacturers  that  routinely  submit  reports  
late  or  with  incomplete  information,  and  improving  outreach  strategies  to  reduce  user  
facility  underreporting.   We  also  recommended  that  FDA  seek  legislative  authority  to  
eliminate  the  regulation  requiring  user  facilities  to  submit  annual  reports.   
FDA  agreed  with  both  of  our  recommendations.   In  response  to  our  first  
recommendation,  FDA  said  that  CDRH  will  develop  a  review  protocol  that  addresses  
the  needs  that  our  report  identified.   Because  FDA  said  that  a  change  in  statutory  
authority  would  be  needed  to  eliminate  the  requirement  to  submit  annual  reports,  we  
revised  our  second  recommendation  accordingly.   OEI010800110.    
Implementation  of  the  Core  Medical  Services  Requirement  in  the  Ryan  White  
Program    
Almost  all  recipients  of  grants  under  Parts  A,  B,  and  C  of  the  Ryan  White  Act  complied  
with  the  core  medical  services  requirement.   In  2007,  96  percent  of  Part  A  grantees  
complied  with  the  requirement,  and  in  2008,  98  percent  allocated  their  grant  funds  in  
compliance  with  the  requirement.   All  Part  B  and  Part  C  grantees  were  in  compliance  
with  the  requirement  based  on  granteeprovided  2007  expenditure  and  2008  allocation  
reports.     
The  reauthorization  of  the  Ryan  White  program  in  2006  (P.L.  No.  109415)  changed  how  
Ryan  White  funds  may  be  used,  emphasizing  lifesaving  and  lifeextending  services  for  
people  living  with  HIV/AIDS.   A  key  change  made  by  the  law  included  providing  more  
funds  for  direct  health  care  services  for  Ryan  White  clients  and  establishing  a  
requirement  that  certain  grantees  spend  at  least  75  percent  of  awarded  grant  funds  on  
core  medical  services  unless  they  receive  a  waiver.   Examples  of  core  medical  services  
include  outpatient  health  services,  home  health  care,  mental  health  services,  and  
medications.   Section  703  of  the  law  repealed  the  Ryan  White  program  effective  October  
1,  2009,  unless  it  is  reauthorized.   On  October  30,  2009,  President  Obama  signed  the  Ryan  
White  HIV/AIDS  Treatment  Extension  act  of  2009,  reauthorizing  the  program  through  
September  30,  2013.   
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   47   Public  Health  and  Human  Services
  
Spring  2010     and  Departmentwide  Issues 
  We  conducted  structured  interviews  with  and  collected  expenditure  and  allocation  
information  from  all  Part  A,  all  Part  B,  and  a  random  sample  of  90  of  the  363  Part  C  
Ryan  White  grantees  funded  in  2007  in  the  50  States,  the  District  of  Columbia,  and  
Puerto  Rico.   We  also  conducted  interviews  with  all  42  HRSA  project  officers  responsible  
for  overseeing  Parts  A,  B,  and  C  Ryan  White  grants.   
We  found  that  grantees  were  spending  a  high  proportion  of  their  grant  funding  on  core  
medical  services  before  implementation  of  the  requirement.   Even  though  grantee  
expenditures  on  core  medical  services  changed  little  from  2006  to  2007,  the  core  medical  
services  requirement  affected  support  services  and  administrative  processes  for  some  
grantees.   When  asked,  71  of  the  121  grantees  interviewed  made  suggestions  for  
Congress  to  consider  during  the  next  reauthorization.   Although  grantees  generally  
found  HRSA  guidance  on  the  core  medical  services  requirement  helpful,  71  percent  of  
grantees  reported  that  project  officer  turnover  in  recent  years  created  program  
management  difficulties.   We  also  found  that  project  officer  oversight  issues  continue  to  
cause  vulnerabilities  in  the  program.   
HRSA  concurred  with  our  findings.   Regarding  the  finding  that  turnover  among  project  
officers  affects  oversight  of  grantees,  HRSA  said  that  it  has  lost  a  number  of  experienced  
project  officers  in  recent  years  and  is  hiring  new  staff  members.   HRSA  noted  that  in  
response  to  the  complex  requirements  of  the  Ryan  White  Act,  its  reauthorization  
(P.L.  No.  11187),  and  the  influx  of  new  project  officers,  training  would  intensify.    
OEI070800240.    
Ryan  White  Title  II  Funding  in  Maryland  
Maryland  complied  with  many,  but  not  all,  Federal  requirements  in  administering  funds  
provided  under  Title  II  of  the  Ryan  White  CARE  Act.   Title  II  grants  fund  the  purchase  
of  medications  through  AIDS  Drug  Assistance  Programs  and  other  health  care  and  
support  services  for  people  with  HIV/AIDS.  
From  April  1,  2003,  through  March  31,  2006,  Maryland  complied  with  the  Title  II  payer
oflastresort  requirement  that  funds  not  be  used  to  pay  for  drugs  that  are  eligible  for  
coverage  by  other  Federal,  State,  or  private  health  insurance  and  with  the  requirement  
that  funds  be  used  only  for  eligible  clients.   However,  from  April  1,  2000,  through  March  
31,  2006,  the  State  did  not  comply  with  the  Federal  requirement  that  reported  
expenditures  include  only  drugs  that  the  State  actually  purchased.   Specifically,  the  State  
claimed  $1.8  million  in  unallowable  Title  II  expenditures  for  drugs  that  it  authorized  but  
never  purchased.    
We  recommended  that  the  State  refund  $1.8  million  to  the  Federal  Government  for  
reported  expenditures  for  drugs  that  it  authorized  but  never  purchased.   The  State  
concurred  with  our  finding  and  said  that  it  would  refund  the  $1.8  million.   
A030800551.      
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   48   Public  Health  and  Human  Services
  
Spring  2010     and  Departmentwide  Issues 
  Fiscal  Year  2005  Cost  Statement  for  the  Indian  Health  Services  PhoenixArea  
Office  
We  found  that  the  $25.8  million  of  obligations  reported  in  Indian  Health  Services  (IHS)  
FY  2005  cost  statement  for  the  Phoenixarea  office  included  $66,000  for  unallowable  
depreciation  and  $2  million  for  unsupported  salaries,  fringe  benefits,  and  related  
obligations  on  which  we  could  not  express  an  opinion.   Based  on  our  review  of  
judgmentally  selected  obligations  totaling  $5.6  million  and  our  limited  review  of  IHSs  
internal  controls,  we  concluded  that  the  remaining  $23.7  million  reported  in  the  cost  
statement  was  allowable.  
We  recommended  that  IHS  (1)  adjust  its  next  cost  statement  for  the  Phoenixarea  office  
for  $66,000  of  unallowable  depreciation  that  was  reported  in  the  FY  2005  cost  statement;  
(2)  review  the  Phoenixarea  offices  cost  statements  before  and  after  FY  2005  and  adjust  
its  next  cost  statement  for  unallowable  depreciation  that  was  reported;  (3)  strengthen  its  
policies  and  procedures  to  ensure  that  depreciation  is  not  reported  for  items  that  are  
fully  depreciated;  (4)  work  with  CMS  to  determine  how  much  of  the  $2  million  for  
salaries,  fringe  benefits,  and  related  obligations  reported  in  the  Phoenixarea  offices  
FY  2005  cost  statement  was  allowable  and  adjust  its  next  cost  statement  for  obligations  
that  are  determined  to  be  unallowable;  and  (5)  develop  and  implement  policies  and  
procedures  to  ensure  that  estimates  used  to  allocate  obligations  in  cost  statements  are  
supported  with  cost  information  that  is  current,  accurate,  and  in  sufficient  detail.   IHS  
partly  agreed  and  partly  disagreed  with  our  recommendations.    (A090700086).    
How  Grantees  Manage  Financial  Conflicts  of  Interest  in  Research  Funded  by  
the  National  Institutes  of  Health   
In  this  review  of  the  National  Institutes  of  Health  (NIH)  grantee  institutions  
identification,  management,  and  oversight  of  financial  conflicts  of  interest,  we  found  a  
number  of  vulnerabilities.   The  most  common  type  of  financial  conflict  of  interest  among  
researchers  is  equity  ownership  (including  stock  and  stock  options)  in  companies  in  
which  the  researchers  financial  interests  could  significantly  affect  the  grant  research.   
Other  financial  conflicts  of  interest  among  researchers  involved  inventing  technology,  
consulting,  or  holding  positions  with  outside  companies.   Examples  of  our  findings  
follow.     
 	  Ninety  percent  of  the  grantee  institutions  rely  solely  on  the  researchers  discretion  to  
determine  which  of  their  significant  financial  interests  are  related  to  their  research  
and  are  therefore  required  to  be  reported.    
 	  Because  nearly  half  of  the  institutions  do  not  require  researchers  to  provide  specific  
amounts  of  equity  or  compensation  on  financial  disclosure  forms,  specific  financial  
interests  of  NIHfunded  researchers  are  often  unknown.    
 	  When  researchers  submit  information  on  their  financial  interests,  the  institutions  do  
not  routinely  verify  it.   
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   49   Public  Health  and  Human  Services
  
Spring  2010     and  Departmentwide  Issues 
   	  Some  institutions  lack  documentation  to  support  their  oversight  of  financial  conflicts  
of  interest.  
 	  Most  do  not  have  policies  and  procedures  that  address  subgrantee  compliance  with  
Federal  regulations  in  regard  to  financial  conflicts  of  interest.   
 	  Conflicts  were  not  reported  by  the  institutions  to  NIH  in  a  consistent  format.    
 	  Institutions  are  not  required  to  report  to  NIH  any  financial  interests  that  they  have  
with  outside  companies.  
 	  Institutions  often  require  researchers  to  disclose  conflicts  in  research  publications;  
however,  grantee  institutions  rarely  reduce  or  eliminate  financial  conflicts  of  interest.     
As  in  a  previous  OIG  report,  we  recommended  that  NIH  ask  grantee  institutions  to  
provide  it  with  details  of  the  nature  of  all  reported  financial  conflicts  of  interest  and  how  
they  are  managed,  reduced,  or  eliminated.   We  also  recommended  that  NIH  (1)  require  
the  institutions  to  collect  information  on  all  significant  financial  interests  held  by  
researchers  and  not  just  those  deemed  by  researchers  to  be  reasonably  affected  by  the  
research,  (2)  collect  information  on  specific  amounts  of  equity  and  compensation  from  
researchers,  (3)  develop  and  disseminate  guidance  on  methods  to  verify  researchers  
financial  interests,  (4)  ensure  that  the  institutions  are  providing  adequate  oversight  of  
subgrantee  compliance  with  the  Federal  financial  conflictofinterest  regulations,  
(5)  ensure  that  the  institutions  are  maintaining  proper  documentation  as  outlined  in  the  
Federal  financial  conflictofinterest  regulations,  (6)  ensure  that  the  institutions  are  
taking  appropriate  actions  against  researchers  who  do  not  follow  the  institutions  
financial  conflictofinterest  policies  and  procedures,  (7)  increase  oversight  of  the  
institutions  to  ensure  that  financial  conflicts  of  interest  are  reported  and  managed  
appropriately,  and  (8)  develop  regulations  that  address  institutional  financial  conflicts  of  
interest.  
Overall,  NIH  did  not  say  whether  it  concurs  with  our  recommendations.   NIH  
highlighted  a  number  of  initiatives  designed  to  improve  NIH  oversight  of  and  promote  
grantee  compliance  with  Federal  regulations.   OIG  recognizes  NIHs  continued  efforts  in  
increasing  oversight  of  grantee  institutions.   However,  vulnerabilities  continue  to  exist  at  
the  institutions  in  their  identification,  management,  and  oversight  of  financial  conflicts  
of  interest.   OEI030700700.    
Internal  Controls  for  Awarding  American  Recovery  and  Reinvestment  Act  
Funds   
Our  review  found  that  NIHs  internal  controls  for  awarding  Recovery  Act  funds  to  
grantees,  as  described  by  management,  were  suitably  designed  to  provide  reasonable  
assurance  that  the  specified  internal  control  objectives  would  be  achieved  if  the  controls  
were  satisfactorily  complied  with  and  applied.   Because  we  did  not  take  steps  to  
determine  the  effectiveness  of  the  internal  controls,  we  expressed  no  opinion  on  the  
operating  effectiveness  of  any  aspects  of  NIHs  internal  controls  for  awarding  Recovery  
Act  funds,  individually  or  in  the  aggregate.   A050900064.    
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HHS  OIG  Semiannual  Report  to  Congress   50   Public  Health  and  Human  Services
  
