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Message from the Inspector General 
 
 
This report, submitted pursuant to the Inspector General Act of 1978, as amended, 
summarizes the activities of the Office of Inspector General (OIG) for the 6-month 
reporting period that ended March 31, 2007. 
 
The time period encompassed by this semiannual report coincides with an unusual 
confluence of milestones.  During the last 6 months, OIG marked the 30th anniversary of 
its establishment, the 20th anniversary of the enactment of the False Claims Amendments 
Act of 1986 (FCA), and the 10th anniversary of the enactment of the 1986 Health 
Insurance Portability and Accountability Act.  These statutes are the legal and policy 
foundations upon which much of OIGs work is based.   
 
Our accomplishments over the past 6 months continue to reflect the impact of these 
historic statutes, as well as OIGs relatively new oversight responsibilities under the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 and Medicaid 
integrity efforts pursuant to the Deficit Reduction Act of 2005.  OIGs focus on the 
Departments public health emergency preparedness and response activities also 
continued in earnest during this reporting period. 
 
OIGs authorities under the FCA were critical in resolving two significant cases during 
this reporting period:  a $900 million settlement with Tenet Healthcare Corporation, 
operator of the Nations second-largest hospital chain, and a $49.5 million settlement 
with Omnicare, Inc., a nationwide institutional pharmacy.  With respect to health care 
work, OIGs focus on the integrity of Medicare and Medicaid payments continued, 
with reviews of payments for Medicare home oxygen equipment and eligibility of 
beneficiaries for Medicaid in New York State.  OIG also reviewed the compliance plans 
of prescription drug programs participating in Medicare Part D.  In addition to health care 
related accomplishments, OIG added to its robust portfolio of emergency preparedness 
work by evaluating the response of the Commissioned Corps to Hurricanes Katrina and 
Rita, the largest deployment of officers in the Corps 207-year history. 
 
I want to express my sincere appreciation to Congress as well as to the senior 
management of the Department for their support over the last 6 months.  I am honored 
to be leading an organization of highly professional and talented employees who are 
committed to the mission of OIG and the important programs administered by the 
Department. 
 
 
Daniel R. Levinson 
Inspector General   
Highlights 
Summary of Accomplishments 
 
For the first half of fiscal year (FY) 2007, the Department of Health and Human Services 
(HHS) Office of Inspector General (OIG) reported expected recoveries of $2.9 billion:  
$1.5 billion in audit receivables and $1.4 billion* in investigative receivables. 
 
Also for this semiannual period, OIG reported exclusions of 1,278 individuals and 
entities for fraud or abuse involving Federal health care programs and/or their 
beneficiaries; 209 criminal actions against individuals or entities that engaged in crimes 
against departmental programs; and 123 civil actions, which include False Claims Act 
and unjust enrichment suits filed in Federal district court, Civil Monetary Penalties Law 
settlements, and administrative recoveries related to provider self-disclosure matters.   
 
The Commissioned Corps Response to Hurricanes Katrina and Rita 
OIG found that, in response to Hurricanes Katrina and Rita, Public Health Service 
Commissioned Corps officers provided valuable support to States.  However, more 
officers, especially nurses, mental health professionals, and dentists, were needed.  In 
addition, although most deployed officers met Corps readiness standards, many lacked 
prior deployment experience, effective training, and familiarity with response plans.  
Logistical difficulties involving contacting officers for deployment, making travel 
arrangements, and communicating assignments, delayed officers arrival to the field.  
OIG noted that the Departments initiative to transform the Corps may alleviate many of 
the issues the Corps experienced in responding to Hurricanes Katrina and Rita and made 
several recommendations to improve the Corps effectiveness and efficiency in deploying 
for and responding to disasters.  
 
$900 Million Settlement With Tenet Healthcare Corporation 
Tenet Healthcare Corporation, operator of the Nations second largest hospital chain, 
agreed to pay the Government $900 million plus interest and enter into a 5-year 
Corporate Integrity Agreement (CIA) to resolve its liability under the False Claims Act 
and related authorities.  Of the settlement amount, Tenet will pay over $788 million to 
resolve claims related to outlier payments Tenet received based on inflated charges for 
inpatient and outpatient care.  
 
$49.5 Million Settlement With Omnicare, Inc. 
Omnicare, Inc., a nationwide institutional pharmacy that exclusively services nursing 
home patients, agreed to pay $49.5 million and enter into a 5-year CIA for allegedly 
improperly switching capsules for tablets.  The switches, allegedly made to avoid Federal 
upper payment limits placed by the Centers for Medicare & Medicaid Services, did not 
comply with State lowest price requirements.  The improper switches cost Medicaid 
                                                 
*This amount represents HHS investigative receivables only; receivables of other Federal agencies, States, 
and other entities are not included here.  
HHS OIG Semiannual Report to Congress  i  October 1, 2006  March 31, 2007  Highlights 
and the Federal Government approximately $26 million more than if the drugs had not 
been switched. 
 
South Florida Durable Medical Equipment Suppliers Compliance With 
Medicare Standards:  Results from Unannounced Visits 
OIG officials made unannounced site visits to 1,581 suppliers of durable medical 
equipment, prosthetics, orthotics, and supplies (DMEPOS) in three South Florida 
counties to determine whether the suppliers comply with certain Medicare standards.  
Investigators found that, contrary to Medicare requirements, 31 percent of suppliers in 
Miami-Dade, Broward, and Palm Beach Counties did not maintain facilities or their 
facilities were not open for business or staffed.  OIG recommended that CMS strengthen 
the Medicare DMEPOS supplier enrollment process and ensure that suppliers meet 
Medicare supplier standards. 
 
Medicare Home Oxygen Equipment 
Although home oxygen equipment is relatively inexpensive to buy, durable, and easy to 
maintain, Medicare allows long-term rentals that cost much more than the equipment.  
Specifically, OIG found that based on the 2006 median fee schedule amount, Medicare 
will allow $7,215 for 36 months rental of concentrators that cost $587, on average, to 
purchase new.  OIG recommended that CMS work with Congress to further reduce the 
rental period allowed for oxygen equipment. 
 
Medicaid Eligibility in New York State 
During a 6-month period in 2005, New York State made Federal payments totaling an 
estimated $230.4 million on behalf of beneficiaries who did not meet Medicaid eligibility 
requirements.  In addition, New Yorks documentation did not adequately support 
eligibility determinations for an estimated $2.8 billion in Federal payments.  OIG did not 
recommend recovery of Federal dollars because a disallowance may occur only if the 
errors are detected through a States Medicaid Eligibility Quality Control program.  
Instead, OIG recommended that New York use the results of this review to help ensure 
compliance with Federal and State eligibility requirements.  
 
Former Dermatologist Sentenced for Performing Unnecessary Surgeries 
A former dermatologist was sentenced to 22 years in prison, ordered to pay $3.7 million 
in restitution, forfeit an additional $3.7 million, and pay a $25,000 fine for performing 
3,086 medically unnecessary surgeries on 865 Medicare beneficiaries.  The dermatologist 
falsely diagnosed patients with skin cancer so he could bill Medicare for expensive 
surgeries. 
 
Prescription Drug Plan Sponsors Compliance Plans 
OIG found that although all prescription drug plan sponsors had compliance plans, 
72 of 79 compliance plans did not address one or more of CMSs 17 requirements.  One 
required element of compliance plans is the development of a comprehensive plan to 
detect, prevent, and correct fraud, waste and abuse.  This requirement was addressed in 
some way by all plans, yet only 15 of 79 compliance plans addressed all 
11 recommendations regarding the design of these anti-fraud plans.   
 
HHS OIG Semiannual Report to Congress  ii  October 1, 2006  March 31, 2007  Highlights 
Unobligated Bioterrorism Grant Funds 
As of the close of the Public Health Preparedness and Response for Bioterrorism 
Program, States and major local health departments had not expended almost 16 percent 
of the approximately $996 million awarded.  Because many awardees did not submit 
timely financial status reports, the Centers for Disease Control and Prevention (CDC) did 
not always have the information needed to encourage the expenditure of funds.  Under 
the new Public Health Emergency Preparedness Program, which began in 2005, CDC has 
strengthened its guidance and established additional controls.  OIG recommended that 
CDC ensure that awardees under the new program submit financial status reports in a 
timely manner; follow its new guidance to better manage grant funds; and, when 
appropriate, offset new-year awards by unobligated funds carried over from the prior 
budget year.  
 
Departmental Financial Statement Audit 
The Department received a clean opinion on its FY 2006 consolidated/combined 
financial statements for the eighth consecutive year.  OIG found that the Departments 
statements were reliable and fairly presented.  However, auditors noted material 
weaknesses in financial management systems and reporting and in information systems 
controls. 
 
 
HHS OIG Semiannual Report to Congress  iii  October 1, 2006  March 31, 2007    
Office of Inspector Generals 
Hurricane-Related Activities 
In response to the Gulf Coast hurricanes of 2005, OIG launched an aggressive, 
coordinated oversight effort to ensure that Federal response and recovery funds are spent 
appropriately; that those attempting to defraud the Government are brought to justice; and 
that the individuals responsible for the relief efforts are wise stewards in their work 
assisting those affected by the hurricanes and their aftermath.   
 
OIG continues to work with Federal, State, and local partners in this effort, including 
participating as a member of the Presidents Council on Integrity and Efficiency (PCIE) 
Homeland Security Roundtable and the Disaster Relief Working Group, which are 
coordinating the oversight activities of the Federal Inspectors General.  OIG took the lead 
in developing information related to State and local liaisons as part of a comprehensive 
Hurricane Action Plan developed by the Homeland Security Roundtable.  In addition, 
along with other members of the Inspector General (IG) community, OIG is a member of 
the Department of Justice Katrina task force in Baton Rouge.  That task force is 
investigating allegations of fraud related to Federal outlays in connection with Hurricane 
Katrina.   
 
OIG has initiated extensive audit, evaluative, and investigative activities related to the 
oversight of HHSs hurricane recovery efforts.  A list of recently completed and ongoing 
projects follows: 
 
Department Accounting for Federal Emergency Management Agency Assignments 
As of February 28, 2007, the spending authority for HHS Federal Emergency 
Management Agency-requested mission assignments totaled $307 million.  This spending 
authority is contained within 117 individual mission assignments with different 
magnitudes and objectives.  OIGs audits will determine whether HHS is appropriately 
accounting for these costs. 
 
Auditing Hurricane-Related Procurements 
OIG is auditing all HHS hurricane-related contractual procurements over $100,000.  
These audits focus specifically on the methods of procurement; costs incurred; and the 
quantity, quality, and timeliness of deliverables.  OIG plans to audit 72 procurements 
with a total value of $92.7 million.  As of February 28, 2007, OIG had issued 21 audit 
reports with an audited value of $29.3 million.  All 21 reports noted that the awarding 
agencies had complied with procurement requirements.  OIG is in the process of 
completing and issuing an additional 51 reports with an audited value of $63.4 million. 
 
Transporting Medically Needy Evacuees 
OIG is auditing the performance and monetary charges of a contractor responsible for 
returning to Texas, Louisiana, and Mississippi all evacuees who required en route 
medical care and therefore could not travel via commercial air or without medical 
assistance.  It is estimated that 6,000 individuals were transported.  This contractor was 
awarded $21 million to transport evacuees back to their medical facilities.   
HHS OIG Semiannual Report to Congress  v  October 1, 2006  March 31, 2007  Hurricane-Related Activities 
Duplication of Benefits  
At the request of the Department of Homeland Security (DHS) OIG and the PCIE 
Homeland Security Roundtable, OIG completed a program survey to identify potential 
duplication of benefits provided in declared disasters associated with Hurricanes Katrina, 
Rita, and Wilma.  OIG distributed the survey request to various operating divisions 
within HHS and asked each operating division to complete the program survey form 
provided by the DHS IG.  Many Federal agencies provided record levels of support, both 
financial and nonfinancial, through programs they administer during presidentially 
declared disasters.  The DHS IG and PCIE will use this survey to determine which 
programs have the greatest risk of duplicative, excessive, and improper payments.   
 
Emergency Response to Hurricane Katrina:  Use of the Government Purchase Card 
OIG recently issued a draft report analyzing the use of purchase cards by HHS personnel 
deployed in response to Hurricane Katrina.  The purchase card program was designed to 
save the Government money by avoiding costly paperwork and expediting the process of 
making purchases.  In response to Hurricane Katrina, Public Law 109-62 authorized 
agencies to streamline certain purchasing requirements for procurement of supplies or 
services to support rescue and relief operations.  The objectives of this report were to 
determine whether Government purchase card purchases related to Hurricane Katrina 
complied with selected requirements for the use of the card and to identify lessons 
learned from Hurricane Katrina purchases to assist in the administration of the 
Government purchase card program during future emergency situations. 
 
The Commissioned Corps Response to Hurricanes Katrina and Rita 
In a recent final report, OIG found that although Commissioned Corps officers deployed 
to Hurricanes Katrina and Rita provided valuable services, the Corps could improve its 
response to public health emergencies.  The Corps provided valuable support to States; 
however, more officers, especially nurses, mental health professionals, and dentists, were 
needed.  Although most deployed officers met Corps readiness standards, many lacked 
experience, effective training, and familiarity with response plans.  Agencies were 
unwilling or unable to allow some officers to deploy, while logistical difficulties delayed 
others arrival in the field.  Confusion surrounded some officers arrival, but most field 
assignments were appropriate and officers felt safe at their locations.  Most officers were 
equipped adequately, but some lacked working communications devices and other basic 
tools.  Many officers personally incurred mission-related expenses and some were not 
reimbursed promptly, which could affect their ability to deploy to future public health 
emergencies. 
 
OIG recommended that the Corps institute more effective training for officers, improve 
the system used to contact officers for deployment, work with the Office of the Assistant 
Secretary for Preparedness and Response (formerly the Office of Public Health 
Emergency Preparedness) to streamline deployment-related travel, stagger deployments 
to ensure continuity of operations, improve its ability to coordinate mission assignments 
and communications in the field, and ensure that all deployable officers have Federal 
Government travel credit cards.  The Assistant Secretary for Health agreed with these 
recommendations.  As part of the Corps comprehensive transformation process and its 
HHS OIG Semiannual Report to Congress  vi  October 1, 2006  March 31, 2007  Hurricane-Related Activities 
efforts to improve the Office of Force Readiness and Deployments practices, the Corps 
currently is addressing the recommendations in this report. 
 
