The Department of Health and Human Services
  
 
  And 
 
  The Department of Justice
  
  Health  Care Fraud and Abuse Control Program 
  Annual Report for Fiscal Year 2017 

 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
April 2018 
 
 
     
    TABLE OF CONTENTS 
 
 
   
I.   Executive Summary	                   1 

   
II.   Statutory Background 	                 3 

   
III. 	  Program Results and Accomplishments             5 

              Monetary Results                  5 

    Expenditures                   7 

    Overall Recoveries                 8 

    Health Care  Fraud Prevention and Enforcement Action Team       8 

    Health Care  Fraud Prevention Partnership           9 

    Medicare Fraud Strike Force               9 

    Opioid Fraud and Abuse Detection Unit            12 

    Highlights of Successful Criminal and Civil Investigations       13 

 
IV.  	 Department of Health and Human Services             34 

  Office of Inspector General          34 

  Centers for  Medicare &  Medicaid Services         45 

  Administration on Community Living            64 

  Office of the General Counsel               67 

  Food and Drug Administration Pharmaceutical  Fraud Program      70 

 
V.  	 Department of Justice                  73 

  United States Attorneys       73 

  Civil Division       74 

  Criminal Division       79 

  Civil Rights Division       82 

   
VI.  	 Appendix                    89 

  Federal Bureau of Investigation               89 

  Return on Investment Calculation             93 

  Total HCFAC Resources                94 

 
VII.   Glossary of Terms	                   95 
                                                                                     
   
 
 
   
  GENERAL NOTE  
 
All years are fiscal years unless otherwise 
stated  in  the text.    
 
  EXECUTIVE SUMMARY
  
 
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) established a national  
Health Care  Fraud and Abuse Control Program (HCFAC or  the Program) under the  joint 
direction of  the Attorney General and the Secretary of the Department of Health and Human 
Services (HHS)1, acting through the Inspector General, designed to coordinate federal, state and  
local  law enforcement activities with respect to  health  care fraud and abuse.  In its  twenty-first  
year of operation, the Programs continued success confirms the soundness of a collaborative  
approach to identify and prosecute the most egregious instances of health care fraud, to prevent  
future fraud and abuse, and to protect program beneficiaries.  
 
Monetary Results  
 
During Fiscal Year (FY) 2017, the Federal Government won or negotiated over $2.4 billion in 
health  care fraud judgments and settlements2, and it attained additional administrative  
impositions  in health care fraud cases and proceedings.  As a result of these efforts, as well as 
those of preceding years, in FY 2017 $2.6 billion was returned to the Federal Government or  
paid to private persons.  Of this $2.6 billion, the  Medicare Trust Funds3  received transfers of  
approximately $1.4 billion during this period, and $406.7 million in Federal Medicaid  money  
was similarly transferred separately  to the Treasury as a result of these efforts.    
 
Enforcement Actions  
 
In FY 2017, the Department of Justice (DOJ) opened 967 new criminal health care fraud  
investigations.  Federal  prosecutors filed criminal charges in  439 cases involving 720 defendants.  
A total of  639  defendants were convicted of health care fraud-related crimes during the year.   
Also in FY 2017, DOJ opened 948 new civil health care fraud investigations and had  1,086 civil 
health  care fraud matters pending at  the end of the fiscal year.   In FY 2017, the FBI investigative  
efforts resulted in over  674 operational disruptions of criminal fraud organizations and the  
dismantlement of the criminal hierarchy of  more than 148 health care fraud criminal enterprises.   
                      
In FY 2017, investigations conducted by HHS  Office of Inspector General  (HHS-OIG) resulted  
in 788 criminal actions against  individuals or entities that  engaged in crimes related  to  Medicare 
and Medicaid, and 818 civil  actions, which include false claims and unjust-enrichment lawsuits 
filed in federal district court, civil monetary penalties (CMP) settlements, and administrative 
recoveries related to provider self-disclosure matters.  HHS-OIG also excluded 3,244 individuals  
and entities from participation  in Medicare, Medicaid, and other federal health  care programs.   
Among these were exclusions based  on criminal  convictions for crimes related  to Medicare and  
Medicaid (1,281) or to other health care programs  (309), for patient abuse or neglect (266), and 
                                                 
1  Hereafter,  referred  to  as  the  Secretary. 
 
2  The  amount  reported  as  won  or  negotiated  only  reflects  the  federal  recoveries  and  therefore  does  not  reflect  state 

Medicaid monies  recovered as  part  of  any  global  federal-state settlements.
 
3  The  Medicare  Trust  Funds  are  also known as  the  Medicare  Hospital Insurance  (Part  A)  Trust  Fund and the 
 
Supplemental  Medical  Insurance (Part  B)  Trust  Fund.  

 
  1 
  as a result of licensure revocations (973).  HHS-OIG also issued numerous audits and 
evaluations  with recommendations that, when implemented, would correct program  
vulnerabilities and save  program funds. 
 
Sequestration Impact  
  
Due to sequestration of  mandatory funding in 2017, there were fewer resources for DOJ, FBI, 
HHS, and HHS-OIG to fight fraud and abuses against Medicare, Medicaid, and other health  care 
programs.  A total of $20.7 million was sequestered from the HCFAC program in FY 2017, for a  
combined total of $115.5  million in the past five  years.  Including funds sequestered from the  
FBI and the  FY 2013 discretionary HCFAC sequester, the total  equals  $161.7  million in the past 
five years.  
   
 
  2 
  STATUTORY BACKGROUND
  
 
The Annual Report of the Attorney General and the Secretary detailing expenditures and 
revenues under the Health Care Fraud and Abuse Control Program  for Fiscal Year 2017 is 
provided as  required by Section 1817(k)(5) of the Social Security Act.  
 
The Social Security Act  Section 1128C(a), as established by the Health  Insurance Portability and 
Accountability Act of 1996 (P.L. 104-191, HIPAA or the Act), created the Health Care Fraud 
and Abuse Control Program, a far-reaching program to combat fraud and abuse in health  care,  
including both public and private health plans.   
 
As was the case before HIPAA, amounts paid to Medicare in restitution or for compensatory 
damages  must be deposited in the  Medicare Trust  Funds.  The Act requires that an amount  
equaling recoveries from  health care investigations  including criminal  fines, forfeitures, civil 
settlements and judgments, and administrative penalties  also be deposited in the Trust Funds.   
 
The Act appropriates monies from the Medicare  Hospital  Insurance Trust Fund to an expenditure  
account, called the Health Care Fraud and Abuse Control Account (the Account), in amounts that  
the Secretary and Attorney General  jointly  certify as necessary to finance anti-fraud activities.   
The maximum amounts available for  certification  are specified in the Act.   Certain of these sums 
are to be used only for activities of the HHS-OIG, with respect to the Medicare and  Medicaid  
programs.  In FY 2006, the Tax Relief and Health Care Act (TRHCA) (P.L 109-432, 303)  
amended the Act so that  funds allotted from the Account are  available until  expended.   
TRHCA also allowed for yearly increases to the  Account based on the change in the consumer  
price index for all urban  consumers (all  items, United States city average) (CPI-U) over the  
previous fiscal year for  fiscal years for 2007 through 2010.4  In FY 2010, the Patient Protection 
and Affordable Care Act, as amended by the Health Care  and Education Reconciliation Act, 
collectively  referred  to as the Affordable Care Act (P.L. 111-148, ACA)  extended permanently 
the yearly increases to  the Account based upon  the change in the consumer price  index for all  
urban consumers, or CPI-U.  
  
In FY 2017, the Secretary and the Attorney General certified $279.5 million in mandatory 
funding to the Account  after accounting for sequester  reductions of $20.7 million  to the total 
appropriation.  Additionally, Congress appropriated $725.0 million in discretionary funding.  A  
detailed breakdown of the allocation of these funds is set forth later  in this report.  HCFAC  
appropriations generally supplement the direct  appropriations  of HHS that are devoted to health 
care fraud enforcement  and have supported over two-thirds of DOJs health care fraud funding 
and over three-fourths of HHS-OIGs appropriated budget in FY 2017.  (Separately, the FBI, 
which is discussed in the appendix, received $131.3 million from HIPAA, after accounting for  
$9.7 million in mandatory sequester reductions.)   Under the joint direction of the Attorney 
General and  the Secretary, the Programs goals are:  
                                                 
4  The CPI-U  adjustment  in  TRHCA  did  not  apply  to  the  Medicare  Integrity  Program  (MIP).   Section  6402  of  the  
ACA  indexed  Medicare  Integrity Program  funding  to  inflation  starting  in  FY 2010.  
3 

  (1)  To coordinate federal, state and  local law enforcement efforts relating  to health  care fraud  
and abuse with respect to health plans;  
 
(2)  To  conduct investigations, audits, inspections, and evaluations relating to the delivery of  
and payment for health care in the United States;  
 
(3)  To facilitate enforcement of all applicable remedies for such fraud; and  
 
(4)  To provide education and guidance  regarding complying with current health care  law. 
 
Additionally, the Act requires the Attorney General and the Secretary  to submit a joint annual  
report to the Congress that identifies  both:  
 
(1)  The amounts appropriated to the Trust Funds for the previous fiscal year  under various  
categories  and the source of such amounts; and  
 
(2)  The amounts appropriated from the Trust Funds  for such year for use by the Attorney 
General and  the Secretary and the justification for the expenditure of such amounts.  
 
This annual  report fulfills the above  statutory requirements.   
 
Additionally, this report  fulfills the  requirement in the annual discretionary HCFAC  
appropriation (Public Law 115-30Consolidated Appropriations Act, 2017) that this  report 
include measures of the operational  efficiency and impact on fraud, waste, and abuse in the  
Medicare, Medicaid, and CHIP programs for the funds provided by this  appropriation.    
 
 
 
4 

    PROGRAM RESULTS AND  ACCOMPLISHMENTS
  
 
As required by the Act, HHS and DOJ  must detail  in this Annual Report the amounts deposited 
to the Medicare Trust Funds and the  source of such deposits.  In FY 2017, $2.6 billion was  
deposited with the Department of the Treasury and CMS, transferred to other federal agencies 
administering health care programs, or paid to private persons during the fiscal year.  Monetary 
results from  these transfers and deposits are provided in the  table below:   
 
Monetary Results:  Total Transfers  / Deposits by Recipient FY 2017  
Department  of the Treasury      
  Deposits to the Medicare Trust Fund, as required by  HIPAA:     
    Gifts and Bequests   $5  
    Amount Equal to Criminal Fines   12,045,515  
    Civil Monetary Penalties   46,447,392  
    Asset Forfeiture   35,481,573  
    Penalties and Multiple Damages   446,282,175  
          Subtotal   540,256,660  
Centers for Medicare and Medicaid Services    
   HHS/OIG Audit Disallowances:  RecoveredMedicare   365,168,853  
   Restitution/Compensatory Damages*   490,881,373  
          Subtotal   856,050,226  
Total Transferred to the Medicare Trust Funds   $1,396,306,886  
Restitution/Compensatory Damages to Federal Agencies     
   TRICARE   $20,419,906  
   HHS/OIG   9,806,538  
   Office of Personnel Management   2,624,783  
   National Institutes of Health   6,620,321  
   Other Agencies   105,120,657  
          Subtotal   144,592,205  
Centers for Medicare and Medicaid Services    
   Federal Share of Medicaid   406,712,923  
   HHS/OIG Audit Disallowances:  RecoveredMedicaid   350,147,845  
          Subtotal   756,860,768  
Total   $901,452,973  
Relators' Payments**   $262,095,000  
GRAND TOTAL MONETARY RESULTS***   $2,559,854,859  
 
*Restitution,  compensatory  damages,  and  recovered audit  disallowances  include  returns  to both  the  Medicare 
 
Hospital  Insurance  (Part  A) Trust  Fund  and the  Supplemental  Medical  Insurance  (Part  B)  Trust  Fund. 
 
**These  are  funds  awarded  to  private persons  who  file suits  on  behalf  of  the Federal  Government  under  the  qui  tam  

(whistleblower)  provisions  of  the  False  Claims  Act,  31  U.S.C.    3730(b).  

***State funds  are also  collected  on  behalf  of  state Medicaid  programs;  only  the Federal  share  of  Medicaid  funds  

transferred  to  CMS  are represented  here.  

5 

  The above transfers include certain collections, or  amounts equal to certain  collections,  required  
by HIPAA to be deposited directly into the Medicare Trust Funds.  These amounts include:  
 
(1)  Gifts and bequests made unconditionally to the Trust Funds, for the benefit of the
  
Account or  any activity financed through the Account; 
 
 
(2)  Criminal fines recovered in cases involving a federal health care offense, including  
collections under section  24(a) of Title 18, United States Code (relating to  health care 
fraud);  
 
(3)  Civil monetary penalties in cases involving a federal health care offense;  
 
(4)  Amounts resulting from the forfeiture of property by reason of a federal health care  
offense, including collections under section 982(a)(7) of Title  18, United States Code;  
and 
 
(5)  Penalties and damages obtained  and  otherwise creditable to  miscellaneous receipts of the 
general fund of the Treasury obtained under sections 3729 through 3733 of  Title 31, 
United States Code (known as the False Claims  Act, or FCA), in cases involving claims  
related to  the provision  of health care items and services (other than funds awarded to a 
relator, for restitution or otherwise  authorized by law).  
 
 
 
  6 
  Expenditures  
 
In the  twenty-first year  of operation, the Secretary and the Attorney General certified 
$279.5 million in mandatory funding as necessary for the Program, after accounting for  
mandatory sequester reductions of $20.7 million as required by law.  Additionally, Congress  
appropriated $725 million in discretionary funding.  See allocation by recipient below:  
 
FY 2017  ALLOCATION OF HCFAC APPROPRIATION  
Mandatory  Discretionary   Funds   Total  
Organization  
Allocation5   Allocation   Sequestered   Allocation  
Department  of Health and  
           
Human Services  
Office of Inspector General6   $205,684,560   $82,132,000   ($13,778,235)   $274,038,325  
Office of the General Counsel   7,000,000   0   0   7,000,000  
Administration for Community  
Living7   0   18,000,000   0   18,000,000  
Food and Drug Administration   4,371,000   0   0   4,371,000  
Centers for Medicare & Medicaid  
18,185,811   551,068,000   0   569,253,811  
Services  
Unallocated Funding   2,635,252   0   (2,635,252)   0  
   Subtotal   $237,876,623   $651,200,000   ($16,413,487)   $872,663,136  
          
Department  of Justice          
United States Attorneys   $39,584,043   $31,967,412   $0   $71,551,455  
Civil Division8   15,269,382   8,877,333   0   24,146,715  
Criminal Division   1,418,888   21,046,144   0   22,465,032  
Civil Rights Division   1,372,760   7,653,312   0   9,026,072  
Justice Management Division   400,000   0   0   400,000  
Federal Bureau of Investigation   0   4,255,799   0   4,255,799  
Unallocated  Funding   4,301,944   0   (4,301,944)   0  
   Subtotal   $62,347,017   $73,800,000   ($4,301,944)   $131,845,073  
TOTAL9   $300,223,640   $725,000,000   ($20,715,431)   $1,004,508,209  
Overall Recoveries  
                                                 
5  As  of FY  2007,  mandatory  funds  are available until  expended.   Discretionary  funds  are available for  two  years.  
 
6  In addition,  HHS-OIG  obligated  $9.7  million in funds  received as  reimbursement  for  the  costs  of  conducting 
 
investigations  and  audits  and  for  monitoring  compliance  plans  as  authorized by  section 1128C(b)  of  the  Social 
 
Security  Act,  42  U.S.C.    1320a-7c(b).
   
7  CMSs  discretionary  HCFAC funds  were  allocated  to  the  Administration  for  Community  Living  to  support  the  

Senior Medicare Patrol  Program.
 
8  The  Elder  Justice  Initiative,  managed  by  the  Civil  Division,  is  included  in  the  Civil  Division  figures. 
   
9  Amounts  only  represent  those  that  are  provided by  statute,  and do  not  include  other  mandatory  sources  or
  
discretionary  appropriated sources  provided  through Departments  annual  appropriations.
  
 
  7 
   
During this fiscal year,  the Federal Government won or negotiated over $2.4 billion in judgments  
and settlements, and attained additional administrative  impositions in health care fraud cases and  
proceedings.   As a result  of these efforts, as well as those of  preceding years, approximately $2.6 
billion was returned  to the Federal Government or private persons.  Of this $2.6 billion, the  
Medicare Trust Funds received  transfers of approximately $1.4 billion during this period; and 
another $406.7 million  in Federal Medicaid money was transferred to  the Treasury separately as 
a result of these efforts.10  
 
In addition to these enforcement actions, numerous audits, evaluations and other coordinated 
efforts yielded recoveries of overpaid funds, and prompted changes in federal health  care 
programs that reduce vulnerability to fraud.    
 
The return on investment (ROI) for the HCFAC  program over the  last three years (2015-2017) is  
$4.20 returned for every $1.00 expended.  Because the annual  ROI can  vary from year to year  
depending on the number and type of cases that are settled or  adjudicated during that year, DOJ  
and HHS use a three-year rolling average ROI for results contained in  the  report.   Additional 
information on how the ROI is calculated can be  found in the  Appendix. 
 
Health Care  Fraud Prevention and Enforcement Action Team (HEAT)  
 
The Attorney General and the Secretary maintain regular consultation at both senior and staff  
levels to accomplish the  goals of the  HCFAC Program.  With  the creation of the Health Care 
Fraud Prevention and Enforcement Action Team (HEAT)  effort, DOJ and HHS pledged a  
commitment to prevent and prosecute health care  fraud.  These teams are  comprised of top level  
law enforcement agents, prosecutors, attorneys, auditors, evaluators, and other staff from DOJ  
and HHS and their operating divisions, and are dedicated to joint efforts across government to 
both prevent fraud and enforce current anti-fraud laws around the country.  The Medicare Fraud 
Strike Force teams are a key component of HEAT.     
 
The mission of HEAT  is:  
 
	   To marshal  significant  resources across government to prevent waste, fraud and 
abuse in the Medicare and Medicaid programs and crack down on the fraud 
perpetrators who are abusing the system and costing us  all billions of dollars.  
 
	   To reduce health care costs and improve the quality of  care by ridding the system of 
perpetrators who are preying on Medicare and Medicaid beneficiaries.  
 
	   To highlight best practices by providers and public sector employees who are
  
dedicated to ending waste, fraud, and abuse in Medicare. 
 
 
	   To build upon existing  partnerships between DOJ and HHS, such as our Medicare 
Fraud Strike Force Teams, to reduce fraud and recover  taxpayer dollars.  
 
                                                 
10  Note  that  some  of  the  judgments,  settlements,  and administrative  actions  that  occurred in  FY  2017  will  result  in  
transfers  in future  years,  just  as  some  of  the  transfers  in FY  2017  are  attributable  to  actions  from  prior  years.  
 
  8 
  Since its creation, HEAT has focused on key areas for coordination and improvement.  HEAT  
members are working to identify new enforcement initiatives and areas for increased  oversight  
and prevention to increase efficiency  in areas such as pharmaceutical and  device investigations.   
DOJ and HHS  have expanded data  sharing and improved information sharing procedures in 
order to get  critical data  and information into the  hands of law enforcement to track patterns of  
fraud and abuse and increase efficiency in investigating and prosecuting complex health care 
fraud cases.  This expanded data sharing enables the DOJ and HHS to efficiently identify and  
target the worst actors in the system. The departments established a cross-government  health care  
fraud data intelligence sharing workgroup to share fraud trends, new  initiatives, ideas, and 
success stories  to improve awareness across issues relating to health care fraud.   
 
Both departments also have developed training programs to prevent honest mistakes and help 
stop potential fraud before it happens.  This includes CMS compliance training for providers, 
on-going meetings  at U.S. Attorneys Offices (USAOs) with the public and private sector, and 
increased efforts by HHS to educate specific groupsincluding elderly and immigrant  
communitiesto help protect them.  In addition, DOJ conducts, with the support of HHS, a  
Health  Care Fraud training program  designed to teach the Strike Force concept and case model  
to prosecutors, law enforcement agents, and administrative support teams.   In FY 2017, 
prescription opioid fraud and abuse training was also provided to the USAO community. 
 
Healthcare Fraud Prevention Partnership (HFPP)  
 
The Healthcare Fraud Prevention Partnership (HFPP) is  CMSs groundbreaking voluntary 
public/private partnership between the Federal Government, State agencies, law enforcement,  
private health insurance  plans, employer organizations, and health care anti-fraud 
associations.  The purpose of the partnership is to exchange data and information between the  
partners to help improve capabilities  to  fight  fraud,  waste and abuse in the health care 
industry.  Since its inception in 2012, the number of participants has increased to 85 public, 
private and state partner  organizations by the end of FY 2017.  During FY 2017, the HFPP 
completed a number of studies using  multiple partner data to  address fraud, waste and abuse.   
 
In FY 2017, the Partnership also hosted its Annual Executive  Board meeting.  The meeting 
focused on strategies to streamline, strengthen, and grow the Partnership, including a  call  to 
action to broaden the HFPPs impact.   
 
Medicare Fraud Strike Force  
 
The first Medicare Fraud Strike Force (Strike Force)  was launched in March 2007 as part of the  
South Florida Initiative, a joint investigative and prosecutorial effort against Medicare fraud and 
abuse in South Florida.   The Strike Force is comprised of interagency teams made up of  
investigators and prosecutors that focus on the worst offenders in regions  with the highest known 
concentration of fraudulent activities.  The Strike Force uses  advanced data analysis  techniques  
to identify aberrant billing levels in  health  care fraud hot spotscities with high levels of billing 
fraudand target suspicious billing patterns, as well as emerging schemes and schemes that  
migrate from one community to another.  Based on the success of these efforts and increased 
appropriated funding for the HCFAC  program from Congress and the Administration, DOJ and 
 
  9 
  HHS expanded Strike Force operations to a total of nine areas in the United States:  Los Angeles, 
California; Miami and Tampa, Florida; Chicago, Illinois; Brooklyn, New York; Detroit,  
Michigan;  Southern Louisiana; and Dallas and Southern Texas.     
 
Each Medicare Fraud Strike Force team brings the investigative and data analytic resources of  
the FBI and  HHS-OIG and the prosecutorial resources of the  Criminal Divisions Fraud Section  
and the USAOs to analyze data obtained from a wide variety of sources  including CMS, and 
bring cases in federal district court.   Strike Force accomplishments in the areas noted  above and  
USAO accomplishments in their districts during FY 2017 include11:  
 
	   Filed 253 indictments, informations  and complaints involving charges filed against  
478 defendants who allegedly billed federal health care programs  more than $2.3 billion;    
 
	   Obtained 290 guilty pleas negotiated and 33 jury trials litigated, with guilty verdicts  
against 40 defendants; and   
 
	   Secured imprisonment for 305 defendants sentenced, averaging more than 50 months of  
incarceration.   
 
Since its  inception, Strike Force prosecutors  filed  more than 1,660 cases charging more than 
3,490 defendants  who  collectively  billed the Medicare program approximately $13 billion; 2,331 
defendants  pleaded  guilty  and 315 others  were  convicted  in jury  trials; and 2,117 defendants  
were sentenced to  imprisonment  for an  average  term of approximately 50 months.12    Medicare  
payment trends  demonstrate the positive  impact of  Strike Force enforcement  and prevention 
efforts.  
 
Increased USAO outreach by the Strike Force partners is another positive  measure that reflects  
the overall impact of the HCFAC program. This year, the Criminal Divisions Fraud Section  
hosted its largest ever National Health Care Fraud Training Conference, which was attended by 
over 310 prosecutors and law enforcement agents, including 130 AUSAs representing almost  60 
USAOs. The Fraud Sections Health Care Fraud  Data Analytics Team  and HHS-OIGs  
Consolidated Data Analysis Center  have supported investigations, led trainings, and conducted 
analyses  in over 35 districts, including the 12 districts selected for the Attorney Generals Opioid 
Fraud and Abuse Detection Unit initiative. In addition, the 2017 National  Health Care  Fraud 
Takedown involved 412 charged defendants across 41 federal districts with an estimated loss to 
federal health care programs of $1.3 billion, including 115 doctors, nurses, and other  licensed 
medical professionals.  The following chart shows the national health care  fraud takedown trends  
from FY 2013 to FY 2017.  
 
                                                 
11  The  accomplishments  figures  presented in  the  bullets  include  all  reported Strike  Force  cases handled by  DOJ
  
Criminal Division  attorneys  and AUSAs  in  the  respective  USAOs  during FY 2017. 
   
12 These  statistics  are  for  the  period  of  May  7,  2007  through  September  30,  2017.  

 
 
  10 
   
 
Medicare payment trends also demonstrate the positive impact of Strike Force enforcement and  
prevention efforts beyond the several Strike Force locations.  The HEAT  Strike Force team in 
Miami initiated  federal law enforcement actions against fraudulent home health  schemes that  
exploited the  Home Health Agency (HHA) outlier payment provisions in 2009.  An HHS-OIG 
evaluation published that same year found that  Miami-Dade County accounted for more home  
health outlier payments than the rest  of the nation combined for claims paid the previous year.  
Twenty-three other  counties nationwide also exhibited aberrant home health payment patterns  
similar to that of Miami, but to a  lesser extent.  In 2010, CMS implemented a cap on total outlier  
payments not to exceed more than 10 percent of home health payments that an individual home  
health provider may receive annually.  The following chart shows the rapid increase  in annual  
Medicare home health payments until peaking in 2010, and the decline in home health payments  
by approximately one billion dollars  annually since that time compared to a hypothetical  
constant level of HHA payments at the 2010 level.  
 
 
 
  11 
   
Opioid Fraud and Abuse Detection Unit  
 
In August FY 2017, the Attorney General  announced the formation of the Opioid Fraud and 
Abuse Detection Unit, a new Department of Justice pilot program that  utilizes  data to help 
combat the devastating  opioid crisis that is ravaging families and communities across America.   
This unit will focus specifically on opioid-related health care fraud using data to identify and 
prosecute individuals that are contributing to this prescription opioid epidemic.  
 
As part of the program, the Department is  committed to funding 12 experienced  AUSAs  for a  
three-year  term  who will work with dedicated HHS-OIG, FBI, and DEA investigators to focus  
solely on investigating and prosecuting health care fraud related to prescription opioids, 
including pill mill schemes and pharmacies that  unlawfully divert or dispense prescription 
opioids for illegitimate purposes.  The following  districts have been identified for participation in  
the program: Middle District of Florida, Eastern  District of  Michigan, Northern District of  
Alabama, Eastern District of Tennessee, District  of Nevada, Eastern District of Kentucky, 
District of  Maryland, Western District of Pennsylvania, Southern District of Ohio, Eastern 
District of California, Middle District of North Carolina, and Southern District of  West Virginia.  
 
 
   
 
  12 
  Highlights of Significant  Criminal and Civil Investigations   
 
Our respective Departments successfully pursued Medicare Fraud Strike Force matters, as well  
as other  criminal and civil investigations in  a wide range of  areas.  Cases are organized by type  
and presented in chronological order.   Strike Force cases are denoted by  (SF)  before the lead  
sentence.  
 
Ambulance and Transportation Services  
 
In January 2017,  a previously excluded provider, was sentenced in New Jersey to 18 years in 
prison for, among other things, his  illegal operation of an ambulance company that billed 
Medicare and Medicaid.  In 2004, the defendant  was excluded from participating in Medicare or  
Medicaid for a minimum of 11 years as a result  of a state conviction for Medicaid fraud.  From at 
least 2005-2014 and in violation of the exclusion, the defendant operated K&S Invalid Coach in 
his brothers name.  During this time, Medicare and Medicaid paid over $9  million  in  claims to  
K&S.  The defendant also engaged in tax evasion, paying numerous employees salaries and all  
employees overtime off the books.  In response  to a Department of  Labor audit in 2014, the  
defendant instructed all  of the companys employees to lie  to the Department of  Labor about  the  
number of hours they worked and instructed certain employees to falsify timekeeping records  to 
match false reports that  had been made to the  companys payroll  accountant.  Following a bench 
trial, during which the defendant attempted to influence a government witness, he was convicted  
of all 17 counts of the indictment charging him  with health care fraud, obstructing a  federal  
audit, tax  evasion, and money laundering.  The defendant was also ordered to pay $8.8 million in 
restitution.  
 
In January 2017, Medstar Ambulance, Inc. and its two owners  agreed to  pay $12.7 million to 
resolve allegations in the District of  Massachusetts that from  January 2011 through October  
2014, Medstar submitted false claims to Medicare for ambulance transport  services.   
Specifically, the United  States  alleged that Medstar routinely billed for services  that did not  
qualify for reimbursement because the transports were not  medically reasonable and necessary,  
billed for higher levels of services  than were required by patients conditions, and billed for  
higher  levels of services than were actually provided.  As part of the settlement agreement,  
Medstar agreed to enter  into a 5-year Corporate  Integrity Agreement (CIA) with HHS-OIG.   
 
In April 2017, the owners of an ambulance company were sentenced to  5 years and 3 months and 
4 years and 9 months  in prison, respectively, and ordered to pay more than $2.3 million in 
restitution in the Southern District of  Texas.  The  defendants owned and operated KMD  
Healthcare  Services  Inc. (KMD) from their home in a gated townhouse community in Houston.  
As part of their guilty pleas, the pair admitted they submitted approximately $6  million in false  
and fraudulent claims to Medicare, Medicaid and Tricare (another government health program)  
for ambulance services that were not provided.  The defendants admitted they transported 
Medicare beneficiaries with only one of the two required emergency medical  technicians  and in 
vans instead of ambulances. They also admitted they paid a  Houston physician $500 for  
certificates of  medical necessity and  paid some of the Medicare beneficiaries to  ride in the vans.   
 
 
In September 2017, the  owner  of  Triumph  Ambulance  Inc. pled guilty to 12 counts of health care  
 
  13 
  fraud and was sentenced to 3 years confinement  and ordered to pay $690,390 in restitution.  The  
owner had engaged in a scheme to defraud Medicare.  Specifically,  Triumph  Ambulance  
employees,  at  the  direction  of  the owner,  transported  Medicare  beneficiaries  by ambulance  or  in  
personally-owned  vehicles  to  regularly-scheduled  dialysis  treatments.  These  patients  were  not  
medically  eligible  for  ambulance  transportation reimbursed by Medicare. The owner  submitted  
false  claims  to  Medicare  for  reimbursement  and also  provided kickbacks  to  Medicare  
beneficiaries.   
 
Clinics  
 
(SF) In January and February 2017, 4 defendants  pled guilty to various charges, including 
conspiracy to commit health care fraud and conspiracy to commit  money laundering, in 
connection  with a scheme to submit false claims to Medicare and Medicaid for, among other  
things, fraudulent physical and occupational therapy services.  From 2008 through 2011, the  
defendants and others executed a scheme in which patients were paid cash kickbacks to present  
themselves for treatment at various Brooklyn-area clinics.  The patients received medically 
unnecessary services that were later falsely billed  to Medicare and Medicaid as genuine physical  
and occupational therapy treatments.  Fraudulent  claims totaling over $55 million were  
submitted to Medicare and Medicaid in connection with the  scheme, and the programs paid out  
over $29 million in reimbursement on those claims.  Together with these defendants, over 20 
individuals have  pleaded  guilty  to various charges in this case for their participation  in the  
schemes perpetrated through these and other clinics.  
 
In February 2017, an Alabama physician was sentenced  to 15 years in prison for illegally  
prescribing controlled substances  and conducting health care fraud involving $9.5 million in 
unneeded and unused urine tests.  The defendant  was a pain management doctor who operated a  
pill mill, Chronic Pain Care Services. In 2012, about 80 to 145 patients a  day visited his clinic, 
with him seeing the majority of patients and writing all prescriptions. According to court  
documents, initial patient visits typically lasted five minutes or less, and follow-ups two  minutes  
or less.   
 
(SF) In March 2017, an owner of several physical and occupational therapy clinics in the Central  
District of California was sentenced to 5 years and 3 months in prison after  pleading guilty to 
health care fraud conspiracy.  He was also ordered to pay more than $2.4 million in restitution to 
Medicare.   At the clinic at the center of the case, the defendant hid his ownership in  the name of  
a co-conspirator  and instructed therapists and others to bill Medicare for physical and  
occupational therapy services  that were medically unnecessary and not provided.  The defendant  
also directed his co-conspirators to fabricate patient files to make it  appear as if the services 
billed to Medicare had been rendered and were medically necessary.  In January 2016, the same  
defendant was sentenced to 10 years  and 1 month in prison and ordered to pay $3 million in 
restitution for his trial conviction on 19 counts related to other clinics where the defendant  
directed billing to Medicare for physical therapy services that  were medically unnecessary and  
never provided. 
 
In May 2017, two doctors  were sentenced to 20  years and 21 years, respectively, for running a  
massive pill mill in Mobile, Alabama.   The two doctors had jointly owned and operated two pain 
management clinics under the name Physicians Pain Specialists of Alabama (PPSA) as well as 
 
  14 
  C&R Pharmacy.  Of particular importance  in the  trial were  two brand name instant-release 
fentanyl drugs  Subsys and Abstral.  Both doctors almost exclusively prescribed  these drugs 
off-label, and the jury found that  the  doctors  received illegal  kickbacks from Insys Therapeutics, 
the manufacturer of Subsys, in exchange for the  defendants prescribing massive quantities of this  
drug.  The doctors also purchased approximately $1.6 million worth of stock in Galena  
Biopharma, the manufacturer of Abstral, and sought to manipulate  the stock price by driving up 
Abstral sales.    
 