Spring  2010     and  Departmentwide  Issues 
  PublicHealthRelated  Legal  Actions  and  Investigations  
Office  of  Inspector  General  Administrative  Sanctions   
OIG  excludes  from  participation  in  Federal  health  care  programs  individuals  who  fail  to  
repay  HHSsecured  educational  loans  and  investigates  specific  allegations  of  fraud,  
waste,  and  abuse  affecting  public  health  and  human  services  programs.   These  
investigations  are  often  complex  and  can  include  allegations  of  misuse  or  theft  of  grant  
funds,  conflict  of  interest,  and  kickbacks.   The  following  sections  provide  descriptions  
and  data  related  to  these  efforts.  
 
Health  Education  Assistance  Loan  Program    
Under  the  Health  Education  Assistance  Loan  (HEAL)  program,  HRSA  guarantees  
commercial  loans  to  students  seeking  education  in  healthrelated  fields.   The  students  
are  allowed  to  defer  repayment  of  the  loans  until  after  they  have  graduated  and  begun  
to  earn  income.   Although  the  Departments  Program  Support  Center  (PSC)  takes  steps  
to  ensure  repayment,  some  loan  recipients  do  not  resolve  their  indebtedness.  
After  PSC  has  exhausted  efforts  to  secure  repayment  of  a  debt,  it  declares  an  individual  
in  default.   Thereafter,  the  Social  Security  Act  permits  exclusion  from  Medicare,  
Medicaid,  and  all  other  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  nor  can  any  other  provider  receive  
reimbursement  for  services  ordered  or  prescribed  by  the  individual.   OIG  is  responsible  
for  excluding  individuals  who  have  defaulted  on  HEAL  loans  from  participation  in  
Federal  health  care  programs.   
During  the  semiannual  period,  we  conducted  an  evaluation  of  and  excluded  individuals  
from  the  HEAL  program.   The  results  of  this  work  are  below.  
 
HEAL  Exclusions  
During  the  period  covered  by  this  report,  six  individuals  and  related  entities  were  
excluded  as  a  result  of  PSC  referral  of  their  cases  to  OIG.   Individuals  who  have  been  
excluded  as  a  result  of  default  may  enter  into  settlement  agreements  whereby  the  
exclusions  are  stayed  while  they  pay  specified  amounts  each  month  to  satisfy  their  
debts.   If  they  default  on  these  settlement  agreements,  they  may  be  excluded  until  the  
entire  debts  are  repaid  and  they  may  not  appeal  the  exclusions.   After  being  excluded  for  
nonpayment  of  their  HEAL  debts,  2,274  individuals  have  chosen  to  enter  into  settlement  
agreements  or  completely  repay  their  debts.   That  figure  includes  the  35  individuals  who  
have  entered  into  such  settlement  agreements  or  completely  repaid  their  debts  during  
this  reporting  period.   The  amount  of  money  being  repaid  through  settlement  
agreements  or  through  complete  repayment  is  $169.3  million.   Of  that  amount,  
$4.5  million  is  attributable  to  this  reporting  period.  
Each  of  the  following  individuals  entered  into  a  settlement  agreement  to  repay  the  
amount  indicated:  
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HHS  OIG  Semiannual  Report  to  Congress   51   Public  Health  and  Human  Services
  
Spring  2010     and  Departmentwide  Issues 
   
   Colorado    Medical  Doctor  Pamela  Simons $841,445   
   California    Chiropractor  David  Eckel $141,140  
   North  Carolina Medical  Doctor  Alan  Mitchell $137,111  
   New  York    Chiropractor  Eric  Obadia $107,091  
 
Employed  HEAL  Program  Defaulters   
Our  evaluation  of  the  HEAL  program  found  that  312  of  the  486  HEAL  defaulters  who  
earned  income  in  FY  2008  made  no  payments  on  their  loans  during  that  time.   These  
312  HEAL  defaulters  earned  $13.4  million  and  owed  $47.5  million  on  their  loans  in   
FY  2008.   Ninetyeight  of  these  defaulters  (31  percent)  earned  $50,000  or  more.   These   
98  defaulters  were  responsible  for  nearly  $15  million  of  the  $47.5  million  owed.   We  also  
found  that  174  HEAL  defaulters  earned  $9.6  million  and  owed  $22.5  million  on  their  
loans  in  FY  2008.   The  median  income  for  these  defaulters  was  $47,331.   However,  78  
(45  percent)  paid  less  than  $2,000  each  and,  of  these,  24  paid  less  than  $500  each  toward  
their  loans  in  FY  2008.   The  amount  these  defaulters  paid  totaled  $659,135  in  FY  2008,  or  
just  3  percent  of  their  total  loan  balance  during  that  time.   
Because  a  portion  of  HEAL  defaulters  earned  income  that  seemingly  would  enable  them  
to  make  payments  but  made  only  minimal  or  no  payments  on  their  outstanding  loans,  
we  recommended  that  HRSA  work  with  PSC  to  (1)  use  the  information  we  provided  on  
these  HEAL  defaulters  to  assist  with  collection  efforts  and  (2)  consider  obtaining  wage  
data  from  Federal  or  State  sources  to  enable  HRSA  and  PSC  to  target  future  collection  
efforts  on  defaulters  who  have  income.   HRSA  concurred  with  our  recommendations.   
OEI-03-09-00100.    
PublicHealthRelated  Investigations  
OIG  investigates  cases  involving  the  misuse  of  public  health  agency  funds  as  well  as  the  
improper  possession,  use,  and  transfer  of  biological  agents  and  toxins,  called  select  
agents,  that  the  Department  has  determined  to  pose  a  severe  threat  to  public  health.   
The  following  is  an  example  of  a  case  involving  violations  of  the  select  agent  regulatons:  
Wisconsin  A  university  in  Wisconsin  agreed  to  pay  $40,000  to  resolve  its  liability  under  
the  select  agent  regulations.   The  university  selfreported  to  the  CDC   Division  of  Select  
Agents  and  Toxins  (DSAT)  that  it  failed  to  obtain  prior  approval  from  DSAT  for  
restricted  experiments  conducted  between  September  2004  and  December  2007.     
HumanServicesRelated  Reports  
Administration  for  Children  &  Families  Resolution  of  Audit  
Recommendations  
We  found  that  during  FYs  20062008,  the  Administration  for  Children  &  Families  (ACF)  
resolved  10,979  of  the  14,180  audit  recommendations  that  were  pending  during  the  
period.   However,  ACF  did  not  resolve  7,531  of  the  10,979  recommendations  within  the  
______________________________________________________________________________________  
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Spring  2010     and  Departmentwide  Issues 
  required  6month  period.   As  of  September  30,  2008,  ACF  had  not  resolved  2,086  audit  
recommendations  that  were  past  due  for  resolution.   The  dollar  amounts  associated  with  
these  recommendations  totaled  $94.6  million.   OMB  Circular  A50  requires  prompt  
resolution  and  corrective  actions  on  audit  recommendations.   Resolution  must  be  made  
within  a  maximum  of  6  months  after  the  issuance  of  a  final  report.   Because  ACF  did  not  
resolve  all  audit  recommendations  in  a  timely  manner,  it  did  not  have  reasonable  
assurance  that  it  was  exercising  proper  stewardship  over  Federal  dollars.   
We  recommended  that  ACF  (1)  resolve  all  audit  recommendations  within  the  required   
6month  audit  resolution  period  and  (2)  resolve  the  2,086  outstanding  audit  
recommendations  that  were  past  due  as  of  September  30,  2008.   ACF  did  not  directly  
address  our  recommendations.   After  reviewing  ACFs  written  comments,  we  reviewed  
our  records  and  maintain  that  the  stewardship  report  as  of  September  30,  2008,  is  
accurate.   Moreover,  ACFs  submission  of  required  documentation  after  our  audit  period  
does  not  negate  the  validity  of  our  findings  and  recommendations  as  of  September  30,  
2008.   A070903118.    
Pennsylvanias  Foster  Care  Claims  on  Behalf  of  Children  Who  Exceeded  the  
Maximum  Eligible  Age   
From  October  1997  through  September  2002,  Pennsylvania  improperly  claimed  
Title  IVE  foster  care  maintenance  and  associated  administrative  costs  for  some  children  
over  the  age  of  19.   ACF  provides  the  Federal  share  of  States  costs,  including  
maintenance  (room  and  board)  costs  and  administrative  and  training  costs,  for  children  
in  foster  care  who  meet  Title  IVE  requirements.   The  State,  as  required,  did  not  file  any  
Title  IVE  claims  for  services  provided  to  63  of  100  sampled  children  after  they  reached  
the  age  of  19.   However,  the  State  filed  unallowable  Title  IVE  claims  on  behalf  of  the  
37  remaining  sampled  children  for  services  provided  after  they  turned  19.   Based  on  our  
sample  results,  we  estimated  that  the  State  improperly  claimed  at  least  $1.6  million  
(Federal  share)  in  Title  IVE  maintenance  and  associated  administrative  costs  on  behalf  
of  children  aged  19  or  older  in  the  65  counties  reviewed.   
We  recommended  that  the  State  (1)  refund  to  the  Federal  Government  $1.6  million,  
including  $1  million  in  unallowable  maintenance  costs  and  $639,000  in  unallowable  
administrative  costs,  for  October  1997  through  September  2002;  (2)  work  with  ACF  to  
identify  and  resolve  any  unallowable  claims  for  maintenance  costs  for  children  aged  
19  or  older  made  after  September  2002  and  refund  the  appropriate  amount;  and  (3)  work  
with  the  counties  to  establish  controls  to  identify  and  prevent  claims  for  Title  IVE  
reimbursement  for  children  aged  19  or  older.  
The  State  disagreed  with  our  finding  and  recommendations.   The  State  questioned  our  
authority  to  conduct  the  audit  and  stated  that  our  recommendations  were  without  merit  
and  contrary  to  law.   We  maintain  the  validity  of  our  recommendations,  as  well  as  our  
conclusion  that  the  State  did  not  always  comply  with  Federal  Title  IVE  age  
requirements.   A030800553.    
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HHS  OIG  Semiannual  Report  to  Congress   53   Public  Health  and  Human  Services
  