Medicaid Payments and Services Under Hurricane-Related Demonstration Projects 
Because of the effects of Hurricanes Katrina and Rita, beneficiaries of HHS programs 
who resided in the Gulf Coast States may have been evacuated to various places around 
the United States or otherwise significantly affected.  In response to this situation, and to 
ensure that victims of Katrina and Rita received needed health care, HHS used 
Section 1115 waiver and expenditure authority to expand Medicaid coverage criteria.   
In this study, OIG will describe the payments and services made under Section 1115 
Medicaid demonstration projects for victims of Katrina and Rita. 
 
Investigations of Health Care Fraud, Quality-of-Care Lapses, and Other Issues 
As of the end of this reporting period, OIG had 11 open investigations involving 
allegations of health care fraud, poor quality of care, and patient abandonment and is 
assisting in investigations of circumstances surrounding the deaths of nursing home 
residents and hospital patients.  OIG is also involved in two other cases that include 
allegations of individuals fraudulently obtaining benefits based on false information.  
 
 
HHS OIG Semiannual Report to Congress  vii  October 1, 2006  March 31, 2007    
Table of Contents 
Centers for Medicare & Medicaid Services .................................................................... 1 
CMS-Related Reports ................................................................................................................... 2 
Organ Acquisition Costs Claimed by Certified Transplant Centers ......................................................... 2 
Hospital Reporting of Deaths Related to Restraint and Seclusion ............................................................ 2 
Availability of Quality of Care Data in the Medicare End Stage Renal Disease Program ...................... 3 
Identifying Beneficiaries Eligible for the Medicare Part D Low-Income Subsidy .................................. 3 
Prescription Drug Plan Sponsors Compliance Plans ................................................................................ 3 
Carrier Determination of Copayments for Medicare Mental Health Services ......................................... 4 
South Florida Durable Medical Equipment Suppliers Compliance With Medicare Standards:  
Results From Unannounced Visits ....................................................................................................... 4 
Medical Equipment Suppliers:  Compliance with Medicare Standards.................................................... 5 
Medicare Home Oxygen Equipment:  Cost and Servicing ........................................................................ 5 
Hospital Wage Data ...................................................................................................................................... 5 
Oversight and Evaluation of the Hospital Payment Monitoring Program ................................................ 6 
Oversight and Evaluation of the Comprehensive Error Rate Testing Program ........................................ 6 
Postretirement Benefit Costs Claimed by Medicare Contractors .............................................................. 7 
Potential Duplicate Payments Identified by a CMS Recovery Audit Contractor ..................................... 7 
Fee-for-Service Payments for Medicare Beneficiaries Enrolled in Managed Care Risk Plans .............. 7 
Inpatient Rehabilitation Facility Claims ...................................................................................................... 8 
Medical Review of a Rehabilitation Facilitys Services for Medicare Outlier Claims ............................ 8 
Place-of-Service Coding for Physician Services ........................................................................................ 8 
Graduate Medical Education for Dental Residents .................................................................................... 9 
Medicare Part B Services for Nursing Home Residents:  2002 ................................................................. 9 
Medicare Contractor Information Security ............................................................................................... 10 
California's Section 1115 Medicaid Demonstration Project Extension for Los Angeles County ......... 10 
Medicaid Eligibility .................................................................................................................................... 10 
Medicaid School-Based Health Claims ..................................................................................................... 11 
Medicaid Outpatient Drug Expenditures in Nebraska ............................................................................. 12 
Arkansas Reporting of Medicaid Overpayments Collected by Contractors ........................................... 13 
Selected States Medicaid Payments for Services Claimed To Have Been 
Provided to Deceased Beneficiaries ................................................................................................... 13 
Medicaid Reimbursement for Distinct-Part Nursing Facilities in California ......................................... 13 
States Requirements for Medicaid-Funded Personal Care Service Attendants .................................... 14 
 
HHS OIG Semiannual Report to Congress  ix  October 1, 2006  March 31, 2007   
Medicaid Provider Enrollment Standards:  Medical Equipment Providers ............................................ 14 
Preadmission Screening and Resident Review for Younger Nursing Facility Residents With 
Serious Mental Illness ......................................................................................................................... 14 
Preadmission Screening and Resident Review for Younger Nursing Facility Residents With 
Mental Retardation .............................................................................................................................. 15 
Review of the Centers for Medicare & Medicaid Services Medicaid Financial Management 
Oversight .............................................................................................................................................. 15 
CMS Financial Statement Audit ................................................................................................................ 15 
Outreach ....................................................................................................................................... 16 
Advisory Opinions ...................................................................................................................................... 16 
Provider Self-Disclosure Protocol ............................................................................................................. 16 
Federal and State Partnership:  Joint Audits of Medicaid ...................................................... 17 
Office of Inspector General Administrative Sanctions ............................................................ 17 
Program Exclusions .................................................................................................................................... 17 
Civil Monetary Penalties Law.................................................................................................................... 18 
Patient Dumping ......................................................................................................................................... 18 
Criminal and Civil Enforcement ................................................................................................ 19 
Hospitals ...................................................................................................................................................... 19 
Prescription Drugs ...................................................................................................................................... 20 
Transportation ............................................................................................................................................. 21 
Practitioners ................................................................................................................................................. 21 
Clinics .......................................................................................................................................................... 22 
Durable Medical Equipment Suppliers ..................................................................................................... 22 
Billing Consultant or Contractor ................................................................................................................ 22 
Nursing Homes ........................................................................................................................................... 23 
Laboratories ................................................................................................................................................. 23 
Medicaid Fraud Control Units ................................................................................................... 23 
Investigations .............................................................................................................................................. 23 
Suspected Medicaid Fraud Referrals ......................................................................................................... 25 
 
Public Health Agencies ................................................................................................... 27 
Public Health Agency-Related Reports ..................................................................................... 28 
Unobligated Balances of Funds Awarded Under the Public Health Preparedness 
and Response for Bioterrorism Program ............................................................................................ 28 
Security of Stockpile Sites.......................................................................................................................... 28 
The Commissioned Corps Response to Hurricanes Katrina and Rita ................................................... 28 
Corrective Actions Concerning the Food and Drug Administrations 
Human Subject Research Program ..................................................................................................... 29 
Food and Drug Administrations Resolution of Audit Recommendations ............................................. 29 
 
HHS OIG Semiannual Report to Congress  x  October 1, 2006  March 31, 2007   
Management of Unobligated Funds Provided by the Ryan White CARE Act ...................................... 29 
Safeguards Over Controlled Substances at an Indian Health Service Hospital ...................................... 30 
Royalty Payments Received by the National Institutes of Health ........................................................... 30 
Financial Statement Audit of the National Institutes of Health Service and Supply Fund .................... 30 
Health Education Assistance Loan Defaults ............................................................................................. 30 
Public Health-Related Investigations ........................................................................................................ 31 
 
Administration for Children and Families; Administration on Aging ...................... 33 
Administration for Children and Families-Related Reports ................................................... 34 
Lebanon Repatriation Program Funds ....................................................................................................... 34 
Undistributable Child Support Collections ............................................................................................... 34 
Title IV-E Adoption Assistance Training Costs in Two States ............................................................... 35 
Connecticuts Title IV-E Adoption Assistance Costs .............................................................................. 35 
Administration on Aging-Related Reports ............................................................................... 36 
Cost Sharing for Older Americans Act Services ...................................................................................... 36 
Administration on Agings Resolution of Audit Recommendations ...................................................... 36 
Child Support Enforcement ....................................................................................................... 37 
Task Forces ................................................................................................................................................. 37 
Investigations .............................................................................................................................................. 37 
 
General Oversight ........................................................................................................... 39 
General Oversight-Related Reports .......................................................................................... 40 
Departmental Financial Statement Audit .................................................................................................. 40 
Special-Purpose Financial Statements ....................................................................................................... 40 
Departmental Service Organizations ......................................................................................................... 40 
Emergency Response to Hurricanes Katrina and Rita ............................................................................. 40 
Non-Federal Audits .................................................................................................................................... 41 
Resolving Recommendations ...................................................................................................... 42 
Table 1:  Reports With Questioned Costs ................................................................................................. 42 
Table 2:  Funds Recommended To Be Put to Better Use ........................................................................ 43 
Legislative and Regulatory Review and Development ............................................................. 44 
Regulatory Review Functions .................................................................................................................... 44 
Regulatory Development ............................................................................................................................ 44 
Employee Fraud and Misconduct .............................................................................................. 45 
Prosecutions ................................................................................................................................. 45 
 
Appendixes....................................................................................................................... 47 
Notes to Tables 1 and 2 ............................................................................................................... 49 
Notes to Table 1 .......................................................................................................................................... 49 
HHS OIG Semiannual Report to Congress  xi  October 1, 2006  March 31, 2007   
Notes to Table 2 .......................................................................................................................................... 55 
Reporting Requirements of the Inspector General Act of 1978, as Amended ....................... 57 
Summary of Sanction Authorities .............................................................................................. 59 
Program Exclusions .................................................................................................................................... 59 
Patient Dumping ......................................................................................................................................... 59 
Civil Monetary Penalties Law.................................................................................................................... 60 
Anti-Kickback Statute and Civil False Claims Act Enforcement Authorities ........................................ 60 
 
 
Please note:  Numerical information in this report is rounded. 
 
 
HHS OIG Semiannual Report to Congress  xii  October 1, 2006  March 31, 2007   
Centers for Medicare & Medicaid Services 
The Centers for Medicare & Medicaid Services (CMS) administers the Medicare and 
Medicaid programs.  Financed by the Federal Hospital Insurance Trust Fund, Medicare 
Part A provides hospital and other institutional insurance for individuals 65 years old or 
older and for certain disabled persons.  Medicare Part B (Supplementary Medical 
Insurance) is an optional program that covers most of the costs of medically necessary 
physician and other services and is financed by participants and general revenues.  
Medicare Part C (Medicare Advantage) enables beneficiaries of Medicare Parts A and B 
to choose to receive all their health care services through a coordinated Medicare 
Advantage plan, which replaced the previous Medicare+Choice managed care plans.  
Medicare Part D is a new, optional program offering prescription drug coverage through 
private drug plans.  Beneficiaries may opt to either enroll in a stand-alone prescription 
drug plan and receive their Part A and Part B benefits through a fee-for-service health 
plan or enroll in a Medicare Advantage prescription drug plan and receive all Medicare 
benefits, including drug coverage, through a Medicare Advantage plan. 
 
The Medicaid program provides funding to States for medical care and other support and 
services for low-income individuals.  State expenditures for medical assistance are 
matched by the Federal Government using a formula that compares per capita income in 
each State with the national average.  The State Childrens Health Insurance Program 
(SCHIP) expands health coverage to uninsured children whose families earn too much for 
Medicaid but too little to afford private coverage. 
 
OIG devotes significant resources to investigating Medicare and Medicaid fraud, waste, 
and abuse and to monitoring these programs through audits and evaluations.  These 
activities have helped to ensure the cost-effective delivery of Medicare, Medicaid, and 
SCHIP services; to safeguard quality of care to program beneficiaries; and to reduce the 
potential for fraud, waste, and abuse.  In addition, these efforts have led to criminal, civil, 
and/or administrative actions against perpetrators of fraud and abuse. 
 
OIG also reports on audits of CMS financial statements, which currently account for 
more than 82 percent of the Departments net costs.  In addition to issuing an opinion on 
the statements, auditors assess compliance with Medicare laws and regulations and the 
adequacy of internal controls. 
HHS OIG Semiannual Report to Congress  1  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
CMS-Related Reports 
 
Organ Acquisition Costs Claimed by Certified Transplant Centers 
OIG found that 11 certified transplant centers did not always comply with Medicare 
regulations and guidelines for claiming approximately $203 million in organ acquisition 
costs during various periods between 1997 and 2002.  Of the almost $80 million of costs 
audited, approximately $47 million did not comply with Medicares definition of organ 
acquisition costs, exceeded Medicares limits on physician salaries, or was not allocated 
or documented properly.  Based on the fiscal intermediaries revisions to the 11 centers 
cost reports for unallowable and unsupported costs, OIG estimated that Medicares share 
of the $47 million was approximately $28 million. 
 
OIG recommended that CMS consider the results of the 11 audits in prioritizing areas to 
be evaluated in annual audits by the fiscal intermediaries.  CMS agreed with the 
recommendation.  (A-09-05-00034) 
 
Hospital Reporting of Deaths Related to Restraint and Seclusion 
OIG found that hospitals failed to report to CMS 44 out of the 104 documented deaths 
related to the use of restraint and seclusion for behavior management between 
August 2, 1999, and December 31, 2004.  Among deaths that were reported directly to 
CMS, less than one-third were reported in a timely manner.  OIG also found that CMS 
and State survey agencies were not consistent in the timeliness of their response to 
reported deaths, limiting their ability to address potentially harmful conditions.  Although 
CMS requires State survey agencies to educate hospitals about the reporting requirement, 
relatively few State survey agencies indicated that they provide hospitals with regular 
guidance.  In addition, CMS does not maintain comprehensive and reliable information 
about hospital deaths related to restraint and seclusion.   
 
To improve hospital reporting of deaths related to restraint and seclusion, OIG 
recommended that CMS seek legislation to establish intermediate sanctions for hospitals 
that fail to report such deaths directly to CMS and consider regulatory changes that would 
implement broader reporting requirements.  To improve the accuracy of its data and the 
timely identification of deaths related to restraint and seclusion, CMS should instruct its 
regional offices and State survey agencies to adhere to timelines, encourage State survey 
agencies to provide ongoing training to hospitals about the mandatory reporting 
requirement, and instruct regional offices to request periodic updates about deaths related 
to restraint and seclusion from other Federal and State agencies.   
 
CMS concurred in part with OIGs recommendations and indicated that it will provide 
written instructions to regional offices and State survey agencies and that it will consider 
regulatory changes that would simplify reporting requirements.  However, the agency 
indicated that expanding sanction options is a statutory issue that is best addressed 
through congressional action.  In addition, CMS stated that, in the future, the agency will 
seek the support of hospital provider groups and accreditation organizations to provide 
ongoing training on the reporting requirements.  (OEI-09-04-00350) 
 
HHS OIG Semiannual Report to Congress  2  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
Availability of Quality of Care Data in the Medicare End Stage 
Renal Disease Program 
OIG found that End Stage Renal Disease (ESRD) networks had access to multiple 
sources of data in ESRD facilities during 2004 and 2005, but that these data sources 
provided limited help in identifying facilities with quality of care problems.  The data 
were fragmented; duplicative; or lacked facility-specific, comprehensive, and clinical 
performance measures.  Such data limitations may impair the networks efforts to ensure 
that patients in ESRD facilities receive high-quality care and limit CMSs ability to 
implement a pay-for-performance system for ESRD. 
 