(SF) In June 2017, the owner and medical director of 4 Orlando-area clinics were sentenced  to  7 
years and 6 months and 5 years and 4 months  in prison, respectively, and ordered to pay $9.8 
million in restitution  after pleading guilty  to conspiracy to commit health care fraud.   The owner  
admitted to  billing Medicare more than $13 million for services that were  never provided.   
Among other fraudulent  billings, the  owner billed Medicare over $7 million in claims for  
Sandostatin, an expensive medication used to treat side effects of intestinal tumors, and over $4.5 
million in claims for Intravenous Immune Globulin, a solution made from human plasma that  
contains antibodies and is used to help individuals with immune deficiencies combat  
infection.  In reality,  the clinics never administered either drug.  The medical director admitted to  
accepting money in exchange for signing medical records authorizing administration of the drugs  
even though they were not medically necessary and were never provided.  He further admitted to 
signing medical  records authorizing  patients to  receive physical therapy at the clinics,  even  
though the clinics had no trained physical therapists on staff.  The government obtained through 
forfeiture real property that was purchased with the fraud proceeds and valued at more than $1 
million.   
 
(SF) In July 2017, a grand jury sitting in the Eastern District of New  York returned a 2-count  
indictment against 5 high-billing medical professionals who worked at a  network of Brooklyn-
area clinics where patients were paid illegal kickbacks in return for subjecting themselves to 
purported physical and occupational therapy, diagnostic  testing, and other medical services.  The  
defendantsa medical doctor, a physical therapist, a  chiropractor, and 2 occupational  
therapistspaid recruiters and others in return for the referral of patients  to their clinics, which  
submitted fraudulent  claims to Medicare for approximately $100 million.    
 
In July 2017, 8 defendants were charged in the Eastern District of Tennessee with drug 
trafficking, money laundering, and anti-kickback violations  in connection with the operation of  
pain clinics  and/or prescription of vast quantities  of opioids outside  the scope of professional  
practice without legitimate medical  purposes.  The clinics generated revenues in excess of $21 
million and were responsible for prescriptions  totaling approximately 12 million opioid pills and  
other narcotics.  Two defendants were also charged with operating kickback schemes with  
national reference laboratories, which resulted in approximately $13.6 million  billed to Medicare 
for  medically unnecessary services.  
 
 
 
Dental  
 
In December, 2016, Texas-based MB2 Dental Solutions  and 21 pediatric dental practices  
affiliated with MB2, along with their owners and marketing chief, agreed to pay  $4.2 million to 
 
  15 
  settle federal civil FCA allegations that they  submitted or caused the submission of  false claims 
for pediatric dental  services that were not rendered, were tainted by kickbacks, or falsely  
identified the person who performed the service. In addition to the federal recovery, MB2 and 
the associated practices and owners paid $4.2 million to resolve state Medicaid liability for the  
same alleged conduct.  As part of the settlement agreement, MB2 Dental Solutions agreed to 
enter into  a 5-year CIA with HHS-OIG.  
 
In June, 2017, a Fruitland, Idaho woman was sentenced to 5 years in prison to be followed by 3 
years of supervised  released for health care fraud  and aggravated identity theft.  Evidence at  trial  
demonstrated that between January 2010 and December 2013, the defendant executed a scheme  
to defraud health care benefit programs, including Medicaid.  Even though the defendant was  
only a dental hygienist, she performed and billed for dental  treatments that may only be  
performed by a dentist.  These treatments included fillings, extractions, and dentures.  The  
defendant also billed for  dental hygiene services  performed without the  supervision and direction 
of a dentist, contrary to state  law and licensing requirements.  The defendant received payment  
for those treatments from health care benefit programs while fraudulently  misrepresenting that 
the treatments had been performed, and supervised, by a dentist, and while using the name and 
provider number of a particular dentist who was  not in the office and who was unable to practice  
at the  time due to disability.  
 
Device Companies  
 
In November 2016, Pennsylvania-based Biocompatibles Inc. pleaded guilty to misbranding its  
embolic device LC Bead in violation of the Federal  Food, Drug and Cosmetic Act. As part of the  
criminal resolution, Biocompatibles  agreed to pay a total of $11 million in criminal fines and 
forfeiture.  LC Bead was cleared by the FDA as an embolization device that can be placed in  
blood vessels to block or reduce blood flow to certain types of tumors and arteriovenous  
malformations.  The government alleged that Biocompatibles  marketed LC Bead for  drug 
delivery despite  the fact  that  it has been never been cleared or  approved by the FDA for use as a  
combination product or  drug-delivery device. Biocompatibles also paid $23.6 million to resolve  
federal  civil  FCA allegations that the company caused false claims to be submitted to 
government health care programs for  procedures in which LC Bead was loaded with 
chemotherapy drugs and used as a drug-delivery device. In addition to the federal  recovery, 
Biocompatibles paid approximately  $1.4  million to resolve state Medicaid liability.   
 
In January 2017, Shire Pharmaceuticals LLC and other subsidiaries of Shire, which is  
headquartered in Ireland with operational headquarters in Lexington, Massachusetts, agreed to 
pay approximately $343.9 million to settle  federal  civil FCA allegations that Shire and the  
company it acquired in 2011, Advanced BioHealing (ABH), employed kickbacks and other  
unlawful methods to induce clinics  and physicians to use or overuse its Dermagraft product, 
which is a bioengineered human skin substitute  approved by the FDA for  the treatment of  
diabetic foot ulcers. The government  alleged that Dermagraft  salespersons unlawfully induced 
clinics and physicians with lavish dinners, drinks, entertainment and travel; medical equipment  
and supplies; unwarranted payments for purported speaking engagements and bogus case  
studies; and  cash, credits and rebates, to induce  the use of Dermagraft in violation of the Anti-
Kickback Statute, the Anti-Bribery Statute, and the  Federal Acquisition Regulations.  In addition 
to the kickback allegations, the government further alleged that Shire and its predecessor ABH  
 
  16 
  unlawfully  marketed Dermagraft for uses not  approved by the FDA,  made false statements to  
inflate  the price of Dermagraft, and caused improper coding, verification, or certification of  
Dermagraft  claims and related services.  The settlement is the largest FCA recovery in a  
kickback case involving a medical device.  In addition to the  federal recovery, Shire  paid $6.1 
million to resolve state  Medicaid liability.  The related criminal investigation resulted in guilty  
pleas of three ABH executives  and two physicians in the Middle District of Florida.   
 
In March 2017, two salesmen who admitted they bought expired and nearly expired weight loss  
gastric bands, which doctors later surgically implanted into patients in  southern Florida, were  
sentenced to 1 year and 6 months and 7 months in prison, respectively.  Between June 2014 and 
October 2015, the defendants, both senior account executives for Apollo Endosurgery, Inc., 
engaged in a scheme to unlawfully enrich themselves by misbranding LAP-BAND Adjustable  
Gastric Banding Systems, changing the serial number and expiration date in order  to sell expired 
medical devices for profit.  The defendants purchased expired and nearly expired LAP-BANDS  
through the internet and created false labels with fraudulent serial numbers and expiration dates  
to hide  the true expiration date of the LAP-BANDs.  They then sold the  misbranded LAP-
BANDs to local physicians. At least seven of these misbranded LAP-BANDS  were subsequently 
implanted into patients.  
 
Diagnostic Services  
 
In November 2016, New York-based  Zwanger &  Pesiri Radiology Group, LLP, Zwanger  
Radiology, P.C., and one provider (collectively, defendants) entered  into a settlement  
agreement to resolve  allegations that between July 2009 and February 2014 they billed Medicare  
and Medicaid for radiology testing performed or supervised by physicians who were not properly 
credentialed with Medicare and Medicaid programs, or which were performed at an unauthorized 
practice location. The defendants agreed to pay $8.1 million to  resolve their federal and state 
civil FCA liability. Contemporaneously with the  civil settlement, Zwanger-Pesiri pleaded guilty 
to two counts of health care fraud for illegally performing and billing for procedures that had not  
been ordered by treating physicians  and agreed to forfeit an additional $2.4 million.   As part of  
the settlement agreement, defendants agreed to enter  into a 5-year CIA with HHS-OIG.  
 
In January 2017, seven individuals  were sentenced to varying prison terms in the Southern 
District of Texas in connection with a scheme involving fraudulent billing for diagnostic  testing 
done at three different clinics from September 2008 to May 2010.  Patients were paid to come to 
the clinics  and the clinics then billed for tests  that were either not performed or not medically 
necessary.   Patients were brought  to  the clinics by recruiters/marketers who were paid for each  
patient they delivered.  
 
In April 2017, Valley Tumor Medical Group (Valley Tumor) in California  paid $3 million to 
resolve federal  FCA allegations  that  from January 2006 through November 2015, it billed 
Medicare, Medi-Cal (Californias  Medicaid program), and TRICARE for radiation  treatments at 
the Ridgecrest location without  the requisite physician supervision. Specifically, radiation 
therapists employed by Valley Tumor allegedly regularly administered radiation treatments when  
no doctor was  present on-site and, thus, physically available to supervise such treatments.    
 
 
  17 
  In May 2017, Poplar  Healthcare PLLC and Poplar Healthcare Management LLC  of Memphis, 
TN, agreed to pay nearly $900,000 to resolve  civil FCA allegations that Poplar, directly and  
through a subsidiary known as GI Pathology, promoted and billed the government for diagnostic  
tests  that the government contends were not medically necessary.   The  HHS-OIG and the United 
States Attorneys Office for the District of Rhode Island  investigated Poplars promotion of  these 
tests, known as immunohistochemical mast cell  tryptase stains,  and alleged that Poplar  
conducted an extensive, multi-year promotional campaign designed to promote the use of the  
stain  with the claim that Poplar could use the  test  to definitively diagnose  a condition known as 
mast cell enterocolitis.  The United States further  alleged that Poplars  promotion of the test  
was not consistent  with  FDA approval requirements and not supported by adequate  scientific  
evidence.  
 
In June 2017, AMI Monitoring Inc., also known as Spectocor, Spectocors owner, Medi-Lynx 
Cardiac Monitoring LLC, and Medicalgorthmics SA agreed to pay approximately $13.5 million 
to resolve civil FCA allegations  that  they billed Medicare for higher  and more expensive levels  
of cardiac monitoring services  than requested by the ordering physicians.  The government  
alleged that  Spectocor  and its owner, and later Medi-Lynx, marketed the Pocket ECG as capable 
of performing three separate types of cardiac monitoring services. When a  physician sought to 
enroll a patient for Pocket ECG, however, the enrollment process allegedly only allowed the  
physician to enroll in Pocket ECG for the service, which provided the highest rate of  
reimbursement provided by a patients insurance, thus steering the ordering physician to a more 
costly level of  service.   As part of the settlement, the owner of AMI and Spectocor agreed  
individually to pay $1 million.  
 
Drug Companies  
 
In December 2016, Forest Laboratories LLC, located in New York  and Forest Pharmaceuticals 
Inc. agreed to pay $35.5 million to settle  federal  civil FCA  allegations that Forest paid kickbacks  
in violation of the Anti-Kickback Statute  to induce prescriptions of the drugs Bystolic, Savella, 
and Nameda. The government alleged that Forest employed speaker program payments and 
meals as improper inducements;  Forest  allegedly  provided these benefits  even when the speaker  
programs were cancelled, no licensed health  care professionals attended  the programs, the same 
attendees had attended  multiple programs over a short period of time, or the meals associated  
with the programs exceeded Forests internal cost limitations. In addition  to the federal recovery,  
Forest paid  $2.5  million to resolve state Medicaid liability.   
 
In July 2017, drug manufacturer Celgene Corp. agreed to pay approximately $259.3 million to 
settle federal civil FCA allegations that it caused the submission of false claims to federal health  
care programs  for non-covered uses  for two drugs manufactured by Celgene.  The settlement  
resolved claims that Celgene promoted two cancer treatment drugs, Thalomid and Revlimid, for  
uses that were not approved by the FDA and not covered by federal health care programs.  The  
settlement also resolved  claims that  Celgene used false and  misleading statements in  promoting  
the drugs and that Celgene paid kickbacks in violation of the  Anti-Kickback Statute to induce  
physicians to prescribe  the drugs.  In addition to the federal  recovery, Celgene paid 
approximately $20.7 million to  resolve state Medicaid  liability.  
 
Also in July 2017, Novo Nordisk Inc., headquartered in Plainsboro, New Jersey, paid a  
 
  18 
  disgorgement of approximately $12.2 million to settle allegations under  the Federal Food, Drug, 
and Cosmetic Act that it failed to comply with the FDA-mandated Risk Evaluation and 
Mitigation Strategy (REMS) for its  Type II diabetes drug Victoza. At  the time of Victozas 
approval, the FDA required a REMS to mitigate  the potential risk in humans of a rare form of  
cancer  called Medullary Thyroid Carcinoma associated with the drug. The REMS required Novo  
Nordisk to provide  information to physicians  regarding Victozas potential risk. A manufacturer 
that fails to comply with the requirements of the REMS, including requirements to communicate  
accurate risk information, renders  the drug misbranded under the law. The  government alleged 
that some Novo Nordisk sales representatives gave information to physicians that created the 
false or misleading impression that  the Victoza REMS-required message was erroneous,  
irrelevant, or unimportant. Novo Nordisk also paid approximately $43.1 million to settle  federal  
civil FCA allegations that Novo Nordisk promoted Victoza with false and  misleading messages 
regarding the importance of the REMS-required information and promoted the use of Victoza for  
uses not covered by federal health care programs. In addition to the federal recovery, Novo 
Nordisk paid approximately $3.3 million to resolve state Medicaid liability.   
 
In August 2017, drug manufacturers Mylan Inc. and Mylan Specialty L.P., headquartered in 
Canonsburg, Pennsylvania, agreed to pay  approximately $231.7  million  to settle federal civil 
FCA allegations that Mylan underpaid rebates owed under the Medicaid Drug Rebate  Program  
(MDRP) and caused the submission of false claims to Medicaid. The government alleged that 
Mylan erroneously classified its patented, brand name drug EpiPen, which has no therapeutic  
equivalents  or generic competition, as a generic  drug to Medicaid while significantly increasing 
its price, thereby avoiding its obligation to pay higher rebates for EpiPen and its price increase.  
Between 2010 and 2016, Mylan allegedly increased the price of EpiPen by approximately 400 
percent yet  paid only a fixed 13 percent rebate  to Medicaid during the same period. The  
government further alleged that while Mylan claimed generic treatment for Medicaid purposes, it  
advocated the drug as a unique brand product elsewhere  including before the FDA. In addition 
to the federal recovery, Mylan also paid $213.9 million to resolve state  Medicaid liability.  As  
part of the settlement agreement, Mylan agreed to enter  into a 5-year  CIA  with HHS-OIG.  
 
Durable Medical Equipment (DME)  
 
In March 2017, Braden Partners, L.P., doing business as Pacific Pulmonary Services, agreed to 
pay $11.4 million to resolve allegations against it  and its general partner, Teijin Pharma USA  
LLC,  that they violated the civil  FCA.  California-based Pacific Pulmonary Services furnishes 
stationary and portable  oxygen tanks and related supplies, and sleep therapy equipment, such as  
continuous  positive airway pressure and bi-level  positive airway pressure masks and related  
supplies,  to  patients homes in California and other states.  The United States alleged  that  
beginning in about 2004, Pacific Pulmonary Services began submitting claims for home oxygen 
and oxygen equipment without obtaining a physician evaluation and authorization, as required 
by program  rules. Further, beginning in 2006, certain of the companys patient care coordinators  
also allegedly agreed  to  make patient referrals to sleep  testing clinics in  exchange for  those 
clinics  agreement to refer patients to Pacific Pulmonary Services for sleep therapy equipment in 
violation of the Anti-Kickback Statute.  As part of the settlement agreement, Pacific Pulmonary  
Services agreed  to enter into a 5-year CIA with HHS-OIG.  
 
 
  19 
  In May 2017, three  individuals were sentenced in South Carolina for conspiracy to commit  mail  
fraud.  In 2010, when Moore merged with Providence Hospital, the director of Orthopedic  
Services for  Moore Orthopedic Clinic established a fake DME company,  Creative Casting  
Concepts (CCC).  The director then submitted false invoices to Moore and Providence,  
representing that CCC was providing orthopedic  boots when they were not.  The director  
recruited an accomplice to  put their name on CCC in order  to keep Moore from learning of the  
directors connection.  The accomplice helped manage a bank account and post office box.  In 
2015, upon the original directors retirement, the new director of Moore agreed to continue  to 
submit fake  invoices.  All three defendantsthe two directors and the accomplicepled guilty 
and were sentenced to incarceration or probation, and restitution and forfeiture of $2.8 million 
also was ordered.  
 
Electronic Health  Records  
 
In January 2017, an associate of the Vice Lords street gang was sentenced  in the Eastern District 
of Michigan to 48 months in prison for witness  tampering by obtaining and disclosing the private  
health information of Vice Lords shooting victims and victims family members to a  member of  
the gang.  The defendant admitted that from May 8, 2015, through at least January 2016, he was  
employed at a medical facility where he had access to a private database that contained  
individually identifiable  health information for anyone who had been treated at a Detroit Medical  
Center facility. At the  request of his  brother  and fellow gang member, and while employed at  the  
medical facility,  the defendant accessed this database on at  least 15 occasions to search for three 
shooting victims, he admitted. The defendant then provided information, including dates of birth,  
phone numbers, addresses, and information pertaining to relatives of these victims to his brother. 
The defendant admitted that he knew  his brother  wanted this information to locate these relatives  
and prevent  them from cooperating in the investigation and prosecution of the Vice Lords  
shooting.  
 
In May 2017, eClinical  Works (ECW) and certain employees agreed to pay $155 million to 
resolve a  civil FCA lawsuit filed  in  Vermont alleging that ECW had  misrepresented  the  
capabilities of its software.   Through the Electronic Health Records (EHR) Incentive Program, 
HHS offers financial  incentive payments to healthcare providers that adopt certified EHR  
technology and meet certain requirements relating to their use of the technology. To obtain 
certification  for their product, EHR software vendors  must  attest that their  product satisfies the 
requirements for certification and pass testing by an accredited independent certifying entity 
approved by HHS. The government contended that ECW falsely obtained certification  for its  
EHR software  by concealing from its certifying entity  that its  software did not comply with the  
requirements for certification.  For  example, the government alleged that  to pass certification 
testing, the  company modified its software by hardcoding only the drug codes required for  
testing.  ECWs software also  allegedly  did not accurately record user actions  in an audit  log, and 
in certain  situations did  not reliably  record diagnostic  imaging orders or perform drug  interaction  
checks. As a result of these and other  deficiencies in its software, ECW  allegedly caused the 
submission of false claims for federal incentive payments based on the use of ECWs software.  
The United States  also alleged that ECW paid unlawful kickbacks to certain customers in 
exchange for promoting its product.  Under the terms of the settlement agreement, ECW and  
three of its founders were jointly and severally liable for $154,920,000, and three ECW  
 
  20 
  employees (a software developer and two project managers)  paid a total  of $80,000.   Also as part  
of the settlement agreement, ECW  agreed  to enter  into a 5-year CIA with HHS-OIG.  
 
Health Maintenance Organization  
 
In May 2017, CareCore National LLC (CareCore), a benefits management company, agreed  to  
pay $45 million to resolve federal civil FCA allegations  that CareCore authorized medical  
diagnostic procedures paid for with Medicare and Medicaid funds without assessing whether the  
procedures  fell within national coverage criteria.  The  government alleged that CareCore, which 
performs prior authorization review for diagnostic procedures on behalf of  many insurers, 
including those providing insurance through Medicare Part C  and Medicaid Managed Care, 
failed to review prior authorization requests in a timely fashion, and in order to avoid contractual  
penalties for failing to  timely process the requests, CareCore instituted a practice of improperly  
approving the requests.  Between 2007 and 2014, CareCore improperly authorized over 200,000 
diagnostic procedures. In addition to the federal recovery, CareCore also paid $9 million to  
resolve  state Medicaid liability.    
 
Also in May 2017, Freedom Health Inc., a Florida-based provider of managed care services,  
agreed to pay approximately $31.7 million to settle civil FCA allegations that Freedom Health 
engaged in  illegal schemes to maximize their payment from the government in connection with 
their Medicare Advantage plans.  The  government alleged that  Freedom Health submitted or  
caused others to submit unsupported diagnosis  codes to CMS, which resulted in inflated 
reimbursements in connection with two of their Medicare Advantage plans operating in Florida. 
The government also alleged that Freedom  Health  made material misrepresentations to  CMS  
regarding the scope and content of its network of providers (physicians, specialists and hospitals)  
in its  application to CMS to expand into new counties  in Florida and in other states. As part of  
the settlement agreement, Freedom Health agreed to enter into a 5-year CIA with HHS-OIG.  
In June 2017, the former general counsel of  WellCare, Inc., pled guilty in the Middle District of  
Florida  to one count of making a false statement to the Florida Medicaid Program.  In 2011, the  
defendant and four other individuals were indicted on various federal criminal violations relating 
to a scheme to defraud the Florida Medicaid program (from the summer of 2003 through the fall  
of 2007) by making false and fraudulent statements relating to expenditure information for  
behavioral  health care services.   The  indictment alleged the ways in which the defendants falsely 
and fraudulently schemed to submit inflated expenditure information in the companys annual  
reports to AHCA in order to reduce  the WellCare HMOs contractual payback obligations for  
behavioral  health care services.   As part of the plea, the defendant in  this  case admitted that, 
along with others, to knowingly and willfully causing the submission of the false 2006 
expenditure  report to the Florida Medicaid program.  
 
 
Home Health  Providers  
 
(SF) In October 2016, the owner and  medical director of Christian Home Health Agency 
(Christian) in New Orleans were sentenced to 8 years and 6 years in prison, respectively, after  
being convicted of health care fraud for billing Medicare for home health services that were not  
medically necessary or  were not provided, based upon false certifications of  medical necessity.  
The vast majority of these patients did not require home health care services, and the medical  
 
  21 
  director falsely claimed that beneficiaries who were never examined were qualified  to receive 
these services. They were ordered to pay a combined $9 million in restitution. 
 
(SF) In November 2016, two co-owners of 16 home health care agencies in the Detroit area were 
sentenced after being convicted of health  care fraud and conspiracy  to pay and receive health  
care kickbacks. According to evidence presented  at trial, the defendants, from October 2004 
through 2011, obtained patients by paying cash kickbacks  to recruiters, who in turn paid cash to 
patients to induce them to sign up for home health care with their agencies. The owners also paid 
kickbacks to  physicians to refer patients to the companies for home health care services that were 
medically unnecessary and were not  provided. One defendant was sentenced to 30 years in 
prison and ordered to pay $40.4 million in restitution, while the other was sentenced to 8 years in 
prison and ordered to pay $38.1 million in restitution.  
 
In May 2017, four individuals were  sentenced in the Northern District of  Ohio for their roles  in 
an $8 million health care fraud conspiracy in which participants provided forged documents and 
fraudulent forms to bill  for services  that were not provided.  The defendants worked in some  
capacity for  Just Like Familee II, Inc., and Just Like Familee III, Inc., which the defendants  
incorporated in 2005 and 2006, respectively, to provide home health  services for elderly and  
disabled clients. Together they defrauded Medicaid, Medicare and the Department of Veteran  
Affairs out of  more than $8 million as a result of the conspiracy in which they prepared and 
submitted forged or false records  in support of previously submitted and reimbursed billings for  
patients they did not actually provide  face-to-face services.  The sentences ranged from  8  months 
home confinement to 10 years in prison.  In addition, the defendants were  ordered to pay more  
than $8 million in restitution. 
 
(SF) In June 2017, a mother and daughter who secretly co-owned and operated seven HHAs in 
the Miami, Florida  area  were sentenced to over  10 years in prison and ordered to pay over $22.9  
million in restitution.  The mother was sentenced to 11 years  and 3 months in prison for health 
care fraud and conspiracy to commit  health care fraud.  The daughter  was sentenced to 12 years 
and 7 months in prison for conspiracy to commit  health care fraud and wire fraud.  As part of  
their guilty pleas, the defendants admitted to paying patient  recruiters bribes and kickbacks in 
exchange for referring Medicare beneficiaries to their home health  agencies; fraudulently 
concealing their ownership interests in the agencies from Medicare; and  laundering millions of  
dollars of fraud proceeds.   
 
In August 2017, a doctor was sentenced in the Northern District of Texas to 35 years  in prison 
and ordered to pay approximately $268 million in restitution to Medicare  and Medicaid for his  
role  in a large-scale, sophisticated health care fraud scheme.  The defendant, through his medical  
practice,  instructed his staff to certify fraudulent  Plans of Care (POCs), also known as 485s,  
which were not medically necessary.  The POCs indicated to  Medicare and Medicaid  that a 
doctor had reviewed the  treatment plan and deemed it medically necessary, and certifying that  
the patient  required home health services, which were only permitted to be provided to those  
individuals  who were homebound and required, among other things, skilled nursing. This  
process was repeated for  thousands of POCs, and the defendants office included a 485  
Department, essentially a boiler room to affix fraudulent signatures and certifications.  At  
trial, the government presented evidence that the defendants practice processed  and approved  
 
  22 
  POCs for 11,000 unique  Medicare beneficiaries from  more than 500 different home health 
agencies.  
 
(SF) Also in August 2017, the owner and operator of five Houston-area HHAs was sentenced to  
40 years in prison and ordered to pay $17.8 million in restitution.  A registered nurse  who 
worked for one of these  HHAs  was sentenced to 5 years in prison and ordered to pay $4.7 
million  in restitution.  The owner and operator pleaded guilty to money laundering, and both 
defendants pleaded guilty to conspiracy to commit health care fraud.  As part of the  defendants  
$17 million Medicare and Medicaid fraud scheme, they paid kickbacks  to patient recruiters and 
office employees for hundreds of patient referrals.  They also paid kickbacks to physicians to 
certify patients for medically unnecessary home health  and personal  attendant services.  This 
case was the largest personal attendant services scheme investigated and tried  in Texas history.  
 
Hospice Care  
 
In March 2017, top executives of Passages Hospice, which was at one time one of the largest  
hospices  in Illinois, were sentenced on fraud and obstruction of a federal  audit charges.  The  
former administrator and co-owner of Passages was sentenced to  6 years  and 6 months  in prison 
for charges relating to falsely billing  Medicare for intensive hospice services despite multiple red  
flags that  the billing was improper.  Other executives received prison sentences after pleading  
guilty to obstructing a federal  audit, and a former  marketing director pleaded  guilty to violating 
the Anti-Kickback Statute.  The United States also intervened in the  three  companion civil qui  
tam  cases, alleging  that  the defendant submitted false and  inflated claims to both Medicare and  
Medicaid.   Among other types of fraud, Passages and its administrator falsely claimed that  a 
large proportion of their  hospice patients were on a high level of care  called general inpatient  
care, even though they knew that the patients neither were qualified for nor were receiving that 
type of care.  The government entered into a consent judgment and settlement with the  defendant  
for $18 million  to resolve state and  federal FCA  liability  and  also filed  a treble damages proof of  
claim in the  bankruptcy case initiated by the now-defunct Passages entity.  
 
In April 2017, International Tutoring Services, LLC, f/k/a International Tutoring Services, Inc.,  
and d/b/a Hospice Plus;  Goodwin Hospice, LLC; Phoenix Hospice, LP;  Hospice Plus, L.P.; and 
Curo Health Services, LLC f/k/a Curo Health Services, Inc.  agreed to pay approximately $12.1 
million to settle  federal  civil FCA allegations that they paid kickbacks in exchange for  patient  
referrals. The government alleged that Hospice Plus, Phoenix Hospice, and Goodwin Hospice, 
which are now consolidated under the Hospice  Plus brand and operate primarily in and around 
Dallas, Texas, paid kickbacks to a physician house call company and medical providers in 
violation of the Anti-Kickback Statute to induce referrals of hospice patients.  In addition to the  
federal recovery, the defendants paid approximately $105,000 to resolve  state Medicaid liability.  
 
In July 2017, defendantsa co-owner of the defunct Home  Care Hospice, Inc. (HCH) and his  
wife agreed to pay money and release their  interest  in property valued at over $7 million to 
settle FCA allegations that they  and  HCH  falsely claimed and received taxpayer dollars for  
hospice services that were either unnecessary or  never provided.  The government alleged the 
defendants knowingly submitted false claims and records (including fabricated records) to  
Medicare for purported  hospice care for patients  who were not terminally ill and thus not eligible  
for the Medicare hospice benefit and knowingly submitted or  caused the submission of false  
 
  23 
  claims and records (including fabricated records) to Medicare for crisis care services that were 
not necessary or not actually provided.  Additionally, a  jury found one defendant guilty of, and 
two others pled guilty to, related criminal charges. In a prior settlement in 2015 to resolve FCA  
allegations, the other co-owner and his wife agreed to pay $400,000 and release  their interests  in 
funds and properties owned jointly with the now-settling co-owner.  With this settlement, the  
funds and properties are  now fully released to the United States.   
 
In August 2017, a Cleveland, Mississippi doctor  was sentenced to 3 years and 3 months in prison 
followed by 3 years supervised release and ordered to pay $1.9 million in restitution to the  
Medicare program.  The  sentencing stems from the doctors guilty plea  to a multi-count  
indictment charging him  with referring patients to hospice  that were not hospice appropriate and  
receiving kickbacks.  The doctor  admitted to referring patients who were  not hospice  appropriate  
to Milestone Hospice and Sandanna Hospice which led to $1.9 million in Medicare payments to 
Milestone and Sandanna.  The doctor also admitted to receiving payments from the hospice  
owner. 
 
Hospitals and Health Systems  
 
In December 2016, South Miami Hospital, Inc. (SMH), entered into a  settlement agreement to 
resolve its civil FCA liability for submitting claims to Medicare, Medicaid, TRICARE, and  
Federal Employee Health Benefit Programs for  medically unnecessary electro  physiology 
studies,  echo cardiograms, tilt-table  tests, implantable cardiovascular-defibrillators, biventricular  
pacemakers, atrioventricular optimizations,  and other procedures. SMH is an acute care hospital  
owned and operated by Baptist Health System of  South Florida. SMH agreed to pay $12  million  
to resolve its liability under the  FCA.  As part of the settlement agreement, SMH agreed to enter  
into a 5-year CIA with HHS-OIG.  
 
In February 2017, TeamHealth Holdings, a successor in interest to IPC Healthcare  Inc., f/k/a IPC  
The  Hospitalist Inc. (IPC) agreed to  pay $57.5 million to settle  federal  civil FCA allegations that  
IPC billed federal health  care programs for higher and more expensive levels of medical service 
than were actually performed.  The government alleged that IPC  encouraged its hospitalists  
medical professionals whose primary focus is the medical care of hospitalized patients  to bill 
for a higher level of service than actually provided. IPCs scheme to improperly maximize  
billings allegedly included corporate pressure on  hospitalists  with lower billing levels  to catch  
up to their  peers. In addition to the  federal recovery, TeamHealth agreed to pay approximately 
$3.5  million to resolve state Medicaid liability.   As part of the settlement agreement, IPC agreed  
to enter into  a 5-year CIA with HHS-OIG.  
 
In May 2017, hospitals  Mercy Hospital Springfield f/k/a St. Johns Regional Health Center, and 
its affiliate,  Mercy Clinic Springfield Communities f/k/a St.  Johns Clinic (collectively,  
Mercy)  agreed to pay  $34  million  to resolve civil FCA allegations  in the  Western District of  
Missouri that they engaged in improper financial relationships  with referring physicians.   The  
government alleged that the hospital and clinic submitted false claims to  Medicare for  
chemotherapy services rendered  to patients who  were referred by oncologists.  Allegedly the  
oncologists compensation was, in part, determined by a formula that improperly took into 
account  the value of their referrals to defendants.  As part of  the settlement agreement, Mercy  
agreed  to enter  into a 5-year CIA with HHS-OIG.  
 
  24 
   
In June 2017, PAMC, Ltd. and Pacific Alliance  Medical Center Inc., which owns California-
based Pacific Alliance Medical Center, agreed  to pay $31.9  million  to settle federal  civil FCA 
allegations that they were involved in improper financial relationships with referring physicians. 
These relationships allegedly violated the Anti-Kickback Statute  and the Stark Law and took the  
form of (1)  arrangements under which the defendants paid above-market  rates to  rent office 
space in physicians offices, and (2)  marketing arrangements that provided undue benefit to 
physicians practices.  In addition to the federal  recovery, PAMC and Pacific Alliance Medical  
Center  paid $10 million to resolve state Medicaid liability.   As part of the settlement agreement,  
PAMC and  Pacific Alliance Medical Center agreed to enter into a 5-year  CIA with HHS-OIG.  
 
Also in June 2017, a financial  advisor who was a part owner of Physicians  Alliance ACO, 
LLC,an Accountable Care Organization (ACO)was sentenced  in the Western  District of  
Arkansas to  12 years and 6 months in prison, ordered to pay $5.7 million in restitution, and 
ordered to pay a $5.7 million judgment.  In January 2013, Physicians Alliance entered into an 
advanced payment agreement with HHS-CMS. The agreement called for payments to Physicians 
Alliance totaling $2.6 million. The payments were based on projected savings to the Medicare  
and Medicaid programs. The defendant diverted investment client funds and advance  payment  
monies to himself and his other businesses. The defendant embezzled more than $8 million in 
client funds and $750,000 in advance payment  monies from Physicians Alliance.  
 