Spring  2010     and  Departmentwide  Issues 
  Californias  Foster  Care  Claims  for  Payments  Made  by  Los  Angeles  County   
In  this  ACFrequested  review,  which  covered  October  1,  2000,  through  November  30,  
2001,  we  found  that  California  improperly  claimed  Federal  Title  IVE  reimbursement  for  
Los  Angeles  County  payments  to  foster  homes  of  relative  caregivers.   Contrary  to  ACF  
rules,  87  of  the  100  relative  homes  in  our  sample  had  not  been  approved  based  on  State  
foster  family  home  licensing  standards.   There  was  no  assurance  that  the  13  remaining  
homes  had  been  approved  based  on  State  licensing  standards  because  the  case  file  
documentation  was  missing  or  substantially  incomplete.   Based  on  our  sample  results,  
we  estimated  that  the  State  improperly  claimed  $88.8  million  ($45.5  million  Federal  
share)  for  county  payments  to  relative  homes.  
These  deficiencies  occurred  because  the  State  disagreed  that  the  licensing  standards  
used  for  nonrelative  homes  were  required  for  relative  homes  and  the  State  had  not  
instructed  the  county  to  discontinue  claiming  payments  for  approved  relative  homes  to  
which  those  standards  had  not  been  applied.   The  standards  applied  to  relative  homes  
were  less  restrictive  than  those  applied  to  nonrelative  homes  in  such  areas  as  criminal  
background  checks  of  caregivers  and  sleeping  arrangements  for  children  and  adults.  
We  recommended  that  the  State  refund  to  the  Federal  Government  $45.5  million  in  
unallowable  foster  care  payments  to  relative  homes.   The  State  said  that  it  did  not  
believe  that  any  payments  were  made  in  error  and  that  any  process  concerns  that  
resulted  in  a  lack  of  documentation  had  been  corrected.   However,  the  State  did  not  
provide  any  information  that  would  cause  us  to  change  our  finding  or  recommendation.   
A090600023.    
Title  IVE  LongTerm  Training  Costs  in  Missouri  
Of  the  $3  million  (Federal  share)  in  Title  IVE  longterm  training  costs  that  Missouri  
claimed  at  the  enhanced  75percent  Federal  financial  participation  (FFP)  rate  from  July  1,  
2002,  through  June  30,  2006,  $301,000  was  unallowable.   Federal  regulations  authorize  
ACF  to  pay  an  enhanced  75percent  FFP  rate  for  certain  State  training  costs  related  to  
Title  IVE  foster  care  and  adoption  assistance.   The  unallowable  costs  claimed  included  
indirect  costs  that  were  not  authorized  for  reimbursement  at  the  enhanced  rate,  
inadequately  documented  costs,  and  indirect  costs  that  were  claimed  on  an  incorrect  
cost  base.   In  addition,  $1  million  was  potentially  unallowable  because  the  costs  were  not  
properly  allocated  to  all  benefiting  programs  as  required  by  Federal  regulations.   The  
remaining  $1.7  million  claimed  was  allowable.  
We  recommended  that  the  State  adjust  its  next  quarterly  claim  to  reduce  Federal  
reimbursement  claimed  for  Title  IVE  training  by  $301,000  (Federal  share),  work  with  
ACF  to  determine  an  appropriate  methodology  to  allocate  $1.5  million  ($1  million  
Federal  share)  in  longterm  training  costs  and  make  appropriate  financial  adjustments  
and  revisions  to  the  cost  allocation  plan  as  necessary,  and  strengthen  its  policies  and  
procedures  to  ensure  that  it  claims  Federal  reimbursement  for  Title  IVE  training  in  
accordance  with  Federal  requirements  and  contractual  provisions.   The  State  generally  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   54   Public  Health  and  Human  Services
  
Spring  2010     and  Departmentwide  Issues 
  disagreed  with  the  first  two  recommendations  and  agreed  with  the  third.   We  maintain  
that  our  findings  and  recommendations  are  valid.   A070903120.    
Health  and  Safety  at  Head  Start  Grantees  
As  part  of  a  series  of  reviews  requested  by  ACFs  Office  of  Head  Start,  we  assessed  four  
Head  Start  grantees  compliance  with  Federal  and  State  regulations  on  ensuring  the  
health  and  safety  of  children  in  their  care.   The  major  objectives  of  the  Head  Start  
program  include  promoting  school  readiness  and  enhancing  the  social  and  cognitive  
development  of  lowincome  children  by  providing  health,  educational,  nutritional,  and  
social  services.   In  FY  2009,  Congress  appropriated  $7.1  billion  to  fund  the  Head  Start  
programs  regular  operations.   The  Recovery  Act  provides  an  additional  $2.1  billion  for  
the  program  during  FYs  2009  and  2010.    
Our  reviews  found  that  the  four  grantees  complied  with  many,  but  not  all,  Federal  Head  
Start  and  State  health  and  safety  regulations.   The  grantees  failure  to  consistently  
comply  with  these  regulations  jeopardized  the  health  and  safety  of  children  in  their  care.   
Specifically:  
 	  Grantee  A  in  Connecticut    As  of  May  2009,  the  files  on  6  of  the  grantees  127  Head  
Start  employees  did  not  contain  all  required  documentation  of  preemployment  
checks,  and  the  grantees  three  childcare  facilities  did  not  fully  protect  children  from  
unsafe  materials  and  equipment  and  did  not  always  provide  a  secure  environment  
for  children.   For  example,  at  one  facility,  potentially  dangerous  items,  including  a  
butcher  knife,  a  steak  knife,  and  a  pair  of  fullsized  office  scissors,  were  accessible  to  
children  in  an  unlocked  classroom  drawer.     
We  recommended  that  the  grantee  develop  and  consistently  implement  procedures  
to  ensure  that  (1)  all  employee  files  contain  all  required  documentation,  (2)  all  unsafe  
materials  and  equipment  are  stored  in  locked  areas  out  of  the  reach  of  children  and  
all  necessary  repairs  are  addressed  in  a  timely  manner,  and  (3)  all  facilities  are  
secure.   In  response,  the  grantee  described  its  completed  and  ongoing  actions  to  
address  the  deficiencies  that  we  identified.   A010902505.    
 	  Grantee  B  in  Connecticut    As  of  June  2009,  the  files  on  21  of  the  grantees  72  Head  
Start  employees  lacked  required  documentation  of  child  abuse  and  neglect  registry  
checks,  criminal  record  checks,  and/or  fingerprint  cards.   In  addition,  the  grantees  
two  facilities  did  not  always  provide  a  safe  and  secure  environment.   For  example,  
toxic  chemicals,  such  as  paint  and  cleaning  supplies,  were  accessible  to  children  in  an  
unlocked  closet  at  one  facility.    
We  recommended  that  the  grantee  develop  and  consistently  implement  procedures
  
to  ensure  that  all  employee  files  contain  evidence  of  child  abuse  and  neglect  checks,
  
criminal  background  checks,  and  fingerprint  cards;  all  unsafe  materials  are  stored  in 
 
locked  areas  out  of  the  reach  of  children  and  other  unsafe  conditions  are  addressed; 
 
and  all  facilities  are  secure.   In  response,  the  grantee  described  its  completed  and 
 
continuing  actions  to  address  the  identified  deficiencies.
    
A010902508. 
   
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HHS  OIG  Semiannual  Report  to  Congress   55   Public  Health  and  Human  Services
  
Spring  2010     and  Departmentwide  Issues 
   	  Grantee  A  in  Georgia    As  of  August  2009,  10  of  the  grantees  12  childcare  facilities  
that  we  reviewed  did  not  adequately  protect  children  from  unsafe  materials  and  
equipment.   For  example,  a  classroom  at  one  facility  had  a  broken  window,  and  
another  window  had  sharp  metal  trim  that  was  accessible  to  children  on  the  
playground.    
We  recommended  that  the  grantee  consistently  follow  its  procedures  to  ensure  that  
all  necessary  repairs  are  addressed  in  a  timely  manner  and  that  all  unsafe  materials  
and  equipment  are  stored  in  locked  areas  out  of  the  reach  of  children.   In  response,  
the  grantee  described  its  corrective  actions.   A040903528.    
 	  Grantee  B  in  Georgia    As  of  August  2009,  the  files  on  2  of  the  grantees  232  
employees  did  not  contain  evidence  of  criminal  record  checks,  and  the  grantees  
14  childcare  facilities  did  not  meet  all  Federal  Head  Start  and  State  regulations  on  
protecting  children  from  unsafe  materials  and  equipment.   At  one  facility,  for  
example,  poison  ivy  was  growing  on  the  playground  fence,  and  fire  ant  mounds  
were  present  on  the  playground.  
We  recommended  that  the  grantee  consistently  follow  its  procedures  to  ensure  that  
(1)  all  employee  criminal  record  checks  are  completed  and  employee  files  contain  
evidence  of  the  checks;  (2)  all  electrical  outlets  are  covered  with  protective  caps,  fire  
extinguishers  are  inspected  annually,  and  firstaid  kits  are  complete  and  current;  
(3)  all  unsafe  materials  and  equipment  are  stored  in  locked  areas  out  of  the  reach  of  
children;  and  (4)  all  necessary  repairs  are  completed.   The  grantee  agreed  with  our  
recommendations  and  described  its  actions  to  address  the  deficiencies  that  we  
identified.   A040903531.    
Child  Support  Enforcement  
Child  Support  Intergovernmental  Collaboration   
Congress  annually  appropriates  funds  to  OIG  to  detect,  investigate,  and  prosecute  
noncustodial  parents  who  fail  to  pay  courtordered  child  support.   These  activities  are  
priorities  for  OIG.   OIG  works  closely  with  the  Office  of  Child  Support  Enforcement  
(OCSE);  DOJ;  U.S.  Attorneys  Offices;  the  U.S.  Marshals  Service;  and  other  Federal,  State,  
and  local  partners  to  expedite  the  collection  of  child  support.    
Child  Support  Task  Forces  
In  1998,  OIG  and  OCSE  initiated  Project  Save  Our  Children,  a  child  support  initiative  
that  united  the  efforts  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  the  Federal  and  State  levels  by  
coordinating  law  enforcement,  criminal  justice,  and  child  support  office  resources.   
Task  force  screening  units  receive  child  support  cases  from  the  States;  conduct  
preinvestigative  analyses;  and  forward  the  cases  to  the  investigative  task  force  units,  
where  they  are  assigned  and  investigated.   The  task  force  approach  streamlines  the  
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HHS  OIG  Semiannual  Report  to  Congress   56   Public  Health  and  Human  Services
  