OIG recommended that CMS increase its efforts to collect data regularly on all clinical 
performance measures from all patients and all facilities to address quality of care in the 
ESRD program.  CMS outlined its efforts to improve the quality of care in the ESRD 
program and acknowledged that further improvements are needed.  (OEI-05-05-00300) 
 
Identifying Beneficiaries Eligible for the Medicare Part D Low-Income Subsidy 
OIG found that there was no effective way to identify beneficiaries who may be eligible 
for a subsidy to help pay the out-of-pocket costs associated with their Medicare 
prescription drug coverage.  CMS has overall responsibility for implementing the 
prescription drug benefit and the Social Security Administration (SSA) was given 
responsibility for processing the subsidy applications and determining eligibility.  Neither 
CMS nor SSA had a comprehensive source of income data to accurately identify 
potential beneficiaries.   
 
OIG concluded that legislation is needed to allow CMS and SSA to more effectively 
identify beneficiaries who are potentially eligible for the subsidy.  Specifically, access to 
Internal Revenue Service earnings data would help CMS and SSA identify beneficiaries 
most likely to be eligible for the subsidy.  The identification of these beneficiaries would 
allow for a more targeted and effective outreach effort to ensure that all those who 
qualify for the subsidy receive this important assistance.  (OEI-03-06-00120) 
 
Prescription Drug Plan Sponsors Compliance Plans 
Prescription drug plan (PDP) sponsors approved to provide Part D benefits in 2006 are 
required by Federal regulation to have compliance plans in place.  These compliance 
plans must address eight elements, including a comprehensive fraud and abuse plan.  
CMS guidance documents state that compliance plans must address 17 requirements 
regarding the eight compliance plan elements.  An OIG review of 79 PDP sponsors found 
that all had compliance plans, yet 72 of 79 compliance plans did not address 1 or more of 
the 17 requirements.  Further, many compliance plans lacked detail regarding 
requirements involving compliance processes or programs.  Although all compliance 
plans addressed the fraud and abuse element in some way, only 15 of 79 plans 
(19 percent) addressed all 11 CMS recommendations regarding fraud detection, 
correction, and prevention that we included in our review.  In addition, many of the plans 
that addressed recommendations regarding fraud detection, correction, and prevention 
procedures lacked sufficient detail. 
 
HHS OIG Semiannual Report to Congress  3  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
OIG recommended that CMS ensure that PDP sponsors compliance plans address all 
requirements presented in its fraud, waste, and abuse manual chapter regarding the eight 
elements set forth in regulation.  In addition, CMS should encourage sponsors to provide 
sufficient detail in their compliance plans to demonstrate clearly how sponsors are 
actually implementing the compliance plan requirements.  CMS concurred with our 
recommendations.  (OEI-03-06-00100) 
 
Carrier Determination of Copayments for Medicare Mental Health Services 
OIG found that carriers inconsistently calculated copayments for Medicare Part B mental 
health claims made in 2003.  OIG determined that the difference in Medicare beneficiary 
copayments for mental health services provided in different geographical areas can be 
more than double, ranging from 20 percent to 50 percent of the cost of exactly the same 
mental health service.  Medicare carriers did not uniformly apply the outpatient mental 
health treatment limitation, causing a disparity in beneficiaries copayments.  Among the 
57 carrier service areas, OIG identified nine different payment policies for application of 
the limitation.  In addition, OIG found that between 2001 and 2004, carriers were 
incorrectly applying the mental health treatment limitation to claims for medical 
management services for beneficiaries diagnosed with Alzheimers disease and related 
disorders.  As a result, over a 4-year period, Medicare underpaid $27 million for these 
services, passing the costs on to beneficiaries as higher copayments. 
 
OIG recommended that CMS issue new guidance to its carriers regarding the limitation, 
ensure that it is consistently applied among all carriers, and require carriers to adjust the 
copayments for the beneficiaries who were overcharged.  CMS stated that it planned to 
issue more precise guidance to its carriers; post educational materials to its Web site; and, 
where feasible, require its carriers to open and adjust incorrectly processed claims.  
(OEI-09-04-00221) 
 
South Florida Durable Medical Equipment Suppliers Compliance With 
Medicare Standards:  Results From Unannounced Visits 
On the basis of unannounced site visits in 2006 to 1,581 suppliers of durable medical 
equipment, prosthetics, orthotics, and supplies (DMEPOS) in Miami-Dade, Broward, and 
Palm Beach Counties, OIG found that 31 percent (491) did not maintain facilities or their 
facilities were not open for business or staffed.  As of November 30, 2006, these 
DMEPOS suppliers billed Medicare for almost $237 million and were allowed over 
$97 million between January 1 and November 30, 2006.  OIG referred these suppliers to 
CMS to consider potential revocation of their Medicare billing numbers.  Through 
unannounced site visits, OIG also found that 14 percent of the suppliers (216) did not 
meet one of three other Medicare requirements reviewed, such as the need to post hours 
of operation.   
 
OIG recommended that CMS strengthen the supplier enrollment process for DMEPOS 
suppliers and ensure that suppliers meet Medicare standards and suggested several 
specific actions CMS could take to do so.  CMS agreed with the recommendations and 
will consider the options OIG provided to implement them.  (OEI-03-07-00150) 
 
HHS OIG Semiannual Report to Congress  4  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
Medical Equipment Suppliers:  Compliance with Medicare Standards 
Of 169 unannounced visits made in late 2005 to suppliers of medical equipment, 
prosthetics, orthotics, and supplies (DMEPOS), OIG found that 6 percent (10) did not 
exist at their business addresses, yet billed almost $393,000 in the 2 months after OIG 
had determined that they were absent.  These out-of-cycle visits, conducted in 
27 counties and 10 States, also revealed that six suppliers physically existed but were 
closed during their posted hours of operation at the time of the site visit.  These six 
collectively billed Medicare almost $102,000 in the 2 months after OIG discovered that 
they were closed and received almost $52,000 in reimbursements as of 
December 31, 2005. 
 
DMEPOS suppliers undergo site inspections from the National Supplier Clearinghouse 
on a 3-year cycle at the time of enrollment and reenrollment into the Medicare program.  
OIGs findings suggest that out-of-cycle site visits of these suppliers may be warranted in 
other areas of the country to assess compliance with Medicare standards.  CMS concurred 
with OIGs findings and stated it will take more aggressive actions in identifying 
suppliers who are no longer in business or do not meet basic supplier standards.  
(OEI-04-05-00380) 
 
Medicare Home Oxygen Equipment:  Cost and Servicing 
In a study of home oxygen equipment, OIG found that if Medicare rental payments for 
oxygen were limited to 13 months, the program and its beneficiaries would save 
approximately $3.2 billion over 5 years.  OIG found that based on the 2006 median fee 
schedule, Medicare will allow $7,215 for 36 months for concentrators that cost $587, on 
average, to purchase.  Beneficiaries will incur $1,443 in coinsurance.  Suppliers 
commonly provide used concentrators, which can last for several years.  If Medicare 
treated concentrators like capped rental items and limited rental payments to 13 months, 
the program and its beneficiaries would realize considerable savings.  Based on our 
analysis, minimal servicing and maintenance of concentrators and portable equipment are 
necessary.  Beneficiaries are trained to perform limited routine maintenance on their 
concentrators, and major manufacturers recommend more comprehensive preventive 
maintenance annually or after several thousand hours of use.  Servicing for portable 
equipment consists mostly of cylinder deliveries.  
 
OIG recommended that CMS work with Congress to further reduce the rental period for 
oxygen equipment and determine the necessity and frequency of nonroutine maintenance 
and servicing for concentrators.  In addition, CMS should determine if a new payment 
methodology is appropriate for portable oxygen.  CMS concurred with our 
recommendations and noted that the Presidents budget for FY 2007 would reduce the 
rental period to 13 months.  In addition, the CMS proposed rule of August 3, 2006, 
addresses our recommendations regarding nonroutine maintenance and servicing for 
concentrators and the payment methodology for portable oxygen.  (OEI-09-04-00420) 
 
Hospital Wage Data 
In a summary report on 21 hospitals cost reports, OIG found wage data totaling 
$377.9 million that did not comply with Medicare requirements.  Under the acute care 
hospital inpatient prospective payment system, CMS adjusts the Medicare base rate paid 
HHS OIG Semiannual Report to Congress  5  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
to participating hospitals by the wage index applicable to the area in which the hospital is 
located.  CMS updates wage indexes annually based on data that hospitals include in their 
cost reports.  However, the 21 hospitals reported unallowable, misstated, unsupported, 
and misclassified wages and other costs, as well as related hours.  As a result, 17 of the 
21 hospitals overstated their average hourly wage rates, and the remaining 4 hospitals 
understated their rates.   
 
Generally, hospitals that overstate wage data will receive higher Medicare reimbursement 
at the expense of hospitals that report accurate or understated wage data.  The inclusion 
of unallowable costs in cost reports can also compromise the reliability of the wage data 
that CMS uses to develop the market basket index and labor-related share.  CMS uses the 
labor-related share in conjunction with the wage index to determine the geographic 
adjustment for hospital payments.  OIG therefore recommended that CMS develop a 
corrective action plan to address hospital reporting errors and offered specific steps for 
CMSs consideration.  CMS generally agreed and provided information on actions 
already taken to address hospital reporting errors.   
 
Included in OIGs summary report were reviews of five hospitals in California that 
inaccurately reported wage data on pension and postretirement benefit costs in their 
FY 2004 Medicare cost reports.  These data were overstated by a total of approximately 
$312.4 million.  OIG recommended that the hospitals submit revised cost reports to 
correct the inaccurate data and ensure that the wage data reported in future cost reports 
are accurate, supportable, and in compliance with Medicare requirements.  The hospitals 
generally disagreed.  (A-01-05-00504, A-09-06-00024, A-09-06-00025, A-09-06-00026, 
A-09-06-00027, A-09-05-00039) 
 
Oversight and Evaluation of the Hospital Payment Monitoring Program 
In a review of the FY 2006 Hospital Payment Monitoring Program (HPMP), OIG found 
that CMS had ensured that the clinical data abstraction contractor and the quality 
improvement organizations had appropriate controls to ensure that sampling procedures, 
admission-necessity and diagnosis-related group (DRG) validation screenings, and 
quality control reviews followed established procedures and operated effectively.  In 
addition, CMS informed OIG of several actions that it had taken toward initiatives to 
reduce the HPMP error rate.  CMS and its HPMP contractors have taken appropriate 
action on the recommendations in OIGs FY 2005 audit report.  (A-03-06-00010) 
 
Oversight and Evaluation of the Comprehensive Error Rate Testing Program 
In a review of the FY 2006 Comprehensive Error Rate Testing (CERT) program, OIG 
found that CMS had ensured that its two CERT contractors had appropriate controls to 
ensure that medical and quality assurance reviews and initial and follow-up document 
requests followed established procedures and operated effectively.  In addition, CMS 
described several actions it had taken toward initiatives to reduce the CERT error rate.  
CMS and the contractors have taken appropriate action on the recommendations in OIGs 
FY 2005 audit report.  (A-03-06-00011) 
 
HHS OIG Semiannual Report to Congress  6  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
Postretirement Benefit Costs Claimed by Medicare Contractors 
OIG found that two Medicare contractors claimed unallowable costs for postretirement 
benefit (PRB) costs.  Medicare reimburses a portion of the annual contributions that 
contractors make to their PRB plans.  In claiming costs, contractors must follow cost 
reimbursement principles contained in the Federal Acquisition Regulation, Cost 
Accounting Standards, and Medicare contracts.  
 
One Medicare contractor claimed nearly $3.6 million in unallowable pension costs for the 
period subsequent to its termination.  The claim, submitted in August 2004, represented a 
retroactive change in the accounting basis, an immediate recognition of the transition 
obligation, and a request for reimbursement of unfunded costs.  None of these costs are 
allowable under the Federal Acquisition Regulation; therefore they were unallowable for 
Medicare reimbursement.  The contractor disagreed.  (A-07-06-00210) 
 
Another Medicare contractor claimed $3.1 million of unallowable pension costs for 
FYs 1991 through 2004 because it did not claim the costs in accordance with the 
Medicare contracts.  OIG recommended that the contractor revise its Final Administrative 
Cost Proposals to reduce claimed pension costs by $3.1 million and claim future pension 
costs in accordance with the Medicare contracts.  The contractor disagreed in part but did 
agree to reduce its pension costs by $2.7 million.  (A-07-06-00209) 
 
Potential Duplicate Payments Identified by a CMS Recovery Audit Contractor 
OIG found that none of the duplicate payments identified by a California recovery audit 
contractor (RAC) were in fact duplicates.  The RAC had identified 241 duplicate 
Medicare inpatient hospital claims totaling $11.3 million while performing work as part 
of a CMS demonstration project mandated by the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA). 
 
OIG recommended that CMS consider the performance of the RAC when reporting to 
Congress on the demonstration projects impact on Medicare savings and on CMSs 
decision to expand the project.  CMS concurred with the recommendation.  
(A-03-06-00004) 
 
Fee-for-Service Payments for Medicare Beneficiaries Enrolled in 
Managed Care Risk Plans  
OIG found that fiscal intermediaries did not always comply with Federal regulations in 
making fee-for-service payments to hospitals for inpatient services furnished to Medicare 
managed care organization (MCO) beneficiaries.  The intermediaries incorrectly paid 
803 fee-for-service inpatient claims totaling $4.6 million in calendar years 2003 and 2004 
for costs that CMS had already reimbursed as part of the capitation payments it makes to 
the MCOs for all medically necessary services, including inpatient services.  These 
payments occurred because enrollment data were not always correctly updated from the 
Group Health Plan system, which should contain information on every Medicare 
beneficiary enrolled in an MCO, to the Common Working File, which should contain 
eligibility information for every Medicare beneficiary. 
 
HHS OIG Semiannual Report to Congress  7  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
OIG recommended that CMS direct the fiscal intermediaries to recoup $4.6 million of 
duplicate payments and periodically compare the Group Health Plan with the Common 
Working File, reconcile any discrepancies in enrollment data, and have the fiscal 
intermediaries take necessary action on apparent duplicate payments.  CMS agreed.  
(A-07-05-01016) 
 
Inpatient Rehabilitation Facility Claims 
OIG found that, during FY 2003, inpatient rehabilitation facilities (IRF) did not always 
code claims as discharged to home with home health agency services in compliance 
with Medicares transfer regulation.  Nationwide, OIG identified 585 IRF claims coded 
and paid as discharges to home with home health agency services that potentially should 
have been paid as transfers.  Medicare pays a lesser amount for a transfer than a 
discharge to home.  Four IRFs that were responsible for 44 of the 585 claims identified 
verified that all 44 sampled claims should have been coded as transfers.  OIG repriced a 
sample of 100 of the 585 claims and estimated that potential overpayments to IRFs 
totaled approximately $2.3 million in FY 2003. 
 