Identity Theft  
 
In April 2017, the leader of a criminal organization in New York pled guilty to racketeering, 
conspiracy to commit health care fraud, bank fraud, money laundering, and identity theft, and 
was sentenced to 17 years and 6 months in prison, and ordered to pay $20 million  in  restitution  
and $20 million  in  forfeiture.  The leader  and his co-defendants stole the  identities of doctors, 
set up fake medical clinics in  their names, and then stole identities of patients so that  Medicare 
could be billed for fictitious medical treatments. Sixteen defendants involved in  the scheme were 
previously sentenced to a combined 51 years and 1 month in prison.  
 
Laboratories  
 
In October 2016, NeuroScience, Inc., its founder, and Pharmasan Labs, Inc. (collectively,  
defendants), entered  into a settlement agreement to resolve  allegations that they  submitted  
false claims  to Medicare  and TRICARE for urinary transmitter testing. From January 2008 
through January 2014, the defendants allegedly violated Clinical Laboratory Improvement  
Amendments (CLIA) regulations by intentionally subjecting  certain Pharmasan as-measured  
urinary neurotransmitter test results  to a shift factor  that they had not validated pursuant to  
CLIA  regulations. In addition, the  government contended that, during this  same period, the  
defendants applied invalidated reference ranges to urinary neurotransmitter test results. The 
defendants agreed to pay $6.1 million to resolve  their liability under the  civil FCA. 
 
In November 2016, MedNet, Inc., a Ewing, New Jersey-based remote cardiac monitoring 
company, entered into a settlement agreement to resolve allegations that, from March 2006  
through January 2014, it entered into fee-for-service or direct-bill agreements with  certain  
hospital and  physician clinic customers. Under these agreements, MedNet allegedly charged a 
 
  25 
  fee to customers for certain services that  they performed in connection with two types of cardiac 
monitoring.  MedNet allowed the customers to bill Medicare directly for these same services and  
permitted the customers to retain  the  reimbursements they  received from  Medicare. However, the 
Medicare reimbursement allegedly exceeded the fee that MedNet charged  the customers. The 
government contended that these arrangements  resulted in a net profit  to  MedNets customers 
who were part of these  agreements and provided remuneration to these customers to induce  
referrals from the customers for MedNets services in violation of the Anti-Kickback Statute. 
The defendant agreed to pay $1.3 million to resolve its  liability under the  FCA.  
 
In April 2017, Quest Diagnostics  agreed to pay $6  million  to  settle civil FCA allegations that 
Berkeley HeartLab Inc. made payments to physicians and patients to induce the use of  Berkeley 
for blood testing services for  medically unnecessary tests in violation of the Anti-Kickback  
Statute. The  government alleged that  Berkeley paid kickbacks  to referring physicians disguised 
as process and handling fees. The government also alleged  that Berkeley paid kickbacks to 
patients by routinely waiving copayments owed by certain patients who were legally required to 
pay for part  of their tests. The government further alleged that these illegal practices resulted  in  
medically unnecessary cardiovascular tests being  charged  to federal health care programs.  
 
Nursing Homes and Facilities  
 
In October 2016, Life Care Centers of America Inc. and its owner agreed to pay, over  a period of  
time, $145 million to settle civil FCA allegations that Life Care, which  is based in Cleveland, 
Tennessee, caused skilled nursing facilities (SNFs) to submit  false claims to Medicare and  
TRICARE for rehabilitation therapy  services that were not reasonable, necessary, or skilled. The 
government alleged that Life Care submitted false claims for  rehabilitation therapy by engaging 
in a systematic effort to  increase its Medicare and TRICARE billings.  Medicare reimburses 
SNFs at a daily rate  that  reflects the skilled therapy and nursing needs of their qualifying 
patients. The highest level of Medicare reimbursement for SNFs is for Ultra High patients who  
require a minimum of 720 minutes  of skilled therapy from two therapy disciplines (e.g., physical, 
occupational, speech), one of which has to be provided five days a week. The government  
alleged that Life Care instituted corporate-wide policies and practices designed to place as many  
beneficiaries in the Ultra  High reimbursement level irrespective of the clinical needs of the  
patients, resulting in the  provision of  unreasonable and unnecessary therapy to many 
beneficiaries. Life Care also allegedly  sought to keep patients  longer  than was necessary in order  
to continue  billing for rehabilitation therapy.  Life Care owns and operates more than 220 SNFs  
across the  country; this is  the  largest civil FCA settlement with a SNF chain.  As part of the 
settlement agreement, Life Care agreed to enter into a 5-year  CIA with HHS-OIG.  
 
In June 2017, Genesis  Healthcare Inc., headquartered in Kennett Square, Pennsylvania, agreed to  
pay, over a  period of time, $53.6  million to settle civil FCA allegations that companies and  
facilities acquired by Genesis caused  the submission of false claims to government health care 
programs for medically unnecessary physical therapy and hospice services, and grossly 
substandard nursing care.  The government alleged that  the companies and facilities acquired by  
Genesis billed (1) for more therapy minutes than the patients actually received, for providing 
therapy longer than medically necessary, and at a higher Resource Utilization Group (RUG)  
level than necessary; (2) for hospice services for patients who  were not terminally ill and  
therefore not eligible for the Medicare hospice benefit; (3) for outpatient  therapy services that  
 
  26 
  were not medically necessary or unskilled in nature; and (4)  for nursing home services that were  
grossly substandard and/or worthless and therefore ineligible for payment.  
 
In July 2017, Reliant Care Group and affiliated entities agreed to pay $8.3 million to resolve  
claims in the Eastern District of Missouri under  the civil FCA for providing unnecessary 
physical, speech, and occupational therapy to nursing home residents.  The government alleged 
that from January of 2008 through April of 2014, Reliant  billed Medicare for unnecessary  
physical, speech and occupational therapy provided to nursing home residents who had a  
relatively high level of independence and who were residing in a  skilled nursing facility 
primarily because of a psychiatric condition. The government further alleged that  some Reliant  
Care Rehabilitative Services management pressured therapists to provide therapy  to residents 
even when the therapists believed that the therapy was not medically necessary.  As part of the  
settlement agreement, Reliant agreed to enter into a 5-year CIA with HHS-OIG. 
 
Also in July 2017, Ohio-based Foundations Health Solutions  Inc., Olympia Therapy Inc., and 
Tridia Hospice Care Inc., and two of their executives,  agreed to pay $19.5 million to settle civil 
FCA allegations pertaining to the submission of false claims for  medically unnecessary  
rehabilitation therapy  and hospice services to Medicare. The government alleged that  Olympia 
and the corporate successor to Foundations Health Solutions  provided therapy services at  
excessive levels to  increase Medicare reimbursement for those services.  The government also  
alleged that  Tridia submitted false claims to Medicare for hospice services provided  to patients 
who were ineligible for the Medicare hospice benefit because Tridia failed to conduct  proper  
certifications or medical examinations.  As part  of the settlement agreement, Foundations Health 
Solutions  agreed to enter into a 5-year CIA with HHS-OIG.  
 
Pharmacies  
 
In October 2016, Omnicare, Inc. agreed to pay approximately $20.3 million to settle  federal  civil 
FCA allegations that it solicited and received kickbacks from pharmaceutical manufacturer  
Abbott Laboratories  in exchange for  promoting the prescription drug Depakote for nursing home  
patients. Nursing homes rely on consultant pharmacists, such as those employed by Omnicare, to 
review their residents medical charts at least monthly and make recommendations  to their 
physicians about what drugs should be prescribed for those residents. The government  alleged 
that Omnicare solicited and received  kickbacks from Abbott in exchange for recommending that  
physicians prescribe Depakote, an anti-epileptic drug manufactured by Abbott, to elderly nursing 
home residents. In addition to the federal  recovery, Omnicare also paid approximately $7.8 
million to resolve  state  Medicaid liability. Omnicare, which was acquired by Rhode Island-based  
CVS Health Corporation  after the  conduct at issue, is the nations largest nursing home  
pharmacy.  As part of the settlement agreement, CVS agreed to enter into  a 5-year CIA with  
HHS-OIG.  
 
In November 2016, the owner of two Miami pharmacies and her son, a registered agent of one of  
the pharmacies, were sentenced after pleading guilty  to a fraud scheme that paid  Medicare 
beneficiaries and patient recruiters for prescriptions that were medically unnecessary.  The owner  
acknowledged that  she directed her co-conspirators to make kickback payments and write and 
cash checks  for the purpose of facilitating kickback payments and concealing fraud proceeds.  
Her son admitted that he  participated in the conspiracy by writing checks to  money launderers  to 
 
  27 
  obtain cash to pay the kickbacks to  Medicare beneficiaries.   The defendants were sentenced  to a 
combined 12 years and 6 months in prison and ordered to pay $11 million in restitution. Two 
other defendants involved in the scheme  were previously sentenced to a  combined 3 years in 
prison and ordered to pay $10.9 million in restitution.  
 
In January 2017, Walgreens Co., a nationwide  retail pharmacy chain, agreed to pay  
approximately $46.2 million to settle federal  civil FCA allegations that Walgreens  enrolled  
hundreds of thousands of  government  health care program  beneficiaries in its prescription  
savings club program in violation of the Anti-Kickback Statute. The government alleged that  
Walgreens provided government beneficiaries with discounts  and other monetary incentives  
under the prescription savings club program to induce them to patronize  Walgreens for all of  
their prescription drug needs. In addition to the federal  recovery, Walgreens also paid 
approximately $3.8 million to resolve state Medicaid liability.  
 
(SF) Also in January 2017, the owner and operator of New Pharmacy Discount Corp. was  
sentenced to 4 years in prison and was ordered to pay over $5 million in restitution, joint and 
several.  The defendant  pled guilty to conspiracy to commit health care fraud and conspiracy to 
pay and receive health care kickbacks.  The defendant paid kickbacks in exchange for  Medicare  
and Medicaid beneficiaries unique  identifying information.  The information was then used to 
submit claims to Medicare and Medicaid for prescription drugs that were medically unnecessary,  
never provided to the beneficiaries, and never purchased by New Pharmacy Discount  Corp. 
 
In March 2017, the owner of two northwest Alabama pharmacies was sentenced  to  6 months  
home confinement, order to pay a $2.5 million fine, and prohibited from  working in a pharmacy 
for a year for obstructing a Medicare  audit.  The pharmacies operated as both compounding and 
retail pharmacies.  According to  the defendants plea with the government, he obstructed a 2012 
audit of his  pharmacys claims for Medicare reimbursement on compounded prescriptions by 
submitting falsified and misleading documents stating that medications  in tablet or capsule form  
were used as ingredients  for compounded prescriptions.  
 
(SF) In August 2016, eight defendants were indicted in Tampa, Florida in a sprawling, complex 
compounding pharmacy fraud conspiracy involving multiple  pharmacies, numerous business  
entities, and over $125 million in proceeds from a fraud scheme that  affected  private and 
government payers.  The defendants included a pharmacist, a podiatrist, and several  self-
described  businessmen.  The fraud scheme  was executed in numerous ways, including through 
inventory shorting, illegal kickbacks, illegitimate use of front pharmacies, and illegitimate  
prescriptions, all of which resulted in the submission of over  $600 million in claims.  The  
government seized numerous vehicles and a 50-foot speedboat.  Of the eight defendants, six have  
pled guilty, most recently in June 2017, and one  defendant was sentenced to 4 years and 3  
months in prison.  Trial  for the two remaining defendants  is scheduled for  November 2017.  
 
Physical Therapy  
 
In June 2017, Union Treatment Center (UTC), a medical and physical therapy provider with 
clinics in Austin, Killeen, San Antonio, and Corpus Christi, agreed to pay $3 million to settle  
civil FCA allegations.  The government  alleged  that UTC and its executives submitted false 
claims to the Office of  Workers Compensation Programs under the guise  that  they were treating 
 
  28 
  injured American workers pursuant  to the Federal Employees Compensation  Act  (FECA).  UTC 
claimed to specialize  in treating workplace  injuries. The company marketed itself to patients  
covered by the FECA program, targeting in particular unionized postal workers  in Austin and 
San Antonio and civilian Army employees in the  Corpus Christi area.  However, the government  
asserted  that, between January 2009 and December  2012, UTC fraudulently billed the  FECA  
program for  services it did not render; routinely overcharged for medical examinations;  falsely 
inflated the  time  patients spent  in therapy;  and  billed for unnecessary services and supplies. The 
government also accused UTC of offering, paying, soliciting, and receiving kickbacks in 
exchange for patient  referrals.  
 
Physician and Other Practitioners  
 
In October 2016, Hudson Valley Hematology-Oncology Associates, R.L.L.P. (Hudson), agreed 
to pay $5.3  million to resolve Hudsons civil FCA liability for improperly submitting claims to  
Medicare and Medicaid.  From June  2010 through June 2015, Hudson allegedly routinely waived 
co-payments without an individualized determination of financial hardship or exhaustion of  
reasonable collection efforts and billed Medicare and Medicaid for evaluation and management  
services, even though Hudson did not provide any significant, separately identifiable  services to  
the beneficiaries.  As part of the settlement agreement, Hudson agreed to enter  into a  5-year CIA 
with HHS-OIG.  
 
In January 2017, a Brea, California man who operated rehabilitation clinics in Walnut, Torrance  
and Los Angeles and defrauded Medicare out of approximately $3 million by billing for  
unneeded or unnecessary services was sentenced to 10 years and 1 month in prison.  The  
defendant was convicted in October  2016 of eight counts of health care fraud, nine counts of  
receiving kickbacks for  health care  referrals, and two counts  of aggravated identity theft.  
Convictions  arose out of  a Medicare fraud scheme involving physical therapy clinics.  The  
defendant owned physical therapy clinics operated by companies  called Hongs Medical  
Management, Inc., CMH Practice Solution, and HK Practice and Solution, Inc.  As part of the  
scheme, the defendant recruited Medicare beneficiaries and provided uncovered services like 
massage and acupuncture for them.   Even though the  beneficiaries did not receive actual physical  
therapy, the defendants co-conspirators billed Medicare for physical therapy, and then funneled 
more than 50 percent of the reimbursement funds back to the  defendant.  During the course of  
the scheme, the defendant and his  co-conspirators received reimbursements from Medicare in the 
amount of $2.9 million.  Eight other  defendants pleaded guilty for their roles in  the Medicare  
fraud scheme involving these clinics.  
 
In February 2017, a pain  management physician who owned clinics in Kentucky and Georgia  
agreed  to the entry of a  $20  million  consent judgment to settle federal civil FCA allegations  that 
he billed federal health care programs for surgical monitoring services that he did not perform  
and for  medically unnecessary  diagnostic tests.  On October 24, 2016, the  physician was  
sentenced to  3 years  and 2  months in prison and 3 years of supervised release in connection with 
this conduct.   
 
(SF) In April 2017, after  a three-week trial, a  jury in the Eastern District  of Michigan convicted a  
medical doctor and a medical billing company co-owner of conspiracy to commit wire fraud and 
health care fraud and three counts of  health care fraud for their roles in a $28 million Medicare  
 
  29 
  fraud scheme.  According to the evidence presented at trial, from 2008 to 2014, the defendants  
submitted fraudulent  claims for services  mainly nerve block injections that  they knew had not  
been provided.  After Medicare subjected  the medical doctor  defendants claims to pre-payment  
review in 2009, the defendants conspired to circumvent Medicares fraud investigation by 
recruiting family  members and employees to serve as straw owners of the defendants  
companies.  The medical doctor used the proceeds of the fraud for international travel  and to 
purchase part ownership of a Canadian professional basketball team.   In September 2017, the  
billing company co-owner was sentenced to 10 years in prison.   The  medical doctor is scheduled 
to be sentenced in  November 2017. 
 
(SF) In June 2017, a Detroit-area medical biller  was sentenced to 4 years and 2 months in prison 
and ordered to pay $3.2 million in restitution for  her involvement in a $7.3 million Medicare and 
Medicaid fraud scheme.  After a week-long trial, a jury convicted the defendant of one count of  
conspiracy to commit wire fraud, health care fraud, and mail fraud, and one count of mail fraud.  
The evidence at trial showed that the defendant  submitted fraudulent bills on behalf of a co-
conspirator  physician for services she knew could not have been rendered, and for services  she  
knew had not been rendered as billed.  In exchange, the physician paid the defendant  six percent  
of the total billings to Medicare and Medicaid.  The physician pled guilty to a $33 million 
Medicare fraud scheme and was sentenced in March 2017 to 8 years and 5 months in prison.    
 
(SF) In September 2017, a doctor was sentenced to 8 years and 1 month in prison and ordered to 
pay $4.8 million in restitution after being convicted of conspiracy to commit health care fraud  
and wire fraud.  As part  of the defendants multi-faceted health care fraud scheme, he received  
kickbacks  in exchange for referring Medicare beneficiaries  to pharmacy owners, signing plans of  
care and prescriptions for home health care services, and prescribing controlled substances, 
including opioids, to patients and patient recruiters who did not need them.  The defendant also 
submitted claims to Medicare for services that he did not render.  
 
 
 
 
Prescription Drugs / Medicare Part D  
 
In October 2016, an osteopathic doctor was sentenced to 30 years in prison and ordered to pay 
$342,504 in restitution for operating a pill mill  out of his medical offices.  The defendant  
worked with Pagans Motorcycle Club, an outlaw gang known for violence and drug dealing, 
writing fraudulent prescriptions for  oxycodone and other drugs, while the Pagans recruited 
pseudo-patients  to buy the fraudulent prescriptions. After filling the prescriptions, the Pagans  
resold  the pills on the street. From March 2012 to January 2015, the defendant distributed more  
than 700,000 pills  containing oxycodone and other Schedule II controlled substances in 
furtherance  of the conspiracy.  Eight additional defendants involved in the scheme were  
sentenced to a combined 49 years and 10 months in prison. Five defendants have pleaded guilty 
and are awaiting sentencing. 
 
 (SF/USAO)  In March 2017, an owner of a  medical clinic  in the Central District of California  
was sentenced to 4 years and 3 months in prison and was ordered to pay $1.9 million  in 
restitution, joint and several,  after being found guilty  at trial of  conspiracy to commit health  care 
 
  30 
  fraud and 11 counts of filing false tax returns.  The defendant, whose wife was the doctor at  the 
medical clinic, sold false prescriptions in the names of his wifes patients to a co-conspirator 
pharmacist.   The pharmacist  then submitted false claims to insurance companies for drugs that  
were never dispensed.   The defendant also filed false federal tax returns, underreporting income  
of over $2.9 million.  As a condition of supervised release, the court ordered the defendant to pay 
the  IRS over $900,000 in unpaid taxes.  
 
In June 2017, Rhine Drug Company and its owner agreed to pay a total of $2.2 million to resolve 
allegations in the Southern District of Georgia that they violated the  FCA and the Controlled 
Substances Act  (CSA)  by submitting claims to Medicare for drugs that Rhine Drug Company did 
not dispense to patients.  In addition, the United States alleged that Rhine  violated the  CSA by 
failing to keep proper  records for a number of substances, including opioids. As part of the 
settlement agreement, Rhine Drug Company agreed to enter  into a 3-year Integrity Agreement  
(IA) with HHS-OIG.  
 
From 2006 through August 2013 in New York, multiple  co-defendants conducted a scheme to 
defraud Medicaid, Medicare, and the New York State-funded AIDS Drug Assistance  Program  
(ADAP) through the purchase  and sale of illegally diverted prescription drugs.  In May 2017, 
one defendant  pleaded  guilty to  conspiracy  to  commit  wire  and  health  care  fraud and was  
ordered to pay $7.5 million in restitution, joint and several.  Two defendants involved in the  
scheme were previously sentenced to a combined 3 years and 1 month in prison and ordered to 
pay $7.5 million restitution, joint  and several.  To date, 4 co-defendants have been excluded from  
participation in Federal health care programs for a combined 102 years.  
 
Psychiatric and Psychological Testing and Services  
 
(SF) In April 2016, a prominent Kentucky attorney, a former Social Security Administration 
(SSA) Administrative Law Judge (ALJ), and a clinical psychologist were charged in an 18-count  
indictment with, among other offenses, conspiracy to commit wire fraud and mail fraud.  The  
defendants defrauded the SSA by creating and submitting falsified medical evidence to support  
favorable SSA disability determinations.  As a result of defendants fraud scheme, claimants 
represented by the attorney obtained improper disability benefits.  The SSA paid the attorney 
over $7.5 million in representative fees and paid the claimants  more than $70 million in 
disability benefits that the SSA subsequently determined they were not entitled to receive.  The  
total value of the social security benefits conferred upon the claimants associated with this  
scheme exceeded $600 million over the claimants lifetimes.  In March 2017, the attorney 
pleaded guilty to theft of government  money and paying illegal gratuities.   Immediately  prior to  
sentencing, the attorney fled the  jurisdiction and remains at large.  Nevertheless, in July 2017, he  
was sentenced,  in absentia, to 12 years in prison and was ordered to pay approximately $106 
million in restitution.   In  April 2017,  the ALJ pled guilty  to receiving illegal gratuities,  and he  
was sentenced to 4 years in prison and was ordered to pay $93  million in restitution.  The  
psychologist proceeded to trial in June 2017.  After a week-long trial, the jury found the  
psychologist guilty of conspiracy to commit  mail fraud and wire fraud, and  making false  
statements.  He is scheduled to be  sentenced in September 2017.   
 
In May 2017, St. Josephs Hospital  Health Center, which operates a Comprehensive Psychiatric 
Emergency Program (CPEP) in Syracuse, New York, paid $4.8  million  to resolve  civil FCA  
 
  31 
  allegations that the hospital routinely  up-coded its CPEP emergency room  visits and improperly 
billed for services rendered by nurse practitioners that failed to satisfy the requirement that a 
physician have a face-to-face encounter with the patient.   Previously, in August 2016, St. 
Josephs paid $3.2 million to resolve allegations that  it violated the federal and New York False  
Claims Acts by presenting false claims for payment to  the state Medicaid  program for  mobile 
crisis outreach services rendered by  unqualified staff.   
 
(SF) Also in May 2017, a jury convicted a psychiatrist of conspiracy to commit health care fraud 
and five counts of health care fraud for his role  in a $158 million Medicare fraud scheme.  The  
evidence  at trial showed that, over the course of  6 years, the  psychiatrist  and others defrauded 
Medicare by submitting false and fraudulent claims for partial hospitalization program  (PHP) 
services, which are intensive outpatient treatments for patients with severe mental illness.  The 
psychiatrist  indiscriminately admitted and readmitted patients into PHPs.  Many of these patients  
were unable  to participate in the  treatment, and therefore did not qualify for the services, because  
they suffered from severe Alzheimers or dementia.  The 15 defendants involved in this scheme  
have either  pled guilty or been tried and convicted.  The psychiatrist is scheduled to be sentenced 
in October 2017. 
 
(SF) In July 2017, a clinical psychologist and his  mother, both of whom owned and operated 
several psychological services companies, were sentenced to 15 years and 7 years, respectively,  
and ordered to pay $13.8  million in restitution.  After a 7-day trial, the defendants were 
convicted of conspiracy to commit health care fraud and conspiracy  to make false statements 
related to health care matters.  According to evidence presented at trial, the defendants  
companies contracted with nursing homes in Alabama, Florida, Louisiana, and Mississippi to 
allow clinical psychologists  to provide psychological  services to nursing home residents.  The  
defendants caused these  companies to bill Medicare for hours of psychological  testing services  
that  these nursing home residents did not need or, in some instances, did not receive.  Between 
2009 and 2015, the defendants submitted over $25.2 million in claims to Medicare, and a  
significant amount of these claims were fraudulent.  Medicare  paid $13.8 million on the  
fraudulent claims.  
 
Other Medicare and Medicaid Matters  
 
(SF) In July 2017, the owner of Tri-County Network, his deputy, and five physicians were  
indicted on various charges for their  involvement in a $132 million Medicare fraud scheme.  The  
Tri-County Network included five medical clinics, a laboratory, and a physical therapy company.  
The defendants conspired to prescribe medically  unnecessary controlled substances,  some of  
which were sold on the street, and to  require Medicare beneficiaries, some of whom  were 
addicted to controlled substances, to submit to medically unnecessary injections, drug testing, 
and other procedures.  The owner also solicited illegal kickbacks for medically unnecessary 
referrals by the physicians to other providers, such as laboratories, diagnostic companies, and 
home health agencies.  The owner concealed his involvement from Medicare by placing the  
clinics in  the name of straw owners and sought to circumvent Medicares investigation by  
opening new clinics when Medicare suspended the billing privileges of existing clinics.  He used 
the fraud proceeds to sit courtside at NBA basketball games, make $6.6 million investments, and 
finance the construction of a $6.8 million house.  Over $12 million in fraudulently obtained 
assets have been seized, and trial  is scheduled for April 2018.  
 
  32 
     
 
  33 
  DEPARTMENT OF HEALTH AND HUMAN SERVICES
  
  
Office of Inspector  General  
 
A certain portion of the funds appropriated under  HIPAA are, by law, set aside for Medicare and 
Medicaid activities of HHS-OIG.   In FY 2017, the Secretary and the Attorney General jointly 
allotted $185.9 million to HHS-OIG  after accounting for a sequester  reduction of    
$13.8 million.  OIG was allocated an additional $6 million in HCFAC  mandatory funds from the  
Secretary.   Additionally, Congress appropriated $82.1 million in discretionary funding for HHS
OIG HCFAC activities.    
 
The HHS-OIG  mission is to protect  the integrity of HHS programs and the health and welfare of  
the people they serve.   As established by the Inspector General Act of 1978, HHS-OIG is an  
independent and objective organization that fights fraud, waste, and abuse and promotes  
efficiency, economy, and effectiveness in HHS programs and operations.  HHS-OIGs vision is  
to drive positive change in HHS programs and in the lives of the people served by these  
programs.  HHS-OIG pursues this vision through independent oversight  of HHS programs and 
operations and by providing HHS and Congress  with objective and reliable information for use  
in policymaking.  HHS-OIG assesses the Departments performance, administrative operations,  
and financial stewardship.  HHS-OIG evaluates risks to HHS programs and recommends 
recovery of misspent funds and program improvements.  The law enforcement component of  
HHS-OIG investigates fraud and abuse against  HHS programs and holds wrongdoers  
accountable for  their actions.   
 
With respect to HCFAC  funds, HHS-OIG focuses on combatting Medicare and Medicaid fraud, 
waste, and abuse, including in priority areas, such as protecting beneficiaries from prescription  
drug abuse, including opioid abuse; enhancing program integrity in non-institutional care  
settings, such as home health and hospice; and strengthening Medicaid program integrity, 
including working with state partners to enhance the effectiveness of the  Medicaid Fraud Control  
Units (MFCUs).  HHS-OIG is working to strengthen oversight of the Medicare Advantage  
program.   
 
As the leading oversight agency specializing  in health  care fraud,  HHS-OIG employs  a multi
disciplinary approach and uses data-driven decision-making to produce outcome-focused results.   
HHS-OIG leverages sophisticated data analysis to identify and target potential fraud schemes 
and areas of program waste and abuse and to provide quality, timely, and actionable data to 
frontline  staff, as well as to its government and, as appropriate, private  sector partners.  HHS
OIG combines data analysis, field  intelligence, and state-of-the art  investigative techniques to 
combat fraud and abuse.   
 
Results  
 
In FY 2017, HHS-OIG investigations resulted  in  788 criminal actions against individuals or 
entities that  engaged in crimes related to Medicare and Medicaid; and 818 civil actions, which  
include false claims and unjust-enrichment lawsuits filed in federal district court, civil monetary  
penalties (CMP) settlements, and administrative recoveries related to provider self-disclosure 
 
  34 
  matters.  In addition, during FY 2017, HHS-OIG  excluded a  total of 3,244 individuals  and 
entities, the details of which are below. 
 
In FY 2017, HHS-OIG continued to staff and support Medicare Strike Force operations working 
in conjunction with DOJ Criminal Divisions Fraud Section, local USAOs, the FBI, and state and 
local  law enforcement agencies.  HHS-OIG has assigned agents to Strike Forces in  Miami, New  
York City, Houston, Tampa, Detroit, Los Angeles, Southern Louisiana, Dallas, and Chicago.  
HHS-OIG has supported Strike Force operations  by providing investigative, analytic, and 
forensic resources.   Among other fraudulent  conduct, the Strike Forces  have  effectively  
investigated and prosecuted individuals and entities that do not provide  legitimate health care  
services, but exist solely for the purpose of defrauding Medicare and other government health 
care programs.  The continued support of Medicare Strike Force operations is a top priority for  
HHS-OIG.   HHS-OIG has also collaborated with DOJ and assigned special agents to  support the 
Opioid Fraud and Abuse Detection Units.  
 
HHS-OIG also provides  critical support in the establishment and ongoing work of the new  
Opioid Fraud and Abuse Detection Units established by the  Attorney General  in collaboration 
with HHS-OIG, FBI, and DEA.  These units focus specifically on opioid related health care  
fraud using data to identify and prosecute  individuals, such as prescribers of opioids, and entities,  
such as clinics, pill mills, and pharmacies, which are contributing to the opioid epidemic.  HHS
OIG has assigned Special Agents to support 12 prosecutors identified by DOJ to focus solely on 
investigating and prosecuting opioid related health care fraud cases.   
 
Investigations, audits, and evaluations frequently reveal vulnerabilities, misspent funds, or  
incentives for questionable or fraudulent  practices in agency programs or administrative 
processes.  As required by the Inspector General Act, HHS-OIG  makes recommendations to  
agency managers to  address these vulnerabilities.  In turn, agency managers may recommend  
legislative proposals or other corrective actions that, when enacted or implemented, close 
loopholes  and reduce  improper payments or conduct.  The savings from these efforts can be  
substantial.  For FY 2017, potential  savings from legislative and administrative actions that were  
supported by HHS-OIG  recommendations were estimated by third parties, such as the  
Congressional Budget Office or actuaries within HHS, to be $24.4 billion$23.2 billion in 
Medicare savings and 1.2 billion in savings to the federal share of Medicaid.   HHS-OIGs  
expected recoveries from its involvement in health care audits and investigations  totaled $4.7 
billion, which resulted in a return on investment (ROI) of $14 to $1.13   
 
Additional information about savings achieved through such policy and procedural changes may 
be found in the HHS-OIG fall Semiannual Report to Congress, on-line at http://oig.hhs.gov. 
 
 
 
Enforcement  
                                                 
13  This  ROI  uses  a 3-year  average  of  expected recoveries,  fines,  penalties,  and  stolen and  misspent  funds  relating  to 
HHS-OIGs  health care  oversight  and is  compared  with  HHS-OIGs  annual  obligations.   This ROI  differs  from  the  
HCFAC  ROI,  which uses  actual  dollars  returned to the  government.  
 
  35 
  HHS-OIG  works with  its law enforcement partners to conduct  criminal and civil investigations  
involving  the Medicare and Medicaid programs and participates in the settlement of  False 
Claims Act cases, including through the negotiation of Corporate  Integrity Agreements (CIAs).  
HHS-OIG  works with the MFCUs to address fraud and abuse  in the Medicaid program.   
Examples of this enforcement work appears elsewhere in this report.  In addition to investigating  
criminal and civil matters, HHS-OIG administers  the exclusion program and imposes civil  
monetary penalties for a variety of health care related offenses.  
 
Combatting the Opioid Epidemic  
Fighting the  opioid crisis and protecting beneficiaries from prescription drug abuse is  among 
HHS-OIGs  top priorities.  Opioids related matters are  a substantial portion of HHS-OIGs  
investigations.  In July 2017, HHS-OIG participated with Federal, State,  and local partners  
(including 31 MFCUs) in the National Health Care Fraud Takedown, described in more detail  
elsewhere in this report.   More than 400 defendants in 41 Federal districts were charged with 
participating in fraud schemes involving about $1.3 billion in false billings to Medicare and 
Medicaid.  Among those charged, 120 defendants (including 27 doctors)  were charged in cases  
involving the illegal distribution of opioids.  HHS-OIG also issued exclusion notices to 295 
doctors, nurses, and other providers  on the basis  of conduct related to opioid diversion and abuse.   
Further, HHS-OIG developed and released a data  brief about  the Part D program identifying 
prescribers  with questionable opioid prescribing patterns and beneficiaries at high risk.  In 
collaboration with DOJ, FBI, and DEA, HHS-OIG has assigned agents and contributed data 
analysis to support the Opioid Fraud and Abuse Detection Units.  
 
Exclusions  
 
One important mechanism for safeguarding the care provided to program beneficiaries is through 
exclusion of providers and suppliers  who have engaged in the abuse or neglect of patients or  
fraud from participation in Medicare, Medicaid, and other federal health care programs.    
During FY 2017, HHS-OIG excluded a total of 3,244 individuals and entities.  Among these  
were exclusions based on criminal convictions for crimes related to  Medicare and  Medicaid  
(1,281) or  to other health care programs (309); for patient abuse or neglect (266); or as  a result of  
licensure  revocations (973).  This list of conduct  is not meant to be exhaustive, but identifies  the  
most prevalent causes underlying HHS-OIGs exclusions of  individuals  or entities in FY 2017.  
In addition to those mentioned in the  Program Accomplishments section above, exclusion 
actions by HHS-OIG included:  
 
Home Health Providers (District of Columbia)  In December 2016, the owner of Global  
Healthcare, Inc. was excluded for a  minimum period of 55 years.  The owner had previously had  
her nursing license revoked and was excluded from all federal health  care programs in March  
2000. Using a different name, the owner fraudulently gained approval  as a provider  in the  
Medicaid program and from  August 2009 through February 2014, led a scheme to bill  Medicaid 
for services  that were not provided, including using phony time sheets, patient files  and 
employment files.  The owner was convicted of health care fraud, money laundering, and other  
charges stemming from this scheme, and was sentenced to 10 years in prison and ordered to pay 
$80.6 million in restitution, joint  and several. The original exclusion from March, 2000 also 
remains in place.  
 