Spring  2010     and  Departmentwide  Issues 
  process  by  which  the  cases  best  suited  for  criminal  prosecution  are  identified,  
investigated,  and  resolved.  
Child  Support  Investigations  
OIG  investigations  of  child  support  cases,  nationwide,  resulted  in  36  convictions  and  
courtordered  restitution  and  settlements  of  $2.9  million  during  this  semiannual  period.   
Examples  of  OIGs  enforcement  results  for  failure  to  pay  child  support  include  the  
following:  
 	  Tennessee    Dwayne  Rudd  was  sentenced  to  5  years  probation  and  ordered  to  pay  
$577,500  in  restitution  for  failure  to  pay  child  support.   The  Judge  told  Rudd  that  if  
he  fails  to  make  payments  while  on  probation,  he  will  be  sentenced  to  2  years  in  
prison.   Rudd  is  a  former  professional  football  player  who  played  for  the  Cleveland  
Browns,  Minnesota  Vikings,  Tampa  Bay  Buccaneers,  and  Oakland  Raiders  over  the  
course  of  his  7year  career  in  the  National  Football  League.  
 	  New  Hampshire    Virginia  Attorney  Peter  Mitrano  was  sentenced  to  2  years  
incarceration  to  be  followed  by  1  year  of  probation,  and  he  was  ordered  to  pay  
$517,406  in  restitution  for  failure  to  pay  child  support.   Mitrano  was  indicted  in  
August  2008  after  failing  to  pay  child  support  for  his  three  children,  as  ordered  in  
2002.   
 	  Virginia    Robert  Cahill  was  sentenced  to  2  years  incarceration  to  be  followed  by  
1  year  of  supervised  release,  and  he  was  ordered  to  pay  $72,732  in  restitution  for  
failure  to  pay  child  support  for  his  two  children.   At  his  plea  hearing,  Cahill  told  the  
magistrate  that  he  was  injured  in  the  first  Persian  Gulf  War.   He  subsequently  told  
pretrial  services  that  he  was  injured,  received  the  Purple  Heart  Award,  and  received  
a  large  cash  settlement  from  the  Government  for  his  injuries.   However,  the  
investigation  revealed  that  Cahill  was  discharged  from  the  Navy  8  months  before  the  
Persian  Gulf  War,  was  never  injured,  and  never  received  a  settlement  from  the  
Government.   
 	  South  Dakota    Matthew  Olshove  was  sentenced  to  5  years  of  supervised  release  
and  6  months  at  a  halfway  house.   He  was  ordered  to  pay  $39,256  in  restitution  after  
pleading  guilty  to  failure  to  pay  child  support.   Olshoves  mother,  Dorothy,  was  
sentenced  to  1  year  of  probation  and  fined  $1,000  after  her  guilty  plea  to  obstruction  
of  justice.   The  investigation  revealed  that  Matthew  Olshove  failed  to  pay  child  
support  for  his  children  and  that  his  mother  harbored  him  at  her  house,  preventing  
his  arrest  during  several  attempts  made  by  law  enforcement.   Dorothy  Olshove,  who  
was  indicted  by  a  Federal  grand  jury,  was  arrested  June  24,  2009;  her  son  was  
arrested  12  hours  later.   
 	  Georgia    Doni  Wagoner  was  sentenced  to  5  years  probation  and  ordered  to  pay  
$30,204  in  restitution  for  failure  to  pay  child  support.   As  part  of  a  divorce  decree  in  
1994,  Wagoner  was  ordered  to  pay  monthly  child  support  payments  to  the  custodial  
parent  of  his  mentally  disabled  child.   However,  Wagoner  made  only  sporadic  
payments.  
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HHS  OIG  Semiannual  Report  to  Congress   57   Public  Health  and  Human  Services
  
Spring  2010     and  Departmentwide  Issues 
  Misuse  of  Administration  for  Children  &  Families  Grant  Funds  
OIG  also  investigates  cases  involving  the  misuse  of  ACF  grant  funds.  The  following  is  an  
example:    
Utah    Douglas  Frownfelter  was  sentenced  to  1  year  and  1  day  in  prison  and  ordered  to  
pay  $24,596  in  restitution  for  theft  of  Government  funds.   Frownfelter,  a  law  
enforcement  officer  at  the  time  the  crime  occurred,  received  monthly  adoption  assistance  
payments  of  $559  per  month  between  February  2003  and  September  2006  to  which  he  
was  not  entitled.   His  adopted  son  resided  with  the  mother  while  Frownfelter  continued  
to  receive  adoption  subsidy  payments.   
Departmentwide  Issues  
Processes  for  Performing  Limited  DataQuality  Reviews  
The  Recovery  Act  created  the  Recovery  Accountability  and  Transparency  Board  
(Recovery  Board)  to  provide  transparency  in  the  use  of  Recovery  Act  funds  and  to  
prevent  and  detect  fraud,  waste,  and  mismanagement.   To  help  meet  its  mandate,  the  
Recovery  Board  asked  that  the  29  Inspectors  General  (IG)  of  Federal  agencies  receiving  
Recovery  Act  funds  determine  whether  the  agencies  had  processes  in  place  to  perform  
limited  dataquality  reviews  of  recipientreported  information  and  to  notify  recipients  of  
the  need  to  make  appropriate  and  timely  changes.   We  issued  a  summary  of  the  IGs  
reports,  as  well  as  a  report  on  HHSs  process  for  performing  limited  dataquality  reviews  
of  recipients  information.  
 	  Our  summary  found  that  20  IGs  had  issued  21  reports  as  of  November  3,  2009.   
Because  many  of  the  IGs  assessments  were  conducted  before  the  recipients  reported  
and  corrected  data,  the  objective  of  the  IGs  assessments  did  not  include  determining  
whether  the  agencies  processes  were  effective.   However,  most  of  the  20  IGs  said  
that  they  intended  to  evaluate  the  effectiveness  of  agency  processes  in  future  
reviews.   Fifteen  of  the  20  IGs  assessed  agency  processes  for  reviewing  information  
reported  by  both  grantees  and  contractors.   The  five  other  IGs  advised  the  Recovery  
Board  that  they  assessed  agency  processes  only  for  grantees  because  the  final  OMB  
guidance  for  contractors  was  not  available  until  September  30,  2009.   A091001002.    
 	  Our  review  found  that  HHS  had  designed  a  process  to  (1)  perform  limited  data
quality  reviews  intended  to  identify  material  omissions  and/or  significant  errors  in  
information  reported  by  recipients  (grantees  and  contractors)  of  Recovery  Act  funds  
and  (2)  notify  recipients  of  the  need  to  make  appropriate  and  timely  changes.   This  
report  contained  no  recommendations.   A090900113.    
Departmental  Financial  Statement  Audit  
The  Chief  Financial  Officers  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.   Independent  external  auditors  provided  an  
unqualified  opinion  on  the  FY  2009  HHS  financial  statements.   This  means  that  for  the  
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Spring  2010     and  Departmentwide  Issues 
  11th  consecutive  year,  the  statements  were  reliable  and  fairly  presented.   However,  the  
report  on  internal  controls  noted  two  material  weaknesses:  
 	  Financial  Reporting  Systems,  Analyses,  and  Oversight    HHS  continued  to  have  
internal  control  weaknesses  in  its  financial  management  systems,  financial  analyses  
and  oversight,  and  corrective  actions.   The  lack  of  an  integrated  financial  
management  system,  substantial  manual  procedures,  and  untimely  or  inadequate  
reconciliations  and  account  analyses  hindered  HHSs  ability  to  produce  financial  
statements.   Also,  management  had  not  implemented  corrective  action  on  some  
longstanding  internal  control  deficiencies.    
 	  Financial  Management  Information  Systems    Weaknesses  in  both  the  design  and  
the  operation  of  key  general  controls  were  noted  in  the  areas  of  security  
management,  access  controls,  configuration  management,  segregation  of  duties,  and  
contingency  planning.   General  controls  are  necessary  to  safeguard  data,  protect  
business  application  programs,  and  ensure  continued  computer  operations  in  case  of  
unexpected  interruptions.   In  addition,  weaknesses  were  noted  in  business  process  
controls,  interface  controls,  and  data  management  system  controls  for  specific  
financial  applications.    
Refer  to:   Department  of  Health  &  Human  Services  Fiscal  Year  2009  Agency  Financial  Report.   
Section  II.   Daniel  R.  Levinson,  Inspector  General,  Report  on  the  Financial  Statement  Audit  
of  the  Department  of  Health  &  Human  Services  for  Fiscal  Year  2009.   OAS170900001  (pp.  II
7,  II14)   Report  
NonFederal  Audits  
OMB  Circular  A133  establishes  audit  requirements  for  State  and  local  governments,  
colleges  and  universities,  and  nonprofit  organizations  receiving  Federal  awards.   Under  
this  circular,  covered  entities  must  conduct  annual  organizationwide  single  audits  of  
all  Federal  money  they  receive.   These  audits  are  conducted  by  nonFederal  auditors,  
such  as  public  accounting  firms  and  State  auditors.   OIG  reviews  the  quality  of  these  
audits  and  assesses  the  adequacy  of  the  entities  management  of  Federal  funds.   In  this  
semiannual  period,  OIGs  National  External  Audit  Review  Center  reviewed  1,737  reports  
that  covered  $1.65  trillion  in  audited  costs.   Federal  dollars  covered  by  these  audits  
totaled  $449  billion,  about  $199  billion  of  which  was  HHS  money.  
OIGs  oversight  of  nonFederal  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.   We  identify  entities  for  highrisk  monitoring,  alert  
program  officials  to  any  trends  that  could  indicate  problems  in  HHS  programs,  and  
profile  nonFederal  audit  findings  of  a  particular  program  or  activity  over  time  to  
identify  systemic  problems.   We  also  provide  training  and  technical  assistance  to  
grantees  and  members  of  the  auditing  profession.  
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Spring  2010     and  Departmentwide  Issues 
  OIG  maintains  a  process  to  assess  the  quality  of  the  nonFederal  reports  received  and  the  
audit  work  that  supports  selected  reports.   The  nonFederal  audit  reports  reviewed  and  
issued  during  this  reporting  period  are  categorized  in  the  following  table.  
 