OIG recommended that CMS instruct the fiscal intermediaries to review the claims in 
question and to recover, as appropriate, the estimated $2.3 million in overpayments; 
instruct the fiscal intermediaries to review claims paid after OIGs audit period for 
possible coding errors; and implement edits in the Common Working File to identify 
potentially miscoded claims.  CMS concurred with the recommendations.  
(A-04-04-00013) 
 
Medical Review of a Rehabilitation Facilitys Services for Medicare Outlier Claims 
OIG found that an IRF submitted outlier claims that did not meet Medicare requirements.  
Of the 100 sampled outlier claims, 69 included services that were not medically 
necessary, reasonable, or adequately documented.  As a result, the IRF received 
approximately $1.6 million in unallowable Medicare payments.  Based on the sample 
results, OIG estimated that Medicare overpaid the IRF approximately $3.3 million for 
outlier claims for 2002. 
 
OIG recommended that the IRF refund approximately $3.3 million; work with its fiscal 
intermediary to identify and refund overpayments for subsequent years IRF outlier 
claims; and ensure that its procedures provide reasonable assurance that beneficiaries 
admitted for IRF services are in need of treatment at the IRF level of care, capable of 
significant practical improvement, able to participate in intensive rehabilitation, and 
medically stable.  The IRF disagreed with the results of the medical determinations and 
with many other aspects of the review.  (A-04-04-00010) 
 
Place-of-Service Coding for Physician Services 
OIG found that physicians in five States incorrectly coded 81 of the 100 sampled claims 
submitted to one carrier for calendar years 2002 and 2003 by using the office place-of-
service code, even though they performed the services in another setting.  Medicare 
Part B pays a higher amount for services that physicians provide in their offices instead 
of an outpatient center of a hospital or an ambulatory surgical center.  
 
HHS OIG Semiannual Report to Congress  8  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
As a result of incorrect coding, the carrier overpaid the physicians $5,400 for the sampled 
claims.  Based on the sample results, OIG estimated that the carrier overpaid physicians 
$4.3 million for incorrectly coded services during the audit period. 
 
OIG recommended that the carrier recover the $5,400 in overpayments for the sampled 
services, review the estimated $4.3 million in incorrectly coded services and recover any 
overpayments, reemphasize to physicians and their billing agents the importance of 
correctly reporting the place of service, and work with the program safeguard contractor 
to identify services at high risk for miscoding and recover resulting overpayments.  The 
carrier generally agreed to implement the recommendations.  (A-01-06-00502) 
 
Graduate Medical Education for Dental Residents 
OIG found that a hospital in Texas inappropriately included dental residents in its direct 
and indirect full-time-equivalent (FTE) counts used to compute FY 2002 graduate 
medical education (GME) payments.  The Medicare program makes payments to 
teaching hospitals to support GME programs for physicians and certain other 
practitioners.  The payments, which cover both direct and indirect GME costs, are based 
in part on the number of FTE residents that the hospitals train.   
 
In this case, the hospital included FTEs for dental residents not in an approved residency 
program and for dental residents who had exceeded their initial residency period.  As a 
result, the hospital overstated its FY 2002 GME claims by nearly $20,000.   
 
OIG recommended that the hospital file amended cost reports, institute procedural 
improvements, determine whether similar errors occurred in Medicare cost reports after 
FY 2002 and refund any overpayments, and work with CMS to resolve payments related 
to the didactic time of residents assigned to nonhospital settings.  The hospital agreed.  
(A-04-04-06004) 
 
Medicare Part B Services for Nursing Home Residents:  2002 
In this memorandum report, OIG described Medicare Part B services and analyzed 
Medicare payments for nursing home residents not in a Medicare Part A covered stay 
during calendar year 2002.  Previous studies by OIG have determined that Medicare 
Part B payments for beneficiaries residing in nursing homes are particularly vulnerable to 
fraud and abuse.  In this review, OIG found that Medicare allowed $5.3 billion for Part B 
services provided to 1.8 million nursing home residents who were not in a Part A-covered 
stay in 2002.  The $5.3 billion represents 5 percent of the total amount that Medicare 
allowed for all Part B services during CY 2002.  Ten categories of service account for 
79 percent of payments for Part B services for nursing home residents.  In addition, 
payments varied by State for each of the top 10 categories.  Building on this work, OIG 
plans to assess more current data to help identify potential patterns and areas of 
questionable billing.  As appropriate, OIG will review identified areas to establish the 
extent of excessive or duplicative payment and recommend controls to minimize or 
alleviate these payments.  (OEI-05-06-00240) 
 
HHS OIG Semiannual Report to Congress  9  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
Medicare Contractor Information Security 
In accordance with the MMA, OIG reviewed the FY 2004 independent evaluations of all 
33 Medicare fiscal intermediaries and carriers and reported to Congress on the areas in 
which the contractors did not meet information security requirements.  OIGs report 
included the results of the contractor information security program evaluations and the 
results of the data center technical assessments.  
 
The information security program evaluations identified a total of 217 security gaps, 
which are differences between Federal information security requirements and the 
contractors implementation of those requirements.  Most of the gaps occurred in the 
areas of continuity-of-operations planning, security programs and system security plans, 
policies and procedures to reduce risk, security awareness training, incident response, and 
testing of information security controls.  In addition, technical assessments of the 14 data 
centers that operate claims-processing systems identified a total of 412 security gaps.  
Most of these gaps occurred in the areas of access controls, organizational practices, 
physical security, and personnel security.  CMS generally agreed with OIGs conclusions.  
(A-18-05-02600) 
 
California's Section 1115 Medicaid Demonstration Project Extension 
for Los Angeles County 
OIG found that during FYs 2001 through 2004, California followed the requirements of a 
Medicaid extension agreement with CMS when claiming Federal Ambulatory and 
Supplemental funds and adequately supported costs claimed for outpatient clinic services 
under both components.  However, Los Angeles County could not identify approximately 
$285.2 million (Federal share) in claimed Supplemental expenditures with specific costs 
incurred.  The agreement with CMS extended the federally funded Los Angeles County 
demonstration project under section 1115 of the Social Security Act.  
 
Although the extension agreement did not require that claimed Supplemental 
expenditures be based on specific costs incurred, there was no assurance that the county 
would use the Supplemental funding for the intended purposes without such a 
requirement.  County documentation indicated that the Supplemental disbursements had 
contributed to a county reserve fund of approximately $306.4 million.  
 
Given OIGs finding that the county placed a significant portion of Federal funds in a 
reserve account, OIG recommended that CMS, in future demonstration project 
agreements with California and the county, deny or limit such use of Federal funds.  OIG 
also recommended that if CMS approves future section 1115 agreements, it require 
documentation by the State and county for claimed expenditures.  CMS agreed with the 
recommendations.  (A-09-04-00038) 
 
Medicaid Eligibility 
In three States, OIG determined whether Medicaid beneficiaries met Federal and State 
eligibility requirements and the States provided adequate documentation of eligibility 
determinations for payments made from January 1 through June 30, 2005. 
 
HHS OIG Semiannual Report to Congress  10  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
 New York State made some Medicaid payments on behalf of beneficiaries who did not 
meet Federal and State eligibility requirements.  Furthermore, the State did not always 
adequately document all eligibility determinations.  Based on its sample results, OIG 
estimated that New York made more than 4.2 million payments totaling $230.4 million 
(Federal share) on behalf of ineligible beneficiaries.  In addition, OIG estimated that case 
file documentation did not adequately support eligibility determinations for an additional 
15.3 million payments totaling $2.8 billion (Federal share).   
 
OIG did not recommend recovery because a disallowance may occur only if the errors are 
detected through a States Medicaid Eligibility Quality Control program.  However, OIG 
recommended that New York use the results of this review to help ensure compliance 
with Federal and State Medicaid eligibility requirements.  Specifically, New York should 
reemphasize to beneficiaries the need to provide accurate and timely information and 
require district office employees to verify eligibility information and maintain appropriate 
documentation in all case files.  In its comments, New York described actions being 
taken to help ensure compliance with Federal and State Medicaid eligibility requirements 
but disagreed with some of OIGs specific findings.  (A-02-05-01028) 
 
 California made some Medicaid payments on behalf of beneficiaries who did not meet 
Federal and State eligibility requirements and did not ensure that the county offices 
adequately documented all eligibility determinations.  Based on its sample results, OIG 
estimated that California made 4.7 million payments totaling $133 million (Federal share) 
on behalf of ineligible beneficiaries.  OIG also estimated that case file documentation did 
not adequately support eligibility determinations for an additional 2.5 million payments 
totaling $117 million (Federal share).   
 
OIG did not recommend recovery because a disallowance may occur only if the errors are 
detected through a States Medicaid Eligibility Quality Control program.  OIG 
recommended that California use the results of the review to help ensure compliance with 
Federal and State Medicaid eligibility requirements.  California agreed with the 
recommendation.  (A-09-06-00028) 
 
 Florida generally made Medicaid payments on behalf of beneficiaries who met Federal 
and State eligibility requirements and provided adequate documentation of eligibility 
determinations.  OIG recommended that Florida use the results of the review to help 
ensure continued compliance with Federal and State Medicaid eligibility requirements.  
Florida agreed with the recommendation.  (A-04-06-00020) 
 
Medicaid School-Based Health Claims 
OIG found that two States claimed unallowable costs for Medicaid school-based health 
services.  The Medicaid program allows reimbursement for covered health-related 
services provided in a school setting under the Individuals with Disabilities Education 
Act, as well as associated administrative costs.  Because both non-Medicaid- and 
Medicaid-eligible students benefit from administrative activities associated with school-
based health services, the service costs must be allocated between the groups.  States use 
proportional Medicaid share ratios to ensure that they claim only costs related to 
Medicaid-eligible children.   
HHS OIG Semiannual Report to Congress  11  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
Results of the State audits follow: 
 
 Minnesota used incorrect proportional Medicaid share ratios, included indirect costs 
that were allocable to non-Medicaid grants, and used inaccurate cost reports.  As a result, 
$9.7 million of the $13.4 million Federal share claimed in State FY 2004 for the 
60 sampled school districts was unallowable. 
 
OIG recommended that Minnesota refund the $9.7 million, use correct proportional 
Medicaid share ratios, and make other procedural improvements.  Minnesota disagreed 
with the recommendations.  (A-05-05-00040) 
 
 Nevada claimed $5.8 million for unallowable school-based administrative expenditures 
for calendar years 2003 and 2004.  In addition, it claimed $775,000 for the summer 
quarter of 2004, but because the State did not conduct a timestudy for the quarter, OIG 
was unable to express an opinion on the claim.  Finally, Nevada allowed confidential data 
to be released to a contractor without written assurance that the information would be 
adequately safeguarded.  
 
OIG recommended that Nevada refund $5.8 million, review claims subsequent to the 
audit period and refund any unallowable costs, ensure that it claims Federal funds only 
for expenditures that are allowable and supported, require school districts to conduct 
timestudies during summer quarters and work with CMS to determine the allowability of 
the $775,000, and ensure that confidential health data are safeguarded.  Nevada generally 
agreed with the recommendations.  (A-09-05-00054) 
 
Medicaid Outpatient Drug Expenditures in Nebraska  
OIG found that Nebraska had not fully complied with Federal requirements in claiming 
costs for Medicaid outpatient drugs.  For FYs 1998 through 2004, the State claimed 
$13 million in duplicate Medicaid expenditures for drugs.  OIG determined that the State 
had refunded approximately $12.8 million of the $13 million associated with the 
duplicate payments but had not refunded $295,000 as of the end of OIGs fieldwork.  For 
FYs 2003 and 2004, the State claimed $267,000 in unallowable expenditures for drugs 
that were terminated, less than effective or inadequately supported, and $609,000 for 
drugs not listed on the quarterly drug tapes provided by CMS.  These latter expenditures 
may not be allowable for Medicaid reimbursement because the State had not verified 
whether drugs missing from the tape were covered by Medicaid.  Under the Medicaid 
drug rebate program, CMS provides the States with a quarterly drug tape listing all 
covered outpatient drugs, and States are to use the tape to verify coverage of the drugs for 
which they claim reimbursement. 
 
OIG recommended that Nebraska refund $562,000 for duplicate and unallowable 
Medicaid drug expenditures, work with CMS to resolve payments for drugs that were not 
listed on the quarterly drug tapes, and strengthen its internal controls.  Nebraska 
concurred with the recommendations.  (A-07-05-04056) 
 
HHS OIG Semiannual Report to Congress  12  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
Arkansas Reporting of Medicaid Overpayments Collected by Contractors 
OIG found that Arkansas did not fully report overpayments collected by contractors in 
accordance with Federal requirements during the period October 1, 2000, through 
April 30, 2005.  Specifically, the State did not report approximately $3.7 million 
($2.7 million Federal share) in overpayments and reported approximately $6.6 million 
($4.9 million Federal share) in overpayments in an untimely manner.  State contractors 
collected and deposited these overpayments in a cash holding account, but the State 
agency did not report the Federal share of any interest earned on funds held in this 
account.   
 
OIG recommended that Arkansas report the $3.7 million to CMS and refund the 
$2.7 million Federal share, determine the Federal share of any interest earned on the 
overpayments and refund that amount, and ensure that all future overpayments are 
reported in accordance with Federal requirements.  The State agreed.  (A-06-06-00023) 
 
Selected States Medicaid Payments for Services Claimed To Have Been 
Provided to Deceased Beneficiaries 
OIG found that providers in 8 of 10 audited States received an estimated total of 
$27.3 million ($15.1 million Federal share) in Medicaid overpayments, which the States 
never recovered, for services claimed to have been provided after beneficiaries deaths.  
Prepayment screening by some States did not successfully identify the overpayments 
because the States did not use all available information sources to identify deceased 
beneficiaries, and their payment systems had data entry, matching, and processing 
problems.  Furthermore, postpayment screening did not identify all overpayments 
associated with deceased beneficiaries.   
 
OIG recommended that CMS work with States to ensure that they use all available data 
sources to identify deceased beneficiaries, match those data against paid claims files and 
recover identified overpayments, and encourage States to establish postpayment reviews 
to mitigate the effect of delays in receiving data regarding beneficiaries dates of death.  
CMS concurred with the recommendations.  (A-05-05-00030) 
 
Medicaid Reimbursement for Distinct-Part Nursing Facilities in California 
In a review of three distinct-part nursing facilities in California, OIG determined that the 
State properly established the three facilities eligibility for additional reimbursement; 
however, the State did not claim additional Federal reimbursement amounts for two of 
the facilities in accordance with State and Federal requirements.  As a result, California 
was overpaid $3.6 million.  A distinct-part nursing facility is a nursing facility that is part 
of a hospital and is certified to provide skilled nursing services.  Eligible facilities may 
receive additional Medicaid reimbursement for the Federal share of certified public 
expenditures in excess of their per diem payments. 
 