  36 
   
Nursing Home and Facilities (Virginia)  In December 2016, a licensed nurse aide was excluded  
for a  minimum period of 30 years. According to court documents, while working in a nursing 
home, the nurse aide sexually assaulted an 84-year old patient. The patient was not alert, 
nonverbal, and suffered from dementia.  The nurse aide was sentenced to 22 years in prison 
based on his conviction for rape.  In addition, the  Virginia State Board of Nursing revoked his  
license to practice as a nurse aide.   
 
Nursing Home and Facilities (Minnesota)  In June 2017, a nursing assistant was excluded for a  
minimum period of 20 years. According to court  documents, the nursing assistant sexually 
assaulted a patient at  a nursing facility.  The patient had dementia and Alzheimers disease and  
was completely dependent on caretakers due to advanced dementia.  The nursing assistant was  
sentenced to 8 years in prison based on a conviction for criminal sexual conduct.     
 
Clinics (New York)  In July 2017, a former outpatient drug rehabilitation program provider was  
excluded from all Federal health care programs for 50 years.   The provider agreed to resolve  
False Claims Act allegations that it submitted claims to Medicaid for services predicated on  
illegal kickbacks and services not rendered.  As a  part of settlement, the provider admitted that, 
between 2006 and 2014, it induced beneficiaries  to use its outpatient programs by providing the  
beneficiaries with subsidized housing.  The provider also admitted that, between 2008 and 2011, 
it paid operators of other short-term residences to  condition residency at their residences on  
enrollment in and attendance at one  of the providers outpatient programs.  The provider also 
admitted that, in 2010, it  directed employees  to falsify records to reflect that counselors had  
treated certain Medicaid  beneficiaries.  As part of settlement, the provider,  which is currently in  
Chapter 7 bankruptcy, agreed that the United States will  receive a $50.5 million bankruptcy 
claim.    
 
Civil Monetary Penalties  
 
HHS-OIG has the authority to  impose civil monetary penalties (CMPs) against providers and  
suppliers who knowingly submit false claims to the Federal Government, who participate in 
unlawful patient referral or kickback  schemes, who fail to appropriately treat or refer patients  at 
hospital emergency rooms, or who engage in other activities prescribed in statute.  HHS-OIG  
continues to  pursue its affirmative enforcement actions under these authorities.  In FY 2017, 
HHS-OIG concluded cases involving approximately $49.1 million in CMPs.  Examples include:    
 
Dental (New Jersey)   In January 2017, a New Jersey dentist agreed to pay $1.1 million in 
assessments and penalties and be excluded from  participation in all Federal health care programs 
for a period of 50 years.  The dentist  is a New Jersey dentist  who was previously excluded due to 
the suspension of his license to practice dentistry in 1999.  HHS-OIG  alleged  that the dentist 
knowingly presented or caused to be presented to  Medicaid claims for items or services he knew  
or should have known were false or fraudulent or  otherwise not provided as claimed; knowingly 
presented or caused to be presented to Medicaid  claims for items or services furnished by an  
excluded person; and was the owner  and managing employee of an entity that was participating 
while he was excluded from participating  in Federal health care programs.    
 
 
  37 
  Hospitals and Health Systems (Connecticut)  In  April 2017,  Hartford Hospital and its sister 
hospital, Midstate Medical Center, agreed to pay  more than $2.8  million  in assessments and  
penalties for submitting claims between February 2009 and March 2015 where patients received 
home health services within three days of the patients release from Hartford Hospital that were 
improperly coded as a discharge rather than  as a post-acute care transfer.  
 
Hospitals and  Health Systems (South Carolina)  In June 2017, AnMed agreed to pay $1.2 
million to resolve its potential liability under EMTALA, the largest such settlement in  HHS
OIGs 30-year enforcement of the statute.   HHS-OIG alleged that, between April 2012 and July 
2013, AnMed violated EMTALA by failing to provide appropriate medical screening 
examinations and stabilizing treatment to patients who presented to the emergency department  
(ED) with psychiatric conditions.  Specifically,  HHS-OIG alleged that, despite  the availability of  
on-call psychiatrists and open beds in its psychiatric unit, AnMed kept 35 individuals  in its ED  
pursuant  to a longstanding policy of  not admitting involuntary patients to its psychiatric unit.  
These 35 individuals, who suffered from serious psychiatric  disorders, were kept in AnMeds ED  
for 6 to 38 days each until they were discharged or transferred to another  medical facility.  
 
Corporate  Integrity Agreements (CIA)  
 
Many health care providers elect  to settle their  cases before litigation.  As part of the settlements,  
providers often agree to enter  into CIAs with HHS-OIG to avoid exclusions from Medicare,  
Medicaid, and other federal health care programs.  Under a  CIA, a provider commits to 
establishing a program and taking other specified steps to ensure future compliance with  
Medicare and Medicaid rules.  The compliance programs are designed,  in  part,  to prevent future 
fraud.  HHS-OIG  monitors providers compliance with these agreements.  HHS-OIG may  
impose penalties on entities that fail  to comply with the  requirements of their CIAs, as  shown in 
the example below:   
 
In September 2016, Kindred Healthcare, Inc., the  Nations  largest provider of post-acute care,  
including hospice and home health services, paid a penalty of more than $3 million for failing to  
comply with a CIA.  The CIA was the result of allegations involving claims for hospice services 
that were medically unnecessary and claims for continuous or crisis care services when the 
patients were not experiencing a crisis.  The penalty for violating the CIA  resulted from  
Kindreds failure to correct improper billing practices  in the fourth year of the 5-year agreement.  
HHS-OIG  made several unannounced site visits to Kindred facilities  and found ongoing 
violations.  Specifically, CIA-required audits performed by Kindreds internal auditors in 2013, 
2014, and 2015 found that the  company and its predecessors failed to implement policies and 
procedures required by the CIA, and that poor claims submission practices led to significant  
error rates and overpayments by Medicare.  
 
 
 
 
Audits and Evaluations  
 
OIG promotes the economy, effectiveness, and efficiency of HHS programs through a program  
of audits and evaluations.  HHS-OIG uses a dynamic work  planning process and makes 
 
  38 
  adjustments throughout the  year to meet  evolving  priorities and to anticipate and respond to 
emerging issues with the resources available.  HHS-OIG assesses relative risks in Medicare and  
Medicaid (as well as  the  many other  programs for which HHS-OIG has oversight authority) to  
identify the  areas most in need of attention and, accordingly, to set priorities for  the sequence and  
proportion of resources  to be allocated.  In addition, HHS-OIG considers a number of factors,  
including:   
 
	   Mandatory requirements for HHS-OIG reviews, as set forth  in laws, regulations, or other 
directives;  
	   Requests made or concerns raised by Congress, HHS  management, or the Office of  
Management and Budget (OMB);   
	   Top  management and performance challenges facing HHS;   
	   Work to be performed in collaboration with partner organizations;   
	   Managements actions to implement our recommendations from previous reviews;  and  
	   Timeliness.  
 
Among HHS-OIGs audit and evaluation findings in FY 2017 were the following, organized by 
outcome:   
 
Preventing Fraud  
State Use of  Express Lane Eligibility for Medicaid and CHIP  Enrollment:   HHS-OIG examined 
the benefits  and barriers  to State use  and expansion of Express Lane Eligibility (ELE)  and found 
that States  that used ELE to expedite and simplify enrollment in Medicaid and CHIP adopted 
variations of three models, with more than half adopting an automated model that requires  
minimal action from staff and beneficiaries.  All  14 States  that used ELE reported benefits, and 
some States reported that they rely heavily on ELE.  Eleven States reported that  they encountered 
barriers when they implemented ELE, but reported that  they overcame these barriers through 
strong partnerships  and integrated eligibility systems.  Despite largely positive experiences using  
ELE, 5 of the 14 States that adopted ELE discontinued its use. HHS-OIG concluded that  ELE  
appears  to meet the intended objective of easing the eligibility and enrollment process  and did 
not identify any significant impediments to continuing to allow voluntary use of ELE  once States  
and CMS have corrected process problems and gaps in oversight identified by HHS-OIG audits  
of ELE enrollments. (OEI-06-15-00410)   
 
Managed Long-Term Care Payments:  HHS-OIG  found that New York improperly claimed 
reimbursement for 36 of 100 payments made to Medicaid Managed Long-Term Care (MLTC)  
plans that were reviewed.  HHS-OIG also found that  if New York develops procedures to 
monitor MLTC plans for compliance with requirements in its  contracts and ensure that future  
contracts  include provisions that  allow it to recover payments when plans  do not comply with 
contract requirements, $1.4 billion ($717 million Federal share)  could have been saved during 
the 1-year audit period.  (A-02-15-01026)  
 
Suspension of Medicaid Payments for Cases with Credible Fraud Allegations:  HHS-OIG found 
that Florida  did not always suspend Medicaid payments to providers  that  had credible fraud 
allegation  cases in accordance with  legal requirements.  Of the 95 cases reviewed, Florida did  
not suspend Medicaid payments for 54 cases.  HHS-OIG recommended that Florida should 
 
  39 
  update its policies and procedures  to ensure that  it suspends  Medicaid payments to providers  
with credible fraud allegations, which could have prevented $40 million (Federal share) from  
being at risk. (A-04-14-07046)   
 
Medicare Part B Drug Payments:  Impact of Price Substitutions Based on 2014 Average Sales  
Prices:  CMS lowered Part B reimbursement for 14 drugs, saving Medicare and its beneficiaries  
$24 million over 1 year  based on 2014 data.  This finding highlights the  success of  HHS-OIGs  
mandated quarterly comparisons of average sales prices with average manufacturer prices and  
implementation of CMSs current price-substitution policy.  HHS-OIG continues  to recommend 
that CMS expand the price-substitution criteria.   CMS did not concur with the recommendation 
to expand the price-substitution policy and believes that more experience  with this  policy is  
needed before it can be expanded. (OEI-03-16-00540)  
 
Availability of T-MSIS Data:   HHS-OIG found that after failing to meet the implementation 
deadline of January 2014, CMS and States reported that  technological problems and competing 
priorities caused further  delays with T-MSIS.  CMS indicated that it expects  that all States will 
be reporting to T-MSIS by the end of 2017.  As of December 2016, 21 States were submitting 
data.  As States and CMS work together to submit data  into T-MSIS, they  continue to raise  
concerns about the completeness and reliability  of the data.   Because of CMSs history of  
delaying target dates for implementation, HHS-OIG is concerned that CMS and States will delay 
further rather than address these outstanding challenges.  (OEI-05-15-00050)  
 
CMS Validation of Hospital  Inpatient Quality Reporting Program Data:   HHS-OIG  found that  
for payment year 2016, CMS  met  its regulatory  requirement by validating sufficient hospital 
inpatient quality reporting program  data, which are used to adjust payments based on quality.  
However, CMS  made limited use of analytics, which can help identify gaming of quality data. 
CMS concurred with our recommendation, which was to make better use of analytics to ensure 
the integrity of hospital-reported quality data and the resulting payment adjustments (OEI-01-15
00320)  
 
Use of Medicaid Payment Suspensions:   Most  Medicaid agencies (41 of  56)  reported imposing 
10 or fewer payment suspensions in fiscal year 2014. Medicaid agencies reported significant  
challenges related to imposing payment suspensions, which appear  to have limited  States use of  
this program integrity  tool.  CMS concurred with our recommendation to provide additional  
technical assistance to help Medicaid  agencies fully utilize Medicaid payment suspensions as a 
program integrity tool. (OEI-09-14-00020)  
 
Medicaid Fraud Control  Units Fiscal Year 2016 Annual Report:  HHS-OIGs MFCU FY 2016 
Annual Report highlights the statistical accomplishments of the 50 MFCUs during FY 2016. 
HHS-OIG  found that FY 2016 continued a trend of increasing numbers of convictions.  Just over  
one-third of the 1,564 MFCU convictions involved personal  care services attendants.  Fraud 
cases accounted for 74 percent of the MFCU convictions, while 26 percent involved patient  
abuse or neglect.   MFCUs reported 998 civil settlements and judgments, almost half of which 
involved pharmaceutical  manufacturers.  MFCUs reported almost $1.9 billion in criminal and 
civil recoveries.  In an appendix to the report, HHS-OIG  summarizes beneficial practices by the 
MFCUs that were identified in onsite review reports published between FYs 2011-2016. (OEI
09-17-00210)  
 
 
  40 
  Analyzing Payment Trends and Detecting Potential Fraud  
 
Impact of  High-Price Drugs on Payments for Medicare Part D Catastrophic Coverage:  HHS
OIG found that high-price drugs are increasing Federal payments for Medicare Part D  
catastrophic coverage.   Federal payments for Part D catastrophic coverage exceeded $33 billion 
in 2015, which is more than triple  the amount paid in 2010.  Spending for high-price drugs  
contributed  significantly to this growth.  Moreover, 10 high-price drugs  accounted for nearly 
one-third of all drug spending for catastrophic coverage  in 2015.  The issue of high-price drugs is  
not exclusive to catastrophic coverage; it affects the entire Part D benefit and can lead to higher  
costs for patients.  Securing the future of the Part  D program  while ensuring that patients have  
access to needed drugs is a complex issue that calls for a multifaceted approach. (OEI-02-16
00270)  
 
Improper Payments for Chiropractic Services:  HHS-OIG has previously found that  Medicare 
made improper payments for chiropractic services that were medically unnecessary,  incorrectly  
coded, insufficiently documented, or  not documented.  In this audit, HHS-OIG found that most  
Medicare payments for chiropractic services did not comply with Medicare requirements.   An  
estimated $358.8 million (82 percent) of the $438.1 million paid by Medicare for chiropractic  
services was found to be unallowable.  These overpayments occurred because CMSs controls 
were not effective in preventing payments for  medically unnecessary chiropractic services.  (A
09-14-02033)  
 
Rebates for Physician-Administered Drugs:  HHS-OIG conducted reviews in California and 
Virginia to determine whether States  are complying with Federal Medicaid requirements for 
billing manufacturers for rebates for  physician-administered drugs dispensed to enrollees of  
Managed Care Organizations (MCOs).  HHS-OIG found that California claimed an estimated  
$7.3 million in Federal reimbursement that was unallowable and $35.2 million that may have  
been unallowable because it did not  comply with Federal Medicaid requirements.  Virginia did  
not bill manufacturers for an estimated $2.9 million in rebates.  (A-09-15-02035; A-03-15
00201)  
 
Medicare Payments to  Acute-Care Hospitals for Outpatient  Services:   HHS-OIG  found that  
Medicare did not appropriately pay acute-care hospitals any of the $51.6 million for outpatient 
services reviewed, and beneficiaries were held responsible for unnecessary deductibles and 
coinsurance of  $14.4 million.   Medicare overpaid the acute-care hospitals because the system  
edits  that  should have prevented or detected the overpayments were not working properly.  If the  
system edits had been working properly since 2006, Medicare could have saved almost $100 
million, and beneficiaries could have  saved $28.9 million in deductibles and coinsurance.  (A-09
16-02026)  
 
Medicares 2-Midnight Hospital Policy: HHS-OIG identified several vulnerabilities  in hospital 
billing under Medicares 2-midnight policy, including a large  number of potentially 
inappropriate  short inpatient  stays and an increased number of beneficiaries in outpatient stays 
paying more and having limited access to skilled nursing facility (SNF) services  compared to 
inpatients.  These findings raise concerns about the cost  to Medicare and  beneficiaries. (OEI-02
15-00200)  
 
 
  41 
  Concerns about Extreme Use and Questionable Prescribing of Opioids:   HHS-OIG  found that  
one out of every three beneficiaries  received a prescription opioid through Medicare  Part D in 
2016. Half a million beneficiaries  received high amounts of  opioids during the year  and almost  
90,000 beneficiaries who were at serious risk of opioid misuse or overdose.  These 90,000 
beneficiaries either received extreme amounts of  opioids or  appeared to be doctor shopping.  
Moreover, 401 prescribers had questionable prescribing patterns for beneficiaries who  are at  
serious  risk.  Ensuring the appropriate use and prescribing of opioids is essential to protecting the  
health  and safety of beneficiaries and the integrity of Part D.  (OEI-02-17-00250)  
 
Medicare Payments for Clinical Diagnostic Laboratory Tests:  Medicare paid $6.8 billion under  
Part B for lab tests  in 2016, a total that changed very little over 3 years.  The top 25 tests by 
Medicare payments totaled $4.3 billion and represented 63 percent of all  Medicare payments for  
lab tests  in 2016.  More than half of payments for  the top 25 tests went to 1  percent of  
labs.  Congress mandated that  HHS-OIG  monitor Medicare payments for  lab tests and publicly 
release an annual analysis of the top 25 lab tests  by Medicare payments.  Changes in the  
Medicare payment rates for these 25  tests could have a significant impact  on overall  Medicare 
spending for lab tests when the new payment system  for lab tests goes  into effect in 2018.  Our  
data brief contains no  recommendations.  (OEI-09-17-00140)  
 
Identifying Misspent Funds and Addressing Improper Payments  
 
Improper Payments for Incarcerated Beneficiaries:  The Medicare Access and CHIP  
Reauthorization Act of 2015 (MACRA) requires  CMS to establish policies and implement claim  
edits to ensure that payments are not  made for Medicare services rendered to incarcerated  
beneficiaries.   HHS-OIG  found that CMSs policies and procedures did not allow CMS to detect  
and recoup  improper payments to beneficiaries who were incarcerated.   CMS has not taken steps 
to determine whether any of the $34.6 million in potentially improper payments (for claims for  
incarcerated beneficiaries) made in 2013 and 2014 should have been denied.  HHS-OIG also  
found that CMSs planned corrective  revisions to its policies and procedures do not comply with 
Medicare requirements.   When CMS implements its revised policies and procedures, it will, 
according to CMS officials, further adjudicate the $34.6 million in claims.   However,  because the 
data that CMS plans to  use will be incomplete, these efforts  will not identify all improper 
payments.  (A-07-15-01158)  
 
Unallowable School-Based Medicaid Administrative Costs: In prior reviews of school-based and  
community-based administrative costs that States allocated  to  Medicaid using random moment  
sampling (RMS), HHS-OIG identified significant overpayments.  As part of Medicaid risk  
assessment, HHS-OIG found that North Carolina and Mississippi used  statistically  invalid RMS  
in allocating costs to Medicaid and did not promptly submit to HHS  for review their  cost  
allocation plan (CAP) amendments describing their new random  moment time study  (RMTS) 
methodology.  As a result, North Carolina claimed almost $107.5 million (almost $53.8 million 
Federal financial participation) and  Mississippi claimed almost $42.4 million  (almost $21.2  
million Federal financial participation) in unallowable school-based Medicaid administrative  
costs for Federal FYs 2010 through 2012.  (A-04-15-00101; A-04-15-00103)  
 
Capitation Payments for Deceased Beneficiaries:  The Florida Statewide Medicaid  Managed  
Care Program pays MCOs to provide covered health care services in return for a monthly fixed 
 
  42 
  payment for  each eligible beneficiary  (capitated payment).  In 2014, nearly all of Floridas  
Medicaid beneficiaries were moved into managed care.   HHS-OIG found that Florida did not  
always stop  making capitation payments after a beneficiarys death, despite  its efforts to identify  
and recover  any overpayments.  HHS-OIG estimated that Florida made overpayments to MCOs 
totaling $26.2  million  ($15.4  million Federal share) during the audit period. (A-04-15-06182)  
   
Vulnerabilities Remain in the Medicare Outlier  Payment Methodology: HHS-OIG  found that for  
the period October 2003 through March 2011, Medicare contractors did not always refer cost  
reports that  qualified for reconciliation, and CMS did not always ensure that Medicare  
contractors reconciled the outlier payments associated with  cost reports that had been  referred.   
Our previous reviews  identified 465  cost reports  that qualified for reconciliation of outlier 
payments.  (A-07-14-02800)    
 
Enhancements Needed in the Tracking and Collection of Medicare Overpayments  Identified by  
ZPICs and PSCs:   Zone Program Integrity Contractors  (ZPICs) and Program Safeguard 
Contractors  (PSCs) referred a total of  $559 million dollars in  overpayments to Medicare  
Administrative Contractors (MACs) in fiscal year 2014; however, the dollar amounts referred 
varied widely across ZPICs and PSCs.  MACs did not collect 80 percent  of the $482 million they  
sought to collect from these overpayment referrals.  MACs collection rate varied depending on 
the type of claim, with home health and hospice overpayments having just  an 11 percent  
collection rate.  Furthermore, ZPICs, PSCs, and MACs continue to experience challenges in 
tracking referrals and collections of overpayments.   Because CMS began transitioning PSCs and 
ZPICs to Unified Program Integrity Contractors  (UPICs) in 2016, our recommendations included 
these new contractors.   CMS concurred with four of our recommendations: share best practices 
across ZPIC- and UPIC-referred overpayments; identify strategies to increase MACs collection  
of ZPIC- and UPIC-referred overpayments; work with ZPICs, UPICs, and MACs to create a 
standard report format both for overpayment referral reports  and overpayment collection reports;  
and require  ZPICs, UPICs, and MACs to use a unique identifier for each overpayment.  CMS did 
not state whether  it concurred or did not concur  with our recommendation to implement the  
surety bond requirement for home health providers and consider the feasibility of implementing 
surety bonds for other providers based on their level of risk.   (OEI-03-13-00630)         
 
Promoting Quality and Safety in Health Care  
 
Incidents of Potential Abuse or Neglect at Skilled  Nursing Facilities: This  memorandum alerts  
CMS to the  preliminary results of an HHS-OIG ongoing review of potential abuse or neglect of  
Medicare beneficiaries in skilled nursing facilities (SNFs) and is part of the offices ongoing  
efforts to detect and combat elder abuse. HHS-OIG identified 134 Medicare beneficiaries whose 
injuries may have been the result of potential abuse or neglect that occurred from January 1, 
2015, through December  31, 2016.  HHS-OIG also found that  a significant percentage of these 
incidents may not have been reported to law enforcement.   As a result, HHS-OIG determined 
that CMS has inadequate procedures  to ensure  that incidents of potential abuse or neglect of  
Medicare beneficiaries residing  in SNFs are identified and  reported.   (A-01-17-00504)  
 
Correcting  Deficiencies at Nursing  Homes:  HHS-OIG found that  that Arizona did not always  
verify nursing homes correction of  deficiencies, as required under Federal regulations, identified 
during surveys in 2014 in accordance with Federal requirements.  HHS-OIG estimated that 
 
  43 
  Arizona did not verify nursing homes correction of deficiencies in accordance with Federal  
requirements for 361 (56 percent) of the 650 deficiencies identified during surveys in 2014. 
Arizonas practice for less serious deficiencies was to accept the nursing homes correction plans 
as confirmation of substantial compliance without obtaining the required evidence of  correction. 
This is part  of an ongoing series of reviews of States verification of correction of deficiencies.   
(A-09-16-02013)  
 
Critical Incidents Involving Beneficiaries with Developmental Disabilities:  HHS-OIG found that  
Maine did not comply with Federal  Medicaid waiver  and State requirements for reporting and 
monitoring  critical incidents involving Medicaid beneficiaries with  developmental disabilities.  
Maine failed to demonstrate that it has a system to ensure the health, welfare, and safety of the 
2,640 Medicaid beneficiaries with developmental disabilities  covered by  the Medicaid waiver.  
(A-01-16-00001)  
 
Tracking Costs for Recalled or Prematurely Failed Medical  Devices:   HHS-OIG determined that  
Medicare costs related to the replacement of recalled or prematurely failed  medical devices could  
not be identified and tracked using only the claim data.  HHS-OIG estimated that  services related  
to the replacement of seven recalled  and prematurely failed medical devices cost Medicare $1.5  
billion and accrued $140  million in beneficiary copayment and deductible liabilities  during 
calendar years 2005 through 2014.  (A-01-15-00504)  
 
Investigations of Nursing Home Complaints:   HHS-OIG found that nursing home complaints  
rose by one-third across  States from 2011 to 2015.  During the period reviewed, States conducted 
nearly all  the required onsite  investigations for  the two most serious  levels of  
complaints.  Although almost all States conducted most of their onsite  investigations  within 
required timeframes, a few States fell short.   This data brief raises questions about how some 
States respond to complaints,  as these responses could have serious consequences for  nursing 
home residents in those States.  To ensure the health and safety of nursing home residents, CMS  
must remain vigilant and assist the States  that are  falling short in meeting timeframes for 
investigations of complaints. (OEI-01-16-00330)  
 
Other HHS-OIG Fraud and Abuse Prevention Activities  
 
Data Analytics  
 
As described above, HCFAC  funding supported HHS-OIGs  continued enhancement of HHS
OIGs technology and data analysis capabilities for detecting health  care fraud.  For example, 
HHS-OIG continues  to use data mining, predictive analytics, trend evaluation, and modeling 
approaches to better analyze and target the oversight of the Medicare and Medicaid 
programs.  Multi-disciplinary teams use near  real time data to examine Medicare claims for  
known fraud patterns, identify suspected fraud trends, and to calculate ratios of allowed services 
as compared with national averages,  as well as other assessments.  When united with the  
expertise of  our HEAT and other partners, HHS-OIGs data analysis supports a highly effective 
combination of cutting edge technologies and traditional skills to fight against fraud,  waste, and  
abuse.   
 
Industry Outreach and Guidance  
 
  44 
   
HHS-OIG strives  to cultivate a culture of compliance in the health care  industry through various  
educational  and outreach efforts. 
 
Advisory Opinions    
Central  to the HIPAA guidance  initiatives  is an advisory opinion process through which parties  
may obtain binding legal guidance as to whether their existing or proposed health care business  
transactions  run afoul of the AKS, the CMP laws, or the exclusion provisions.  During FY 2017, 
the HHS-OIG, in consultation with DOJ, issued 9 advisory opinions and modified 1 advisory 
opinions.  A total of 352 advisory opinions and 21  modifications to advisory opinions have been 
issued, and 4 opinions  terminated, during the 21 years of the  HCFAC program.  
 
Collaborations with Private Sector Partners   
 
HHS-OIG regularly engages with public stakeholders to combat fraud.  For example, HHS-OIG 
is an active  partner in  the Healthcare Fraud Prevention Partnership (HFPP), described in more  
detail elsewhere in  this report, and with the National Healthcare Anti-Fraud Association, both of  
which are publicprivate partnerships that  address health care fraud by sharing data  and 
information for the purposes of detecting and combatting fraud and abuse in health care  
programs.  HHS-OIG  frequently  shares information about prescription-drug fraud schemes, 
trends, and  other matters related  to  health  care fraud, as appropriate.  As a further example, HHS
OIG has collaborated with the DEA to provide anti-fraud education at  numerous  Pharmacy 
Diversion Awareness Conferences held across the United States.   The conferences were designed  
to assist pharmacy personnel with identifying and preventing diversion activity.  Since 2013, 
HHS-OIG has presented at conferences in 50 States and Puerto Rico.  
 
Centers for Medicare & Medicaid Services  
 
In FY 2017, CMS was allocated $20.8 million by HHS, which is comprised of $18.2 million in 
new FY 2017 mandatory HCFAC funding and $2.6 million in prior year  mandatory funding, and 
appropriated $569.1 million in discretionary funds by Congress to support its comprehensive  
program integrity strategy for Medicare, Medicaid, and the  Childrens  Health Insurance Program  
(CHIP).   In FY  2017, Congress required HHS to fully fund the Administration for Community 
Livings  (ACL) Senior Medicare Patrols activity.  Therefore, $18 million of CMSs $569.1 
million in discretionary funding was allocated to ACL to support the program.  With these funds, 
CMS is working to ensure that public funds are  not diverted from their intended purpose: to 
make accurate payments to legitimate entities for  allowable services or activities on behalf of  
eligible beneficiaries of  federal health care programs.   
 
CMS also performs  many program integrity activities that are beyond the scope of this report  
because  they are not funded directly by the HCFAC Account or discretionary HCFAC funding.  
Medicare Fee-for-Service and Medicaid improper payment rate measurement and other Medicaid  
program integrity activities, the Fraud Prevention System, Recovery Audit Contractor  activities,  
and  prior authorization initiatives  are discussed in  detail  in separate reports.  CMS will  also  
submit an annual  Medicare and Medicaid Integrity Program report  to Congress later this year.  
 
Address the Full Spectrum of Fraud, Waste, and Abuse  
 
  45 
   
CMS uses a multi-faceted approach  to target all causes of fraud, waste, and abuse that  result in  
improper payments, with an emphasis towards prevention activities.  This includes a  focus on 
initiatives  that are foundational to addressing program integrity across the continuum of fraud, 
waste, and abuse and improving payment accuracy. 
   
During FY 2017, CMS continued to integrate Medicare and Medicaid efforts, and provide  
technical guidance  to states, providers, and other  stakeholders on program integrity activities.  
CMS continued to conduct Medicare and Medicaid fraud investigations and  provider audits, as  
well as state program integrity reviews.   
 
This section  describes the wide range of program  integrity  activities that CMS utilizes  to  
comprehensively address fraud, waste, and abuse.  These activities include many different  
approaches to program integrity, such as data  analysis, investigations and audits, and recovery 
actions.  
 
Fraud Prevention System  
 
The Fraud Prevention System (FPS) is the predictive analytics technology required under the  
Small Business Jobs Act of 2010 14  (SBJA).  Since June 30, 2011, the FPS has run predictive  
algorithms and other sophisticated analytics nationwide against all Medicare FFS claims on a 
continuous  basis prior  to payment in order to identify, prevent, and stop potentially fraudulent  
claims.  The FPS helps CMS target  potentially fraudulent providers and suppliers, reduce the  
administrative and compliance burden on legitimate providers and suppliers, and prevent  
potential fraud so that funds are not  diverted from providing beneficiaries with access to quality  
health care.  
 
CMS has invested considerable resources in  systems and initiatives related to data and analytics 
to prevent or rapidly identify fraud, waste, and abuse.  During FY 2016, CMS developed the next  
generation system of the  FPS, known as 2.0, which was  implemented in 2017.  FPS 2.0 improves  
model development, decreases  time to market for  models and edits, and expands  CMS analytic 
capabilities.  
 
The FPS helped CMS identify or prevent $527.1 million in inappropriate  payments during FY  
2016, which resulted in a ROI of $6.3 to 1.15   Since CMS implemented the  original FPS  
technology in June 2011, the FPS has identified or prevented almost $2.0 billion in inappropriate  
payments by discovering new leads or contributing to existing investigations.  During FY  2016, 
the FPS  models generated  688 leads that were included in the Zone Program Integrity 
Contractors workload, resulting in 476 new investigations  and augmented information for 212 
existing investigations. (FY 2017 numbers not available at time of  this report.)  
                                                 
14  Public  Law 111-240.  
15  During FY  2016,  CMS  operated the  FPS  (FPS  1.0)  and simultaneously  developed  FPS  2.0,  which is  the  next  
generation of  the  FPS.  FPS  2.0 became  operational  in  FY  2017,  so  there  were  no  savings  associated with  it  in FY  
2016.   The  $6.3 to  $1 ROI  includes  costs  associated with both FPS  1.0  and the  development  of  FPS  2.0.  If  the  FPS  
2.0 costs  are  excluded  from  the  calculation,  the  ROI  would  be  $8.2 to  $1.  
 
  46 
  Suspensions  
 
In FY 2017, CMS continued its use  of  statutory authority to suspend Medicare payments to 
providers during an investigation of  a credible allegation of fraud.  CMS also has authority to 
suspend Medicare payment if there is reliable information  that an overpayment exists.  During 
FY 2017, there were 551 payment suspensions  that were active at some point during the fiscal  
year.  Of the 551 payment suspensions, 252 new payment suspensions were imposed during FY  
2017. 
 
National  Correct Coding Initiative   
 
Medicare  
 
Given  the volume of claims processed by Medicare each day and the significant cost associated  
with conducting medical review of an individual  claim, CMS  uses  automated edits to  help 
prevent improper  payment  without the need for manual intervention.  The National Correct 
Coding Initiative  (NCCI) program consists of edits designed to reduce improper payments in 
Medicare Part B.   CMS  originally implemented  the NCCI program in the Medicare  program in 
January 1996 using Procedure-to-Procedure  (PTP) edits to ensure accurate  coding and reporting 
of services by physicians.  PTP  edits  prevent  inappropriate payment for  billing  code pairs  that 
should not be reported together by the same provider for the same beneficiary for the  same date 
of service.   In addition to  PTP  edits,  CMS established the Medically Unlikely Edit  (MUE)  
program in 2007 as part of the NCCI program  to reduce the  Medicare Part B  paid claims  
improper payment  rate.   MUEs prevent payment for an inappropriate number/quantity of  the  
same service on a single day.  
 