Reports  issued:    
Without  changes  or  with  minor  changes  1,626  
With  major  changes   99  
With  significant  inadequacies   12  
  Total   1,737  
 
The  1,737  reports  included  5,359  recommendations  for  improving  management  
operations.   In  addition,  these  audit  reports  provided  information  for  55  special  
memorandums  that  identified  concerns  for  increased  monitoring  by  management.  
Employee  Fraud  and  Misconduct  
Most  people  employed  by  HHS  are  dedicated,  honest  civil  servants.   Occasionally,  
however,  employees  violate  their  ethical  and  fiduciary  responsibilities.   OIG  conducts  or  
oversees  investigations  of  serious  allegations  of  wrongdoing  by  Department  employees,  
as  in  the  following  example:  
Maryland    Lekyla  Whitaker,  a  former  FDA  employee,  was  sentenced  to  1  year  of  
incarceration,  suspended,  and  ordered  to  pay  $3,290  in  restitution  after  pleading  guilty  
to  theft  over  $500.   The  investigation  identified  Whitakers  involvement  in  the  
interception  and  misuse  of  other  FDA  employees  Governmentissued  purchase  cards  
and  her  misuse  of  Government  FedEx  accounts  for  personal  mailings.   Whitaker  has  
since  resigned  from  her  position  with  FDA.   
Legislative  and  Regulatory  Review  
Pursuant  to  the  IG  Act,    4(a)(2),  OIG  reviews  existing  and  proposed  legislation  and  
regulations  relating  to  HHSs  programs  and  operations  and  makes  recommendations  
concerning  their  impact  on  economy  and  efficiency  or  the  prevention  and  detection  of  
fraud  and  abuse.   Most  audits  and  other  reviews  that  OIG  conducts  are  designed  to  test  
compliance  with  and/or  assess  the  administration  and  oversight  of  existing  laws  and  
regulations.   OIGs  reports  of  such  reviews  describe  our  findings,  which  include  
questioned  costs,  inefficiencies,  vulnerabilities  to  fraud,  inconsistencies,  errors  in  
application,  or  weaknesses  in  oversight  or  supporting  systems.   OIGs  corresponding  
recommendations  advise  HHS  and  the  pertinent  operating  or  staff  divisions  of  the  type  
of  actions  we  believe  are  needed  to  effectively  respond  to  the  findings.   
Recommendations  may  be  administrative,  regulatory,  legislative,  or  a  combination.    
The  narratives  in  this  Semiannual  Report  to  Congress  describe  findings  and  
recommendations  from  recently  completed  OIG  reviews,  many  of  which  focus  on  
existing  laws  and  regulations.   In  our  Compendium  of  Unimplemented  Office  of  Inspector  
General  Recommendations,  which  is  published  annually,  we  describe  priority  findings  and  
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HHS  OIG  Semiannual  Report  to  Congress   60   Public  Health  and  Human  Services
  
Spring  2010     and  Departmentwide  Issues 
  recommendations  from  past  periods  that  remain  to  be  implemented,  along  with  
pertinent  citations  of  existing  laws  and  regulations.   In  our  annual  Work  Plan,  which  is  
published  at  the  start  of  each  fiscal  year,  we  provide  citations  that  pertain  to  ongoing  or  
future  reviews   All  three  publications  are  available  on  our  Web  site  at  
http://www.oig.hhs.gov/publications.asp.  
OIG  also  reviews  proposed  legislation  and  regulations  related  to  HHS  programs  and  
operations.   HHS  routinely  involves  its  operating  and  staff  divisions,  including  the  
Office  of  Inspector  General,  in  the  review  and  development  of  HHS  regulations  through  
a  wellestablished  HHS  process.   Moreover,  OIGs  audits,  evaluations,  and  investigations  
are  sometimes  cited  in  regulatory  preambles  as  influencing  HHS  regulations.   OIG  also  
participates  in  a  longstanding  HHS  process  for  developing  and  reviewing  HHSs  
legislative  proposals.   In  addition,  OIG  provides  independent,  objective  technical  
assistance  on  a  bipartisan,  bicameral  basis  to  congressional  committees  and  members  
who  request  it.  
Resolving  Recommendations  
In  accordance  with  the  Inspector  General  Act  of  1978  (IG  Act),    5,  5  U.S.C.  App.,  tables  
indicating  the  dollar  value  of  actions  taken  on  OIGs  recommendations  in  this  
semiannual  period  have  been  developed  and  are  provided  in  Appendix  A.  
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HHS  OIG  Semiannual  Report  to  Congress   61   Public  Health  and  Human  Services
  
Spring  2010     and  Departmentwide  Issues 
   
Appendix  A: 
   
Resolving  Recommendations  

The  following  statistical  tables  summarize  the  Office  of  Inspector  Generals  (OIG)  
monetary  recommendations  and  the  Department  of  Health  &  Human  Services  (HHS)  
responses  to  those  recommendations.   This  information  is  provided  in  accordance  with  
sections  5(a)(8)  and  (a)(9)  of  the  Inspector  General  Act  (5  U.S.C.  App.    5(a)(8),  (a)(9))  
and  the  Supplemental  Appropriations  and  Rescissions  Act  of  1980.    
Table  1:   Reports  With  Questioned  Costs  
Questioned  costs  are  those  costs  that  are  questioned  by  OIG  because  of  an  alleged  
violation  of  a  provision  of  a  law,  regulation,  contract,  grant,  or  other  agreement  
governing  the  expenditure  of  funds.   Costs  are  questioned  because  the  expenditure  was  
not  supported  by  adequate  documentation  or  because  the  expenditure  was  unnecessary  
or  unreasonable.  
OIG  includes  those  questioned  costs  that  HHS  program  officials,  in  a  management  
decision,  have  agreed  should  not  be  charged  to  the  Federal  Government,  commonly  
referred  to  as  disallowed  costs,  as  part  of  the  expected  recoveries  in  the  Accomplishment  
section  at  the  beginning  of  the  Semiannual  Report.   Superscripts  indicate  end  notes.   
 
Number  of   Dollar  Value   Dollar  Value  
Reports  
Reports   Questioned   Unsupported  
Section  1        
For  which  no  management  decision  had  
been  made  by  the  beginning  of  the  
reporting  period1   169  $1,479,636,000  $65,265,000 
Issued  during  the  reporting  period   88  $145,064,000   $6,436,000 
  Total  Section  1   257  $1,624,700,000  $71,701,000 
Section  2      
For  which  a  management  decision  was  
made  during  the  reporting  period2,  3,  4      
  Disallowed  costs   152  $667,251,000   $24,066,000 
  Costs  not  disallowed   6  $201,979,000   $2,298,000 
  Total  Section  2   158  $869,230,000   $26,364,000 
Section  3      
For  which  no  management  decision  had  
been  made  by  the  end  of  the  reporting  
period    
  Total  Section  1  
  Minus  Total  Section  2   99  $755,470,000   $45,337,000 
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HHS  OIG  Semiannual  Report  to  Congress   63   Appendix  A  
Spring  2010    
Section  4    
For  which  no  management  decision  was  
made  within  6  months  of  issuance5   65  $633,880,000   $38,901,000 
Table  2:   Funds  Recommended  To  Be  Put  to  Better  Use  
Recommendations  that  funds  be  put  to  better  use  are  recommendations  that  funds  could  
be  used  more  efficiently  if  management  took  action  to  implement  an  OIG  
recommendation  through  reductions  in  outlays,  deobligation  of  funds,  and/or  avoidance  
of  unnecessary  expenditures.   Table  2  reports  HHS  program  officials  decisions  to  take  
action  on  these  recommendations.   Implemented  recommendations  are  reported  in  the  
fall  edition  of  the  Semiannual  Report.    
 
Number  of  
Reports   Dollar  Value  
Reports  
Section  1      
For  which  no  management  decision  had  been  made  by  the  
beginning  of  the  reporting  period1   16  $1,799,472,000 
Issued  during  the  reporting  period   4  $2,630,024,000 
  Total  Section  1   20  $4,429,496,000 
   
Section  2    
For  which  a  management  decision  was  made  during  the  
reporting  period    
  Value  of  recommendations  agreed  to  by  management    
  Based  on  proposed  management  action   6  $373,361,000 
  Based  on  proposed  legislative  action    
  Value  of  recommendations  not  agreed  to  by  management   1  $97,600,000 
  Total  Section  2   7  $470,961,000 
   
Section  3    
For  which  no  management  decision  had  been  made  by  the  
end  of  the  reporting  period2    
  Total  Section  1   
  Minus  Total  Section  2   13  $3,958,535,000 
 
End  Notes  to  Tables  1  and  2   
Table  1  End  Notes  
1  The  opening  balance  was  adjusted  upward  by  $  70.9  million  because  of  a  reevaluation  
of  previously  issued  recommendations.   
 
2  The  following  OIG  audits  with  questioned  cost  recommendations  were  resolved  as  a  
result  of  a  Department  of  Justice  settlement  of  a  False  Claims  Act  case  between  the  
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HHS  OIG  Semiannual  Report  to  Congress   64   Appendix  A  
Spring  2010    
Federal  Government,  New  York  State,  and  New  York  City:   A020201030,  Review  of  
Medicaid  Speech  Claims  Made  by  School  Health  Providers  in  New  York  State;   
A020301008,  Review  of  Medicaid  Transportation  Claims  Made  by  School  Health  Providers  in  
New  York  State; A020201029,  Review  of  Medicaid  Speech  Claims  Made  by  the  New  York  City  
Department  of  Education; A020301023,  Review  of  Medicaid  Transportation  Claims  Made  by  
the  New  York  City  Department  of  Education; A020301029,  Review  of  Retroactive  School  
Health  Claims New  York  City  Department  of  Education;  and  A020401021,  Review  of  
Retroactive  School  Health  Claims New  York  State.    As  a  result  of  this  settlement,  CMS  
reduced  its  original  disallowance  of  $769,735,788  on  the  first  four  audits  to  $291,260,251.   
CMS  resolved  an  additional  two  audits  this  semiannual  period  by  reporting  
management  decisions  in  the  amount  of  $120,941,632  based  on  the  negotiated  
settlement.   
3  During  the  period,  revisions  to  previously  reported  management  totaled  $694,000.  
4  Included  are  management  decisions  to  disallow  $70.1  million  in  questioned  costs  that  
were  identified  by  nonFederal  auditors  in  audits  of  State  and  local  governments,  
colleges  and  universities,  and  nonprofit  organizations  receiving  Federal  awards  
conducted  in  accordance  with  OMB  Circular  A133.   By  law,  OIG  is  responsible  for  
ensuring  that  work  performed  by  these   nonFederal  auditors  complies  with  Federal  
audit  standards;  accordingly,  OIG  tracks,  resolves,  and  reports  on  recommendations  in  
these  audits.  
5  Because  of  administrative  delays,  many  of  which  were  beyond  management  control,  
resolution  of  the  following  65  audits  was  not  completed  within  6  months  of  issuance  of  
the  report;  however,  based  upon  discussions  with  management,  resolution  is  expected  
before  the  end  of  the  next  semiannual  reporting  period:   
 