OIG recommended that the State refund $3.6 million, review additional reimbursement 
amounts paid to the selected facilities subsequent to the audit period and refund any 
overpayments, provide instructions to all facilities to ensure that expenditures are 
properly calculated, and strengthen its monitoring procedures.  The State agreed in part 
with the recommendations.  (A-09-05-00050) 
HHS OIG Semiannual Report to Congress  13  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
States Requirements for Medicaid-Funded Personal Care Service Attendants 
OIG found that States have established multiple sets of attendant requirements that often 
vary among programs and by delivery models within programs, resulting in 300 sets of 
attendant requirements nationwide.  The Medicaid State Manual requires States to 
develop qualifications for attendants who provide care to Medicaid beneficiaries; it does 
not list specific qualifications but offers examples of requirements States may establish to 
ensure that attendants provide high quality personal care. 
 
Because States had established different requirements for various programs and/or 
delivery models, attendants may need to meet different requirements depending on the 
programs and delivery models through which they are serving beneficiaries.  Only seven 
States applied uniform requirements to all the programs within that State, and there were 
five programs nationwide using the consumer-directed delivery model that had no 
requirements.  The six most commonly established requirements for attendants included 
background checks, training, supervision, age, health, and education/literacy.  However, 
States defined these requirements differently and used them in different combinations.  
Of the 300 requirement sets, 245 included a background check, 227 included training, 
218 included minimum age, 197 included supervision, 161 included health, and 
124 included literacy or education.   
 
Most States were monitoring compliance with these attendant requirements on two levels.  
First, States delegated responsibility for ensuring that attendants met requirements to 
another entity (e.g., home health or personal care service agency, beneficiary, case 
manager).  Second, the State retained direct responsibility by ensuring that the entities 
with primary responsibility fulfilled their oversight duties.  (OEI-07-05-00250) 
 
Medicaid Provider Enrollment Standards:  Medical Equipment Providers 
In a study of 15 States, OIG found that States employed a variety of provider enrollment 
standards to safeguard their Medicaid durable medical equipment (DME) programs.  
Such standards included licensure of providers, posting a sign and hours of operation, and 
obtaining surety bonds.  We found that only seven of the States required Medicaid 
providers to enroll as providers in the Medicare program, which subjects Medicaid 
providers in these States to Medicare standards.  The remaining eight States did not 
require providers to enroll in the Medicare DME program. 
 
Despite the presence of standards, we found that most of the 15 States were not routinely 
verifying whether providers met all State DME provider enrollment standards, and 7 of 
the 15 States were not conducting routine site visits at initial enrollment.  Finally, only 
6 of the 15 States reported that they either routinely reenrolled providers or had recent 
initiatives to reenroll providers to ensure all met the provider enrollment standards.  
(OEI-04-05-00180) 
 
Preadmission Screening and Resident Review for Younger Nursing 
Facility Residents With Serious Mental Illness 
OIG reviewed the extent to which Preadmission Screening and Resident Review 
(PASRR) requirements were addressed for Medicaid nursing facility residents with 
serious mental illness aged 22 to 64 in 20 facilities in five selected States.  OIG found 
HHS OIG Semiannual Report to Congress  14  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
that almost all sampled residents with serious mental illness had a Level I screen that met 
all Federal requirements.  Two-thirds of sampled residents had evidence of a Level II 
PASRR.  Only 5 percent of these Level II PASRRs met all Federal requirements.  For 
sampled residents who received a Level II PASRR, 85 percent received mental health 
service recommendations.  Thirty-three percent had all the recommended services in their 
nursing facility care plan.  Federal regulations require the consideration of alternative 
placements to nursing facilities during the Level II PASRR.  OIG found that only two of 
five selected States Level II PASRR evaluation forms prompt evaluators to consider 
community-based placements.  Lastly, OIG found that, while all five selected States 
monitor aspects of the PASRR process, CMS provides limited oversight. 
 
OIG recommended that CMS hold State Medicaid agencies accountable for ensuring 
compliance with Federal requirements, hold States accountable for considering 
community placements during the Level II PASRR process, and revise survey and 
certification requirements to ensure systematic oversight of the PASRR.  CMS concurred 
with all OIG recommendations.  (OEI-05-05-00220) 
 
Preadmission Screening and Resident Review for Younger Nursing 
Facility Residents With Mental Retardation 
OIG reviewed the extent to which PASRR requirements were addressed for Medicaid 
nursing facility residents aged 22 to 64 with mental retardation within 20 nursing 
facilities in five selected States.  OIG found that while Level I screens were present in 
88 percent of selected resident case files, one-fourth of these were completed late.  
Fifty-two percent of selected resident case files contained neither a Level II evaluation 
nor a Level II determination.  Additionally, 22 percent of sampled Level II evaluations 
did not contain evidence that the evaluator assessed whether the individuals total needs 
could be met in a community setting.  Lastly, we found that CMS and the survey and 
certification agencies in the five States we reviewed conducted limited oversight.  
 
OIG recommended that CMS hold State Medicaid agencies accountable for ensuring 
compliance with Federal requirements, hold States accountable for considering 
community placements during the Level II PASRR process, and revise survey and 
certification requirements to ensure that State surveyors sample residents with mental 
retardation and review the PASRR documentation for timely completion.  CMS 
concurred with all OIG recommendations.  (OEI-07-05-00230) 
 
Review of the Centers for Medicare & Medicaid Services Medicaid 
Financial Management Oversight 
Under a contract with OIG, Ernst & Young (E&Y) reviewed the current CMS 
management structure, examined prior studies and audits, compared the financial 
management structures and activities of Medicare to those of Medicaid, held discussions 
with various stakeholders, and analyzed the issues identified through these activities.  The 
E&Y report contains a series of findings, conclusions, and recommendations for 
improving the financial management of the Medicaid program.  (OEI-06-04-00480) 
 
CMS Financial Statement Audit 
The CMS FY 2006 financial statements received an unqualified audit opinion, which 
means that the statements were fairly presented in accordance with generally accepted 
HHS OIG Semiannual Report to Congress  15  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
accounting principles.  However, auditors identified a material weakness in CMSs 
Medicare electronic data processing.  This material weakness was based on a number of 
specific deficiencies.  For example, numerous security weaknesses would allow internal 
users to access and update Medicare claims data without proper authorization.  
(A-17-06-02006) 
 
Outreach 
As part of its ongoing effort to promote the highest level of ethical and lawful conduct by 
the health care industry, OIG has continued to issue advisory opinions and other 
guidance. 
 
Advisory Opinions 
In accordance with section 205 of the Health Insurance Portability and Accountability 
Act of 1996 (HIPAA), OIG, in consultation with the Department of Justice, issues 
advisory opinions to outside parties regarding the interpretation and applicability of 
certain statutes relating to Federal health care programs.  This authority allows OIG to 
provide case-specific formal guidance regarding the application of the anti-kickback 
statute and safe harbor provisions and other OIG health care fraud and abuse sanctions.  
For the period October 1, 2006, through March 31, 2007, OIG received 31 advisory 
opinion requests and issued 11 advisory opinions. 
 
Provider Self-Disclosure Protocol 
In keeping with a longstanding commitment to assist providers and suppliers in detecting 
and preventing fraudulent and abusive practices, OIG established a set of comprehensive 
guidelines for voluntary self-disclosure, titled Provider Self-Disclosure Protocol, 
available on the Internet at http://www.oig.hhs.gov in the Fraud Prevention & Detection 
section under Self-Disclosure Information.   
 
The protocol guides providers and suppliers through the process of structuring a 
disclosure to OIG about matters that appear to constitute potential violations of Federal 
laws (as opposed to honest mistakes that may have resulted in overpayments).  After 
making an initial disclosure, the provider or supplier is expected to undertake a thorough 
internal investigation of the nature and cause of the matters uncovered and make a 
reliable assessment of their economic impact (e.g., an estimate of the losses to Federal 
health care programs).  OIG evaluates the reported results of each internal investigation 
to determine the appropriate course of action.   
 
During this reporting period, self-disclosure cases resulted in $3.8 million in HHS 
receivables.  For example: 
 Connecticut  Following a self-disclosure filed pursuant to OIGs Provider 
Self-Disclosure Protocol, Danbury Hospital, Inc., agreed to pay the Government 
$2.3 million and enter into a 3-year certification of compliance agreement (CCA).  
Danbury, a 371-bed not-for-profit hospital, resolved its liability for allegedly causing 
improper assignment of DRG codes on claims for inpatient stays from October 2000 to 
September 2003.  As a result of the improper DRG codes, Danbury received payments 
from Medicare in excess of what it was entitled to receive.  OIG agreed to a 3-year CCA 
HHS OIG Semiannual Report to Congress  16  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
after an extensive review of Danburys compliance program showed, among other 
measures, that it has taken considerable steps to ensure that such coding issues do not 
occur in the future.   
 
 Georgia  Gwinnett Hospital System, Inc., agreed to pay $18,000 to resolve its liability 
under the Civil Monetary Penalties Law (CMPL).  In a matter reported under OIGs 
Provider Self-Disclosure Protocol, the agreement resolves Gwinnetts liability in 
connection with its employment of an excluded staff pharmacist at Gwinnett Medical 
Center from February 28 to June 18, 2002.  The pharmacist had been excluded for a 
period of 5 years but did not apply for and receive reinstatement until June 18, 2002.  The 
hospital did not have a screening process in place at the time the staff pharmacist was 
hired, and the pharmacist was not identified as having been excluded until 
December 2005.  As part of the agreement, for 3 years Gwinnett will submit to OIG an 
annual certification that it has policies and procedures in place to prevent hiring or 
contracting with any excluded individuals and will perform at least an annual screening 
of current employees and contractors. 
 
Federal and State Partnership:  Joint Audits of Medicaid 
Another major OIG outreach initiative has been to work closely with State auditors in 
reviewing the Medicaid program.  To this end, a partnership plan was developed to foster 
joint reviews and provide broader coverage of the Medicaid program.  The partnership 
approach has been an overwhelming success in ensuring more effective use of scarce 
audit resources by both the Federal and the State audit sectors.  To date, partnerships 
have been developed in 25 States. 
 
Reports issued to date have resulted in identification of more than $260 million in Federal 
and State savings and have led to joint recommendations for savings at the Federal and 
State levels, as well as improvements in internal controls and computer system 
operations. 
 
Office of Inspector General Administrative Sanctions 
During this reporting period, OIG administered 1,289 sanctions in the form of program 
exclusions or administrative actions for alleged fraud or abuse or other activities that 
posed a risk to Federal health care programs and their beneficiaries.  A brief explanation 
of OIGs sanction authorities can be found in Appendix C. 
 
Program Exclusions 
During this reporting period, OIG excluded 1,278 individuals and entities from 
participating in Medicare, Medicaid, and other Federal health care programs.  Most of the 
exclusions resulted from convictions for crimes relating to Medicare or Medicaid, for 
patient abuse or neglect, or as a result of license revocation.  Examples include the 
following: 
 
 New Jersey  A registered nurse (RN) was excluded for a minimum period of 95 years 
based on his conviction on multiple counts related to patient abuse or neglect.  The RN 
was sentenced to multiple consecutive life sentences for the murder and the attempted 
HHS OIG Semiannual Report to Congress  17  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
murder of patients under his care.  In addition, his nursing license was revoked in the 
States of New Jersey and Pennsylvania.   
 
 Florida  A physician was excluded for a minimum period of 70 years based on her 
conviction related to a prescription drug fraud scheme that resulted in the death of one of 
her patients.  From April 1998 through March 2002, the physician prescribed controlled 
substances that were not medically necessary.  One of the physicians patients died of a 
drug overdose in 2001.  The physician was sentenced to 50 years incarceration.  She 
surrendered her license to practice medicine in the State of Florida. 
 
 California  An owner of a counselling center was excluded for a minimum period of 
28 years based on his conviction regarding a theft and Medi-Cal fraud scheme that 
occurred from May 1996 to November 2004.  The subject was sentenced to 365 days in 
jail and ordered to pay approximately $2.5 million in restitution.   
 
Also in California, a nursing assistant was excluded for a minimum period of 15 years 
based on his conviction related to patient abuse or neglect.  The subject committed a sex 
act on a patient who, at the time, was incapable of giving consent.  The subject was 
sentenced to 8 years incarceration and the State revoked his license. 
 
Civil Monetary Penalties Law 
The CMPL authorizes OIG to impose administrative penalties and assessments against a 
person who, among other things, submits claims to a Federal health care program that the 
person knows or should know are false or fraudulent.  During this reporting period, OIG 
collected over $932,000 in civil monetary penalties and assessments.  The following is 
among the civil monetary penalties actions resolved during this reporting period: 
 
 Tennessee  Williamson County Hospital District, doing business as Williamson 
Medical Center, agreed to pay $705,000 to resolve its liability under the CMPL for its 
improper lease arrangements with physicians.  In a matter self-disclosed to OIG, 
Williamson had lease arrangements with the owners of a medical office building adjacent 
to the hospital from 1995 to 2001.  The lease agreements contractually required 
Williamson to pay for vacant office space.  The subsequent investigation revealed that 
Williamson leased numerous office suites at above fair market value and sublet the space 
to physicians at below fair market value, in potential violation of the Stark Law and the 
anti-kickback statute.   
 
Patient Dumping 
Of the total civil monetary penalties OIG collected between October 1, 2006, and 
March 31, 2007, $80,000 represents collections from three hospitals under the 
Emergency Medical Treatment and Labor Act, a statute designed to ensure patient access 
to appropriate emergency medical services.  The following are examples of settlements 
involving alleged violations of that statute: 
 
 Puerto Rico  Hospital Hermanos Melendez paid $30,000 to resolve allegations that it 
failed to provide an appropriate medical screening examination and/or stabilizing 
treatment to two individuals who presented to its emergency department.  The first 
HHS OIG Semiannual Report to Congress  18  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
individual (2 months old, born prematurely and having recently left a pediatric intensive 
care unit), presented with anemia and potential bronchitis.  The second individual 
(3 years old) complained of vomiting after falling from a bed. 
 