Since October 2008, CMS has made  public and posted all PTP edits and the majority of MUEs  
on the CMS website.  To prevent  misuse or manipulation by fraudulent  or abusive individuals  
and entities, CMS does not publish certain edits.   The use of  PTP edits developed through the  
NCCI program  saved the Medicare program $186.9 million during the first nine months of FY  
2017. In addition, MUEs  saved the Medicare program $359.8 million during the first nine  
months of FY 2017   
 
Medicaid   
 
Section 1903(r)  of  the required CMS to notify states by September 1, 2010 which NCCI  
methodologies are  compatible with claims filed with Medicaid.  It also  required states to use 
these methodologies to  process applicable Medicaid claims filed on or after October  1, 2010.16   
CMS has worked closely with state Medicaid agencies to implement the NCCI  methodologies in  
their Medicaid programs.  Complete and correct implementation of NCCI methodologies in state  
Medicaid programs will be a long-term undertaking by both CMS and the states.  However, 
CMS  use of  the Medicaid NCCI  methodologies  in states  adjudication of  Medicaid claims 
produces significant savings in federal and state  Medicaid program expenditures based on 
                                                 
16  CMS  reported on the  implementation of  this  requirement  in a  March 2011 report  to Congress,  accessible  at:  
http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Data-and
Systems/Downloads/ReporttoCongresspdf.pdf.  
 
  47 
  reductions in improper payments for Medicaid claims with improper coding, as has occurred in 
the Medicare program.  
In FY 2013, CMS created a major, new technical guidance document for states, the  Medicaid  
National Correct Coding Initiative Technical Guidance Manual, which compiles, organizes, and 
integrates CMS requirements for state implementation for the Medicaid NCCI  methodologies.  
Similar to that for Medicare, this document is continually refined, with revised edit tables  
published quarterly.  The  Medicaid NCCI  edits include Medicare compatible edits and  Medicaid  
specific  NCCI edits.  These resources are located on  The National Correct Coding Initiative  in 
Medicaid website.   
 
Integrated Data Repository and the  One  Program  Integrity  (One PI) Portal   
CMS continues to augment the data  available  in  the Integrated Data Repository  (IDR) to provide  
a comprehensive view of Medicare and Medicaid data including claims, beneficiary data, and  
prescription drug information.  CMS  is using the  IDR to provide broader and easier access to 
data and enhanced data integration while strengthening and supporting CMSs analytical  
capabilities.   The IDR contains  Medicare Part A,  Part B  (including DME), Part C (encounter),  
and Part D  paid claims beginning with January 2006, both before and after final payment.  This  
allows for prepayment analytics on historical data  to develop models  for  use in the FPS.   
 
CMS continues to integrate new data sources into the IDR. CMS  has added Shared Systems 
location data for pre-adjudicated claims, claims submitter,  and  medical review utilization data.    
 
CMS is also working to  incorporate state Medicaid data into  the IDR  through standard T-MSIS 
data formats,  while also working with states to improve the  quality and consistency of the data  
from each state, described  more fully below.  
 
CMS uses the One Program Integrity (One PI) web-based portal in conjunction with the IDR to  
facilitate data sharing with program integrity contractors and  law enforcement.  The portal 
provides a single access point to  the data within the IDR, as well as the analytic tools to review  
the data.  
 
The Command Center  
 
The Command Center opened in July 2012 and provides an opportunity for Medicare and 
Medicaid policy experts, law enforcements officials from  HHS-OIG and the DOJ, including the  
Federal Bureau of Investigation (FBI), state law  enforcement officials, clinicians, and  CMS fraud  
investigators to collaborate before, during, and after the development of fraud leads  in real  time.  
The Command Centers  advanced technologies and collaborative environment allow multi
disciplinary  teams of experts and decision makers to more efficiently coordinate policies and 
case actions, reduce duplication of efforts, and streamline fraud investigations for  more 
immediate administrative action.  These collaborative activities enable CMS to take 
administrative actions, such as revocations of Medicare billing privileges and payment  
suspensions,  more quickly and efficiently.  In FY  2017, 25 missions were  conducted in the  
Command Center  that  included participants from CMS and CMS partners, including the FBI. 
 
 
  48 
  DME Initiatives  
DME suppliers pose a high risk of fraud to the  Medicare program and CMS has undertaken an 
aggressive strategy to address this risk.  Zone Program Integrity Contractors (ZPICs)/Program  
Safeguard Contractors  (PSCs)/Unified Program  Integrity Contractors  (UPICs) have continued  to  
conduct site  visits and interviews of DME suppliers, providers, and beneficiaries receiving DME  
products  in high billing areas for DME supplies and products.  In FY 2017 these additional funds  
supported DME investigations, which included site visits  to, and interviews of, suppliers, 
doctors, and patients that were identified as potentially suspicious or high risk.  
 
Proactively Manage Provider Screening and Enrollment  
 
Provider enrollment is the gateway to the Medicare and Medicaid programs and is the key to  
preventing ineligible providers, or if applicable, suppliers from entering either program.  CMS is  
committed to  maintaining operational excellence  in its provider enrollment screening process.   
Through provider screening and enrollment, CMS continues  to prevent and reduce fraud, waste, 
and abuse in the Medicare and Medicaid programs and ensure that only eligible providers are  
caring for beneficiaries and receiving payment.  
Medicare Provider Screening and Site Visits  
CMS implemented additional screening provisions through a final rule17  published by the  
Federal Register on February 2, 2011.  CMS  regulation establishes  three levels of provider and 
supplier enrollment risk-based screening:  limited, moderate, and high, and each provider  
and supplier specialty category is assigned to one of these three screening levels.  Providers and  
suppliers designated in the limited risk category undergo verification of licensure and a wide  
range of database checks to ensure compliance with all provider- or supplier-specific 
requirements.  Providers and suppliers designated in the moderate risk  category are subject to  
all  the requirements in the limited screening level, in addition to unannounced site visits.   
Providers  and suppliers in the high  risk category are subject to all of the requirements in the 
limited and moderate screening levels,  in addition  to fingerprint-based criminal background 
checks (FCBCs).  For Medicare, CMS began phasing in the fingerprinting requirements on 
August 6, 2014.  In FY 2017, CMS denied approximately 1,259 enrollments and revoked 19 
enrollments as a result of the FCBCs  or a failure to respond.  
The Advanced Provider  Screening system (APS) automatically screens all current and  
prospective providers  and suppliers against  a number of data sources, including provider and 
supplier licensing and criminal records  to  identify and highlight potential program integrity 
issues for  proactive  investigation by CMS.  In FY 2017, APS resulted in  more than 2.6 million 
screenings.   These screenings were composed of  more than 21,700 actionable License  
Continuous  Monitoring alerts, and more than 60 actionable  Criminal Continuous Monitoring 
alerts, which resulted in approximately 176 Criminal revocations and over 590 Licensure  
revocations.  
                                                 
17  76  FR  5862  (Feb.  2,  2011).  
 
  49 
  Site visits are a screening mechanism used to prevent questionable providers and suppliers from  
enrolling or  maintaining enrollment in the Medicare program.  The CMS-authorized site-visit 
contractors  validate that the provider or supplier  complies  with  Medicare enrollment  
requirements during these visits.  In FY 2017, the initiative  resulted in 75,568 site visits 
conducted by the National Site Visit Contractor (NSVC), which conducts  site visits for most  
Medicare FFS providers and suppliers, and 17,745 conducted by the National Supplier  
Clearinghouse (NSC), which conducts site visits  for Medicare DME suppliers.  This  work  
resulted in 227 revocations due to non-operational site visit determinations for all providers and  
suppliers.  
CMSs provider screening and enrollment initiatives in Medicare have had a significant impact  
on removing ineligible providers from the program.  In FY 2017, CMS deactivated 177,525 
enrollments, and revoked 2,831 enrollments.  Site visits, revalidation, and other  initiatives have 
contributed to the deactivation18 and revocation19  of  more than one million enrollment records  
since CMS started implementing these screening and enrollment  requirements.   
Enrollment Special Study  
 
The Enrollment Special  Study is a project designed to utilize  and expand the existing 
programmatic infrastructures to  take  administrative actions under existing CMS authorities by  
conducting site verifications of potentially high risk providers and suppliers.  The information 
obtained during site verifications is used by CMS to determine if provider enrollment  
requirements are met and to calculate a fraud level indicator.   
 
Since inception in July 2009, this project has produced significant results, including an increased 
number of revocations, deactivations, and prepayment edit savings.  The project has  also 
provided valuable information that  CMS has used to identify and implement programmatic  
changes that have proven successful  to deter and  prevent Medicare fraud.  
 
From July 1, 2015 through September 30, 2017, the Medicare  Administrative Contractor  
covering Florida (First Coast Service  Operations)  had conducted 17,558 site visits  to verify  
providers and suppliers operational status, deactivated 596 practice locations, and revoked or  
denied 1,433 providers.  CMS saved $21.6 million  from  prepayment  medical record review.  
 
Medicaid Screening and Enrollment  
 
As part of its oversight role in Medicaid, CMS works closely  with state Medicaid Agencies 
(SMAs) to provide regulatory guidance, technical assistance,  and other support with  respect  to  
provider  enrollment.  SMAs can comply with Medicaid screening requirements by using CMS  
screening results for dually-enrolling providers, thus eliminating the need and burden associated 
with states  re-screening such applicants.  States may use Medicare screening data, including site  
visits, payment of application fees, and FCBCs.  For Medicaid-only FFS providers, SMAs  at a 
minimum  must follow the same risk-based screening procedures followed by Medicare when 
enrolling Medicare providers and suppliers.  
                                                 
18  Deactivation  means  the  providers  or  suppliers billing  privileges  were  stopped,  but  can  be  restored upon  the 
 
submission of  updated  information.   See 42  CFR  424.540. 

19  Revocation  means  the providers  or  suppliers  billing  privileges  are  terminated.   See 42 CFR 424.535.  

 
  50 
   
During FY 2017, CMS continued to expand its efforts to assist states with meeting Medicaid 
screening and enrollment requirements.   These efforts include enhanced sharing of Medicare 
enrollment and screening data with  states, providing a new data compare service to help states 
identify providers for which the  state is able to rely on Medicares screening, providing technical  
assistance  to states through site visits, and publishing additional guidance in the Medicaid 
Provider Enrollment Compendium (MPEC). 
 
CMS shares Medicare enrollment and screening data to  assist  states with  meeting Medicaid  
screening and enrollment requirements.   Specifically, CMS shares the Medicare provider  
enrollment record via the Provider Enrollment Chain and Ownership System (PECOS)  
administrative interface  and in bulk data extracts from PECOS.  Additionally in FY 2017, CMS  
launched the PECOS  States page and included provider  enrollment information such as  
Medicare enrollment status, recent change of ownership information, reassignments, Medicare  
risk levels, and  more.  CMS also shares HHS-OIG exclusion data with states.  Since  May 2016, 
CMS has offered a data compare service that allows a state to rely on Medicares screening, in 
lieu of conducting state screening.   Using the data compare service, a state provides an extract of  
Medicaid provider enrollment data to CMS and then CMS returns information to the  state  
indicating for which providers  the state is able to  rely on Medicares screening.  
CMS continually provides ongoing guidance, education, and outreach (site visits and technical  
assistance) to states on federal requirements for  Medicaid enrollment and screening.   In addition, 
CMS published updates  to the MPEC in FY2017, which is sub-regulatory guidance designed to 
assist states in applying  certain regulatory requirements.  
CMS also offers training, technical assistance, and support to  state Medicaid program integrity 
officials through the Medicaid Integrity Institute  (MII).  The  FY 2017 course schedule included a  
seminar in April 2017 that focused exclusively on provider  screening and enrollment compliance  
provisions  in statute.  More information on the  MII  can be found at: https://www.justice.gov/mii.  
 
 
 
 
Provider Enrollment Moratoria  
 
CMS has used the authority provided to the Secretary in section 1866(j)(7) of the Social Security 
Act to temporarily prevent the  enrollment of new Medicare, Medicaid, and CHIP providers and 
suppliers, including categories of providers and suppliers, where the Secretary has determined 
such moratoria are necessary to combat fraud, waste, or  abuse.  In July 2013, CMS announced 
temporary  moratoria on the enrollment of new Home Health Agencies (HHAs)  and Part B  
ground ambulance suppliers  in Medicare  in three fraud hot spot metropolitan areas  of the  
country:  in and around Miami, Florida, and Chicago, Illinois  (HHAs and HHA Sub-units)  and in 
and around Houston, Texas (Part B ground ambulance suppliers).  The moratoria also applied to 
Medicaid and CHIP.  CMS exercised this authority again on January 2014, CMS extended these  
moratoria by 6 months and expanded the  moratoria  to include HHAs in the areas surrounding 
Fort Lauderdale, Florida; Dallas and Houston, Texas; and Detroit, Michigan, and Part B  ground 
ambulance suppliers in and around Philadelphia, Pennsylvania. CMS continued to extend these  
moratoria in 6-month increments  and nearby New Jersey counties.  The moratoria have since 
 
  51 
  been extended at 6-month intervals  and to date, remain in place in all of the above-mentioned 
locations.   
 
In July 2016, CMS announced the 6-month extension and statewide expansion of  the moratoria  
on the enrollment of  HHAs in Florida, Illinois, Michigan, and Texas and of Part B non
emergency ambulance suppliers in Texas, New Jersey, and Pennsylvania.   In addition, it  
announced the lifting of  the moratoria on all Part  B emergency ground ambulance suppliers. 
These moratoria and  changes also applied  to Medicaid  and CHIP.   
 
In conjunction with the  extension and expansion of  the  moratoria, CMS implemented the 
Provider Enrollment Moratoria Access Waiver Demonstration (PEWD)  for HHAs and Part B 
non-emergency ground ambulance suppliers in moratoria-designated geographic locations.  The  
PEWD also applies to Medicaid and CHIP. The PEWD includes heightened screening and  
investigations of certain providers and suppliers, and allows CMS  to  support an expansion to 
state-wide  moratoria by addressing the operational concerns that have surfaced throughout the  
moratoria and providing possible  exceptions  to a  statewide moratorium based primarily on 
beneficiary  access to care, so long as the provider passes the enhanced screening measures.   
 
In January 2017, and again in July 2017, CMS extended these  moratoria for an additional six 
months.  On August 25, 2017, the President of the United States signed the Presidential Disaster  
Declaration for several counties  in the State of Texas due to Hurricane Harvey.  As a result of the 
President's declaration, CMS carefully reviewed  the potential  impact of continued moratoria in  
Texas, and decided to lift the temporary enrollment moratorium on Medicare Part B non
emergency ground ambulance suppliers  in Texas in order  to aid in the disaster  response, 
effective September 1, 2017.  The lifting of the  moratorium also applied to Medicaid and CHIP  
in Texas.  A notification  that CMS lifted the moratorium was published on the CMS website and 
became effective on September 1, 2017.  In accordance with  424.570(d), CMS also published a  
document in the  Federal Register to announce this action.  
 
In each moratorium area, CMS  prohibited the new enrollment of HHAs and ground ambulance  
suppliers while  taking administrative actions, such as deactivations  and revocations of HHAs and 
ground ambulance companies, as well as worked  with law enforcement to support investigations  
and prosecutions.   
 
Continue to Build States Capacity to  Protect Medicaid  
 
CMS assists states in building their internal capacity  to conduct program  integrity  activities for 
Medicaid.  CMS continues to use HCFAC program discretionary funds and other funding 
sources  to develop and implement enterprise  systems that support Medicaid, in particular the  
Medicaid and CHIP Business Information Solution (MACBIS) initiative, which will improve the  
ability of CMS and the  states to gather and analyze data  that will support program integrity 
activities.  HCFAC  funding also supports the preparation and dissemination of educational  
toolkits for states to use  to enhance awareness of Medicaid fraud, waste, and abuse among 
providers, beneficiaries,  managed care organizations, and others.  Utilizing technical assistance 
and education through CMS Medicaid Technical Advisory Groups, voluntary state assistance 
site visits, provider screening and enrollment strategies, onsite focused program integrity 
reviews, consolidation of provider  audits and investigations  through the five newly awarded 
 
  52 
  Unified Program Integrity Contractors, and through desk reviews of state  processes and 
procedures,  CMS also identifies areas of improvement and works with the states to make sure 
their integrity programs are robust.  
 
Medicaid Enterprise System  
 
Todays modern design  of IT systems encompasses the use of current technologies that span  
across the entire Medicaid Enterprise.  These systems work in concert with one another and must  
adhere  to certain regulations and guidance, including the Medicaid Information Technology 
Architecture (MITA) framework and the Seven Standards  and Conditions.  Adhering to these  
mandates will promote the consistency of business and technical processes and IT platforms, as 
well as standards across the Medicaid Enterprise.    
 
CMS provides independent technical assistance for IT and policy requirements, including 
monitoring and oversight, in working with state-specific system requirements, IT system builds,  
and associated interfaces for all states and the territories.  CMS also ensures all 50 states and the  
territories received  technical assistance with moving through  the Enterprise Life Cycle (ELC) 
Gate Review Process, including any associated  consults.  States received assistance with project  
management, implementation, and operations.  Technical artifacts required by statute were 
analyzed  and tracked to  assess state progress.  Gap analyses were done on a regular basis and  
risk registers were studied to identify opportunities for improvement.  In addition, CMS geared  
numerous tasks towards  achieving reduction in fraud, waste, and abuse and reduction of cost of  
these Medicaid Management Information Systems.  One such effort includes the development of  
an open source provider  enrollment and screening  module that will be able to be reused and 
shared by any state and integrated into its MMIS.  This could potentially save CMS at  least 75 
percent of the average cost to procure a provider enrollment and screening  module per  state,  
across all states that will utilize  this  module.  
 
Improper Payment Rate Measurement and Increased Accountability  in  Medicaid and CHIP  
Programs  
 
The Improper Payments Information Act (IPIA)  of 2002, as amended by the Improper Payments  
Elimination and Recovery Act of 2010 (IPERA) and the Improper Payments Elimination and 
Recovery Improvement Act of 2012 (IPERIA), requires  each agency to periodically review  
programs it  administers  and identify programs that may be susceptible  to significant improper  
payments.  For those programs determined to be susceptible, the agency  is required to estimate 
the amount of improper payments, submit those  estimates to Congress, and report on actions the  
agency is  taking to reduce improper payments.   
 
The Medicaid  program and CHIP have been identified as  at risk for significant improper  
payments.  CMS estimates improper payment rates in Medicaid and CHIP through the Payment  
Error Rate Measurement (PERM)  program.  The improper payment rates are based  on reviews of  
the Fee-For-Service  (FFS), managed care, and eligibility components of Medicaid and CHIP in 
the fiscal year under  review.  CMS  measures Medicaid  and CHIP improper payment rates using  
a 17-state rotation so that each state is reviewed once every  three years.   
 
 
  53 
  In light of changes to  the way states adjudicate beneficiary  eligibility for Medicaid and CHIP  
under the  current  law, in August 2013 and October 2015, CMS released guidance announcing 
temporary changes to PERM eligibility reviews.  For FYs 2015 through 2018, CMS did not  
conduct the  eligibility measurement component  of PERM in order to update the eligibility 
component  measurement methodology and related PERM program regulation.  In place of these  
PERM eligibility reviews, all states are required  to conduct eligibility review pilots  that provide  
more targeted, detailed information on the accuracy of eligibility determinations  to: provide  
state-by-state programmatic assessments of the performance of new processes and systems in  
adjudicating  eligibility;  identify strengths and weaknesses  in operations and systems leading to 
errors; and test the effectiveness of corrections  and improvements in reducing or eliminating 
those errors.  During this time, for the purpose of computing the overall national improper  
payment rate, the Medicaid and CHIP eligibility component improper payment rates are held  
constant at  the FY 2014 national rate of 3.11 percent and 4.22 percent, respectively.  In July 
2017, CMS issued a final rule (CMS-6068-F) that  made changes to the eligibility measurement  
component  of the PERM program, and the eligibility measurement component will resume  for  
reporting in 2019.  
 
In the Department of Health and Human Services FY 2017 Agency Financial Report (AFR), 
CMS reported  the national Medicaid improper payment rate that  is based on measurements 
conducted in FYs 2015, 2016, and 2017.  The FY 2017 national Medicaid improper payment rate  
is 10.10 percent, representing $36.73 billion in gross improper payments.  The FY 2017 national  
improper payment rates  by component  are  12.87 percent  for Medicaid FFS, and 0.30 percent  for  
Medicaid managed care.  As noted above, the Medicaid eligibility component improper payment  
rate is  held constant  at the FY 2014 reported rate  of 3.11 percent.  The Medicaid improper  
payment rate decreased from 10.48 percent in FY 2016 to 10.10 percent in FY 2017.  
 
Since FY 2014, the Medicaid improper payment rate has been driven by errors due  to state non
compliance with provider screening,  enrollment, and National Provider Identifier (NPI) 
requirements.  Compliance with provider screening, enrollment, and NPI requirements for the 17 
states measured in FY 2017 improved and CMS saw a decrease in improper payments related to  
non-compliance.  The Medicaid FFS improper payment rate for non-compliance with these 
requirements decreased for these states from 5.74 percent in 2014 to 4.03 percent in 2017.  
Although the 17 states reviewed this year had better compliance results compared to their  
previously measured cycle, non-compliance with the provider screening, enrollment, and NPI  
requirements is still a major contributor to  the improper payment rate.  Additionally, improper 
payments due to no or  insufficient medical documentation increased in FY 2017. 
  
CMS also reported in the FY 2017 AFR the national CHIP improper payment rate that  is based 
on measurements conducted in FYs  2015, 2016, and 2017.  The FY 2017 national CHIP  
improper payment rate  is 8.64 percent, representing $1.24 billion in gross improper payments.  
The national improper payment rates  by component  are  10.29 percent  for CHIP FFS and 1.62 
percent  for  CHIP  managed care.  As noted above, the CHIP eligibility  component improper 
payment rate is held constant  at the  FY 2014 reported rate of 4.22 percent.  The CHIP improper  
payment rate increased from 7.99 percent  in FY 2016 to 8.64 percent in FY 2017. 
 
The increase was due to continued state difficulties coming into compliance with the  provider  
screening, enrollment, and NPI requirements described in Medicaid above.  The CHIP  FFS  
 
  54 
  improper payment rate for non-compliance with these requirements increased for these states 
from 4.69 percent in 2014 to 5.73 percent in 2017.  A higher percentage of CHIP providers  are  
not enrolled  in Medicare and, therefore, there are more CHIP  providers where states are not able 
to rely on Medicares  screening in lieu of conducting state screening.  Additionally, there was an 
increase in managed care improper payments in FY 2017 due to recipients that aged out of  
CHIP, yet continued to receive medical coverage.  
 
Medicaid 1115 Financial Oversight  
 
The Medicaid  section 1115 demonstration is an increasingly important vehicle for state  
innovation in Medicaid and CHIP program development, expansion and financing.  Three 
quarters of states operate at least one  1115 demonstration, and there  are approximately 54 active  
demonstrations for which federal outlays an estimated $109 billion in FY 2015.  The Medicaid  
portfolio of  section 1115 demonstrations continues to grow in number, federal outlays, and 
policy importance and complexity.  CMS has committed additional staff and reorganized  section 
1115 demonstration work to develop and implement a more robust approach to monitoring and 
oversight of these demonstrations.   
 
CMS staff activities in 2017 included  implementing a new budget neutrality calculation policy  
under which projected expenditures  that are compared to estimated demonstration costs are now  
based on more current  and realistic expenditure growth assumptions.  CMS also implemented   a 
new  uncompensated  care (UC) pools policy  that resizes the pools to the extent  the pool has been  
substituting for payment that could be provided by Medicaid through payment of appropriate  
rates  and ongoing participation on a  taskforce to develop a phased approach to building standard 
operating procedures  and reporting tools to strengthen section 1115 fiscal and program  
monitoring, including a  new budget neutrality workbook to support state  reporting and CMS  
review and a demonstration monitoring template for states.  
 
CMS staff continue  to work closely with technical assistance contractors  to build core  
performance measurement sets for high priority demonstrations.  They also work with states to 
include  these measures in the demonstration design and reporting requirements, and then monitor  
demonstration progress  against them.  The same staff continue to support  a CMS IT contractor  
further advance an information management system that is beginning to strengthen federal  
monitoring and analysis of performance trends across states  and over time.  The third version of  
this system was recently released and staff are being trained  on it.     
 
Medicaid/CHIP Financial Management Project  
Under the Medicaid/CHIP Financial  Management Project, funding specialists, including 
accountants  and financial analysts, worked to improve CMS financial oversight of the  Medicaid 
Program and CHIP.  In FY 2017 through the continued efforts of these  specialists, CMS  
removed an estimated $2.7 billion (with approximately $647 million recovered and $2.1 billion 
resolved) of approximately $9.5 billion identified in questionable Medicaid costs.  
 
Furthermore, an estimated $457 million in questionable reimbursement was actually averted due  
to the funding specialists preventive  work with states  to promote proper state Medicaid  
financing.  The funding specialists  activities included reviews of proposed Medicaid state plan  
 
  55 
  amendments that related  to reimbursement; development of financial management reviews;  
research regarding state Medicaid financing policy and practices; collaboration with states to  
resolve  the  Medicaid and CHIP portions of the  A-133 Single State audits; and identification of  
sources of the non-Federal share of Medicaid program payments to ensure proper financing of  
Medicaid program costs.  
  
Extend Work in Medicare Parts C and D  
 
CMS is committed to expanding program integrity activities in capitated,  managed care 
programs in Medicare.  For example, CMS has strengthened oversight of Medicare Part C and 
Part D plan sponsors by conducting audits  that detect whether plans are delivering the  
appropriate  health care  services and medications  for which they are being paid.  
 
National Benefit Integrity  Medicare Drug Integrity Contractor (NBI MEDIC)  
The NBI MEDIC has national jurisdiction  related to Part C and Part D benefits  and is responsible  
for processing and tracking all Part  C and Part  D complaints, requests for information, and 
referrals to  law enforcement, and  conducting proactive data  analysis and investigations. 
 
In the first nine months of FY 2017,  NBI MEDIC Part C referrals resulted in sentences ordering  
restitution of $2.7 million according to FY 2017 notifications from law enforcement.  In 
addition, in the  first nine months of FY 2017, NBI MEDIC Part D referrals resulted  in  sentences 
ordering restitution of $38.0 million and $2.5 million in fines  according to FY 2017 notifications  
from law enforcement.   The NBI MEDIC was responsible for assisting  the HHS-OIG and the  
Department of Justice (DOJ), through data analysis and investigative  case  development, in 
achieving arrests, indictments, and convictions, from FY 2017 notifications.  As a result of the  
NBI MEDICs data analysis projects including  Part D plan sponsor self-audits, HHS recovered 
$5.0 million in the first nine months of FY 2017 from Part D sponsors.   
 
Medicare Parts C and D Marketing  Oversight    
 
CMS takes compliance action against  Part C, Part D Prescription Drug Plans (PDPs), Section  
1876 Cost Plans, and Medicare-Medicaid Plans (MMPs) that  fail to send  timely and accurate 
Annual Notice of Change (ANOC)/Evidence of Coverage  (EOC) documents to Medicare  
enrollees.  Both documents provide  Medicare enrollees with  vital information  that can impact 
their ability to make informed choices concerning their Medicare health care and prescription 
drug options.   
 
Program Audit  
 
CMS conducts program  audits of Part C and Part  D plan sponsors to evaluate their delivery of  
health  care services and  medications to beneficiaries.  In order to conduct  a comprehensive audit  
of a sponsors operation and maximize Agency resources, program audits in 2017, as well as  in 
prior years,  occur at the  parent organization level.  
 
Sponsors have all program areas audited when possible, unless a protocol  was not applicable to 
their operation.  Sponsors who have deficiencies  cited in their audit  report are required to correct  
 
  56 
  all deficiencies and undergo validation to ensure  issues have been corrected before the program  
audit can be  closed.  
 
In general, program audits give CMS reasonable assurance that sponsors deliver benefits in  
accordance with the terms of their contract and  plan benefit  package.  However, CMS also has 
the authority to take  enforcement actions, up to and including termination, if warranted, for  
findings that involve direct beneficiary harm or the potential  to result in such harm.  
 
CMS has  greatly  increased the level  of transparency with respect to  audit  materials, the 
performance of audits, and the results of those audits, including any enforcement actions that  
may result.  CMS  believes that program audits and consequences of possible enforcement actions  
are continuing to drive improvements in the  industry and are  increasing sponsors compliance  
with core program  functions in the Part C and Part D program.    
 
Compliance and Enforcement  
CMS has the authority  to take enforcement or contract actions when CMS determines that  a Part  
C or Part D plan sponsor either:  
 
 	  Substantially fails to comply with program and/or contract  requirements,  
 	  Is carrying out its  contract with CMS in a manner that is inconsistent with the efficient  
and effective administration of the  Medicare Part C and Part D program  requirements, or  
 	  No longer substantially  meets the applicable conditions of the Medicare Part C and  D  
program.  
 
Enforcement and contract actions  include:  
 
	   Civil  money  penalties (CMP), 
	   Intermediate sanctions (i.e., suspension of  marketing, enrollment, payment), and 
	   Terminations. 
 
Part C Benefits Review  Activities  
 
Each year,  CMS requires Part C  organizations  to submit bids and plan benefit packages detailing  
how their Part C plans will provide  coverage  to beneficiaries  for the following year.   About 
4,000 Part C plans submitted plan benefit packages and project to cover  more than 20 million 
beneficiaries in contract  year 2018 Bid and plan benefit submissions are reviewed to ensure they 
do not discriminate against beneficiaries and comply with CMS regulations.  Plan requirements 
are established and communicated annually and the following reviews are performed:  
 
	   Low Enrollment PlansEach year, CMS evaluates existing  Part C  plans that have low  
total enrollment to  make sure these plans are sustainable over time and protect  
beneficiaries from selecting a potentially unsustainable plan.  
 
	   Total Beneficiary Cost (TBC)Evaluate increases in beneficiary cost sharing or
  
decreases in  plan benefits from one year to the next.  This evaluation makes sure
  
 
  57 
  beneficiaries receive value in their benefit package selection  and protects them  from large 
increases in  out of pocket costs.  
 
	   Maximum  Out of Pocket Costs (MOOP)This review examines the  maximum out-of
pocket costs that face beneficiaries who enroll  in  Part C  and protects beneficiaries from  
very high out of pocket  medical costs. 
 
	   Meaningful DifferenceThis review helps to reduce potential confusion for beneficiaries 
when they are choosing between multiple plan options.  By conducting this review, CMS  
helps to protect meaningfully different choices between plans and prevent  Part C  
organizations from offering similar plans in the same geographic area.  
 
	   Service Category Cost-Sharing StandardsEach year, CMS evaluates the cost-sharing 
plans include in their bids and plan benefit packages to make sure the plans do not exceed 
established  limits and are not discriminatory.    
 
	   Actuarial EquivalenceCMS also reviews bids to  make certain the estimated cost  
sharing presented in the  bid is actuarially equivalent to the cost-sharing levels in Original  
Medicare.   CMS currently examines four categories for actuarial equivalence and this 
review helps guard against plans  imposing discriminatory cost-sharing on beneficiaries.  
 
	   Supplemental BenefitsThere are several reviews conducted in this area, including  a 
review of supplemental benefits that help make sure that any optional supplemental  
benefits offered are of reasonable value, as well  as a review to  make  certain the benefits 
are offered in a non-discriminatory fashion.  
 
All of these  reviews are  conducted in careful coordination with CMSs Office of the Actuary and  
the Medicare Drug Benefit Group to  make certain that plans make all necessary changes to their 
bids and plan benefit packages.  These  reviews are conducted between early June  and August  
and involve  communications with Part C organizations  to correct  issues  and resubmit their bids  
and plan benefit packages as necessary.  Following bid and plan benefit approval, Part C  
organizations must complete the contracting process with CMS and  may market to beneficiaries 
beginning October 1 of each year.  Part C  benefits requirements and review processes are 
intended  to  protect beneficiaries from discrimination and to make sure that  Part C plans provide  
value  to enrollees.  
 
Part C Encounter Data Processing System Contract  
 
The Part C  Encounter Data Processing System (EDPS) is currently being maintained and 
modified in accordance  with the final FY 2009 inpatient  prospective payment system (IPPS)  
rule.  In  that rule, CMS revised regulations  to clarify that CMS has the authority  to require Part C  
organizations to submit encounter data for each item and service provided to Part C plan 
enrollees.   Consistent with this authority, CMS is  requiring Part C organizations  to submit 
encounter data for dates of service January 3, 2012 and later.  Part C organizations are required 
to submit data for all institutional, professional, and DME services provided to Part C Medicare  
Advantage plan enrollees on or after  that date.  To date, CMS has collected over 2.7 billion 
encounter data records (EDRs).    
 
  58 
   
The encounter data detail each  item and service provided  to enrollees of Part C  
organizations.  These records are comparable in  format and detail to claims submitted to the  
MACs by FFS providers.  The encounter data collected by  EDPS will allow CMS to recalibrate  
the risk adjustment payment  model, so that Part  C payments more accurately  reflect  the patterns 
of care and the predicted costs of diseases for Part C enrollees.  Recalibrating the model on Part  
C diagnoses  and expenditures, rather  than using the FFS experience, will  result  in payments that  
are more accurate to Part C organizations.   CMS is also able to use the information  to evaluate  
service utilization,  assess quality of care, and  assess the performance of Part C organizations.  
 
Beginning with payment year 2015, CMS began to use encounter data  as an additional source of  
diagnoses to risk adjust  payments to Part C organizations.  For payment year 2016 and 2017 
CMS continued that  transition  and will ultimately use encounter data as the sole source of plan-
submitted diagnosis information.   
 
Encounter Data Oversight and Integrity Activities  
  
Since complete and accurate encounter data are  integral to risk adjustment payments and other  
uses of encounter data, CMS has developed an encounter data oversight and integrity plan to 
support efforts to  ensure the completeness and accuracy of the MA data that are collected by  
CMS.  This  plan is  aligned with direction provided by the GAO and lays out an incremental  
approach  to  assess and drive encounter data submission and quality over  multiple years. Major  
components of the plan include: outreach, analysis, monitoring, and compliance of MAOs  
encounter data submissions. 
 