CIN:  A060700041   REVIEW  OF  AMP  CALCULATION  MANUFACTURER  A,  MAR  2008,  
$268,000,000  
CIN:  A060700039   REVIEW  OF  AMP  CALCULATION  MANUFACTURER  C,  MAR  2008,  
$101,000,000  
CIN:  A030700560   PENNSYLVANIA  FOSTER  CARE  MAINTENANCE  PAYMENTS,  
PHILADELPHIA,  UNDER  $300,  MAY  2008,  $56,513,439  
CIN:  A090200054   AUDIT  OF  STATE  OF  CALIFORNIA  DISPROPORTIONATE  SHARE  
HOSPITAL  PROGRAM  FOR  FY  1998,  MAY  2003,  $33,318,976  
CIN:  A010200006   REVIEW  OF  RATE  SETTING  METHODOLOGY  FOR  MEDICAID  
SCHOOL  BASED  HEALTH  SERVICES  CONNECTICUT,  MAY  2003,  
$32,780,146  
CIN:  A060700040   REVIEW  OF  AMP  CALCULATION  MANUFACTURER  B,  MAR  2008,  
$27,700,000  
CIN:  A090100098   AUDIT  OF  KERN  MEDICAL  CENTER  DISPROPORTIONATE  SHARE  
HOSPITAL  PAYMENTS  FOR  FY  1998,  SEP  2002,  $14,165,950  
CIN:  A090700054   ALLOWABILITY  OF  COSTS  INCLUDED  IN  THE  INDIAN  HEALTH  
SERVICESS  HEADQUARTERS  COST  STATEMENT  FOR  FISCAL  
YEAR  2005,  AUG  2009,  $13,710,824  
CIN:  A030600564   PENNSYLVANIA  FOSTER  CARE  MAINTENANCE  PAYMENT,  
PHILADELPHIA,  OVER  $300/DAY,  DEC  2007,  $11,693,989  
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HHS  OIG  Semiannual  Report  to  Congress   65   Appendix  A  
Spring  2010    
CIN:  A030500550   AUDIT  OF  PENNSYLVANIA  FOSTER  CARE  MAINTENANCE  
PAYMENTS  CASTILLE  SAMPLE,  SEP  2007,  $11,611,822  
CIN:  A060200034   COST  REPORTS  AND  MEDICARE  FEEFORSERVICE  PAYMENTS  
SCOTT  AND  WHITE,  MAY  2003,  $8,229,574  
CIN:  A030803000   REVIEW  OF  PROCUREMENTS  MADE  BY  THE  NATIONAL  
INSTITUTES  OF  HEALTH  FOR  THE  DEPARTMENT  OF  DEFENSE,  
MAY  2009,  $6,300,000  
CIN:  A040803521   AUDIT  OF  UNDISTRIBUTABLE  CHILD  SUPPORT  COLLECTIONS  IN  
TENNESSEE  FOR  THE  PERIOD  OCTOBER  1,  1998,  TO  DECEMBER  31,  
2007,  FEB  2009,  $5,768,243  
CIN:  A010600007   REVIEW  OF  RHODE  ISLANDS  MEDICAID  ADMINISTRATIVE  COST  
CLAIMS  FYS  2004  AND  2005,  MAR  2008,  $5,092,735  
CIN:  A040402003   MEDICARE  OUTLIER  PAYMENTS  TO  COMMUNITY  MENTAL  
HEALTH  CENTERS,  APR  2006,  $4,762,036  
CIN:  A070701046   REVIEW  OF  PAYMENTS  FOR  DECEASED  MEDICARE  
BENEFICIARIES  ENROLLED  IN  MEDICARE  ADVANTAGE  
ORGANIZATIONS  AND  MEDICARE  ADVANTAGE  PRESCRIPTION  
DRUG  PLANS,  MAR  2009,  $4,414,643  
CIN:  A040803523   REVIEW  OF  TITLE  IVE  ADOPTION  ASSISTANCE  MAINTENANCE  
PAYMENTS  IN  FLORIDA  FOR  THE  PERIOD  OCTOBER  1,  2004,  
THROUGH  SEPTEMBER  30,  2007,  MAY  2009,  $4,413,264  
CIN:  A090100085   AUDIT  OF  UCSDMC  DISPROPORTIONATE  SHARE  HOSPITAL  
PAYMENTS  FOR  SFY  1998,  SEP  2002,  $3,776,054  
CIN:  A040701046   ALLOWABILITY  OF  COSTS  CLAIMED  FOR  REIMBURSEMENT  
UNDER  CDC  BIOTERRORISM  AND  EMERGENCY  PREPAREDNESS  
PROGRAM  GRANTS  FLORIDA,  SEP  2008,  $3,633,671  
CIN:  A060400076   MEDICAL  REVIEW  OF  SYNERGYS  PARTIAL  HOSPITALIZATION  
SERVICES  CLAIMS,  MAR  2006,  $3,098,296  
CIN:  A109600001   REVIEW  OF  GROUP  HEALTHS  GHCPS  REPORTING  OF  ESRD,  
APR  1997,  $2,763,498  
CIN:  A070803114   REVIEW  OF  MISSOURI  ACF  TRAINING  COSTS,  AUG  2009,  $2,556,099  
CIN:  A060600105   AUDIT  OF  NEW  MEXICOS  TITLE  IVE  ADMINISTRATIVE   
TRAINING  COSTS  (STATE  ISSUES),  DEC  2008,  $1,138,499  
CIN:  A090801006   REVIEW  OF  WASHINGTON  STATES  PANDEMIC  INFLUENZA  
EXPENDITURES  FOR  THE  PERIOD  AUGUST  31,  2005,  THROUGH  
JUNE  30,  2008,  JUL  2009,  $751,178  
CIN:  A070903119   MISSOURI  CLAIM  FOR  TITLE  IVE  TRAINING  COSTS  FOR  SALARIES  
AND  BENEFITS,  JUL  2009,  $741,872  
CIN:  A040701047   ALLOWABILITY  OF  COSTS  CLAIMED  FOR  REIMBURSEMENT  
UNDER  CDCS  BIOTERRORISM  AND  EMERGENCY  PREPAREDNESS  
GRANT  PROGRAMS  ALABAMA,  SEP  2008,  $570,400  
CIN:  A070903121   MISSOURI  TITLE  IVE  TRAINING  COSTS  FOR  RTCS  AND   FOSTER  
CARE  PARENTING,  SEP  2009,  $569,663  
CIN:  A050600038   UNDISTRIBUTABLE  CHILD  SUPPORT  COLLECTIONS  INDIANA,  
MAR  2007,  $461,430  
CIN:  A040402010   REVIEW  OF  COMPREHENSIVE  OUTPATIENT  REHABILITATION  
THERAPY  SERVICES  PROVIDED  BY  ABSOLUTE  THERAPY  INC.,  
NOV  2006,  $414,712  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   66   Appendix  A  
Spring  2010    
CIN:  A060600072   REVIEW  OF  COST  FOR  TEXAS  MEDICAL  FOUNDATION  AUDITEE,  
MAY  2008,  $403,581  
CIN:  A050100096   PAYMENTS  TO  INTER  VALLEY  FOR  INSTITUTIONAL  
BENEFICIARIES,  MAY  2002,  $319,355  
CIN:  A070501013   PAYMENTS  FOR  MEDICARE  PLUS  CHOICE  ORGANIZATION  FOR  
INSTITUTIONAL  BENEFICIARIES,  OCT  2005,  $293,885  
CIN:  A010802502   REVIEW  OF  TITLE  IVE  FOSTER  CARE  FOR  CHILDREN  AGE  19  OR  
OLDER  IN  MASSACHUSETTS,  JUL  2009,  $272,810  
CIN:  A050500033   UNDISTRIBUTABLE  CHILD  SUPPORT  COLLECTIONS  MICHIGAN,  
AUG  2006,  $257,859  
CIN:  A050100094   PAYMENTS  TO  KAISER  OF  OAKLAND  FOR  INSTITUTIONAL  
BENEFICIARIES,  OCT  2002,  $229,656  
CIN:  A070601035   AUDIT  OF  QUALITY  IMPROVEMENT  ORGANIZATION IOWA,  
OCT  2007,  $208,974  
CIN:  A060900006   TEXAS  SUBRECIPIENT  CDC  BIOTERRORISM  EL  PASO,  SEP  2009,  
$186,839  
CIN:  A090500077   REVIEW  OF  PACIFICARES  USE  OF  ADDITIONAL  CAPITATION  
UNDER  THE  MMA  OF  2003,  MAR  2006,  $135,000  
CIN:  A090901007   REVIEW  OF  IDAHOS  TITLE  IVE  ADOPTION  ASSISTANCE  COSTS  
FOR  FEDERAL  FISCAL  YEARS  2006  THROUGH  2008,  JUL  2009,  
$124,046  
CIN:  A050100091   PAYMENTS  TO  UNITED  HC  OF  FLORIDA  FOR  INSTITUTIONAL  
BENEFICIARIES,  SEP  2002,  $121,023  
CIN:  A040701045   COSTS  CLAIMED  FOR  ESRD  NETWORK  6  OPERATIONS,  AUG  2009,  
$116,728  
CIN:  A050500044   DUPLICATE  MEDICARE  PAYMENTS  TO  COSTBASED  HEALTH  
MAINTENANCE  ORGANIZATION  PLAN  ARNETT  HEALTH  
PLANS,  INC.,  FOR  FISCAL  YEARS  2000  THROUGH  2003,  SEP  2005,  
$111,862  
CIN:  A059700017   FHP,  INC. HMO  INSTITUTIONAL  STATUS  PROJECT,  JUN  1998,  
$109,114  
CIN:  A050100079   PAYMENTS  TO  BLUE  CARE  MIDMICHIGAN  FOR  INSTITUTIONAL  
BENEFICIARIES,  JUN  2002,  $100,692  
CIN:  A050200067   REVIEW  OF  MEDICARE  FEEFORSERVICE  PAYMENTS  AND  COST  
REPORTS WELBORN,  JUN  2003,  $97,623  
CIN:  A050100090   PAYMENTS  TO  AETNA  U.S.  HEALTHCARE  PENNSYLVANIA  FOR  
INSTITUTIONAL  BENEFICIARIES,  JUL  2002,  $87,516  
CIN:  A030800011   REVIEW  OF  DUPLICATE  PAYMENTS  TO  PHARMACIES  FOR  
MEDICARE  PART  D  DRUGS  (PDEDEMO):   BARON  DRUGS,  SEP  
2009,  $79,489  
CIN:  A020601023   AUDIT  OF  QUALITY  IMPROVEMENT  ORGANIZATION NEW  
YORK,  MAR  2008,  $77,358  
CIN:  A050100089   ADDITIONAL  BENEFITS  REVIEW  ON  MANAGED  CARE  
ORGANIZATION,  OCT  2002,  $77,000  
CIN:  A090600039   MEDICARE  INTEGRITY  AUDIT  OF  QUALITY  IMPROVEMENT  
ORGANIZATION WASHINGTON  STATE,  FEB  2008,  $73,636  
CIN:  A060700009   REVIEW  OF  CAREFLITE  CONTRACT,  JUN  2007,  $68,841  
CIN:  A040502000   AUDIT  OF  HHA  THERAPY  BILLINGS,  SEP  2005,  $63,425  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   67   Appendix  A  
Spring  2010    
CIN:  A050100086   PAYMENTS  TO  HMO  OF  NE  PENNSYLVANIA  FOR  INSTITUTIONAL  
BENEFICIARIES,  MAY  2002,  $62,432  
CIN:  A010800601   REVIEW  OF  COSTS  CLAIMED  BY  RETIREE  DRUG  SUBSIDY  PLAN  
SPONSOR  BLUE  CROSS  BLUE  SHIELD  OF  MASSACHUSETTS,  INC.,  
FOR  PLAN  YEAR  ENDED  DECEMBER  31,  2006,  APR  2009,  $33,300  
CIN:  A040600023   REVIEW  OF  QUALITY  IMPROVEMENT  ORGANIZATIONS  
TENNESSEE,  JUL  2008,  $30,654  
CIN:  A080373541   SOUTH  DAKOTA  FOUNDATION  FOR  MEDICAL  CARE,  JAN  2003,  
$28,573  
CIN:  A070200150   PAYMENTS  TO  COVENTRY,  PITTSBURG,  FOR  INSTITUTIONAL  
BENEFICIARIES,  JUN  2003,  $26,000  
CIN:  A050100078   PAYMENTS  TO  HEALTH  NET,  TUCSON,  AZ,  FOR  INSTITUTIONAL  
BENEFICIARIES,  APR  2002,  $21,233  
CIN:  A080476779   COLORADO  FOUNDATION  FOR  MEDICAL  CARE,  DEC  2003,  $18,925  
CIN:  A050100100   PAYMENTS  TO  FALLON  HEALTH  FOR  INSTITUTIONAL  
BENEFICIARIES,  MAY  2002,  $18,842  
CIN:  A050100095   PAYMENTS  TO  HUMANA  OF  ARIZONA  FOR  INSTITUTIONAL  
BENEFICIARIES,  JUN  2002,  $18,645  
CIN:  A070300151   REVIEW  OF  MEDICARE  PAYMENTS  FOR  BENEFICIARIES  WITH  
INSTITUTIONAL  STATUS,  JUN  2003,  $18,400  
CIN:  A070401011   PAYMENTS  FOR  UNITED  HEALTHCARE  FOR  INSTITUTIONAL  
BENEFICIARIES,  MAR  2005,  $13,128  
CIN:  A050600043   REVIEW  OF  OHIO  KEPRO,  FEB  2008,  $11,874  
CIN:  A050100070   PAYMENTS  FOR  BENEFICIARIES  WITH  INSTITUTIONAL  STATUS  
MISSOURI  GROUP  HEALTH  PLAN,  JAN  2002,  $11,089  
TOTAL  NUMBER  OF  REPORTS:   65  
TOTAL  AMOUNT  :  $633,880,420   
Table  2  End  Notes  
1  The  opening  balance  was  adjusted  upward  by  $1.3  million.  
2  Management  decisions  were  not  made  within  6  months  on  nine  reports.  Discussions  
with  management  are  ongoing,  and  it  is  expected  that  the  following  audits  will  be  
resolved  by  the  next  semiannual  reporting  period:  
 