 California  Sierra Kings District Hospital paid $15,000 to resolve allegations that it 
failed to provide an appropriate medical screening exam, stabilizing treatment or an 
appropriate transfer of an 81-year-old man.  He presented to the emergency department 
complaining of nausea, diarrhea, burning on urination, right upper quadrant pain and 
shortness of breath.  He was seen by a physician and discharged home.  Two days later he 
became unconscious and was diagnosed with urosepsis, pneumonia, and cerebral vascular 
accident.  He died 4 days later. 
 
Criminal and Civil Enforcement 
One of the most common types of fraud perpetrated against Medicare, Medicaid, and 
other Federal health care programs involves filing false claims for reimbursement.  False 
claims may be pursued under Federal and State criminal statutes and, in appropriate 
cases, under the civil False Claims Act (FCA).  A description of these enforcement 
authorities can be found in Appendix C.  The successful resolution of such matters often 
involves the combined investigative efforts and resources of OIG, the Federal Bureau of 
Investigation (FBI), Medicaid Fraud Control Units, and other law enforcement agencies. 
 
OIG has the responsibility of assisting the Department of Justice in bringing and settling 
cases under the FCA.  Many providers elect to settle their cases prior to litigation.  As 
part of their settlements, providers often agree to enter integrity agreements with OIG to 
avoid exclusions and to be permitted to continue participating in Medicare, Medicaid, and 
other Federal health care programs.  Such agreements are monitored by OIG and require 
the providers to enhance existing compliance programs or establish new ones.  The 
compliance programs are designed, in part, to prevent a recurrence of the underlying 
fraudulent activities. 
 
During the semiannual period ending March 31, 2007, the Governments enforcement 
efforts resulted in $1.3 billion in HHS investigative receivables, representing civil and 
administrative settlements or civil judgments related to Medicare, Medicaid, and other 
Federal health care programs.  Some of those successful actions, as well as notable 
criminal enforcement actions, are described below.  Summaries are organized by the 
sector of the health care industry involved or by the nature of the offense. 
 
Hospitals 
 
 Washington, DC  Tenet Healthcare Corporation, operator of the Nations second 
largest hospital chain, entered into a global civil settlement to resolve a number of 
allegations of unlawful billing practices, improper outlier payments, kickbacks, and other 
conduct.  Tenet agreed to pay the Government $900 million plus interest and enter into a 
5-year CIA to resolve its liability under the FCA and related authorities.  Over 
$788 million of the settlement is attributable to claims related to outlier payments that 
were based on inflated charges Tenet billed for inpatient and outpatient care.  More than 
$47 million will resolve Tenets liability for allegedly paying a kickback to physicians for 
HHS OIG Semiannual Report to Congress  19  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
patient referrals and for billing Medicare for services that were ordered or referred by a 
physician with whom Tenet had a financial relationship.  Another $46 million is 
attributed to allegations that to increase its reimbursements, Tenet submitted claims that 
assigned DRG codes that were improper or were not supported by patient records, a 
practice known as upcoding.  
 
As part of the resolution of its civil and administrative liability, Tenet agreed to a 5-year 
CIA in September 2006.  Under the CIA, Tenet will implement a comprehensive 
compliance program and engage independent review organizations to review its DRG 
claims, outlier payments, physician relationships, and clinical quality management.  The 
CIA also includes unprecedented provisions requiring the Quality, Compliance and 
Ethics Committee of Tenets Board of Directors to review and inform OIG of the 
effectiveness of Tenets compliance program.   
 
 Louisiana  Our Lady of Lourdes Regional Medical Center, Inc. (OLOL) agreed to 
pay the Government $3.8 million and enter into a 5-year CIA to resolve its liability under 
the False Claims Act.  The Government alleged that between May 1999 and 
November 2003, OLOL submitted claims to the Medicare, Medicaid, and TRICARE 
programs for interventional cardiac procedures, such as angioplasty and angiograms 
performed by one of its physicians, which were determined to be medically unnecessary. 
 
Prescription Drugs 
 
 Illinois  Pursuant to a qui tam complaint, Omnicare, Inc., a nationwide institutional 
pharmacy that services exclusively nursing home patients, agreed to pay $49.5 million 
and enter into a 5-year CIA to resolve its liability under the False Claims Act.  The 
Government alleged that Omnicare improperly substituted Ranitidine capsules for the 
tablet form of Ranitidine  the generic version of the drug commercially known as 
Zantac.  An investigation revealed that Omnicare also allegedly switched drug forms of 
Fluoxitine and Buspirone.  The switches were allegedly made to avoid Federal upper 
limits placed by CMS on certain forms of each drug and did not comply with State 
lowest price requirements.  Thus, the improper switches cost Medicaid and the Federal 
Government approximately $26 million more than if the drugs had not been switched.  
The CIA requires Omnicare to develop a centralized process to implement therapeutic 
interchanges taking into account prices to payors and therapeutic attributes of the 
switched drugs. 
 
 Ohio  A pain management physician convicted in a jury trial was sentenced to life in 
prison and ordered to pay $14.3 million in restitution for health care fraud resulting in 
death.  He was additionally sentenced to 20 years in jail for illegal drug distribution, mail 
fraud, wire fraud, and health care fraud.  The investigation revealed that the doctor 
conducted unnecessary and painful procedures on patients in exchange for prescriptions 
for narcotic drugs.  In turn, the physician submitted claims to health care benefit 
programs falsely indicating that he performed multiple complex procedures such as nerve 
block or epidural injections.  Many of the patients endured painful treatments because 
they were addicted to drugs, while other patients, who initially had legitimate injuries, 
fell victim to the physicians scheme and became addicted.  Two of his patients died of 
HHS OIG Semiannual Report to Congress  20  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
drug overdoses in 2001.  The physician is subject to supervised release and deportation if 
his life sentence is overturned.   
 
Transportation 
 
 Texas  American Medical Response, Inc. (AMR) agreed to pay $9.2 million and enter 
into a 5-year CIA to resolve its liability under the FCA.  AMR allegedly entered into 
contracts known as swapping arrangements with certain Texas hospitals in violation of 
the anti-kickback statute.  The Government alleged that from January 1994 through 
December 2001, AMR gave discounts to certain Texas hospitals on their facility-
responsible transports in exchange for all or some of the hospitals nonemergency 
transports for patients being discharged. 
 
Practitioners 
 
 Florida  A former dermatologist was sentenced to 22 years in prison, ordered to pay 
$3.7 million in restitution, forfeit an additional $3.7 million, and pay a $25,000 fine for 
performing 3,086 medically unnecessary surgeries on 865 Medicare beneficiaries.  The 
dermatologist was found guilty of health care fraud and false statements following a 
4-week trial that showed that the doctor routinely falsely diagnosed patients with skin 
cancer in order to bill Medicare for expensive and unnecessary invasive surgeries.  The 
dermatologist established an internal laboratory in his office so no one other than he 
reviewed specimens for diagnosis.  From 1998 through 2004, a detailed analysis showed 
that nearly all the biopsies that he performed were diagnosed as cancer and resulted in 
invasive surgeries.  In fact, some of the specimens that he diagnosed as skin cancer were 
actually slides which contained chewing gum, Styrofoam, or skin tissue of his employees.  
During the trial, it was also revealed that the doctor had established a quota whereby he 
performed five surgeries each day for which Medicare paid between $1,500 and $2,000 
per surgery. 
 
Also in Florida, a physician was sentenced to 46 months in prison and ordered to pay 
$2.3 million in joint and several restitution for her involvement in a massive kickback 
scheme involving pharmacies, medical equipment companies, and Medicare 
beneficiaries.  The investigation revealed that the physician entered into improper 
relationships with owners of DME companies.  The owners brought patients to the 
physician and specified which equipment and medications they wanted her to prescribe.  
The physician performed cursory examinations of patients and then signed the 
prescriptions for equipment and medications regardless of medical necessity.  The 
physician received cash kickbacks from the DME company owners based on the 
reimbursement rate for the item or medication prescribed.  In addition to the sentencing 
of the physician, several DME company owners had previously been sentenced for their 
roles in the scheme, including one who was sentenced in June 2006 to 46 months in 
prison and ordered to pay $674,000, a portion of the joint and several restitution amount. 
 
 Michigan  Three physicians and their medical practice agreed to pay $1 million to 
resolve their False Claims Act liability.  The Government alleged that, from January 1996 
through December 2004, the defendants billed Medicare for medical services performed 
HHS OIG Semiannual Report to Congress  21  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
by nurse practitioners, clinical nurse specialists, and physician assistants as though the 
services were performed by physicians.  The three physicians agreed to enter individual 
integrity agreements and the medical practice entered into a comprehensive CIA. 
 
 Pennsylvania  A physician specializing in cardiology agreed to pay the Government 
$435,000 and enter into a 5-year integrity agreement to resolve his liability for submitting 
false claims to Medicare, Medicaid, and the Federal Employees Health Benefits Program 
from October 1997 through October 2002.  The physician allegedly submitted claims for 
consultation services that were not supported by patient medical records or that did not 
meet the criteria of a consultation.  The Government also alleged that he submitted false 
claims for evaluation and management services when he had already received payment 
for such services in connection with his claims for nuclear stress testing.   
 
 Texas  A licensed speech therapist was sentenced to 5 years probation and ordered to 
pay $355,000 in restitution for defrauding the Medicaid program and the State Childrens 
Health Insurance Program.  The investigation revealed that from March 1998 through 
February 2003, the speech therapist submitted claims indicating that she provided one-
on-one speech therapy when she actually provided group speech therapy. 
 
Clinics 
 
 Tennessee  Dialysis Clinic, Inc. (DCI) agreed to pay $1.8 million to resolve its 
liability under the FCA, the CMPL, and the OIGs permissive exclusion authority.  DCI 
provides health care services to Medicare beneficiaries with end stage renal disease at its 
clinics located in more than 30 states.  The settlement resolved conduct related to DCIs 
administration and billing of the drug Epogen allegedly provided to patients when it was 
medically unnecessary.  In addition, DCI allegedly allowed hospital labs to bill Medicare 
separately for tests for DCI patients even though DCI was paid for the lab services as part 
of Medicares composite rate payment, resulting in duplicate payments.  As part of the 
settlement agreement, DCI entered into a 3-year CIA. 
 
Durable Medical Equipment Suppliers 
 
 Idaho  Lincare Inc. agreed to pay the Government $1.2 million to resolve allegations 
that its Idaho facilities violated the FCA by submitting false claims to Medicare, 
Medicaid, and the Veterans Affairs programs.  From January 1998 through 
December 2000, Lincare allegedly submitted claims for home oxygen using supporting 
certificates of medical necessity that were falsified by Lincare employees and also 
submitted claims for new patients without performing a required 30-day review.  An 
existing CIA contains provisions that address the alleged misconduct at issue in this 
settlement. 
 
Billing Consultant or Contractor 
 
 Ohio  A consultant and two of his companies were sentenced for conduct related to a 
fraudulent billing scheme.  The consultant, who was a former chiropractor, was sentenced 
to 41 months in prison and ordered to pay $1.1 million in restitution.  His two companies, 
HHS OIG Semiannual Report to Congress  22  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
which have now closed, were held jointly and severally responsible for $820,000 of the 
restitution amount.  In a nationwide investigation, it was revealed that through his 
consulting business, the consultant informed chiropractors attending his billing seminars 
that he knew of a company that could help identify chiropractic services that were 
performed but had not been previously billed.  The consultant, who claimed to be 
certified by OIG, did not reveal that he owned the company with which chiropractors 
were encouraged to contract.  However, the contracted company reviewed only a small 
sampling of patient records, if any, but billed for additional services by using modifier 
codes for virtually every patient for every date of service during the prior 12-18 months. 
 
Nursing Homes 
 
 Pennsylvania  A nursing home and its owner/operator were sentenced for health care 
fraud and false statements.  The nursing home and its owner/operator were convicted 
after a 6-week trial in which evidence showed that employees were directed to falsify 
medical records to conceal the nursing homes deficiencies.  As a result of the scheme, 
the nursing home billed Medicare and Medicaid for services provided to residents, most 
of whom suffered from Alzheimers disease, that were either not provided or were 
substandard.  The nursing home, which is now closed, was ordered to pay a $490,000 
fine.  The owner/operator was sentenced to 5 years in jail and ordered to pay a $50,000 
fine.  The investigation also revealed that although the nursing home claimed that it did 
not have the ability to pay food and pharmaceutical vendors, it donated $1 million to 
another nonprofit company which in turn paid the owner/operator an exorbitant salary. 
 
Laboratories 
 
 California  A neurophysiologist was sentenced to 13 months imprisonment and 
ordered to pay $400,000 in restitution for his scheme to defraud Medicare and Medi-Cal, 
Californias Medicaid program.  Because the neurophysiologist is a technician who 
conducts diagnostic tests and is not considered a physician, he did not qualify for 
Medicare or Medi-Cal provider numbers.  To gain access to provider numbers, the 
neurophysiologist entered into business relationships with physicians and other medical 
professionals.  Once he obtained the physicians provider numbers, he improperly billed 
for ultrasounds, nerve conduction studies, and pulmonary function tests.  One of the 
improper business relationships involved a doctor who falsely indicated on his provider 
number application that he was running his own practice.  Through the course of the 
investigation, it was determined that the neurophysiologist actually operated the practice, 
and the doctor was paid a small salary for the use of his number.  In June 2006, the doctor 
was ordered to pay $50,000 in restitution for his part in the scheme.  The investigation 
also revealed that the neurophysiologist employed marketers who paid patients to 
undergo various unnecessary diagnostic tests and services. 
 
Medicaid Fraud Control Units 
 
Investigations 
Currently, 49 States and the District of Columbia have MFCUs, which investigate and 
prosecute, or refer for prosecution, providers charged with defrauding the Medicaid 
HHS OIG Semiannual Report to Congress  23  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
program or abusing, neglecting, or financially exploiting beneficiaries in Medicaid-
sponsored facilities.  During this semiannual period, OIG provided oversight for and 
administration of approximately $160 million in Federal grant funds to the units.   
 
Examples of cases worked jointly by OIG with MFCUs during this reporting period 
include the following: 
 
 North Carolina  The State of North Carolina agreed to repay the Government 
$151.5 million to settle claims in connection with Medicaid Disproportionate Share 
Hospital and Hospital Supplemental Payment program funds.  The State administers the 
Medicaid program, which is both federally and State-funded and makes payments to 
hospitals in the States Medicaid program.  During fiscal years 1997 through 2002, the 
State plan covering hospital payments required that certain of the payments made during 
those years be adjusted based on cost data made available through cost reports submitted 
by the hospitals.  The Government alleged that, despite having identified overpayments 
resulting from the use of erroneous data provided by the States data processing 
contractor, adjustments were not made in a timely manner and hospitals continued to 
receive the overpayments.  The Government collected $100 million from the State in 
2006.  The balance is to be paid over a 3-year period in equal annual installments.  The 
investigation involved OIG, the North Carolina MFCU, and the FBI. 
 