Improper Payment Rate Measurement and Increased Accountability  in  Medicare Advantage 
(Part C) and Medicare Prescription  Drug Benefit Program (Part D)  
 
Each year,  CMS publishes a national improper  payment rate for Medicare Part C and Part D in  
accordance with the IPIA, as amended by IPERA and IPERIA.   
 
The Part C gross improper payment estimate reported for FY 2017 (based on the 2015 payment  
year)  is 8.31 percent or $14.35 billion.  The Part C  methodology estimates improper  payments 
resulting from errors in  beneficiary risk scores.   The primary component  of  most beneficiary risk 
scores  is based on clinical diagnoses submitted by the plan.  If the diagnoses submitted to CMS  
are not supported by medical  records, the risk scores  will  be inaccurate and  result  in payment  
errors.  The Part C estimate is based  on  medical record reviews conducted under CMS annual  
National Risk Adjustment Data Validation (RADV) process, where CMS identifies  unsupported  
diagnoses and calculates corrected  risk scores.    
 
In an effort to improve the Part C improper payment rate, CMS has implemented four  key 
specific corrective actions described  below:   
 
	   Contract-Level Audits:  Contract-level RADV audits are CMS primary corrective  action  
to recoup overpayments.  RADV verifies, through  medical record review, the accuracy of  
enrollee diagnoses submitted by Part C organizations for risk adjusted payment.  CMS  
expects that  payment recovery will have a sentinel effect on the quality of risk adjustment  
 
  59 
  data submitted by plans  for payment, as contract-level RADV audits increase the 
incentive for Part C organizations to submit valid and accurate diagnosis information, and 
encourage Part C organization to self-identify, report, and return overpayments they have  
received.  Payment recovery for the  pilot  audits  has been completed, totaling $13.7 
million ($5.4 million was recovered in FY 2014, $5.0 million in FY 2013, and $3.4 
million in FY 2012).  After completing the pilots, contract-level RADV audits of  
payment years 2011 through 2013 are in various  stages of the audit process.  For  
example, payment year  2013 audits  continued in FY 2017, and CMS will initiate  
payment year 2014 audits in FY 2018.  Furthermore, CMS expects to conduct recoveries 
for the 2011 and 2012 contract-level RADV audits (which began in FY 2014 and FY  
2015, respectively) in FY 2018, which will be  the first reviews to recoup funds based on 
extrapolated estimates.    
  
 	  Overpayment  Recoveries  Related to Regulatory Provisions:   As required by the Social  
Security Act, CMS regulations specify MA organizations report and return overpayments  
that they identify.  In FY 2017, MA organizations reported and returned approximately 
$78.7 million in self-reported overpayments.  CMS believes that this  requirement will 
reduce  improper payments by encouraging MA  organizations to submit accurate payment  
information. 
 
	   Recovery Audit Contractor:   Section 1893(h) of the Social Security Act required the  
implementation of a Medicare Part  C RAC program. CMS previously published a  
solicitation for comments and, in 2014, issued a  request for proposal; however, no 
proposals were received. In 2015, CMS issued a request for  information and reviewed 
comments received. Currently, CMS is exploring how to fit the Medicare Part C RAC  
program into the larger  Medicare Part C program integrity efforts, and examining 
refinements that can  be  made to the operations of RACs such that  their activities do not  
excessively burden  plans.  
 
	   Training:  Historically,  CMS has conducted fraud, waste, and abuse in-person and 
webinar training sessions for MA plans. Only one training session for MA plans was 
conducted in FY 2017 due to procurement activities  that were underway and the  
termination of  contractor support in mid-FY 2017. In late FY 2017, CMS procured a new  
contractor to support this initiative and will resume training  in  FY 2018.  
 
The Part D gross improper payment estimate reported for FY 2017 (based on CY 2015) is 1.67 
percent or $1.3 billion, which represents payment error related to prescription drug event  (PDE)  
data.  CMS measures the inconsistencies between the information reported on PDEs and the  
supporting documentation submitted by Part D sponsors: prescription record hardcopies (or  
medication order, as  appropriate), and detailed claims information. Based on these  reviews, each  
PDE in the audit sample is assigned a gross drug cost error, which is simulated onto a  
representative sample of beneficiaries to determine the Part  D improper payment estimate.   
 
In an effort to improve the Part D error rate, CMS has implemented three key specific corrective  
actions described below:    
 
 
  60 
  	   Training:  CMS continued its national training sessions for Part D sponsors on payment  
and data submission.  For example, CMS continued to offer training sessions with 
detailed instructions for Part D sponsors submitting documentation to support their  
Prescription Drug Events (PDEs) as part of the  improper payment estimation process.  
Historically, CMS has also conducted fraud, waste, and abuse in-person and webinar  
training sessions for Part D sponsors.  Only one fraud, waste, and abuse training session 
for Part D  sponsors was conducted in FY 2017 due to procurement activities  that were  
underway and the termination of contractor support in mid-FY 2017.  In late FY 2017, 
CMS  procured a new contractor to support this initiative, and will resume trainings  in FY  
2018. 
 
	   Outreach:   CMS continued formal outreach to plan sponsors for invalid/incomplete  
documentation.  CMS distributed Final Findings  Reports to all plan sponsors  
participating in the national payment error  estimate.  This  report provided feedback on 
the number of PDE records successfully validated, and, if applicable, identified PDEs  
that CMS had determined were not substantiated by supporting documentation and 
therefore found to be in error.  
 
	   Overpayment  Recoveries  Related to Regulatory Provisions:   As required by the Social  
Security Act, CMS requires that Part  D sponsors report and return overpayments that they 
identify.  CMS believes the overpayment statute  and regulation contribute to increased 
attention paid by Part D sponsors to data accuracy.  In FY 2017, Part D sponsors reported 
and returned approximately $2.8 million in self-reported overpayments. 
 
CMS Marketplace Program Integrity  
 
Program integrity is an  increasing concern in  the Health Insurance Exchanges  both in the  
Federally Facilitated Exchange (FFE) and the State-Based Exchange (SBE).  In FY 2017, CMSs  
exchange integrity team performed investigations work to identify areas  of fraud and abuse in the  
Exchanges to include pilots to test  the value of consumer complaints and identify leads that  
could result in administrative  action, test the value of  monitoring the  license status of insurance  
agents once  they register with CMS, and identify areas  that  appear to have a higher  risk of fraud 
and abuse.  CMS will continue  these  activities in FY 2018, including implementing an Exchange  
Program Integrity Contractor (EPIC) to facilitate  analysis and investigations.  
 
Provide Greater Transparency into Program  Integrity Issues within Medicare and  
Medicaid  
 
CMS is dedicated to providing greater transparency into program integrity issues through 
education, outreach, partnership, strategic  communications, and data releases.  CMS is well  
positioned to work with its partners and stakeholders to share best practices and lessons learned  
in program integrity.  Increased transparency  and accountability  ensure program efficiency and  
effectiveness.  
 
 
  61 
  Provider Outreach and Education  
 
One of the goals of  CMSs provider education and outreach is to reduce the Medicare  and 
Medicaid improper payment rates by giving Medicare and Medicaid providers the  timely and 
accurate information they need to bill correctly the first  time.  The Medicare FFS claims 
processing contractors, known as Medicare Administrative Contractors (MACs), educate 
Medicare providers and  their staff about Medicare policies and procedures, including local  
coverage policies, significant  changes to the Medicare program, and issues identified through 
review of provider  inquiries, claim submission errors, medical review data, and Comprehensive  
Error Rate Testing program data.  The MACs  use a variety of strategies and communication  
channels  to offer Medicare providers and suppliers a broad spectrum of information about the  
Medicare program, including CMS-developed materials  and contractor-developed materials.  
 
Healthcare Fraud Prevention Partnership (HFPP)  
 
In July 2012, the Secretary of HHS and the U.S. Attorney General  announced a ground-breaking 
partnership to fight fraud, waste, and abuse across the health care system.  The HFPP is a  
voluntary, public-private partnership  consisting of the Federal Government, state agencies,  law  
enforcement, private health insurance plans, and health care  anti-fraud associations.  The overall  
mission of the HFPP is to position itself as a leading body of empowerment for the healthcare  
industry to reduce fraud, waste, and abuse by:    
 
	   Providing an unparalleled cross-payer data source, representing the full spectrum of the  
healthcare industry, to  enable the performance of sophisticated data analytics and  
information-sharing for the benefit  of all Partners;  
	   Achieving meaningful  participation by Partners  and establishing strategic collaborations  
with diverse stakeholders; and  
	   Leveraging Partnership  resources and relationships to generate real-time, comprehensive  
approaches that materially impact efforts to  reduce healthcare fraud, waste, and abuse.  
 
In FY 2017, the HFPP reached a membership level of 85 Partner organizations, an increase of 23 
percent since FY 2016. Membership is comprised of nine federal  agencies, 12 associations, 44 
private payers, and 20 state and local partners.  
 
In FY 2017, the HFPP expanded its study methodology to collect frequently updated data, 
including personally identifiable information (PII) and protected health information (PHI).  Over 
5 billion professional claim lines were submitted by Partners in FY 2017 for the purpose of  
conducting cross-payer  analyses, and at the  end of FY 2017, the HFPP had commenced or  
completed 15 studies  since program inception. These cross-payer studies enable the HFPP to  
proactively  identify vulnerabilities  in real time, significantly increasing the value of membership  
to all Partner organizations. The HFPP is currently using professional claims but is planning to 
expand to collect institutional, pharmacy, and dental claims in the future.  
 
The HFPP uses a diverse variety of approaches to identify vulnerabilities in Partner data. These 
methods include standard searches to detect anomalies that  may implicate the existence of fraud,  
waste, and  abuse; scanning of incoming claims information against  existing data sets, such as  
lists of deactivated providers; creation of reference files that list providers that may be suspect  
 
  62 
  based on known risks; and creation of informational content to support  stakeholders in 
addressing vulnerabilities (e.g., white papers). Some studies  initiated in FY 2017 include the  
identification of:  
 
	   Services billed under an impossible  day scenario (including evaluation and 
management services, psychotherapy services, and  physical and occupational therapy  
services),  
	   Referring providers with no prior relationship treating  that patient,  
	   Excessive holiday and weekend billing, and  
	   Deactivated providers that continue to submit claims  for payment.  
 
Additionally, in January 2017, the HFPP released a White Paper entitled Healthcare Payer  
Strategies to Reduce the Harms of Opioids: The Healthcare Fraud Prevention Partnerships 
Commitment to the Management of  Opioid Misuse and Opioid Use Disorder. The White Paper  
describes best practices for serious consideration  by all healthcare payers and other  relevant  
stakeholders to effectively address and  minimize the harms of  opioids while ensuring  access to  
medically-necessary therapies and reducing fraud, waste, and  abuse.   
 
Open Payments  
 
Open Payments is a statutorily required, national transparency program  designed to provide the  
public with information regarding the financial  relationships between the health  care industry  
(applicable  manufacturers and group purchasing organizations  (GPOs), including pharmaceutical  
and medical device manufacturers) and health  care providers (physicians and teaching  
hospitals).   Open Payments data includes payments and other transfers of value (such  as gifts,  
honoraria, consulting fees, research grants, and  travel reimbursements) that drug or device  
companies provide  to physicians and teaching hospitals, as well as the ownership and investment  
interests held by physicians or their  immediate family  members in these  companies.   
 
The Department of  Health and Human  Services (HHS)  is required  to collect and display this  
information, which is self-reported by industry, annually on a public website.  The public can 
search, download, and evaluate the  reported data.  
In Fiscal Year 2017, CMS published $8.18 billion in payments and ownership and investment  
interests that were made from applicable manufactures and GPOs to physicians and  teaching  
hospitals.  This amount is comprised of 11.96 million total  records attributable to 631,000 
physicians and 1,146 teaching hospitals.   Payments in the three major reporting  categories  
included:  
	   $2.80 billion in general (i.e., non-research related) payments, 
	   $4.36 billion in research payments, and 
	   $1.02 billion of ownership or investment interests  held by physicians or their immediate  
family members  
 
Over the course of the  Open Payments program since 2014, CMS has published 40.77 million  
records, accounting for  $24.94 billion in payments and ownership and investment interests.   
 
 
  63 
  Administration for Community Living  
 
The mission of  the Senior Medicare Patrol  (SMP) program is to empower and assist  Medicare 
beneficiaries, their families, and caregivers  to prevent, detect, and report health care fraud, 
errors, and abuse through outreach, counseling, and education.  In FY 2017, HHS allocated    
$18 million in HCFAC  appropriations, plus an additional $571,899 in carryover funding from  
FY 2016 to the Administration for Community Living (ACL) to support SMP program  
infrastructure and provide grants to SMPs in 53 states and  territories.   
 
Until FY 2016, ACL received funding from a separate Congressional appropriation (the Older  
Americans  Act) to support SMP base grants.  However, the Consolidated Appropriations Act of  
2016 required the SMP program to be fully funded by HCFAC beginning in FY 2016.  In FY 
2017, ACL  was allocated $18  million from CMSs discretionary HCFAC  appropriation to  
support the  SMP program.    
 
SMP Project Activities and Outcomes  
 
ACL uses the majority of its HCFAC allocation to fund SMP  projects in states and territories  
include  the  District of Columbia.  In FY 2017, ACL awarded $15.48 million in grant  funding to 
SMPs nationwide, an increase of 5  percent over  FY 2016.  Each SMP grantee receives a 
standard, base amount of funding to support the  operation of their project, as well  as an  
additional, variable amount of funding based on the number of Medicare  beneficiaries residing in 
the state and the rural areas of the state.   
 
SMP projects use this funding to educate and  empower Medicare beneficiaries to prevent, detect,  
and report Medicare fraud,  errors, and abuse.  ACL  (and SMPs) have also  recently  partnered 
with CMS to identify potential fraud trends  related to the new Medicare cards CMS will begin  
issuing to  all beneficiaries  starting in April 2018.   In FY 2017, SMPs conducted 2,408 group 
outreach and education events and 4,167 individual interactions  to educate beneficiaries about  
the new Medicare cards  and related scams.  To date, SMP projects have reported new Medicare 
card-related  scams in four states.  
 
Each year,  the HHS Office of the Inspector General (HHS-OIG) completes an annual  
performance report on the SMP projects.  In CY 2016, the 53 SMP projects had a total  of 6,157 
active team members (including volunteers, staff, and partners) who contributed more than 
413,395 hours of work in support of the SMP program.  These team  members conducted 26,307 
group outreach and education events  to teach beneficiaries how to prevent, detect, and report  
Medicare fraud, errors, and abuse, reaching an estimated 1.5 million people.  In addition, the  
projects had 195,386 individual  interactions with, or on behalf  of, beneficiaries  in order  to help 
resolve instances of suspected fraud,  errors, or abuse.  For 2016, the SMP projects reported 
$163,904 in cost avoidance on behalf of Medicare, Medicaid, beneficiaries, and others. Savings  
to beneficiaries and others totaled $53,449.  Expected Medicare recoveries  totaled $2,672.  
Further,  two projects provided information to Federal prosecutors that resulted  in settlements  
totaling an additional $9.2 million in expected Medicare recoveries.  
 
Since SMPs inception, the program  has educated over 36.6 million beneficiaries  through  
361,000 group education and outreach sessions.   The primary focus of these sessions is on  
 
  64 
  education, prevention, and teaching beneficiaries how to protect themselves and avoid fraud in 
the first place.  This is the true value of the SMP program.  However, the impact of these 
education and prevention activities is  extremely difficult to quantify in dollars and cents.  As  
HHS-OIG indicated in their June 2017 report on the SMP program:  
 
We note that the projects may not be receiving full credit for recoveries, savings, and  cost  
avoidance attributable to their work.  It is not always possible to track referrals  to 
Medicare contractors or law enforcement from beneficiaries who have learned to detect  
fraud, waste, and abuse from the projects.  In addition, the projects are unable to track  
the  potentially substantial savings derived from a sentinel effect whereby Medicare  
beneficiaries scrutiny of their bills reduces fraud and errors.    
 
ACL recognizes  the importance of  measuring the  value of the  SMP program impact to the  fullest 
degree possible.  To that  end, ACL awarded a three-year research grant to Tufts University to  
measure the value of SMP prevention activities.   Tufts designed a research  methodology,  
collaborated with SMPs to pilot the  methodology, and collected data about the health care fraud 
knowledge, attitudes, and behaviors  of beneficiaries both before and (three to six months) after  
attending SMP education sessions.   Preliminary results appear to show it is possible  to quantify 
and demonstrate  the value of SMP prevention efforts,  however  further research  and analysis is 
needed.  In FY 2018, ACLs evaluation contractor will begin follow-up work to attempt to 
replicate and expand upon these results.  
 
Despite  the factors  that have limited ACLs ability to quantify the value of the SMP program in 
preventing, identifying, and reporting health care  fraud, HHS-OIG has documented over $124.6 
million in savings attributable  to the  program as a result of beneficiary complaints since its  
inception in 1997.  
 
SMP Infrastructure and Program Support   
 
SMP Resource Center  
In FY 2017, ACL awarded a new, three-year grant  to the  National SMP  Resource Center.  The  
SMP Resource Center has provided technical assistance, support, and training to the SMP  
projects since 2003.  The goal of the  Center is to provide professional expertise and technical  
support, serve as an accessible and responsive central source  of information, maximize the  
effectiveness of the SMP projects in health care  fraud outreach and education, and ensure a fully  
consolidated national approach to  reaching Medicare beneficiaries.  The Center has also been  
instrumental in supporting ACL efforts to forge national visibility for the  SMP program.   
 
 
SMP Information and Reporting System (SIRS)   
In FY 2016, ACL implemented a new SMP data reporting system (SIRS) to support  the evolving 
needs  to the SMP  program.  The previous SMP reporting system, SMART FACTS, had been in 
operation for seven years and was at  the end of its functionality.  SIRS is expected  to last at least  
10 years and provides SMPs with advanced reporting features and data  analytics to help them  
better manage their programs.  In FY 2017, ACL  worked with SMPs to prioritize and implement  
ongoing system improvements to ensure SIRS continues  to meet their needs and best support  
their programs.   
 
  65 
   
Target Population Grants  
The goal of the SMP program is to provide education to all Medicare beneficiaries.  However, 
there  are specific populations that are historically hard to reach.  In FY 2015, ACL awarded four  
grants  to organizations  that initiated seventeen-month projects to increase awareness,  
empowerment, and actions to prevent health care fraud amongst several generally underserved 
populations, including Medicare beneficiaries under age 65, Lesbian, Gay, Bisexual  and 
Transgender (LGBT) beneficiaries,  Hispanic and Latino beneficiaries, and Asian American and 
Pacific Islander beneficiaries.  The goal of these grants was  to develop new, efficient, and 
sustainable approaches  for  ensuring high-quality, culturally competent service delivery to help  
educate consumers to prevent health  care fraud.   These projects concluded in FY 2017.  
 
SMP Customer Satisfaction Survey   
In late FY 2015, ACL issued a contract to develop a customer satisfaction  survey for the SMP  
program.  This will be the first national survey to ascertain the quality and effectiveness of the  
services provided by SMP and to determine if beneficiaries are receiving accurate, relevant and  
timely information.   While  the SMP  program currently tracks output and outcome  measures such 
as number of SMP team  members, group outreach and education events, individual interactions, 
and savings, customer satisfaction is  not one of them.  As a result, there is no current  
understanding of the link between the quality of the information received and the likelihood to 
avoid health care fraud, errors, and abuse. 
 
The  SMP Customer Satisfaction Survey received OMB approval in August 2017.  Survey 
implementation will begin in late 2017 and continue  over  a three-year period. Each SMP project  
will be  surveyed during one of the three years.  The results from the survey will be used to 
measure satisfaction among individuals who attend SMP group education sessions  and determine 
how the program can be improved to provide better service  to Medicare beneficiaries. Survey 
results will  be available at the national level, as well as for each individual SMP project.  
 
Office of the General Counsel   
 
In FY 2017, the Office of the General Counsel (OGC) was allocated $7 million in HCFAC  
funding by HHS to supplement OGCs efforts to support program integrity activities.  Many of  
OGCs efforts were focused heavily on program  integrity review, in which OGC  reviews CMSs 
programs and HCFAC activities in order to strengthen them against potential fraud, waste, and 
abuse.  OGC also continued its  active litigation role  in order to assist in the recovery of program  
funds.  During FY 2017, OGC  was involved in a wide range  of HCFAC efforts that resulted in 
Government recoveries of over $1.8 billion in judgments, settlements, or other  types of  
recoveries,  savings, or  receivables as described elsewhere in  this report.      
 
HEAT  
During FY 2017, OGC  was involved in HEAT initiatives and worked closely with other HEAT  
members to combat fraud, waste, and abuse in  the Medicare and Medicaid programs by  
providing advice on the  myriad legal issues presented as  the Federal Government implements 
innovative anti-fraud programs throughout the country.  OGC assisted DOJ in pursuing both 
criminal and civil cases involving individuals and entities  seeking to defraud the Medicare and 
Medicaid programs and  to defend federal  court  challenges that were brought as a result of HEAT  
 
  66 
  initiatives.  OGCs involvement in HEAT also included advising CMS on provider  and supplier  
revocations, payment suspensions, and recoupments, and defending the administrative  appeals  
that resulted.   
 
FCA and Qui Tam Actions  
OGC supported DOJ in assessing FCA qui tam actions filed under the FCA by interpreting 
complex Medicare and  Medicaid rules and policies to  assist  DOJ in discerning which allegations  
were program violations and should be pursued, and helping DOJ focus Federal Government  
resources on  matters most likely to result in a recovery of  money for the  Government.  When 
DOJ filed or intervened in a FCA  matter, OGC provided significant litigation support, including 
assisting DOJ in evaluating the merits of the allegations, interviewing and preparing witnesses, 
and responding to often extensive requests for documents and information.  OGC also expended 
considerable resources in responding to requests for information and witness testimony in 
declined qui tams that were litigated by relators.  In FY 2017, OGC participated in FCA and 
related matters that recovered over $1.6 billion for the Federal Government.  The types of FCA  
cases in which OGC worked collaboratively with DOJ included: provider  billing for services not  
rendered, marketing activity by device manufacturers  that  resulted in payment for items that do 
not qualify as payable durable medical equipment (DME), physician self-referral violations,  
billing by skilled nursing facilities for services that were not reasonable or  necessary, improper  
approval of  prior authorization requests, incident to and clinical  supervision violations, 
provider upcoding, false certification  of electronic health  record capabilities, and Medicare 
Advantage matters, especially relating to risk  adjustment issues.    
 
Provider/Supplier Suspensions and Enrollment Revocations or Denials  
Payment suspensions play a critical role in protecting against  the abuse of  program funds.  OGC  
continuously advises CMS on whether to suspend payments to Medicare providers and suppliers  
and defended the suspensions when challenged through the appeal process.  In FY 2017, OGC  
attorneys were involved in a myriad of suspension and recoupment actions, which involved 
suspected fraudulent billings by many different segments of the health care industry, including 
DME suppliers, physicians, and diagnostic testing facilities.   OGC also represented CMS when  
providers or  suppliers appealed denials of enrollment or revocation actions.  In FY 2017, OGC  
represented CMS in appeals before the HHS Departmental Appeals Board and in U.S. district  
court.    
 
Part C and Part D Compliance  
During FY 2017, OGC continued to provide extensive advice to CMS on a variety of Part C and 
Part D-related contract compliance issues, including identifying enforcement options against  
plan sponsors that  are noncompliant or violate program rules, such as the  Marketing Guidelines.  
OGC reviewed compliance-related correspondence that CMS issued to Part D sponsors and Part  
C plans in the form of  warning letters, corrective action plan  letters,  intermediate sanctions, CMP  
notices, and non-renewal or termination notices.   
 
Civil Monetary Penalties  
CMS has the responsibility of administering numerous CMP provisions enacted by Congress to 
combat fraud, waste, and abuse by enforcing program compliance and payment integrity.  In FY  
2017, OGC  provided legal advice to CMS regarding the development and imposition of CMPs  
and defended CMS in many administrative appeals and judicial  litigation resulting from these  
 
  67 
  cases.   In addition, OGC assisted HHS in developing an agency-wide Interim Final Rule that 
adjusts for  inflation all  CMP amounts authorized by statute  and regulations under the Social  
Security Act as required  under the Federal Civil Penalties  Inflation Adjustment Act  
Improvements Act of 2015 (Sec. 701 of the Bipartisan Budget Act, Pub. L. 114-74).   
 
Petitions for Remission  
OGC collaborated with federal law enforcement, including the FBI, U.S. Attorneys  Offices, the  
Secret Service, U.S. Postal Service,  and  the U.S. Marshals Service in filing petitions  for  
remission directed to recover assets subject  either to administrative forfeiture by federal law  
enforcement or civil judicial forfeiture by DOJ.  Each petition set forth the background of the  
fraudulent scheme, the history of Medicares payments, and how the fraudulently induced 
payments could be traced to the seized assets.  During FY 2017, OGC petitioned these agencies  
to recover funds in both  criminal and civil litigation  matters  in which Medicare was a  victim of 
fraud. 
     
Regulatory Review and Programmatic Advice  
In FY 2017, OGC advised CMS on a vast variety of regulatory and program issues, all to assist  
CMS in strengthening its programs and activities  against fraud and to prevent the wrongful  
disbursement of program funds in the first instance.  Some highlights of OGCs efforts include:  
providing counsel to the  CMS Innovation Center on program integrity issues regarding new  
and existing payment and delivery models to improve the quality of care and reduce costs to  the 
Medicare and Medicaid  programs; working with  CMS to implement the agencys notices related  
to extending provider  and supplier enrollment moratoria; assisting CMS in developing fraud-
related sections of a new Medicare payment rule applicable  to clinical diagnostic laboratory  tests  
reimbursed under the Clinical Laboratory Fee Schedule;  and helping CMS interpret  and 
implement a new regulation that addresses concerns about fraud, waste, and abuse in the Part D  
program by requiring prescribers  of  Medicare Part D covered drugs to enroll Medicare.   
 
Physician Self-Referral  
OGC provided guidance  to CMS and DOJ in navigating the complexities  of the Stark physician 
self-referral  law.  This consultation helped build stronger cases and focus investigatory efforts,  
leading to successful results for the  Government.  In FY 2017, OGC provided extensive counsel  
to CMS in its ongoing implementation of the Medicare Physician Self-Referral Disclosure 
Protocol, which was created to enable Medicare providers to  self-disclose technical violations of  
the Stark laws physician self-referral prohibition.  OGC advised CMS regarding numerous  
matters disclosed under this protocol, now numbering over 600.   
 
Medicare Secondary Payer (MSP) Workload  
OGCs efforts to recover Medicares conditional  payments that are the primary responsibility of  
other payers directly support the HCFAC statutory goal of facilitating  the enforcement of all 
applicable  legal remedies for program fraud and abuse.  During FY 2017, OGC has been 
successful in establishing the right to recover over $9.2 million for Medicare under the MSP  
program.   
 
Bankruptcy Litigation  
OGC protects Medicare funds from  waste in bankruptcy cases by asserting CMS recoupment  
rights  to collect overpayments, arguing to continue suspension or termination actions  against  
 
  68 
  debtors, seeking adequate assurances from the bankruptcy court that CMS interests in the  
debtors estate will be protected, arguing for the assumption of Medicare provider  agreements as  
executory contracts, and petitioning for administrative costs  where appropriate.  In FY 2017, 
OGC asserted CMSs interests in numerous bankruptcy and  receivership actions involving  
physicians, hospitals, independent diagnostic test facilities, DME suppliers, skilled nursing 
facilities,  and home health agencies,  collecting or establishing the right to  collect over  
$10.5 million in recoveries involving bankrupt providers and suppliers.  
 
Denial of Claims and Payments  
CMS and its contractors  engaged in various activities and initiatives to detect and prevent  
abusive and fraudulent billing practices.  These measures  included provider and beneficiary 
education, use of claim sampling techniques, and a more rigorous scrutiny of claims  with 
increased medical review.  In FY 2017, OGC played a major role  in advising CMS regarding the  
development and implementation of these  types  of program integrity measures and defended 
CMS in litigation brought by providers and suppliers challenging these efforts.  OGC continued 
to aggressively defend CMS and its contractors in cases seeking damages for the alleged  
wrongful denial of claims, for being placed on payment suspension, and for not being granted 
extended repayment plans.   
 
In summary, OGCs FY  2017 work in support of CMS  advances the specific goals of the 
HCFAC program, including program integrity, fraud prevention, and fraud response.  Most CMS  
operations have a fraud and abuse component, and OGCs work supporting all CMS  substantive  
program areas directly supports the  HCFAC programs goals of fraud and abuse prevention in 
those operational program areas.  
 
Food  and Drug  Administration  Pharmaceutical Fraud Program  
 
In FY 2017, $4.4 million in HCFAC funding was made available for  the U.S. Food and Drug 
Administration (FDA)  Pharmaceutical Fraud Program  (PFP).  The  PFP  was instituted to  
enhance the  health care  fraud-related activities of  FDA's Office  of Criminal  Investigations  
(OCI)  and the  Office of the General Counsel  Food and Drug Division (OGC-FDD).   OCI, 
with  the support of  OGC-FDD, investigates criminal violations of the  Federal Food, Drug, and 
Cosmetic  Act (FFDCA),  the  Federal Anti-Tampering Act,  and related Federal statutes.  
 
The  PFP  is designed to  detect, prosecute, and prevent pharmaceutical, biologic,  and medical 
device  fraud.  The  PFP  gathers information from sources inside  and outside  FDA  and focuses on 
fraudulent marketing schemes,  application fraud,  clinical trial fraud, and flagrant manufacturing- 
related violations concerning biologics, drugs, and  medical devices.  The  goal of the program is  
the  early detection and prosecution of  such fraudulent  conduct, which furthers  FDAs  public  
health mission by protecting the public from potentially dangerous medical products, helping to 
reduce  health care costs, in most  cases before they are incurred,  and deterring future  violators.   
By  initiating  investigations  of medical product fraud schemes earlier in their lifecycle,  FDA is  
able to preclude potential public harm by barring medical  products, which have  not  followed 
the  legal FDA approval  processes  and do not meet FDA  standards, from  making it to market, 
thus  saving valuable health care dollars from being spent.   
 
 
  69 
  The  PFP  has identified multiple  alleged medical product fraud schemes through various  avenues.  
Since the inception of the PFP, OCI  has opened a total of 200 criminal HCFAC investigations.  
In FY 2017, FDAs seventh full fiscal year of HCFAC Program activity, OCI, through its PFP, 
opened 46 criminal investigations, including investigations  involving drug compounders, clinical  
trials, and foreign and domestic medical-product manufacturers.   These investigations  consist of  
allegations involving:  
 
	   Questionable manufacturing practices of a foreign-based drug firm involving 
possible violations  regarding application fraud, data integrity, data manipulation, and 
product adulteration.  
 
	   Questionable manufacturing practices of drug compounding facilities, involving 

possible violations of misbranding and/or adulteration.   

 
	   Questionable manufacturing practices of drug and medical devices ultimately causing  
public safety risks, involving possible violations of  misbranding and/or adulteration.  
 
	   Clinical trial fraud, involving individuals suspected of falsifying/manipulating clinical  
trial data or conducting  clinical trials without FDA oversight.     
 
	   Application fraud, involving individuals or companies who either submitted 
false/fraudulent information to FDA in order to obtain approval/clearance  or did not  
submit the required information to legally market drugs, devices or biologics.  
 
	   Fraudulent marketing  schemes.        
 
As noted in previous  requests, the types of criminal investigations conducted through the PFP  are 
typically complex investigations, such as application fraud and marketing fraud, requiring 
extensive document review.  It is not unusual for  these complex fraud investigations to last for  
five years or  more from initiation to conclusion.  Yet investigations under the PFP have produced 
numerous prosecutions  
 
For example, in November 2016, a PFP investigation resulted in a 40 count indictment of a sales  
representative of a Tennessee company, who devised a scheme to defraud  health  insurance 
companies of  more than $5 million, by using false and/or  invalid prescriptions for patients with 
no pre-existing medical condition or  need for the  treatments.  The defendant pled guilty to one  
count of wire fraud in September 2017.  
 
In March 2017, a PFP investigation resulted in the conviction of an owner and head pharmacist  
of a compounding pharmacy that infected 750 people with mold and resulted in 64 deaths.  After 
a nine week  trial, a federal jury convicted the owner of racketeering and mail fraud.  This owner  
and head pharmacist was sentenced in June 2017 to nine years in prison and three years of  
supervised release.  In September 2017, the owner was ordered to forfeit  assets  totaling over $7.5  
million.  A second supervisory pharmacist at this same compounding pharmacy was convicted  
by a federal  jury in October 2017, of racketeering, racketeering conspiracy, mail fraud, and 
introduction of  misbranded drugs into interstate commerce.  In this case, fourteen defendants in 
total were charged and three of them pled guilty to charges  in 2016. 
 
Also in March 2017, the co-owner and chief operating officer of a  Wisconsin drug manufacturer  
 
  70 
  pled guilty to one count  of introducing a misbranded drug into interstate  commerce, in 
connection with the shipment of sterile products that were contaminated with harmful bacteria.   
It was suspected that these contaminated products may have caused unexpected skin infections in  
numerous patients, including two children who developed sepsis after  exposure to the product.  
The defendant was sentenced to probation in June 2017, and was ordered to pay approximately 
$35,000 in restitution.  
 