CIN:  A060700042 	   INDEXING  THE  REBATE  FOR  GENERIC  DRUGS,  OCT  2007,  
$966,000,000  
CIN:  A020702000  	 OPEN  AND  INACTIVE  GRANTS  ON  THE  PAYMENT  
MANAGEMENT  SYSTEM  ACF,  FEB  2009,  $472,155,156  
CIN:  A040603508  	 UNDISTRIBUTABLE  CHILD  SUPPORT  COLLECTIONS  FLORIDA,  
JAN  2008,  $7,881,447  
CIN:  A050500033  	 UNDISTRIBUTABLE  CHILD  SUPPORT  COLLECTIONS  MICHIGAN,  
AUG  2006,  $4,397,133  
CIN:  A060000073  	 MANAGED  CARE  ADDITIONAL  BENEFITS  NYLCARE  HEALTH  
PLANS  OF  THE  SOUTHWEST  CY  2000,  MAR  2002,  $4,000,000  
CIN:  A050600038  	 UNDISTRIBUTABLE  CHILD  SUPPORT  COLLECTIONS  INDIANA,  
MAR  2007,  $871,677  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   68   Appendix  A  
Spring  2010    
CIN:  A050100070   PAYMENTS  FOR  BENEFICIARIES  WITH  INSTITUTIONAL  STATUS  
MISSOURI  GROUP  HEALTH  PLAN,  JAN  2002,  $98,689  
CIN:  A050600023   UNDISTRIBUTABLE  CHILD  SUPPORT  COLLECTIONS  
MINNESOTA,  SEP  2006,  $28,240  
CIN:  A090901007   REVIEW  OF  IDAHOS  TITLE  IVE  ADOPTION  ASSISTANCE  COSTS  
FOR  FEDERAL  FISCAL  YEARS  2006  THROUGH  2008,  JUL  2009,  $17,764  
TOTAL  NUMBER  OF  REPORTS:   9
  
TOTAL  AMOUNT:   $1,455,450,106  
 
 
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   69   Appendix  A  
Spring  2010    
Appendix  B:    
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  
in  the  following  table  along  with  the  location  of  the  required  information.   Page  numbers  
in  the  table  indicate  pages  in  this  report.   The  word  None  appears  where  there  are  no  
data  to  report  under  a  particular  requirement.    
 
Section  of  
the  Act   Requirement   Location  
Section  4 
   
(a)(2)   Review  of  legislation  and  regulations   p.  60  
Section  5      
    Significant  problems,  abuses,  and   Throughout  this  report  
(a)(1)   deficiencies  
    Recommendations  with  respect  to   Throughout  this  report  
(a)(2)   significant  problems,  abuses,  and  
deficiencies  
    Prior  significant  recommendations  on   See  the  Compendium  of  Unimplemented  
(a)(3)   which  corrective  action  has  not  been   Office  of  Inspector  General  Recommendations  :  
completed   http://www.oig.hhs.gov/publications.html.  
    Matters  referred  to  prosecutive   p.  33  
(a)(4)   authorities  
    Summary  of  instances  in  which   None  
(a)(5)   information  was  refused  
    List  of  audit  reports   Submitted  to  Secretary  under  separate  
(a)(6)   cover  
    Summary  of  significant  reports   Throughout  this  report  
(a)(7)  
    Statistical  Table  1    Reports  With   Appendix  A  
(a)(8)   Questioned  Costs  
    Statistical  Table  2    Funds   Appendix  A  
(a)(9)   Recommended  To  Be  Put  to  Better  Use  
    Summary  of  previous  audit  reports   Appendix  A  
(a)(10)   without  management  decisions  
    Description  and  explanation  of  revised   Appendix  A  
(a)(11)   management  decisions  
    Management  decisions  with  which  the   None  
(a)(12)   Inspector  General  is  in  disagreement  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   71   Appendix  B  
Spring  2010    
Appendix  C: 
   
Summary  of  Sanctions  Authorities 
 
The  Inspector  General  Act  of  1978,  as  amended,  sets  forth  specific  requirements  for  
semiannual  reports  to  be  made  to  the  Secretary  for  transmittal  to  Congress.   A  selection  
of  authorities  appears  below.  
Program  Exclusions  
The  Social  Security  Act,    1128  (42  U.S.C.    1320a7),  provides  several  grounds  for  
excluding  individuals  and  entities  from  participation  in  Medicare,  Medicaid,  and  other  
Federal  health  care  programs.   Exclusions  are  required  for  individuals  and  entities  
convicted  of  the  following  types  of  criminal  offenses:   (1)  Medicare  or  Medicaid  fraud;  
(2)  patient  abuse  or  neglect;  (3)  felonies  for  other  health  care  fraud;  and  (4)  felonies  for  
illegal  manufacture,  distribution,  prescription,  or  dispensing  of  controlled  substances.   
The  Office  of  Inspector  General  (OIG)  has  the  authority  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.   These  include  a  hearing  
before  an  administrative  law  judge  and  appeals  to  the  Department  of  Health  &  Human  
Services  Departmental  Appeals  Board  and  Federal  district  and  appellate  courts  
regarding  the  basis  for  the  exclusion  and  the  length  of  the  exclusion.  
Patient  Dumping  
The  Social  Security  Act,    1867  (42  U.S.C.    1395dd),  provides  that  when  an  individual  
presents  to  the  emergency  room  of  a  Medicareparticipating  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.  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   73   Appendix  C  
Spring  2010    
OIG  is  authorized  to  collect  civil  monetary  penalties  (CMP)  of  up  to  $25,000  against  
small  hospitals  (fewer  than  100  beds)  and  up  to  $50,000  against  larger  hospitals  
(100  beds  or  more)  for  each  instance  in  which  the  hospital  negligently  violated  any  of  the  
section  1867  requirements.   In  addition,  OIG  may  collect  a  penalty  of  up  to  $50,000  from  
a  responsible  physician  for  each  negligent  violation  of  any  of  the  section  1867  
requirements  and,  in  some  circumstances,  may  exclude  a  responsible  physician.  
Civil  Monetary  Penalties  Law  
The  Civil  Monetary  Penalties  Law  (CMPL)  of  the  Social  Security  Act,  1128A  (42  U.S.C.  
  1320a7a),  provides  penalties,  assessments,  and  exclusion  from  participation  in  Federal  
health  care  programs  for  engaging  in  certain  activities.   For  example,  a  person  who  
submits  or  causes  to  be  submitted  to  a  Federal  health  care  program  a  claim  for  items  and  
services  that  the  person  knows  or  should  know  is  false  or  fraudulent  is  subject  to  a  
penalty  of  up  to  $10,000  for  each  item  or  service  falsely  or  fraudulently  claimed,  an  
assessment  of  up  to  three  times  the  amount  falsely  or  fraudulently  claimed,  and  
exclusion.  
For  the  purposes  of  the  CMPL,  should  know  is  defined  to  mean  that  the  person  acted  
in  reckless  disregard  or  deliberate  ignorance  of  the  truth  or  falsity  of  the  claim.   The  
CMPL  and  its  implementing  regulations  also  authorize  actions  for  a  variety  of  other  
violations,  including  submission  of  claims  for  items  or  services  furnished  by  an  excluded  
person;  requests  for  payment  in  violation  of  an  assignment  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  antikickback  statute  (42  U.S.C.  
  320a7b(b)).  
AntiKickback  Statute  and  Civil  False  Claims  Act  Enforcement  Authorities  
The  AntiKickback  Statute    The  antikickback  statute  authorizes  penalties  against  
anyone  who  knowingly  and  willfully  solicits,  receives,  offers,  or  pays  remuneration,  in  
cash  or  in  kind,  to  induce  or  in  return  for  (1)  referring  an  individual  to  a  person  or  an  
entity  for  the  furnishing,  or  arranging  for  the  furnishing,  of  any  item  or  service  payable  
under  the  Federal  health  care  programs  or  (2)  purchasing;  leasing;  ordering;  or  
arranging  for  or  recommending  the  purchasing,  leasing,  or  ordering  of  any  good,  
facility,  service,  or  item  payable  under  the  Federal  health  care  programs  of  the  Social  
Security  Act,    1128B(b),  (42  U.S.C.    1320a7b(b)).  
Individuals  and  entities  that  engage  in  unlawful  referral  or  kickback  schemes  may  be  
subject  to  criminal  penalties  under  the  general  criminal  antikickback  statute;  a  CMP  
under  OIGs  CMPL  authority  pursuant  to  the  Social  Security  Act,    1127(a)(7),  (42  U.S.C.  
  1320a7a);  and/or  program  exclusion  under  OIGs  permissive  exclusion  authority  
under  the  Social  Security  Act,    1128(b)(7),  (42  U.S.C.    1320a7(b)(7)).  
False  Claims  Amendments  Act  of  1986    Under  the  Federal  False  Claims  
Amendments  Act  of  1986  (FCA)  (31  U.S.C.    37293733),  a  person  or  an  entity  is  liable  
for  up  to  treble  damages  and  a  penalty  between  $5,500  and  $11,000  for  each  false  claim  it  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   74   Appendix  C  
Spring  2010    
knowingly  submits  or  causes  to  be  submitted  to  a  Federal  program.   Similarly,  a  person  
or  an  entity  is  liable  under  the  FCA  if  it  knowingly  makes  or  uses,  or  causes  to  be  made  
or  used,  a  false  record  or  statement  to  have  a  false  claim  paid.  
The  FCA  defines  knowing  to  include  not  only  the  traditional  definition  but  also  
instances  in  which  the  person  acted  in  deliberate  ignorance  or  reckless  disregard  of  the  
truth  or  falsity  of  the  information.   Under  the  FCA,  no  specific  intent  to  defraud  is  
required.   Further,  the  FCA  contains  a  qui  tam,  or  whistleblower,  provision  that  allows  a  
private  individual  to  file  a  lawsuit  on  behalf  of  the  United  States  and  entitles  that  
whistleblower  to  a  percentage  of  any  fraud  recoveries.   The  FCA  was  again  amended  in  
2009  in  response  to  recent  Federal  court  decisions  that  narrowed  the  laws  applicability.   
Among  other  things,  these  amendments  clarify  the  reach  of  the  FCA  to  false  claims  
submitted  to  contractors  or  grantees  of  the  Federal  Government.  
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   75   Appendix  C  
Spring  2010    
Appendix  D: 
   