 Maryland  Pediatrix Medical Group, Inc., agreed to pay the Government $25 million 
and enter into a 5-year CIA to resolve its liability under the FCA for improperly billing 
Medicaid, TRICARE, and the Federal Employees Health Benefits Program for neonatal 
services provided by their doctors.  Through its network of affiliated physician groups, 
Pediatrix provides neonatal services at various hospital neonatal intensive care units in 
32 States and Puerto Rico.  Pediatrix allegedly used improper billing codes for neonatal 
services provided at several of these units located throughout the country.  The 
Government alleged that from January 1996 to December 1999, Pediatrix billed critical 
care services for infants when, in fact, many of the infants were not critically ill.  The 
settlement also resolved a Colorado case being investigated for the same misconduct.  
The investigations involved OIG, the Office of Personnel Management, the Defense 
Criminal Investigative Service, and MFCUs for the States of North Carolina, South 
Carolina, New Jersey, and Maryland, coordinated through the National Association of 
Medicaid Fraud Control Units. 
 
 Texas  A physical therapy clinic operator was sentenced to 51 months in prison and 
ordered to pay $1.32 million in restitution for conspiracy to commit wire fraud and health 
care fraud.  Her codefendant was sentenced in August 2006 to 33 months in prison and 
held jointly responsible for the restitution.  The two women billed the Medicare and 
Medicaid programs for services not rendered and billed for physical therapy services as if 
they were either performed or supervised by a licensed physician.  The investigation 
revealed that the defendants hired unlicensed foreign medical graduates to perform the 
services of a licensed physician.  The investigation involved OIG, the Texas MFCU, and 
the FBI. 
 
HHS OIG Semiannual Report to Congress  24  October 1, 2006  March 31, 2007  Centers for Medicare & Medicaid Services 
 Oregon  Oregon Imaging Center (OIC) agreed to pay $510,000 and enter into a 
5-year CIA to resolve its liability under the FCA for allegedly submitting false claims to 
Medicare and Medicaid from January 1998 through March 2004.  The Government 
alleged that OIC billed Medicare and Medicaid for radiology tests that the patients 
treating physician did not order.  The investigation involved OIG and the Oregon MFCU. 
 
 Connecticut  A physician agreed to pay $160,000 to resolve his liability under the 
FCA for submitting false claims to Medicare and Medicaid from January 1998 through 
October 2002.  The Government alleged that the physician billed office visits that were 
rendered in whole or in part by an employee who was not licensed to practice medicine.  
The employee, a foreign medical school graduate, was unable to pass the medical school 
graduate examination.  Despite knowing that the employee was not licensed to practice 
medicine, the physician directed him to treat approximately 25 percent of the physicians 
patients.  Prior to the settlement, the physician pled guilty to conspiracy to commit health 
care fraud and was subsequently sentenced to 18 months in prison and ordered to pay 
$156,000 in restitution.  In December 2006, the employee pled guilty for his involvement 
in the conspiracy and was sentenced to 2 months imprisonment, 4 months home 
confinement, and ordered to pay a $4,000 fine.  The investigation involved OIG, FDA, 
the Connecticut MFCU, and the FBI. 
 
Suspected Medicaid Fraud Referrals 
OIG found that Medicaid Fraud Control Units (MFCU) reported receiving a total of 
13,733 suspected fraud referrals over a 3-year period (July 2002 through June 2005), of 
which 29 percent came from State Medicaid agencies.  Eighty-four percent of the 
MFCUs that provided information reported receiving less than half of all suspected fraud 
referrals from their respective State Medicaid agencies.  MFCU-accepted referrals are 
matters that the MFCU retains for further investigation.  Overall, MFCU-accepted 
referrals from State Medicaid agencies increased in numbers but their  percentage of total 
referrals remained constant over a 3-year period.  Within individual States these trends 
varied widely.  Fifty-nine percent of MFCUs reported accepting fewer referrals from 
their respective State Medicaid agency in the last year of our review compared to the 
average number of referrals over all 3 years.  One State Medicaid agency contributed to 
67 percent of the increase in the number of MFCU-accepted referrals over the 3-year 
study period.  OIG recommended that CMS establish fraud referral performance 
standards for State Medicaid agencies.  CMS concurred.  (OEI-07-04-00181) 
HHS OIG Semiannual Report to Congress  25  October 1, 2006  March 31, 2007     
     
Public Health Agencies 
The activities that HHS public health agencies conduct and support represent this 
countrys primary defense against acute and chronic diseases and disabilities.  The 
programs provide the foundation for the Nations efforts in promoting and enhancing the 
health of the American people.  Public health agencies within the Department include: 
 
 Agency for Healthcare Research and Quality (AHRQ) 
 Agency for Toxic Substances and Disease Registry (ATSDR) 
 Centers for Disease Control and Prevention (CDC) 
 Food and Drug Administration (FDA) 
 Health Resources and Services Administration (HRSA) 
 Indian Health Service (IHS) 
 National Institutes of Health (NIH) 
 Substance Abuse and Mental Health Services Administration (SAMHSA) 
 
OIG continues to examine the policies and procedures of these agencies to determine 
whether appropriate controls are in place to guard against fraud, waste, and abuse.  These 
activities include preaward and recipient capability audits and evaluations.  This 
oversight work has provided valuable recommendations to program managers for 
strengthening the integrity of agency policies and procedures and improving program 
performance. 
 
OIG is also involved in investigating specific allegations of fraud, waste, and abuse 
affecting HHS public health service agency programs.  These investigations are often 
complex cases and include such allegations as misuse or theft of grant monies, conflict of 
interest, kickbacks, and employee misconduct. 
HHS OIG Semiannual Report to Congress  27  October 1, 2006  March 31, 2007  Public Health Agencies 
 
Public Health Agency-Related Reports 
 
Unobligated Balances of Funds Awarded Under the Public Health Preparedness 
and Response for Bioterrorism Program 
OIG found that from August 31, 1999, until the end of the Public Health Preparedness 
and Response for Bioterrorism Program on August 30, 2005, CDC awarded almost 
$3 billion to States and major local health departments (awardees).  At the close of the 
program, unobligated balances totaled more than $157 million, representing 15.8 percent 
of the approximately $996 million awarded for the last budget period.  Many awardees 
did not fully execute their expenditure plans or submit timely financial status reports, so 
CDC did not always receive the information needed to encourage the expenditure of 
funds and minimize unobligated balances.   
 
Under the new Public Health Emergency Preparedness Program, which began 
August 31, 2005, CDC has strengthened its guidance and established additional controls.  
OIG recommended that CDC ensure that awardees under the new program submit 
financial status reports in a timely manner; follow program guidance to better manage 
grant funds among eligible entities and preparedness priorities; and, when appropriate, 
offset new-year awards by the amount of unobligated funds carried over from the prior 
budget year.  CDC concurred and stated that it had taken a number of actions that had 
helped reduce unobligated balances significantly.  (A-05-05-00031) 
 
Security of Stockpile Sites 
During this semiannual period, OIG issued reports on the security of the Strategic 
National Stockpile at selected sites and identified ways to increase the sites protection 
against theft, tampering, destruction, or other loss.  CDC manages the stockpile to 
provide ready access to drugs and medical supplies during public emergencies.  CDC 
responded that it was actively addressing the concerns raised.  Site reports are considered 
sensitive and thus are not publicly available.  OIG expects to issue additional site reports 
in the next semiannual period. 
 
The Commissioned Corps Response to Hurricanes Katrina and Rita 
OIG found that although Commissioned Corps officers deployed to Hurricanes Katrina 
and Rita provided valuable services, the Corps could improve its response to public 
health emergencies.  The Corps provided valuable support to States; however, more 
officers, especially nurses, mental health professionals, and dentists, were needed.  
Although most deployed officers met Corps readiness standards, many lacked experience, 
effective training, and familiarity with response plans.  Agencies were unwilling or 
unable to allow some officers to deploy, while logistical difficulties delayed others 
arrival in the field.  Confusion surrounded some officers arrival, but most field 
assignments were appropriate and officers felt safe at their locations.  Most officers were 
equipped adequately, but some lacked working communications devices and other basic 
tools.  Many officers personally incurred mission-related expenses and some were not 
reimbursed promptly, which could affect their ability to deploy to future public health 
emergencies. 
 
HHS OIG Semiannual Report to Congress  28  October 1, 2006  March 31, 2007  Public Health Agencies 
OIG recommended that the Corps institute more effective training for officers, improve 
the system used to contact officers for deployment, work with the Office of the Assistant 
Secretary for Preparedness and Response (formerly the Office of Public Health 
Emergency Preparedness) to streamline deployment-related travel, stagger deployments 
to ensure continuity of operations, improve its ability to coordinate mission assignments 
and communications in the field, and ensure that all deployable officers have Federal 
Government travel credit cards.  The Assistant Secretary for Health agreed with these 
recommendations.  As part of the Corps comprehensive transformation process and its 
efforts to improve the Office of Force Readiness and Deployments practices, the Corps 
currently is addressing the recommendations in this report.  (OEI-09-06-00030) 
 
Corrective Actions Concerning the Food and Drug Administrations 
Human Subject Research Program 
At the request of the Commissioner of Food and Drugs, OIG assessed the implementation 
of corrective actions designed to address problems identified in a clinical study and to 
prevent future problems in FDAs human subject research program.  The objective of the 
review was to determine the status, as of October 2005, of the six corrective actions 
specified in the Commissioners letter of March 21, 2003.  The corrective actions 
directed FDAs centers and the Office of Science to initiate an inventory and audit of 
clinical studies, examine research-monitoring programs and develop quality assurance 
programs, establish a policy of accountability to the Commissioner, have the Chief 
Counsels Office help ensure appropriate regulatory schemes, provide additional 
funding for oversight, and initiate a mandatory education and certification program. 
 
OIG found that FDA had undertaken several efforts to implement corrective actions to 
improve its human subject research program but that some efforts were still underway at 
the time of the review.  OIG recommended that FDA increase its efforts to complete the 
Commissioners corrective actions.  FDA agreed with the recommendation.  
(A-06-06-00042) 
 
Food and Drug Administrations Resolution of Audit Recommendations 
OIG found that, as of December 31, 2005, FDA had not resolved eight audit 
recommendations, all of which had exceeded the required 6-month resolution timeframe.  
Additionally, during calendar years 2003 through 2005, FDA resolved 306 of the 314 
audit recommendations that were outstanding during this period, but it did not resolve 
287 of these recommendations within the required timeframe.  OIG recommended that 
FDA resolve the outstanding audit recommendations and resolve all audit 
recommendations within 6 months of receiving the audit reports, as required.  FDA 
concurred with all findings.  (A-07-06-03083)  
 
Management of Unobligated Funds Provided by the Ryan White CARE Act 
OIG found that, in managing funds under Title I of the Ryan White Comprehensive 
AIDS Resources Emergency Act, HRSA did not always comply with Departmental 
policy that, during the audit period, limited the carryover of unobligated grant balances to 
the next budget period.  For grant years 1999 to 2003, HRSA authorized 46 of the 51 
eligible metropolitan areas that received Title I grants to carry over unobligated funds 
totaling $45.1 million for periods ranging from 2 to 5 years beyond the original budget 
HHS OIG Semiannual Report to Congress  29  October 1, 2006  March 31, 2007  Public Health Agencies 
 
period.  These funds had been awarded to HIV/AIDS health care and support services 
during a specific budget period. 
 
OIG recommended that HRSA comply with current departmental policy guidance which 
now permits the carryover of unobligated grant balances into either of the next two 
budget periods.  HRSA concurred with the recommendation.  (A-02-03-02006) 
 
Safeguards Over Controlled Substances at an Indian Health Service Hospital 
OIG found that an IHS hospital in Oklahoma did not always comply with applicable 
requirements to secure and account for its Schedule II substances, which are addictive 
drugs regulated under the Controlled Substances Act of 1970.  The hospital did not 
appropriately secure or have adequate internal controls over its Schedule II substances.  
The hospital also did not appropriately account for its Schedule II substances, leaving 
them vulnerable to theft and mismanagement.  
 
OIG recommended that IHS direct the hospital to enforce enhanced security and internal 
controls and enhanced accountability controls.  IHS concurred and stated that the hospital 
had implemented, or was currently implementing, all recommended corrective actions.  
(A-06-06-00035) 
 
Royalty Payments Received by the National Institutes of Health 
OIG found that NIH did not adequately monitor the FY 2004 royalty payments that it 
received or ensure their timely collection.  NIH did not take all steps required to collect 
delinquent royalty payments, nor did it terminate license agreements, or seek to impose 
interest and penalty charges.  NIH enters into license agreements to move technologies 
developed through in-house research to the private sector.  NIH retains title to these 
technologies and receives royalty payments from the licensees.   
 
OIG recommended that NIH finalize its guidance to ensure the review of all sales and 
royalty reports as required; revise its compliance audit policy; and enforce the 
requirement to send late notices, terminate license agreements when appropriate, and 
forward delinquent licensees to the NIH Debt Collection Office to be considered for 
interest and penalty charges.  NIH partially agreed with the recommendations and 
reported that it had implemented revised policies and procedures facilitating proper 
administration of royalty payments and audits.  (A-03-04-03000)   
 
Financial Statement Audit of the National Institutes of Health Service and 
Supply Fund 
OIG contracted with an independent external auditor to audit the FY 2004 financial 
statements of the NIH Service and Supply Fund.  The auditors determined that the 
statements were reliable and fairly presented.  No material weaknesses were noted.  
(A-17-04-00005) 
 
Health Education Assistance Loan Defaults   
Through the Health Education Assistance Loan (HEAL) program, HRSA guarantees 
commercial loans to students seeking education in health-related fields of study.  The 
students are allowed to defer repayment of the loans until after they have graduated and 
HHS OIG Semiannual Report to Congress  30  October 1, 2006  March 31, 2007  Public Health Agencies 
begun to earn an income.  Although the Departments Program Support Center (PSC) 
takes all steps it can to ensure repayment, some loan recipients ignore their indebtedness. 
 
After PSC has exhausted efforts to secure repayment of a debt, it declares the individual 
in default.  Thereafter, the Social Security Act permits, and in some instances mandates, 
exclusion from Medicare, Medicaid, and all Federal health care programs for 
nonpayment of these loans.  Exclusion means that the individual may not receive 
reimbursement under these programs for professional services rendered.  During the 
period covered by this report, 23 individuals and related entities were excluded as a result 
of PSC referral of their cases to OIG. 
 