In June 2017, the  owner of an Indiana compounding pharmacy and his compliance director were  
both indicted in connection with distributing over- and under-potent drugs, and for defrauding 
the United States by obstructing the  lawful functions of the FDA.  The compliance director pled  
guilty in July 2017.  The owner pled not guilty and has a trial  set for April 2018. 
 
Furthermore, FDA believes that various investigations already initiated under the PFP  may lead  
to future judicial action that may include criminal prosecution and monetary recoveries.  These 
investigations include several foreign drug manufacturers under investigation for data integrity 
and other manufacturing violations  which could possibly pose a risk to the publics  health and 
safety.  Sixty percent of generic drugs in the United States come  from  foreign manufacturers.  
 
Finally, FDA continues  to train its employees to maximize the agencys ability to prevent and 
detect fraud involving medical products. In December 2016, FDA conducted a  training session to 
FDA regulatory personnel attending the annual Clinical Bioresearch Monitoring training.  These  
personnel routinely conduct inspections of clinical trials to ensure the protection of research  
subjects and the integrity of data submitted to FDA in support of a  marketing application.  Those 
inspections  may uncover fraud.  This training assists  in teaching FDA regulatory personnel how  
to identify fraud and develop skills  in collecting evidence  that  may result in a potential criminal  
case.  In March 2017, FDA conducted a one day training session for newly hired criminal  
investigators and current  supervisors  covering PFP-related topics.  In July 2017, FDA  conducted 
a three-day training session for current FDA criminal  investigators.  The  attendees were provided 
background on FDAs PFP and resources available to assist  in investigations conducted under  
the PFP.  Information included legal training by OGC-FDD on the Federal  Food, Drug, and 
Cosmetic Act.    
 
  71 
  DEPARTMENT OF JUSTICE 

 
United States Attorneys  
 
In FY 2017, the United States Attorneys Offices (USAOs) were allocated $71.6 million  in 
HCFAC funding for civil and criminal health care fraud enforcement efforts.  These funds  
supported attorneys, paralegals, auditors, and investigators, as well as  litigation expenses for  
health care fraud investigations and cases.   The USAOs  play a major role in health care fraud 
enforcement by bringing criminal and affirmative civil cases  to recover funds wrongfully taken 
from the Medicare Trust  Funds and other  taxpayer-funded health care systems through fraud, 
waste, and abuse.  The USAOs litigate a wide variety of health care fraud matters, including 
false billings by physicians and other providers of  medical services, overcharges by hospitals, 
Medicaid fraud, kickbacks to induce  referrals of Medicare or  Medicaid patients, fraud by 
pharmaceutical and medical device companies, home health and hospice fraud, and failure of  
care allegations against  nursing home owners.  The USAOs also coordinate with CMS regarding 
the imposition of potential civil monetary penalties against a  provider.  
 
To ensure a  focused and coordinated approach to health care fraud enforcement, each USAO has  
designated criminal and civil health care fraud coordinators.  These coordinators work closely 
with outside investigative agencies and with trial attorneys in the Departments Civil and 
Criminal Divisions on health  care fraud matters.   While the USAOs receive many health care 
fraud referrals directly from investigative agencies, they also receive referrals from the Civil  
Divisions Commercial Litigation Branch (Civil Fraud Section) and through the filing of qui tam  
(or whistleblower) complaints.  Qui tam cases either are handled jointly with trial attorneys in the  
Civil Fraud Section or are delegated to the USAO to handle  independently.  The USAOs also 
handle most criminal and civil litigation at the federal appellate level.  
 
The USAOs also partner with the  Departments  Criminal Division  on Medicare Fraud Strike  
Forces Teams which currently operate  in nine areas across the country.   Each  Strike Force  team  
consists of  dedicated AUSAs and support personnel  from the USAO, as well as from the 
Criminal Division.  Examples of successful  Strike Force cases are noted earlier  in this  report.   
 
To ensure that USAO personnel are  knowledgeable and up-to-date on the law and tools for  
combatting health care fraud, HCFAC funding is used to train AUSAs and trial attorneys, as well  
as paralegals, investigators, and auditors on a wide variety of health care  fraud enforcement  
matters.  In FY 2017, the Office of  Legal Education (OLE)  offered Certified  Fraud Examiner 
Training, which was attended by approximately 40 analysts, auditors, investigators, and 
paralegals, and which provided training on a variety of topics related to health care fraud.  The  
Criminal Division Fraud Section also held its  annual 2017 National Health Care Fraud Training 
Conference that was attended by 130 Assistant United States Attorneys representing almost 60 
districts.  In addition, the Executive  Office for United States  Attorneys  (EOUSA) presented 
multiple webinars during FY 2017 focusing on health care fraud issues.  Many AUSAs, analysts,  
auditors, investigators, and paralegals participated in other federal, state,  and private health  care 
fraud seminars.    
 
  72 
   
Criminal Prosecutions20  
 
In FY 2017, the USAOs  opened 967 new criminal health care fraud investigations and filed  
criminal charges in  439 cases involving  720 defendants.  During that same time period, 639 
defendants were convicted of health care fraud-related crimes during the year.     
 
Civil Matters and Cases21  
 
In FY 2017, the  USAOs opened 948 new civil health care fraud investigations and had 1,086 
civil health  care fraud matters pending at the end of the fiscal year.  
 
Civil Division  
 
In FY 2017, the Civil Division received approximately $24.1 million in FY  2017  HCFAC 
funding to support the health care fraud activities of the Commercial Litigation Branchs Fraud 
Section and the Consumer Protection Branch.  This amount also included funding to support the  
Department of Justices Elder Justice Initiative.    
 
The  Commercial Litigation Branchs Fraud Section  
 
The Civil Divisions Commercial Litigation Branch (Fraud  Section) investigates  complex health  
care fraud allegations and files suit under the civil FCA to recover money on behalf of defrauded 
federal health care programs including Medicare, Medicaid, TRICARE, the Department of  
Veterans Affairs (VA), and the Federal Employee Health Benefits Program (FEHBP).  The 
Fraud Section works closely with  the  United States Attorneys Offices and often teams with the  
Consumer Protection Branch, HHS-OIG, state  Medicaid Fraud Control  Units and other law  
enforcement agencies to  pursue allegations of health care fraud.  As a result of these efforts, the 
Fraud Section has obtained settlements and judgments in health care cases of  over $2 billion 
every year since FY 2010. 
 
The Fraud Section investigates and resolves matters involving a wide array of health care  
providers and suppliers.  Matters  involving pharmaceutical  and device manufacturers  and 
hospitals continued to constitute some of the most significant matters pursued by the Fraud  
Section this past  year.  These matters included  allegations of  hospitals, drug and device  
manufacturers, and pharmacies paying kickbacks to health care providers, including physician  
practices and  hospitals, for referrals  of patients, drugs, or devices (such as the Shire, Forest, 
Omnicare, and Walgreens  matters discussed in  the Highlights section) in  violation of the Anti-
Kickback Statute  (AKS).  Other cases involved allegations of drug manufacturers underpaying 
drug rebates to the Medicaid program (the  Mylan  matter discussed earlier in  this  report) and  
                                                 
20  FY 2017  numbers  are actual data  through the  end of  September  2017.  This  data includes  records  classified  either 
 
with  the  primary  or  tertiary  03G    Health  Care Fraud  program  code.
   
21  FY 2017  numbers  are actual data  through the  end of  September  2017.   This  data  includes  those  records  classified 

under with  the FRHC   Health  Care  Fraud  civil  code.  

 
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  marketing and selling products based on misleading or false  information (the Biocompatibles and  
Novo Nordisk matters discussed earlier).  
 
The Fraud Sections recoveries for  AKS claims remained  significant this year.   The AKS  
prohibits the willful solicitation or payment of remuneration to induce the purchase of a good or  
service for  which payment may be made under a federal health care program.  The Departments 
largest recovery for a violation of the AKS was from Shire Pharmaceuticals LLC.  The  
Department also recovered  close  to a hundred million dollars from hospitals  and  health systems  
for  allegedly paying unlawful remuneration to clinics and physician practice groups.  Similarly,  
the Department  pursued matters involving alleged violations  of the Stark Law, which prohibits  
overutilization of services by physicians, practice groups, and hospitals that stand to profit from  
referring patients  to other health care providers in which they have a financial  interest  (including 
the Mercy Hospital matter discussed  earlier).  
 
The Fraud Section has continued to pursue matters in which providers bill federal health care  
programs for medically  unnecessary services or  services not  rendered as billed.  Such cases 
involve allegations  that  providers, including skilled nursing facilities, ambulance companies, and 
hospices, billed for services that the patients did  not need (such as Life Care, Olympia Therapy,  
Medstar, and Genesis discussed above).  Other  cases involved allegations that providers such as 
hospitals billed federal health  care programs for higher and more expensive levels of medical  
service than  were actually performed (the IPC matter discussed earlier).  The Department is 
pursuing claims  against  a hospital chain and its owner, alleging that  the hospital chain billed for  
excessive and unnecessary inpatient  hospital services instead  of less costly outpatient  or  
observation services.  The Section has  also  committed significant resources to litigating claims  
against a number  of nursing homes and health care providers  relating to rehabilitation therapy 
administered to elderly  residents who did not require or  could not benefit  from such therapy.  
Similarly, the Department  has continued to pursue  claims against  hospice  providers for billing 
Medicare for patients who did not have a terminal prognosis  of six months or less or  who 
received medically unnecessary  services.   
 
The Fraud Section is also handling an increasing number of  matters related to managed care 
providers.  Such cases  include settlements of allegations that the defendants submitted 
unsupported diagnosis  codes to inflate reimbursement (the CareCore and Freedom Health 
matters discussed previously).  In  addition,  the Section filed  suit against the nations largest 
Medicare Advantage organization, alleging that the company obtained inflated risk adjustment  
payments based on untruthful and inaccurate information about the health status of beneficiaries  
enrolled in certain of the  companys  Medicare Advantage plans.   
 
The Fraud Section  also has successfully  sought to hold individuals responsible for defrauding 
federal health care programs.  In one  matter, in addition to recovering a significant amount from  
an electronic health records vendor alleged  to have misrepresented the capabilities of the 
companies electronic medical records software,  the Fraud Section also pursued settlements with  
certain founders and employees of that company (the ECW  matter discussed earlier).  In the past 
year,  the Department has pursued  a  pain management physician who allegedly billed federal  
health  care programs for  services and tests that were not performed or were not medically  
necessary, the owners of pediatric dental practices alleged to have submitted false claims for  
pediatric dental  services not rendered (the MB2  matter discussed earlier), and the owner of a 
 
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  skilled nursing facility chain alleged to have billed Medicare  and TRICARE for  rehabilitation  
therapy services that were not reasonable, necessary, or skilled  (the Life Care matter discussed  
earlier).  The Fraud Section also obtained a settlement from a physician and office  manager  
(husband and wife) who implemented a bonus scheme that induced a clinics family to order  
unnecessary laboratory tests in violation of the Stark Law.      
 
As the Fraud Section  is litigating an  increasing number of FCA cases, including the cases  
described above, to obtain an appropriate  resolution, the Fraud Section is  devoting additional  
resources to  ensure that  these complex cases are presented to  the court  in a polished and efficient  
manner.  As  courts have  moved toward the use of technology in the courtroom, the Fraud 
Section,  like other litigating parties,  must retain litigation  consultants who specialize in  
courtroom presentation.    
 
Because the Fraud Section receives every FCA complaint filed by whistleblowers (otherwise 
known as relators) across the country, it has a  unique vantage point over health care fraud 
trends and developments nationwide  and therefore regularly handles some of the most  complex 
matters and  takes  the lead on coordinating national investigations with  its law enforcement 
partners.  Likewise, given the diversity of health care fraud cases pursued by the Fraud Section, 
it frequently provides  training and guidance on the FCA and health  care fraud issues to AUSAs 
and agents.  The Section works closely with the  HHS Office of the Inspector General (HHS
OIG) and the Office of  Counsel to the Inspector General (OCIG) in all settlements of health care  
fraud allegations to ensure that  the  administrative remedies possessed by  HHS are appropriately  
considered and to enable the negotiation of compliance  terms that diminish the risk that the  
offending conduct will be repeated.  The Section also collaborates with and counsels CMS and 
HHS-OIG on interagency initiatives  and proposed rules and regulations.   
 
Finally, the  Elder Justice Initiative,  which is  overseen by the  Civil Division, coordinates and 
supports  law enforcement efforts to combat elder  abuse, neglect, and financial  exploitation.  The 
Initiative helps law enforcement efforts by maintaining an information bank of Elder Justice  
related materials (including briefs, opinions, indictments, plea  agreements, subpoena templates);  
funding medical reviewers, auditors, and other consultants  to assist DOJ attorneys and AUSAs in  
their nursing home and/or long term  care facility  cases; hosting quarterly  teleconferences with  
DOJ attorneys and AUSAs across the country  to  discuss issues or developments in connection  
with our nursing home and failure of care cases;  and coordinating nationwide investigations of  
skilled nursing facilities.  In addition to supporting law enforcement efforts, the Initiative  
continues to fund research projects awarded by the Office of  Justice Programs, National Institute  
of Justice, to study the  abuse, neglect, and exploitation of elderly individuals and residents of  
residential care facilities.    
 
Elder Justice Initiative  members represent  the  Department on Interagency Working Groups such  
as the Elder  Justice Coordinating Council.  The  Civil Division  maintains the Elder Justice  
Website (www.elderjustice.gov), a valuable resource for elder abuse victims and their families,  
state and local prosecutors, elder abuse researchers, as well as practitioners.   On March 30, 
2016, the Department of Justice announced the launch of ten regional Elder Justice Task  
Forces.  These teams bring together federal, state  and local prosecutors, law enforcement, and 
agencies that provide services to the elderly, to coordinate and enhance efforts to pursue nursing 
homes that provide grossly substandard care to their residents.   The Elder Justice Task  Forces are 
 
  75 
  led by representatives from the U.S. Attorneys  Offices, state Medicaid Fraud Control Units, 
state and local prosecutors offices, the Department of Health and Human Services (HHS), state 
Adult Protective Services agencies, Long-Term  Care Ombudsman programs, and law  
enforcement.  The ten districts  are  the Northern  District of California, Northern District of 
Georgia, District of Kansas, Western District of Kentucky, Northern District of Iowa, District of  
Maryland, Southern District of Ohio, Eastern District of Pennsylvania, Middle District of  
Tennessee, and the Western District  of  Washington.  
 
The Consumer Protection Branch  
 
The Consumer Protection Branch (CPB) enforces consumer protection laws to end dangerous  
practices that harm Americas most vulnerable populations, like the sick and elderly.  Among its  
top priorities are pursuing  cases against those who  market unsafe pharmaceuticals and  medical  
devices that endanger the health  and safety  of  patients.   CPB works closely with the Commercial 
Litigation Branchs Fraud Section,  U.S. Attorneys Offices, the Food and Drug Administration, 
and other  law enforcement partners on a wide range of health care fraud  cases, including those 
involving the promotion and distribution of unapproved and adulterated drugs and medical  
devices.  Under the Departments regulations, the Branch is  the primary component charged with 
enforcement of the Food, Drug, and Cosmetic Act  in the federal court system.   In FY 2017,  CPB 
investigated and resolved a number of cases involving harmful practices that endanger  the public  
health, employing novel  tools  to prosecute wrongdoers who sell  unsafe pharmaceuticals and  
medical products to the  American public.  Several examples are discussed below:  
 
In January 2017, the Branch resolved a case against Baxter Healthcare Corporation, which 
agreed to pay more  than $18 million  to resolve criminal and civil liability  arising from its failure  
to follow current Good Manufacturing Practices  (cGMP) when manufacturing sterile  drug 
products.  Under the Federal Food, Drug, and Cosmetic Act, the failure  to follow cGMP renders  
drugs manufactured under such conditions  adulterated.  At  a  plant  in North Carolina, Baxter  
manufactured large-volume sterile intravenous  (IV) solutions in a clean room that had high-
efficiency particulate absorption  (HEPA) filters  installed  in the ceiling.   Air was pushed into the  
clean room through the  HEPA  filters.  Between July 2011 and November 2012, Baxter  
manufactured IV solutions in a clean room  with moldy HEPA filters, despite  the fact that an  
employee had reported the presence of  mold on the HEPA  filters to plant  management.  Baxter  
distributed the adulterated products  it made in that clean room (although there was no evidence 
that any of the product  was actually contaminated with mold).  As part  of a global resolution, 
Baxter agreed to a deferred prosecution  agreement and to pay a total of $16 million in criminal  
monetary penalties and forfeiture.  The resolution also included a civil settlement with the  
federal government, including a payment of approximately $2.158 million, to resolve allegations  
that Baxter  submitted or  caused to be submitted false claims to the Department of  Veterans 
Affairs in violation of the False Claims  Act.  
 
The Branch  was part of the team  that prosecuted the owner and head pharmacist of New England 
Compounding Center (NECC), Barry Cadden, in 2017.  After a 9-week trial, in March 2017, 
Cadden was convicted by a federal  jury of racketeering,  racketeering conspiracy, mail fraud and  
introduction of  misbranded drugs into interstate commerce with the  intent  to defraud and 
mislead.   The charges arise from the  2012 outbreak of fungal meningitis caused by adulterated 
medicine made at NECC in Framingham, Massachusetts.  The 2012 outbreak was caused by  
 
  76 
  contaminated vials of preservative-free methylprednisolone acetate (MPA) manufactured by  
NECC.   In 2012, 753 patients  in 20 states were diagnosed with a fungal infection after  receiving 
injections of MPA  manufactured by NECC. Of those 753 patients, the U.S. Centers for Disease  
Control and Prevention (CDC) reported that 64 patients in nine states died. The outbreak was the  
largest public health crisis ever caused by a pharmaceutical product.  
The ensuing investigation revealed a  host of fraudulent and unsafe pharmacy operations at  
NECC.   Cadden directed and authorized the shipping of contaminated MPA to NECC customers 
nationwide. In addition, he authorized the shipping of drugs before test results  confirming their  
sterility were returned, never notified customers of nonsterile results, and compounded drugs  
with expired ingredients.   Furthermore, certain  batches of drugs were manufactured, in part, by 
an unlicensed pharmacy technician at NECC.  Cadden also repeatedly took steps to shield 
NECCs operations from regulatory oversight by the FDA by claiming to be a pharmacy 
dispensing drugs pursuant to valid, patient-specific prescriptions.   In fact, NECC routinely  
dispensed drugs in bulk without valid prescriptions. NECC even used fictional and celebrity 
names on fake prescriptions to dispense drugs.  Cadden was sentenced to serve 9 years in prison  
in June.  
Another example of CPBs focus on consumer health and safety is  the Novo Nordisk matter, 
resolved in September of this year.  On September 5, 2017, the Department of Justice announced  
that Danish pharmaceutical manufacturer Novo Nordisk paid an equitable disgorgement of  
$12.15 million under the terms of a civil settlement agreement related to the companys failure to 
comply with a Risk Evaluation and Mitigation Strategy (REMS) required under the Food, 
Drug, and Cosmetic Act (FDCA) for Type II diabetes medication Victoza.   Pursuant to the  
settlement agreement, the United States filed  a complaint against Novo Nordisk in  the  District 
Court for the District of  Columbia.  The complaint alleged that shipments of Victoza  were  
misbranded pursuant  to the FDCA because Novo Nordisks sales force made false or  misleading  
statements regarding  the potential  risk of a rare form of cancer associated with the drug.  Those  
false or misleading statements contradicted the REMS required by FDA as a condition of  
approval  of Victoza  to ensure doctors understood the potential risks of the drug.  As part of the  
settlement agreement, the parties requested  the court dismiss the complaint.  The global  
resolution also included a False Claims Act settlement of $46.5 million.  This is the first 
resolution or action of any kind brought for a manufacturers failure to comply with a  REMS.  
 
CPB also has taken a leading role in  the Departments efforts to combat elder fraud.   With a long 
record of successfully prosecuting mass-mailing and  telemarketing  scams that target older  
Americans, CPB is now  coordinating a major Department effort to highlight and advance elder-
fraud  cases across the country.   CPB also is an  active participant in the  Elder Justice Initiative,  
furthering law  enforcement efforts to combat elder exploitation through training, interagency 
collaboration, and public events.  By protecting and educating seniors  susceptible to fraud 
schemes, CPBs work helps to detect  and deter a  broad array of scams, including health-care
related frauds. 
 
   
 
  77 
  Criminal Division  
 
In FY 2017, the Criminal Division was allocated $22.5 million in FY 2017 HCFAC funding to 
support criminal health care fraud litigation and interagency coordination, which is carried out  
primarily by the Fraud Sections Health Care Fraud Unit and, to a lesser  extent, the Organized 
Crime and Gang Section.   
 
The Fraud Section  
 
The Fraud Sections Health Care Fraud Unit (HCF Unit) employs criminal prosecutors who 
focus exclusively on investigating and prosecuting health care fraud and related offenses.  The  
HCF Units core mission is to investigate and prosecute health care fraud  schemes that harm the 
public  in two ways.  First, a significant number of the HCF Units  charged cases and  active 
investigations focus on harm to federal health care program  beneficiaries, including opioid abuse  
and drug diversion.  Second, all of the cases  investigated and prosecuted by the HCF Unit  
involve substantial  losses to federal  health care programs and the public fisc.  The HCF Unit also  
supports  the  U.S. Attorneys Office community by providing legal, investigative  and data  
analytics support, guidance and training on criminal health care fraud matters.   
 
Beginning in March 2007, the Fraud Section, working with the local USAO, the FBI, HHS-OIG,  
and state and local  law enforcement  agencies, launched the Medicare Fraud Strike Force in  
Miami-Dade County, Florida, to investigate and prosecute  individuals  and entities that do not  
provide legitimate health care services but exist solely for the purpose of defrauding  Medicare 
and other government health care programs.  In FY 2017, the HCF Unit provided attorney 
staffing, litigation support, and leadership and management for the Strike Force programs 
operations in nine regions:  Miami and Tampa/Orlando, Florida; Southern Texas; Southern 
Louisiana; Los Angeles, CA; Detroit, MI; Chicago, IL; Brooklyn, NY; and Washington, DC  
(Corporate Strike  Force). Since  the inception of the Strike Force program  in 2007, the  HCF Unit  
and its Strike Force partners have charged  3,286 defendants  who have collectively billed the  
Medicare program  more  than $12 billion.  In FY 2017 alone, the HCF Unit achieved the  
following results:   
 
	   Filed  102 indictments, criminal informations and complaints involving charges filed 
against 210 defendants  who allegedly collectively billed federal health care programs 
approximately $1.5 billion;    
 
	   Obtained 160 guilty pleas and litigated 18 jury trials, with guilty  verdicts against 

18 defendants; and 
  
 
	   Sentenced 166 defendants, with an average sentence of over  63 months. 
 
Each year, the HCF Unit leads and coordinates the National  Health Care  Fraud Takedown.  On  
July 13, 2017, Attorney General  Jeff Sessions  and Department of Health  and Human  Services 
(HHS)  then Secretary  Tom Price, M.D., announced the results of the FY 2017 Takedown  the  
single  largest health care fraud law enforcement  operation in history - led by the  HCF Unit in  
coordination with 41 U.S. Attorneys Offices and  29 Medicaid Fraud Control Units (MFCUs).  
This years Takedown resulted  in charges against  412 individuals, including 115 doctors, nurses, 
 
  78 
  and other  licensed medical professionals, involving approximately $1.3 billion in fraudulent  
billings  of opioids.  Of the 412 individuals  charged, 120 (including 27 doctors) were  charged in 
cases involving the  illegal distribution of opioids.  Furthermore, the Centers for Medicare &  
Medicaid Services  (CMS) also suspended a number of providers using its suspension authority 
as provided in the Affordable Care  Act. 
 
The  HCF Unit also provided legal guidance  to FBI and HHS-OIG agents, health program agency 
staff, Assistant  U. S. Attorneys, and other Criminal Division attorneys on criminal and 
administrative tools  to combat health care fraud.  Throughout FY 2017, the  HCF Units 
prosecutors  met with federal prosecutors and agents across the United States to provide training,  
investigative leads based on data analysis, and related support.  The  HCF Unit also provided 
advice and  written materials on patient medical  record  confidentiality and disclosure issues, and  
coordinated  referrals of possible  criminal HIPAA privacy violations from the HHS  Office for 
Civil Rights; monitored and coordinated DOJ responses to  legislative proposals, major 
regulatory initiatives, and enforcement policy matters;  reviewed and commented on health care  
provider requests  to the HHS-OIG  for advisory opinions and consulted with the HHS-OIG on  
draft advisory opinions;  worked with CMS to improve Medicare contractors fraud detection, 
referrals to law enforcement for investigation, and case development work; and prepared and 
distributed to all USAOs and FBI field offices periodic summaries of recent and significant  
health  care fraud cases.   
 
Each year, the HCF Unit coordinates and hosts  the National  Health Care  Fraud Training 
Conference.  The 2017 National Health Care Fraud Training Conference was held in September  
2017 in Washington, D.C. and was attended by 310  criminal and civil prosecutors (representing 
almost 60 U.S. Attorneys Offices) and law enforcement personnel  from FBI,  DEA, HHS-OIG,  
IRS  Criminal Investigation, and Defense Criminal Investigative Service (DCIS), and provided 
training on investigative  techniques and tools, trial  skills,  case studies, and persistent  and  
emerging health care fraud schemes.  
 
As part of  the HCF Units  efforts to lead a coordinated, national approach to combating health 
care fraud, the HCF Unit  created and  launched the  HCF  Unit Data Analytics Team in November  
2016. This team allows the  HCF Unit  to  better  assist prosecutors in effectively and efficiently  
identifying and prosecuting individuals and entities, and to examine emerging health care fraud  
trends  in the field.   The HCF Unit Data Analytics Team also provides U.S. Attorneys Offices 
with customized HCF data analytic training and ongoing case-specific investigation and 
prosecution assistance.   The HCF  Data Analytics Team  will continue to  strengthen  the  HCF  
Units partnerships with  U.S. Attorneys  Offices across the country in  combating health care 
fraud.   
 
The HCF  Units  cases  are  also  increasingly  complex, both in the individual Strike Force  
locations and the Corporate Strike Force.  Specifically, the  Corporate Strike  Forces  mission is to 
investigate and prosecute corporate fraud cases  involving major health care providers that  
operate in multiple jurisdictions, including major regional health care providers operating in the  
Strike Force cities, with a focus on investigations and prosecutions of individuals.  The  
Corporate Strike Force coordinates  with the Civil Divisions Fraud Section and Consumer  
Protection Branch, U.S. Attorneys  Offices across the country, state Medicaid Fraud Control  
Units, the FBI, and HHS-OIG in order to identify, investigate, and prosecute significant  
 
  79 
  corporate health care fraud cases, including the global resolution with Tenet Healthcare 
Corporation and related individual prosecutions.  In addition, numerous city-based Strike Force 
prosecutions involve sophisticated money laundering and financial fraud schemes involving the  
use of shell  companies and intermediaries to conceal ownership interests, kickback payments,  
and assets.   The  HCF  Units  expertise enables  it to  pursue these  complex  cases,  many of which 
involve 100s millions of dollars in fraudulent  claims  to the  Medicare and  Medicaid  program  and 
TRICARE.  
 
The Organized Crime and Gang Section (OCGS)  
 
The Criminal Divisions  Organized Crime and Gang Section (OCGS) supports and conducts  
investigations and prosecutions of  health care fraud and abuse targeting  private sector health  
plans as well as health care fraud and abuse perpetrated by domestic and  international organized 
crime groups.   With respect to private sector health care fraud, OCGS supports and conducts 
enforcement efforts combatting fraud and abuse  directed at  the  2.3 million private sector health  
plans sponsored by employers and/or labor organizations which cover some 143 million 
Americans.  OCGS also works to improve strategic coordination in the identification and 
prosecution of domestic and international organized crime groups engaged in sophisticated 
frauds posing a threat to the health care industry and supports  the use of  the Racketeer Influenced  
and Corrupt Organizations (RICO) statute  to combat health care fraud and abuse.  
 
In FY 2017, seven  OCGS attorneys were assigned to health  care fraud prosecutions and  
investigations.   
 
In Knoxville, one OCGS  attorney worked with the United States Attorneys office on the  
superseding indictment in a pill-mill  prosecution of individuals for operating pain clinics and 
prescribing vast quantities of opioids outside  the  scope of professional  practice without 
legitimate medical purposes.   The clinics were responsible for generating  revenues in  excess of  
$21 million and prescriptions for approximately 12 million opioid pills  and other narcotics.  The  
indictment also charged two pain clinic owners with taking bribes and kickbacks from  national  
drug laboratories for referral of unnecessary urine screenings, causing the labs to submit  
approximately $13,564,364 in claims to Medicare for the medically unnecessary  tests,  and  
directing bribe and kickback payments through shell companies which appeared to be providing 
legitimate services to the labs.  This case is summarized above in  the Highlights of Significant 
Criminal and Civil Investigations.  
 
In Detroit, an OCGS attorney worked with the United States Attorneys Office to obtain a 48
month sentence of a medical facility employee who obtained  and disclosed individually 
identifiable  health  information from the facilitys private database at the  direction of  a member 
of the Traveling Vice Lords (TVL) gang.  The employee, an associate of the Vice Lords street  
gang, pleaded guilty to witness  tampering for obtaining private health information of Vice Lords  
shooting victims and victims family members and disclosing the information to a member of the  
TVL gang knowing that  this information was wanted to locate these  individuals  and prevent  
them from cooperating in the investigation and prosecution of a TVL shooting.  This  case is  
summarized above in the Electronic Health  Records section of the Highlights of Successful  
Criminal and Civil Investigations.   
 
 
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  Additional  OCGS attorneys were engaged in investigations  of health care fraud and abuse  
involving  several large collectively bargained health plans, third party  administrators  to private  
sector health plans, health plans funded through prevailing wage government contracts, a federal  
prescription drug program and the sale of unapproved pharmaceuticals.  
  
OCGS attorneys routinely provide litigation support and advice to AUSAs and criminal  
investigative agencies in the investigation and prosecution of corruption and abuse of private  
employment-based group health plans covered by the Employee Retirement Income Security Act  
(ERISA).  Litigation support is provided as requested at any stage of the prosecution from  
indictment through trial  and on appeal.  Private sector  employment-based group health plans are  
the leading source of health care coverage for individuals not covered by Medicare or  
Medicaid.   OCGS attorneys also provide support to investigations  and prosecutions of  fraud 
schemes by  corrupt  entities that sell  unlicensed health  insurance products, as well as fraud  
schemes by corrupt  employers  that  cheat workers out of health benefits  required by the  
prevailing wage laws and regulations. 
 
OCGS attorneys regularly provide health care fraud and abuse training and legal guidance to 
AUSAs and to criminal investigators  and agents of the Department of  Labors Employee  
Benefits Security Administration and Office of Inspector General.  Such training and guidance  
covers prosecutions  involving abuse  of private sector employee health plans subject to ERISA  
and health plans sponsored by labor  organizations, as well as  fraud and abuse committed in 
connection with the operation of  multiple employer welfare  arrangements.  OCGS is  also  
responsible  for drafting and reviewing criminal legislative proposals affecting employee health 
benefit plans.  Finally, OCGS provides legal guidance to prosecutors and required approvals  in 
the use of the RICO  statute in prosecutions of Medicare and  Medicaid frauds as well as private 
sector health care frauds.   
 
Civil Rights Division  
 
In FY 2017 the Civil Rights Division was allocated approximately  $9.0 million in FY 2017 
HCFAC funding to support Civil Rights Division  litigation activities  related to health care fraud  
and abuse.  The Civil Rights Division pursues relief affecting public, residential and 
nonresidential health care facilities and service systems, as well as conducts investigations to 
eliminate abuse and grossly substandard care in public, Medicare, and Medicaid funded long
term care facilities.  Consistent with  the Supreme Courts decision in  Olmstead v. L.C., 527 U.S. 
581 (1999), the Division also works to prevent the needless institutionalization of individuals  
who require health care supports  and services.  
  
The Division plays a critical role in the HCFAC  Program through the work of several sections.  
The Special Litigation Section of the Civil Rights Division is  the sole DOJ component  
responsible  for the Civil Rights of Institutionalized Persons  Act, 42 U.S.C.1997 (CRIPA).  
CRIPA authorizes  the  investigation  of conditions of confinement at state and local residential 
institutions (including facilities for persons with  developmental disabilities or mental illness, and  
nursing homes) and initiation of civil action for  injunctive relief to remedy a pattern or practice  
of violations of the Constitution or Federal statutory rights.  The program includes review of 
conditions in facilities for persons who have mental  illness, facilities for persons with  
developmental disabilities, and nursing homes.  
 
  81 
   
The Disability Rights Section of the  Civil Rights  Division has primary enforcement authority 
for the Americans with  Disabilities  Act (ADA).  Title  II of the ADA authorizes  investigation of  
allegations of discrimination by public entities against individuals with disabilities, including  
discrimination in the form of needless institutionalization of  persons who require health care 
supports and services.  See Olmstead, 527 U.S. 581.  Title  II  also authorizes the  initiation of  
civil actions  to remedy discrimination in violation of the ADA.  In addition to violating the civil  
rights of individuals with disabilities, such unnecessary  institutionalization often results in  
unnecessarily increased  Medicaid costs inconsistent with  the Medicaid requirements for home 
and community-based services.  Both the Special Litigation Section and the Disability Rights  
Section have undertaken initiatives  to combat the use of Medicaid funding for the unjustified 
institutionalization of persons with disabilities.  
 