Acronyms  and  Abbreviations 
  
Following  are  selected  acronyms  and  abbreviations  used  in  this  publication.  
Terms,  Titles,  and  Organizations   
 
ACF      Administration  for  Children  &  Families  
AHRQ     Agency  for  Healthcare  Research  and  Quality  
AMP      average  manufacturer  price   
ARRA     American  Recovery  and  Reinvestment  Act  
ASAM    Office  of  the  Assistant  Secretary  for  Administration  and  Management   
ASP    average  sales  price   
ASPE    Office  of  the  Assistant  Secretary  for  Planning  and  Evaluation   
ASPR    Office  of  the  Assistant  Secretary  for  Preparedness  and  Response   
CCA    certification  of  compliance  agreement   
CDC    Centers  for  Disease  Control  and  Prevention   
CDPAP    Consumer  Directed  Personal  Assistance  Program   
CERT    Comprehensive  Error  Rate  Testing  (program)   
CHIP    Childrens  Health  Insurance  Program   
CHS   contract  health  services   
CIA    corporate  integrity  agreement   
CMP    civil  monetary  penalty   
CMPL    Civil  Monetary  Penalties  Law   
CMS    Centers  for  Medicare  &  Medicaid  Services   
CoPs    Conditions  of  Participation   
CPAP    continuous  positive  airway  pressure   
CSBG    Community  Services  Block  Grant   
CY    calendar  year   
DME    durable  medical  equipment  
DMEPOS   durable  medical  equipment,  prosthetics,  orthotics,  and  supplies   
DoD    Department  of  Defense   
DOH    Department  of  Health   
DOJ    Department  of  Justice   
DPM    Division  of  Payment  Management   
DRG    diagnosisrelated  group   
DSH    disproportionate  share  hospital   
E&M    evaluation  and  management  (services)   
ED    emergency  department  
ENT   enteral  nutrition  therapy  
ESA   erythropoiesisstimulating  agent   
ESRD    end  stage  renal  disease   
FBI    Federal  Bureau  of  Investigation   
______________________________________________________________________________________  
HHS  OIG  Semiannual  Report  to  Congress   77   Appendix  D  
Spring  2010    
FDA    Food  and  Drug  Administration  
FFS   fee  for  service  
FI   fiscal  intermediary  
FMAP   Federal  medical  assistance  percentage  
FMO   field  marketing  organization   
FY   fiscal  year  
GAO   Government  Accountability  Office  
HAC   hospital  acquired  conditions   
HCFAC   Health  Care  Fraud  and  Abuse  Control  (program)  
HCOP   Health  Careers  Opportunity  Program  
HCPCS   Healthcare  Common  Procedure  Coding  System   
HEAL   Health  Education  Assistance  Loan   
HEAT   Health  Care  Fraud  Prevention  and  Enforcement  Action  Team   
HHS   Department  of  Health  &  Human  Services   
HIV   human  immunodeficiency  virus   
HRSA   Health  Resources  and  Services  Administration   
IHS   Indian  Health  Service   
IRF   inpatient  rehabilitation  facility  
IRE   independent  review  entity  
IRO   independent  review  organization   
IRS   Internal  Revenue  Service   
LCD   local  coverage  determination   
LTC   longterm  care   
LTACH   longterm  acute  care  hospital   
MA   Medicare  Advantage  
MAO   Medicare  Advantage  organization  
MAC   Medicare  administrative  contractor   
MCO   managed  care  organization  
MEDIC   Medicare  drug  integrity  contractor   
MFCU   Medicaid  Fraud  Control  Unit   
MMIS    Medicaid  Management  Information  System   
NDC   national  drug  code   
NEMT   nonemergency  medical  transportation   
NF   nursing  facilities   
NIEHS   National  Institute  of  Environmental  Health  Sciences   
NIH   National  Institutes  of  Health   
NLA   national  limit  amount  
NPSD   Network  of  Patient  Safety  Databases   
O&M   operations  and  maintenance   
OCSE   Office  of  Child  Support  Enforcement   
OIG   Office  of  Inspector  General   
OCS   Office  of  Community  Services  
OPO   organ  procurement  organization  
PDE   prescription  drug  event   
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HHS  OIG  Semiannual  Report  to  Congress   78   Appendix  D  
Spring  2010    
PDP   private  prescription  drug  plan  
PECOS    Provider  Enrollment,  Chain,  and  Ownership  System   
P.L.   Public  Law   
PPS   prospective  payment  system   
PRB    postretirement  benefit   
PSA   professional  services  agreement   
PSC   Program  Support  Center  
PSO   Patient  Safety  Organization   
PTH   parathyroid  hormone   
QAA   Quality  Assessment  and  Assurance  
RAC   recovery  audit  contractor   
RDT&E    research,  development,  test,  and  evaluation   
SNF   skilled  nursing  facility  
TCM   targeted  case  management   
UCCP   uncompensated  care  pool   
U.S.C.   United  States  Code  
WAMP   widely  available  market  price  
Public  Laws  
 
BBA   Balanced  Budget  Act  of  1997,  P.L.  No.  10533  
BIPA   Medicare,  Medicaid,  and  SCHIP  Benefits  Improvement  and  Protection  
Act  of  2000,  P.L.  No.  106554  
CERCLA   Comprehensive  Environmental  Response,  Compensation,  and  Liability  
Act  of  1980,  P.L.  No.  96510  
CFO  Act 	  Chief  Financial  Officers  Act  of  1990,  P.L.  No.  101576  
CSA	   Controlled  Substances  Act,  Title  II  of  the  Comprehensive  Drug  Abuse  
Prevention  and  Control  Act  of  1970,  P.L.  No.  91513  
DRA 	   Deficit  Reduction  Act  of  2005,  P.L.  No.  109171,    
EMTALA	   Emergency  Medical  Treatment  and  Labor  Act  of  1986,  P.L.  No.  99272  
FCA	   False  Claims  Act  Amendments  of  1986,  P.L.  No.  99562  
FDCA 	  Federal  Food,  Drug,  and  Cosmetic  Act  of  1938,  P.L.  No.  75717   
FISMA	   Federal  Information  Security  Management  Act  of  2002,  P.L.  No.  107347  
GMRA 	  Government  Management  Reform  Act  of  1994,   P.L.  No.  103356  
HIPAA 	   Health  Insurance  Portability  and  Accountability  Act  of  1996,  P.L.  No.  
104191   
IG  Act 	  Inspector  General  Act  of  1978  (IG  Act),  as  amended  by  P.L.  No.  11125,  
5  U.S.C.  App.  
 
MIPPA 	  Medicare  Improvements  for  Patient  and  Providers  Act  of  2008,  P.L.  No.  
110275  
MMA  	  Medicare  Prescription  Drug,  Improvement,  and  Modernization  Act  of  
2003,  P.L.  No.  108173  
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HHS  OIG  Semiannual  Report  to  Congress   79   Appendix  D  
Spring  2010    
Recovery   American  Recovery  and  Reinvestment  Act  of  2009,  P.L.  No.  1115
  
Act 
 
SCHIP   SCHIP  Extension  Act  of  2007,  P.L.  No.  11073
  
TRHCA   Tax  Relief  and  Health  Care  Act  of  2006,  P.L.  No.  109432 
 
 
Not  Abbreviated  	 John  Warner  National  Defense  Authorization  Act  for  Fiscal  Year  

2007,    P.L.  No.  109364
  
 
Not  Abbreviated  	 MedicareMedicaid  AntiFraud  and  Abuse  Amendments  of  1977,
  
P.L.  No.  95142  
 
Not  Abbreviated  	 Supplemental  Appropriations  and  Rescissions  Act  of  1980,
   
P.L.  96304
  
 
 
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HHS  OIG  Semiannual  Report  to  Congress   80   Appendix  D 
 
Spring  2010