The Educational Opportunities Section of the Civil Rights Division also participates  in the  
HCFAC Program to address the use of Medicaid funding for unnecessary institutionalization of  
youth with disabilities  in segregated education placements in violation of the ADA.  The  
Special Litigation, Educational Opportunities, and Disability Rights Sections work 
collaboratively  with the USAOs  and with HHS.  
 
Fiscal  Year 2017  Accomplishments  
 
Key litigation and enforcement accomplishments in FY 2017 by the Civil  Rights Division can be  
summarized as follows:  
 
   Number of  matters in active enforcement:  18;  
   Cumulative  estimate of individuals  with disabilities  affected:  42,600; and  
   Number of institutional facilities affected: 2,321  
 
Special Litigation Section  
 
In Fiscal Year 2017, the  Special Litigation Section made findings regarding the unlawful use of  
nursing facilities to serve people with  mental illness; closed  five  cases that  successfully  
implemented reforms enabling  individuals with  intellectual and developmental disabilities and  
individuals  with mental health disabilities to avoid needless institutionalization; continued  
monitoring compliance with  eight  statewide settlement agreements and  one  facility-focused 
agreement benefiting thousands of people; continued monitoring an agreement with an urban 
police department requiring it to connect individuals with mental illness to community-based  
services instead of costly institutional services and to avoid unnecessary criminal justice 
involvement;  continued litigating two large cases involving the  unlawful  institutionalization of, 
and denial of necessary services to, individuals  with disabilities; and opened an investigation into 
conditions in a public mental health facility and whether a  lack of county community alternatives  
causes unnecessary institutionalization of people with mental health disabilities.   During this  
time, the Sections work  including its formal investigations,  monitoring of remedial  
agreements, and active litigation  affected more than 1,700 health  care facilities in  13  states as 
well  as the  District of Columbia.   
 
In Louisiana, the Division  made findings that  the state violates the ADA by facilitating the 
 
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  placement of people with  mental illness into  nursing facilities  when they qualify for, and could 
be served in, community-based settings.  The Division is negotiating a proposed resolution to 
transition people with mental illness  from nursing facilities  to appropriate community-based  
care, enhance the community-based  services necessary  to support them,  and divert other people 
with mental illness from  unnecessary nursing facility  admission.      
 
An important aspect of the Divisions work is the active enforcement of its agreements and 
litigation  (i.e., ongoing monitoring to ensure agreements are  successfully implemented and 
pursuit of remedial  measures where compliance is not occurring).   Because of these agreements  
scope and complexity, this work typically spans  several years.  In FY 2017, the Special  
Litigation Section brought to a successful close  five  such agreements.   
 
For example, in Tennessee, long-standing litigation regarding institutional and community 
services for  people with  intellectual  disabilities in the eastern and middle of the state successfully  
concluded as a result of the Sections persistent  compliance work.  In June 2017, the State of  
Tennessee completed the last requirements of an Exit Plan negotiated by the parties.  In  
August 2017, the parties filed a joint motion to vacate  the case, and the  court granted the parties  
motion in September. 
 
Another example is the  Divisions settlement agreement with the State of Delaware, which  
required the  State  to provide community-based services for people with serious mental illness 
who had been unnecessarily institutionalized in the States psychiatric hospital.  This  matter  
concluded after Delaware implemented the agreement on schedule and significantly expanded 
community-based mental health services  to ensure positive individual outcomes in integrated 
settings.  Further, the State created 812 units of permanent Supported Housing, which is a  
SAMHSA evidence-based practice  that reduces  hospitalizations, and 15 Assertive Community 
Treatment (ACT) teams, a SAMHSA evidence-based practice that reduces contact with 
institutional  settings and enhances  the quality of life in the community.  The State also  
implemented a mental health  crisis system with mobile crisis teams that  divert 80 to  90  percent  
of callers from hospitalization or criminal justice interaction.  
 
The Section also  continued monitoring implementation of reform agreements in numerous  
jurisdictions across  the country.  These ongoing enforcement  efforts are helping individuals with 
intellectual,  developmental, and mental health disabilities avoid unnecessary institutionalization  
in New Hampshire, Virginia, Georgia, and other settings.  
 
 
 
 
 
 
In New Hampshire, the Sections agreement with the State has enabled  the State to  divert  
hundreds of individuals  with mental illness from  costly hospital admissions through community 
crisis services; serve over 750 people in permanent Supported Housing;  provide close to 1,000 
adults with ACT  team services; and provide over 3,000 people with Supported Employment  
services, a SAMHSA evidence-based practice that assists individuals with disabilities to gain  
meaningful, competitive employment, self-sufficiency, and independence.     
 
  83 
   
Similarly, in Georgia,  the Section has continued its oversight  of the States efforts to comply 
with its  court-enforceable agreements.  In implementing these agreements, Georgia has  diverted 
hundreds of individuals  with mental illness from unnecessary hospital admissions, provided 
permanent Supported Housing enabling 4,000 people to live  successfully in the community, 
provided approximately 2,500 adults with ACT services, and provided over 2,600 people with 
Supported Employment services.  Under these agreements, Georgia is  also serving an additional  
1,800 people with IDD through Medicaid home and community-based  services  to prevent  their 
institutionalization or return them to the community from institutional  settings.   
 
In  Virginia, the Section also has continued oversight of the States efforts to comply with a  
statewide agreement requiring the development of community resources for people with 
intellectual and developmental disabilities (IDD) who otherwise would be at risk of  
institutionalization.  As a result of the agreement to date, more than 3,000 people  with  IDD who 
qualify for Medicaid-funded community services  have received  them, an additional  7,000 people  
with IDD have received  one-time supports to assist them in continuing to live in  the  community, 
more than 300 people with IDD have been able to live  in their own home; and more than 600 
individuals  have successfully transitioned from state-run institutions to community settings.    
 
In FY 2017, the Section continued monitoring Oregons implementation of a Performance Plan 
for Mental  Health Services for Adults with Serious and Persistent Mental Illness 
(SPMI).   Oregon developed the Plan in response to the Divisions investigation of the States  
mental health system under  the  ADA.  The Plan  memorializes steps the State will take over three 
years to help individuals with serious and persistent mental illness live successfully  in  
community settings.  The  Plan required that, by June 30, 2017, the State  would increase the  
number of individuals  with SPMI served by ACT teams, from a baseline of 815, to 1,050 
individuals served.  The State reportedly exceeded the target, with 1,098 people with SPMI  
served by ACT teams.   The Plan required that by June 30, 2017, the State would increase the  
number of individuals served with mobile crisis services to 3,500 people served.  The  State 
reportedly exceeded the  target, with 4,383 people served with mobile crisis services.  The Plan  
required that, by June 30, 2017, the State would ensure that 60 percent  of individuals discharged 
from an acute care psychiatric facility would receive a follow up visit with a community mental  
health provider within 7 days of discharge.  The  State reportedly  exceeded the target, with 71.5 
percent of individuals receiving a follow up visit  with a community mental health provider  
within 7 days of discharge.  If the State successfully implements the remainder of the  Plans 
objectives,  the Section  will close its  investigation.   
 
The total number of people benefiting from these Agreements continues to grow, as the  
population served turns  over with time.  
 
The Section continued to negotiate a  resolution in FY 2017 with the State  of South Dakota  
regarding the Sections findings that South Dakota fails to serve older  adults and people with 
disabilities  in the most integrated setting appropriate  to their needs in violation of the  ADA and 
Olmstead v. L.C.  More than 6,300 individuals reside in South Dakotas nursing facilities at any  
given time, often for long periods unrelated to their age or disability, because of a lack of  
community-based service options.    
 
 
  84 
  Negotiations  also  continued with the  State of West Virginia to resolve  the  Sections findings that 
West Virginia  fails  to serve children  with mental health  conditions in  the  most integrated setting  
appropriate  to their needs.  
 
When it has  not been possible  to reach a negotiated resolution where the Department of Justice  
has found that individuals rights have been violated through unlawful institutionalization or  
unlawful institutional conditions, the Section has  litigated those findings.   In FY 2017, the  
Section filed suit against the State of Mississippi,  alleging that the State violates the ADA by  
serving thousands of persons with mental  illness  in State psychiatric hospitals when they could 
be served in integrated settings  in the  community.  The litigation is ongoing.  Also in FY 2017, 
the Section continued to pursue litigation against the State of Texas alleging that the State  
violates the  ADA by institutionalizing persons with intellectual and developmental disabilities in 
nursing facilities.  That case is scheduled for trial in June 2018. 
 
Disability Rights Section  
 
In FY 2017, the Disability Rights Section monitored compliance of  five  settlement agreements,  
under which  more than 16,100 people collectively will obtain relief; investigated whether  
another state  provides services  to individuals with physical disabilities in the most integrated 
setting appropriate to  their needs; and  continued its litigation of another case involving 
unnecessary institutionalization of people with disabilities.  
The Section  continued  to  monitor the implementation of its  settlement agreement with the State  
of North Carolina, under  which the State is providing opportunities to individuals with  mental  
illness in  adult care homes to transition to less costly, integrated service settings.  Specifically,  
the State must provide integrated  Supported Housing to 3,000 people by July 2020 and expand 
integrated employment opportunities for people  with mental illness by providing Supported 
Employment services  to 2,500 individuals by 2019.  These services will allow individuals with  
mental illness to choose  to live and work in the  community, while allowing the State  to avoid 
costly institutional  settings.  
 
Due to the States failure to meet intermediate targets, the Section filed  a  motion to enforce the  
agreement in January 2017.  In September 2017, the court granted the motion in part, found the  
State had failed to substantially comply with its July 1, 2016 obligations  to provide Supported 
Housing and Supported Employment services, and ordered the parties  to submit any agreed-to 
modifications by October 27, 2017.   
 
As of August 31, 2017, 1,562 individuals had been diverted from or  moved from large adult care  
homes to community-based settings.  Six hundred ten individuals were diverted from adult care  
homes upon discharge from a state psychiatric hospital or upon being considered for  admission 
to an adult care home, and 952 individuals moved out of adult care homes into the community.  
Of these 1,562 individuals, 1,225 (or  78 percent)  continue to live and receive services in the 
community.  In addition, 5,014 individuals were  receiving Assertive Community Treatment  
services and 1,269 individuals in the  agreements target population were receiving Supported 
Employment services.   
 
 
  85 
  The  Section  also continued to monitor its  settlement agreements with the State of Rhode Island  
and the City of Providence, addressing the unnecessary segregation of individuals with 
disabilities  in sheltered workshop and facility-based day programs.  Under the  agreements, the 
State will provide  Supported Employment placements to roughly 2,600 individuals  with 
intellectual and developmental disabilities by 2024, and roughly 3,500 individuals will benefit  
from systemic changes to the States employment and day service systems.  The Sections 
enforcement efforts prompted the State to  improve its data tracking and  increase employment  
supports and placements.  More than  540 individuals have obtained competitive, integrated 
employment  as a result of these agreements.   
 
The  Section, along with  the U.S. Attorneys Office for the Eastern District of New  York,  
continued monitoring the settlement agreement with the State of New York and private plaintiffs  
regarding New Yorks mental health service system.  The agreement benefits  at least 2,500 
people and remedies discrimination by the State  in the administration of its mental health service  
system.  Pursuant to the  agreement, individuals  with serious  mental illness who reside in 22 large 
institutional  settings known as adult  homes in New York City will be given the opportunity to 
receive services in  the most integrated setting appropriate  to their needs consistent with the ADA  
and Olmstead. Under the agreement, such individuals can  choose to live and receive services in  
the  community such that  they are able to live, work, and participate fully in community life.  To  
date, more than 540 adult home residents are living and receiving services in the community, and 
another 2,000 adult home residents have expressed interest  in and are working toward doing so.   
The parties filed a  second amended settlement agreement on May 4, 2017, which the  Court  
approved on May 18, 2017.   
The Section  is working  with class plaintiffs to  monitor a settlement agreement with the State of  
Oregon.  Pursuant  to the settlement agreement, the State is decreasing its reliance on segregated  
employment settings and increasing Supported Employment  services to help individuals with  
intellectual and developmental disabilities to obtain competitive integrated employment.  The  
State will provide Supported Employment services so that 1,115 working-age individuals will 
obtain competitive  integrated employment by June 30, 2022.  By July 1, 2022, the State will also 
provide employment services  to at  least 4,900 youth ages 14 to 24, and provide an Individual  
Plan for Employment to at least half of those youth.  As of March 2017, the State reduced the 
census of segregated settings to 1,043 individuals and reduced the total number of hours worked 
in segregated settings  to  53,857.  The parties are currently working to confirm the number of new  
individuals  who achieved competitive integrated employment.  Finally, as of June 30, 2017, the  
State reported  that 2,453 transition-aged youth received at least one new employment service, 
and 2,043 of those youth received an Individual Plan for Employment.  
 
The  Section continued to  litigate  United States v. Florida (S.D. Fla. 2013), a case in which the  
United States alleges, among other things, that the State of Florida administers its Medicaid  
service system for children with significant medical needs in  violation of  Title II of  the ADA by  
unnecessarily segregating them in nursing facilities, when they could, and want to, be  served at  
home or in other community-based settings.   On August 7, 2017, the United States filed a notice  
of appeal, appealing to the U.S. Court of Appeals for the Eleventh Circuit the Final Order of  
Dismissal as to the United States, entered on September 20, 2016, and the final order  of  
dismissal of all other claims and parties, entered June 9, 2017. 
 
  86 
   
Separately,  a federal district court cited the Departments Statement of Interest and  Olmstead  
guidance document in Ball v. Kasich, 2:16-cv-282 (S.D. Ohio), a case in which individuals on a  
wait list for home- and community-based services allege that  Ohios ongoing denial of services 
has placed them at serious risk of institutionalization. The Statement of Interest responded to the  
defendants  motion to dismiss a named plaintiffs claims on the ground of ripeness, clarifying 
that non-institutionalized individuals  with disabilities who are  not currently receiving state-
funded home- and community-based services may bring a claim that a public entity  has placed  
them at serious risk of institutionalization or segregation in violation of Title IIs integration  
mandate. On March 23, 2017, the court denied in part defendants motion to dismiss and 
concluded  that the plaintiffs claims  were ripe  for review.    
   
Educational Opportunities Section  
 
The Educational Opportunities Section (EOS) has participated in the HCFAC Program for the  
past three years.  The Section has carefully analyzed the legal issues related to unnecessary  
segregation in the  context of K-12 schools.  The Sections pending litigation against the State of  
Georgia, alleging that the State  is violating Title II of the ADA  regarding its use of segregated 
educational  services for  approximately 5,000 Georgia students with emotional and behavioral  
disabilities, has been stayed pending resolution of  United States v. Florida, noted above. 
 
   
 
  87 
  APPENDIX
  
 
Federal Bureau of Investigation  
 
In FY 2017, the FBI was allocated $131.3 million in funding from  HIPAA and $4.3 million from  
DOJs HCFAC funds  to support the  facilitation, coordination and accomplishment of the goals of  
the HCFAC  Program.  This yearly appropriation was used to support 814 positions (488 Agent, 
326 Support). 
 
In FY 2017, the FBI initiated 625 new Health Care Fraud (HCF) investigations  and had 2,799 
pending investigations.  Investigative efforts produced 583 criminal HCF convictions  and 793 
indictments and informations.  In addition, investigative efforts resulted in over 674 operational  
disruptions  of criminal fraud organizations  and the dismantlement of the  criminal hierarchy of  
more than 148  HCF criminal enterprises.   
 
The FBI is the primary investigative  agency involved in the fight against  HCF that has  
jurisdiction over  both federal and private insurance programs.  HCF investigations are  
considered a high priority within the  FBIs Complex Financial Crime Program.  Each  of the 56 
FBI field offices has  personnel assigned specifically to investigate HCF  matters.   
 
The FBI seeks to approach the HCF crime problem in a threat-based and intelligence-driven 
manner.  The approach employs the  prioritization of enforcement efforts, at both the  national and  
field office levels,  to ensure limited resources are focused on the most significant entities 
committing health  care fraud and abuse.  As part of the process, the FBI gathers relevant data 
and information to understand the impact of the crime problem and to identify intelligence  
gaps, or  areas which require additional research  and analysis.  The need and availability of  
resources to support mitigation efforts, including enforcement and intelligence related activities, 
are also factored into the analysis.  The process is constantly on-going and requires collaboration 
not only among FBI components, but also with its public and private partners.  
 
As part of our collaboration efforts, the FBI  maintains  investigative  and intelligence sharing 
partnerships with government agencies such as other DOJ components, HHS-OIG, state 
Medicaid Fraud Control  Units, and other enforcement and regulatory agencies.  The FBI  
conducts significant  information sharing and coordination efforts with private insurance partners, 
such as the National Health Care Anti-Fraud Association, the National  Insurance Crime  Bureau, 
and private insurance investigative units.  The FBI is also  actively involved in the Healthcare 
Fraud Prevention Partnership, an effort to exchange facts and information between the public  and  
private sectors in order to reduce the prevalence of HCF.   
 
As a result of the collaboration and review process, the FBI has designated criminal enterprises 
and other  crime groups, corporate-level fraud and abuse, and public safety issues  to  include the  
rising prescription drug abuse epidemic, as  the priority HCF threat  areas of focus.  Each field  
office conducts a similar  analysis to determine their areas of focus and the actions they  will take 
to mitigate the associated threats.  
 
 
  88 
  FBI field offices  throughout the U.S. address  the  HCF threat through joint investigative  efforts; 
intelligence  collection, sharing, and analysis; and the utilization of advanced and sophisticated 
investigative techniques.  FBI field offices  participate in  HCF Task Forces and/or working 
groups with partners including local  US  Attorneys Office, HHS-OIG, DEA, IRS, FDA, other  
federal, state,  and local  law enforcement agencies, and private insurance personnel.  Based on 
information sharing and coordination, additional  cases are vetted and identified for investigation.  
These activities seek to  identify and pursue investigations against the most egregious offenders  
involved in health care  fraud and abuse.   
 
The FBIs Health Care Fraud Unit (HCFU) oversees program efforts, including providing 
guidance to  field offices, to ensure the threat is mitigated in an effective and efficient  manner.  In 
support of joint agency activities and  general threat mitigation efforts the  HCFU  developed and 
supports four initiatives, including the Health Care Fraud Prevention and Enforcement  Action 
Team (HEAT), Large Scale Conspiracies, Major  Provider Fraud, and the Prescription Drug 
Initiative.  
 
HEAT is a DOJ, FBI and HHS Cabinet-level  commitment to prevent  and prosecute  HCF.  
HEAT, which is jointly led by the Deputy Attorney General and HHS  Deputy Secretary, is  
comprised of top level  law enforcement agents, prosecutors, attorneys, auditors, evaluators, and 
other staff from DOJ, FBI and HHS and their operating divisions, and is dedicated to joint efforts  
across government to both prevent fraud and enforce current anti-fraud laws around the country.  
The Medicare Fraud Strike Force (Strike Force)  teams are a key component of HEAT.  As part  
of the HEAT Initiative, the FBI coordinates with the DOJ and HHS-OIG on funding, resource  
allocation, Strike Force expansion, target  identification, training, and operations.  The  FBI has  
approximately 101 Agents supporting the nine Strike Forces  located  in Miami, Detroit, Houston 
(also includes McAllen, Texas), New York City (Brooklyn), Tampa, Los Angeles, Chicago, 
Dallas, and Southern Louisiana (Baton Rouge and New Orleans).  In 2017, two pilot Strike Force  
teams were established  in Puerto Rico and the Washington, DC area.  In addition to funding 
agent resources, the FBI  funds undercover operation expenses, financial and investigative  
analysis support, offsite  and evidence storage locations, operational travel, and other  
investigative costs.  The  Strike Forces have effectively investigated and prosecuted individuals  
and entities that do not provide legitimate health care services, but exist solely for the purpose of  
defrauding Medicare and other federal health care programs.  The FBI participated in the July 
2017 DOJ National Health Care Fraud Takedown  resulting in the charging of 412 subjects, 
including 115 doctors, nurses and other licensed medical professionals, for their alleged 
participation in health care fraud schemes involving approximately $1.3 billion in false billings. 
120 of these individuals, including 27 doctors, were charged in cases  related to the prescription 
drug opioid threat.  The  continued support of Medicare Strike Force operations is a top priority 
for the FBI.  In addition, the FBI completes coordination and intelligence sharing with HHS and 
DOJ components on other prevention and enforcement activities, including efforts associated  
with the Large Scale Conspiracies, Major Provider Fraud, and Prescription Drug Initiatives.  
 
In FY 2017, the FBI led  law enforcement efforts to identify judicial districts across the United  
States that are  particularly  at risk in  the current opioid epidemic.  The Attorney General created 
the Opioid Fraud and Abuse Detection Unit to surge prosecutorial resources to twelve of these 
judicial districts  to prosecute individuals that are  contributing the prescription opioid epidemic.  
As  part of this initiative, DOJ appropriated additional funding to the FBI to support the  
 
  89 
  deployment of dedicated Special Agents to identify, investigate, and prosecute individuals who 
divert prescription opioids in judicial districts  in states such as Tennessee, North Carolina, West  
Virginia, and Alabama.  
 
The Large Scale Conspiracies Initiative seeks to  identify and target  criminal enterprises and  
other groups whose schemes result in significant losses to health care benefit programs.   
Intelligence efforts  for this initiative include information sharing and analysis of billing data with 
HCF enforcement partners.  Investigative assistance provided to field offices as part of the 
initiative can include  support for undercover operations, source identification and support, and 
funding of investigative  costs.  Examples of these types of cases were the convictions  of a pair of  
physicians in Alabama on 20 counts  including RICO Conspiracy, Conspiracy to Distribute  
Controlled Substances, and Conspiracy to Commit Health Care Fraud.  This conspiracy included 
double-billing for toxicology screens, kickback payments to the physicians totaling nearly 
$80,000 per  month, and voluminous controlled prescriptions  from both subjects to individuals  
without medical necessity.   The  physicians were  sentenced to a combined 492 months in prison 
and over  $30 million in restitution.   In Detroit, three physicians  was convicted of Conspiracy to 
Commit Health Care Fraud for submitting false statements, upcoding claims, billing for  
unnecessary services, and paying kickbacks for over $17 million in claims to Medicare.  In 
Houston, an 18-month FBI undercover operation collected evidence to ensure prosecution of  
significant health  care fraud encompassing over  $90  million  in Medicare losses,  incurred by over  
200 home health care facilities and four clinics  submitting false claims.  One Houston physician 
identified through this operation was sentenced to 480 months in prison for guilty verdicts of  
Conspiracy to Commit Health Care Fraud and Conspiracy to Commit  Money Laundering.  The  
FBI is committed to addressing this type of crime problem  through the  disruption, dismantlement  
and prosecution of those  involved in criminal enterprises and other organized criminal activities.  
 
The Major Provider Fraud Initiative seeks to identify and target corporate-level  groups involved 
in fraud and  abuse schemes with significant billing to health care benefit programs.  The related  
schemes are frequently complex, challenging to identify, and can involve  conduct  that is 
nationwide  in scope.  Extensive resources and coordination are frequently required due to the  
complexity and scope of the schemes.   Qui tams are a significant intelligence source for these 
types of cases.  These investigations  frequently involve pharmaceutical manufacturers,  hospital  
corporations, and regional or national medical provider agencies.  In addition to the  work 
completed at the field office level, and in response to this substantial  threat, the FBI has 
established  a centralized support team to provide investigative assistance on these cases 
nationwide.  An example of these types of cases  would include the  FBI-led  investigation of  
Tenet Healthcare Corporation, which resulted in a $513 million settlement ($368 million civil;  
$145 million criminal) to  resolve allegations including the payment of over $12 million in 
kickback payments to regional clinics for labor and delivery services.  The FBI coordinates 
efforts in these types of cases with our law enforcement partners, such as DOJ components, 
HHS-OIG, and other federal  agencies.  
 
The  Prescription Drug Initiative seeks to identify  and target criminal enterprises  and other groups  
or individuals engaged in prescription drug schemes, and where appropriate prosecute improper  
prescribing and dispensing practices  of controlled substances.  These schemes are a significant  
crime problem and impact public health and safety.  Examples of these types of cases  would be a  
Philadelphia doctor convicted, after a six week trial, to 360 months in federal prison for  
 
  90 
  conspiring with a local  chapter of the Pagan Motorcycle Club to divert approximately $5 million  
worth of Schedule II controlled pain  medications. An Alabama physician was sentenced to 180 
months in prison for his role in operating a pill mill prescribing Schedule II controlled pain 
medications for  cash.  This physician was videoed in a surreptitious recording saying that he was  
numb to the 2 to 3 overdose deaths per week of his patients.  With the  Attorney Generals  
allocation of funds to the FBI as part  of the Opioid Fraud and Abuse Detection Unit, the FBI is  
dedicated to prioritizing prescription drug scheme investigations, particularly in at-risk federal  
judicial districts, with enhanced support from the Prescription Drug Initiative.  
 
The FBI actively provides training and guidance on HCF  matters.  The FBI has teamed with the 
DOJ, HHS, and private insurance organizations  to provide  training in the  priority threat areas of  
HCF.  Funded training has included innovative methods of employing advanced investigative  
techniques;  basic HCF training for FBI Special  Agents and professional staff newly assigned to 
investigate  HCF; and sessions on new and current HCF trends and issues.  FBI personnel training  
opportunities included sessions offered by the FBI, other government agencies  and the private  
sector.  In FY 2017, more than 279 FBI HCF investigators and analysts received  training.  FBI 
personnel  also conducted a wide range of training for external audiences, including private  
insurance and regulatory personnel.  
 
Funding received by the FBI is used to pay direct and indirect personnel-related  costs associated  
with the 814 funded positions.  Funds not used directly for personnel matters, are used to provide  
operational  support for  HCF investigations, national initiatives, training, specialized equipment, 
expert witness testimony, and Strike  Force operations.  
   
 
  91 
  Return on Investment Calculation  
 
	   The return on investment (ROI) for the HCFAC  program is calculated by dividing the  total  
monetary results  to the  Federal government (not including relator payments)  by the annual  
appropriation for the HCFAC Account in a given year (not including portions of CMS  
funding dedicated to the  Medicare Integrity Program listed in the table on page 88).    
 
	   The monetary results include deposits and transfers to the Medicare Part A  Trust Fund and 
the Treasury, as well as restitution and compensatory damages to Federal agencies.  
 
	   The HCFAC Account is made up of three funding sources:  mandatory funding for HHS and 
DOJ, including HHS-OIG, appropriated through Section 1817(k)(3)(A) of the Social Security  
Act; mandatory funding for FBI activities appropriated through Section 1817(k)(3)(B) of the  
Social Security Act; and discretionary funding for the HCFAC Account appropriated through 
the annual Labor-HHS-Education appropriation.   
 
	   FBI  mandatory HIPAA  funding is included in the HCFAC ROI calculations given the 
important role the FBI plays in achieving the monetary  results reflected in the HCFAC  
annual report and because that  statute states that the funds are for the same purposes as the 
funds provided for HHS  and DOJ under the Social Security Act.  However, FBI spending 
and monetary results are  not required to be reported per the statute.  Therefore, even though 
the FBI mandatory HIPAA funding is included in the HCFAC ROI calculation,  it is  not  
reflected in the table on page 7 of this report.   
 
	   Only certain portions of  discretionary HCFAC Account funding are included in the ROI  
calculation.  All discretionary HCFAC funding for HHS-OIG and DOJ are included in the 
HCFAC report  ROI since they spend their discretionary funding on the same types of  
activities that they support with mandatory funding.  Only the  portion of CMS Medicare  
discretionary HCFAC funding that  supports  law enforcement is included in the HCFAC  
report ROI.  The remainder of CMSs HCFAC Medicare discretionary funding supports  
activities in  the Medicare Integrity Program (MIP) that are  included in  the MIP ROI, which  
calculates the impact of the prevention activities supported by  the MIP mandatory and  
discretionary funds  is calculated separately  from the HCFAC ROI and is reported outside of  
the HCFAC  report.   Impacts  for both the CMS Medicaid and Medicare program integrity 
funding are included in a separate report.  
   
 
  92 
  Total Health Care  Fraud and Abuse  Control  Resources  
 
The table below sets forth HCFAC funding, by agency, for health care fraud and abuse control  
activities  in FY  2017, including sequester  reductions.  The FBI also receives a stipulated amount  
of HIPAA funding for use in support of the Fraud and Abuse Control Program, which is shown 
below.  Separately, CMS receives additional Mandatory Resources under the Medicare Integrity  
Program (section 1817(k)(4) of the Social Security Act).  The  inclusion of the activities  
supported with these funds is not  required in this  report, and this information is included for  
informational purposes.  Since 2009, Congress has also appropriated annual amounts to help 
carry out health care fraud and abuse control activities within DOJ and HHS.  Those amounts are  
set forth  as Discretionary Resources in the table below and the results of the efforts supported  
with these funds are contained within this report.  
 
Mandatory Resources1   Fiscal  Year 2017  
Office of Inspector General   185,906,325  
Health and Human Services Wedge2   35,556,811  
Medicare Integrity Program3   859,238,682  
MIP/Medicare (non-add)   793,143,399  
Medi-Medi (non-add)   66,095,283  
Department of Justice Wedge2   58,045,073  
Federal Bureau of Investigation4   131,334,942  
Subtotal, Mandatory HCFAC   1,270,081,834  
Discretionary Resources    
Office of Inspector General   82,132,000  
CMS Program Integrity   569,068,000  
Medicare Program Integrity (Non-Add)   468,936,000  
Medicaid Program Integrity (Non-Add)5   82,132,000  
         Senior Medicare Patrols (ACL Non-Add)6   18,000,000  
Department of Justice   73,800,000  
Subtotal, Discretionary HCFAC   725,000,000  
1,995,081,834  
Grand Total, HCFAC  
                                                 
1  All  mandatory  resources  are post-sequester.  

2  The  HHS  and DOJ  Wedge  funds  are  divided  among multiple  agencies  within HHS  and DOJ.   Page  7  of  this  report 
 
includes  the  allocations  of  the  HHS  and  DOJ  Wedge  by  agency  or  activity. 

3  Medicare  Integrity Program  (MIP)  and Medi-Medi  fund  fraud  prevention  and  detection  activities  within  Medicare  

and  Medicaid  are  not  part  of  this  report to  Congress.   A  separate  report  to  Congress  addresses  MIP  activities. 
 
4  The  FBI  receives  funding annually  to conduct  anti-fraud activities  authorized by  HIPAA.   This  funding is  included 
 
in  the  HCFAC ROI  calculation  for  this  report.
 
5  This  does  not  include  the  Medicaid Integrity  Program  authorized  in  the  Deficit  Reduction  Act  of  2005,  which 
 
receives  funding  separately  from  the HCFAC  account. 

6  The  Consolidated Appropriations  Act  of  2016 requires  that  the  full  cost  of  the  Senior  Medicare  Patrol  funding be 
 
supported  by discretionary HCFAC  funds. 
 
 
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  Glossary of Terms  
 
The AccountThe Health Care Fraud and Abuse Control Account  
 
ACA  Affordable Care Act  
 
AKS Anti-Kickback Statute  
 
ACLDepartment of Health and Human Services, Administration for Community Living 
 
AUSAAssistant United States Attorney  
 
CHIPChildrens Health Insurance  Program  
 
CIACorporate  Integrity Agreement  
 
CMP   Civil Monetary Penalty  
 
CMPLCivil Monetary Penalties Law  
 
CMSDepartment of Health  and Human  Services, Centers for Medicare & Medicaid  Services    
 
CNCCompromised Number Contractors  
 
CPICenter for Program Integrity  
 
CRIPACivil Rights of Institutionalized Persons Act  
 
CYCalendar Year  
 
D.XX or X.D.XxFederal  judicial  district of a state, which may include north, south, east, west   
 
DMEDurable Medical Equipment  
 
DOJThe Department of Justice  
 
FEHBPFederal Employee Health Benefits  Program  
 
FBIFederal Bureau of Investigation  
 
FCAFalse Claims Act  
 
FDAFood and Drug Administration 
 
FFDCAFederal  Food, Drug, and Cosmetic Act  
 
 
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  FWAFraud, Waste, and Abuse  
 
FYFiscal Year  
 
HCFACHealth Care Fraud and Abuse Control  Program or the Program  
 
HEATHealth Care Fraud Prevention & Enforcement Action Team  
 
HFPPHealth care Fraud Prevention Partnership   
 
HHAHome Health Agency  
 
HHSThe Department of Health and Human Services  
 
HHS-OIGThe Department of  Health and Human Services - Office of the Inspector General  
 
HIHospital Insurance  Trust Fund  
 
HIPAA  The Health Insurance Portability and Accountability Act of 1996, P.L. 104-191 
 
MEDICMedicare Drug Integrity Contractors  
 
MFCUMedicaid Fraud Control Unit  
 
OCGSOrganized Crime and Gang Section  
 
OGCOffice of the General Counsel, Department of Health and Human Services  
 
PERMPayment  Error Rate Measurement  
 
PFPPharmaceutical Fraud  Pilot Program  
 
The ProgramThe Health Care Fraud and Abuse Control Program  
 
SecretaryThe Secretary of  the Department of Health and Human Services  
 
SMPSenior  Medicare Patrol  
 
USAOUnited States Attorneys Office  
 
ZPICZone Program Integrity Contractor  
 
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