Individuals who have been excluded as a result of default may enter into settlement 
agreements, whereby the exclusion is stayed while they pay specified amounts each 
month to satisfy the debt.  If they default on these settlement agreements, they may be 
excluded until the entire debt is repaid and cannot appeal the exclusion.  Some health 
professionals, upon being notified of their exclusion, immediately repay their HEAL 
debts. 
 
After being excluded for nonpayment of their HEAL debts, a total of 2,070 individuals 
have taken advantage of the opportunity to enter into settlement agreements or 
completely repay their debts.  That figure includes the 38 individuals who have entered 
into such a settlement agreement or completely repaid their debts during this reporting 
period.  The amount of money being repaid through settlement agreements or through 
complete repayment is $147.2 million.  Of that amount, $2.9 million is attributable to this 
reporting period. 
 
In the following examples, each individual entered into a settlement agreement to repay 
the amount indicated: 
 
 A California psychologist  $134,000 
 A Florida chiropractor  $104,000 
 An Ohio chiropractor  $23,000 
 
Public Health-Related Investigations 
OIG also investigates cases involving the misuse of public health agency funds and 
threats to public health and safety, such as the improper use of select agents.   
 
The following is an example of a case involving improper use of HHS grant funds 
resolved during this reporting period: 
 
 Virginia  A former caseworker for a nonprofit AIDS organization that received HHS 
grant funds was sentenced to 4 months home detention for engaging in a scheme to 
defraud.  She repaid the nonprofit organization $7,500.  The caseworker worked on a 
project to identify individuals who were at a high risk of being infected with HIV 
and/or AIDS.  Employees working on the project earned a bonus for each completed 
questionnaire and saliva sample obtained.  During a 6-month period, the individual 
HHS OIG Semiannual Report to Congress  31  October 1, 2006  March 31, 2007  Public Health Agencies 
 
submitted 91 samples of her own saliva and risk assessment questionnaires that she 
completed using fictitious names and personal identifiers. 
HHS OIG Semiannual Report to Congress  32  October 1, 2006  March 31, 2007     
Administration for Children and Families; 
Administration on Aging 
The Administration for Children and Families (ACF) provides direction and funding for 
programs designed to promote stability, economic security, responsibility, and 
self-support for the Nations families.  Some of the major programs include Temporary 
Assistance for Needy Families (TANF), Child Support Enforcement, Foster Care, Family 
Preservation and Support, Head Start, and the Child Care and Development Block Grant.  
OIG reviews these programs and makes recommendations to increase the efficient use of 
program dollars; implement programs more effectively; better coordinate programs 
among the Federal, State, and local governments; and strengthen States financial 
management practices. 
 
The Administration on Aging (AoA) awards grants to States for establishing 
comprehensive community-based systems that assist the elderly in maintaining their 
independence and in remaining in their homes as long as possible.  Socially and 
economically disadvantaged elderly and low-income minority elderly are targeted for 
assistance, including supportive and nutrition services, education and training, low-cost 
transportation, and health promotion.  Over the years, OIG has reported on opportunities 
for program improvements to target the neediest for services, expand available financial 
resources, upgrade data collection and reporting, and enhance program oversight.   
 
OIG works closely with ACFs Office of Child Support Enforcement and other Federal, 
State, and local partners to detect, investigate, and prosecute noncustodial parents who 
fail to pay child support obligations.  In addition, OIG also investigates specific 
allegations of fraud, waste, and abuse affecting ACF and AoA programs.  These 
investigations are often complex cases and include such allegations as misuse or theft of 
grant monies, conflict of interest, kickbacks, and employee misconduct.   
HHS OIG Semiannual Report to Congress  33  October 1, 2006  March 31, 2007  Administration for Children and Families; Administration on Aging 
 
Administration for Children and Families-Related Reports 
 
Lebanon Repatriation Program Funds 
At the Secretarys request, OIG reported to Congress on ACFs use of Lebanon 
Repatriation Program funds.  Under this program, ACF offered temporary emergency 
assistance to repatriates at ports of entry in Georgia, Maryland, New Jersey, and 
Pennsylvania.   
 
OIG found that ACF expended $1.2 million to provide temporary assistance to more than 
12,000 individuals repatriated from Lebanon.  Approximately $1 million represented 
reimbursement of States administrative costs, and the remaining $215,000 represented 
temporary assistance provided directly to about 350 individuals and household heads.  
ACF generally followed Federal requirements in administering these funds.  However, as 
of December 6, 2006, ACF had reimbursed Pennsylvania for approximately $125,000 in 
estimated, rather than actual, administrative costs and had not submitted bills for 
temporary assistance loans totaling about $135,000 that repatriates were required to 
repay.  These problems occurred because ACF made clerical errors and did not request or 
monitor reports on the status of loan collections from PSC, ACFs collection agent.  
 
OIG recommended that ACF obtain a refund from Pennsylvania, provide PSC with all 
necessary information on temporary assistance loans and direct PSC to bill repatriates for 
these loans, ensure that States are aware of the requirement to provide adequate 
documentation for administrative costs, and implement written monitoring procedures to 
ensure that PSC bills for temporary assistance loans.  ACF generally agreed with the 
recommendations.  (A-01-07-02501)   
 
Undistributable Child Support Collections  
OIG found that two States did not fully comply with Federal requirements pertaining to 
undistributable child support collections.  Undistributable collections result when a State 
receives a child support payment but cannot identify or locate the custodial parent or 
return the funds to the noncustodial parent.  States are required to offset Child Support 
Enforcement program costs, for which they receive Federal matching funds, by 
recognizing and reporting undistributable collections as program income at the time the 
funds are considered abandoned under State law. 
 
 Massachusetts did not report program income totaling $1.3 million (Federal share) 
for undistributable child support collections.  In addition, OIG deferred review of 
$2.3 million (Federal share) of interest earned on undistributed collections to the Office 
of Child Support Enforcement. 
 
OIG recommended that the State report child support collections totaling $1.3 million 
as undistributable and program income and revise its procedures to ensure that 
undistributable collections meeting the States abandoned property requirements are 
reported as undistributable and program income on the quarterly Federal financial 
reports.  The State generally agreed.  (A-01-06-02500) 
HHS OIG Semiannual Report to Congress  34  October 1, 2006  March 31, 2007  Administration for Children and Families; Administration on Aging 
 
 Connecticut did not report program income totaling $1.1 million (Federal share) in 
outstanding unclaimed or undistributed child support collections that were held more than 
3 years. 
 
OIG recommended that the State report child support collections totaling $1.1 million as 
undistributable and program income and implement controls to ensure that State 
unclaimed property procedures are adhered to and that future undistributable collections 
are reported as undistributable and program income on the quarterly Federal financial 
reports.  The State generally agreed.  (A-01-06-02502) 
 
Title IV-E Adoption Assistance Training Costs in Two States 
OIG reviewed two States claims for Title IV-E training costs.  ACF provides funding at 
a 50-percent rate for State administrative expenditures and at an enhanced 75-percent rate 
for certain State training expenditures. 
 
 Maryland  For calendar years 1999 through 2001, Maryland overstated its Federal 
share of Title IV-E training costs by $3.2 million, including $2.9 million in administrative 
and indirect costs incorrectly claimed at the enhanced training rate and almost $380,000 
for training not allowable under Title IV-E.   
 
OIG recommended that Maryland refund to the Federal Government $3.2 million in 
overstated Title IV-E claims, review Title IV-E training costs claimed subsequent to the 
audit period and make the appropriate adjustments, and strengthen internal controls to 
ensure that future training costs are claimed in accordance with Federal requirements.  
Maryland partially agreed with the findings.  (A-03-06-00563)  
 
 New Mexico  For the 2 years ended September 30, 2002, New Mexico claimed 
$1.2 million (Federal share) in unallowable or unsupported Title IV-E training costs 
incurred by three State universities under contract with the State.  In addition, New 
Mexico claimed almost $48,000 for one university that incorrectly computed 
administrative costs using an unsupported indirect-cost rate.   
 
OIG recommended that New Mexico refund $1.2 million to the Federal Government, 
work with ACF to identify the allowable portion of the $48,000 in indirect costs allocated 
to the Title IV-E program, implement procedures to review and amend university 
contracts as necessary to comply with Federal requirements, and implement procedures to 
ensure that universities bill only for costs that are allowable and supported.  New Mexico 
partially agreed with the findings.  (A-06-06-00045) 
 
Connecticuts Title IV-E Adoption Assistance Costs 
OIG reviewed 1,000 of Connecticuts Title IV-E adoption assistance claims for State 
FY 2002 and found that 298 children did not meet Federal eligibility requirements.  The 
State agency continued to claim adoption assistance payments for all 298 ineligible 
children in FY 2003 and for 294 of these children in FY 2004.  As a result, the State 
agency overclaimed $4.3 million (Federal share) in adoption assistance payments for 
FYs 2002 through 2004.  
HHS OIG Semiannual Report to Congress  35  October 1, 2006  March 31, 2007  Administration for Children and Families; Administration on Aging 
 
OIG recommended that Connecticut make a financial adjustment of $2.8 million for 
children who did not meet income eligibility requirements, work with ACF to resolve 
$1.5 million in overpayments for children who did not meet voluntary placement or 
judicial determination requirements, and review adoption assistance payments claimed 
after the audit period to ensure compliance with Federal reimbursement requirements.  
Connecticut concurred with the recommendations.  (A-01-06-02506) 
 
Administration on Aging-Related Reports 
 
Cost Sharing for Older Americans Act Services 
OIG found that States implementation of cost sharing for Older Americans Act (OAA) 
services has been limited.  In 2000, amendments to the OAA allowed but did not require 
States to implement cost sharing for certain OAA services.  A total of 12 States have 
implemented cost sharing for at least one OAA service in at least one part of their State.  
None of these States have implemented cost sharing for all allowed OAA services.  The 
States that have implemented cost sharing do not always follow all OAA requirements 
for cost sharing that are designed to protect low-income individuals access to services.  
OIG also found that AoA has provided limited guidance to States about implementing 
cost sharing and that State officials are often confused about cost sharing under the OAA.  
Additionally, AoAs participation data cannot be used to determine the impact of cost 
sharing on participation rates primarily because States report participation data in the 
National Aging Program Information System/State Program Reports (NAPIS/SPR) 
differently.   
 
OIG recommended that AoA ensure that States cost-sharing practices comply with the 
OAA requirements designed to protect low-income individuals access to services, 
provide additional guidance to States on cost sharing; and improve the quality of the 
NAPIS/SPR data so that any effects of cost sharing can be measured.  In general, AoA 
agreed with our finding that cost sharing is limited but does not agree that it has provided 
limited guidance to States.  AoA also did not agree with OIGs recommendation 
regarding NAPIS/SPR.  AoA stated that it will follow up on OIGs observations and 
correct instances of noncompliance with the provisions of the OAA and will provide 
additional guidance to States.  (OEI-02-04-00290) 
 
Administration on Agings Resolution of Audit Recommendations  
OIG found that, as of December 31, 2005, AoA had not resolved 28 audit 
recommendations, all of which were within the allowable 6-month timeframe for 
resolution.  Also, during calendar years 2003-2005, AoA resolved 291 of the 319 audit 
recommendations that were outstanding during that period.  However, it did not resolve 
207 of the 291 recommendations within the required timeframe.  OIG recommended that 
AoA resolve all audit recommendations within 6 months of receiving the audit reports, as 
required.  AoA concurred with the recommendation and stated that it had implemented 
more rigorous internal control procedures to resolve all recommendations within 
6 months.  (A-07-06-03084) 
 
HHS OIG Semiannual Report to Congress  36  October 1, 2006  March 31, 2007  Administration for Children and Families; Administration on Aging 
 
Child Support Enforcement  
 
The detection, investigation, and prosecution of noncustodial parents who fail to pay 
court-ordered child support are priorities for OIG.  Working with the Federal Office of 
Child Support Enforcement (OCSE), the Department of Justice, U.S. Attorneys Offices, 
the U.S. Marshals Service, and other Federal, State, and local partners, OIG develops 
ways to expedite the collection of child support.  Since 1995, OIG has opened 3,307 
investigations of child support cases nationwide, resulting in 1,276 convictions and 
court-ordered restitution and settlements of $68.7 million. 
 
Task Forces 
In 1998, OIG and OCSE initiated Project Save Our Children, a child support initiative 
made up of multiagency, multijurisdictional investigative task forces for child support 
enforcement.  The task forces are designed to identify, investigate, and prosecute 
egregious criminal nonsupport cases on both the Federal and State levels by coordinating 
law enforcement, criminal justice, and child support office resources.  Task force 
screening units receive child support cases from the States, conduct preinvestigative 
analyses, and forward the cases to the investigative task force units, wherein they are 
assigned and investigated.  The task force approach streamlines the process by which the 
cases best suited for criminal prosecution are identified, investigated, and resolved. 
 
To date, the task force units have received more than 10,897 cases from the States.  As a 
result of the work of the task forces, 802 Federal arrests have been made and 748 
individuals have been sentenced.  The total ordered amount of restitution related to 
Federal investigations is $39.6 million. 
 
Investigations to date at the State level have led to 482 arrests and 422 convictions or 
civil adjudications, resulting in $28.3 million in restitution ordered.   
 
Overall, more than $38 million of court-ordered restitution has actually been collected 
and distributed to families. 
 
Investigations 
Nationwide, OIG investigations of child support cases resulted in 51 convictions and 
court-ordered restitution and settlements of $3.7 million during this semiannual period.  
Examples of OIGs enforcement results for failure to pay child support include the 
following: 
 
 Minnesota  Based on his guilty plea, a man was sentenced to 5 years probation and 
ordered to pay $213,000 in restitution for failure to pay child support.  Of the restitution 
amount, approximately $91,000 is owed in a Virginia case and the remaining $122,000 is 
owed for a case in Minnesota.  In addition, the man was ordered to participate in a mental 
health program for evaluation and/or treatment. 
 
 Michigan  A man was sentenced to 16 months imprisonment, 1 year of probation, 
and ordered to pay $130,000 in restitution for failure to pay child support.  Although the 
HHS OIG Semiannual Report to Congress  37  October 1, 2006  March 31, 2007  Administration for Children and Families; Administration on Aging 
 
man was employed for approximately 30 years, he failed to pay his child support 
obligation.  At his sentencing hearing, the man attempted to mitigate his actions by 
advising the court that he has a gambling addiction and is supporting his current family. 
 
 Connecticut  Based on his guilty plea, a man was sentenced to 5 years probation and 
ordered to pay $75,000 in restitution that included an immediate payment due of $15,000 
for failure to pay child support.  Despite being ordered to pay support for his two children 
in 1992, the man made payments only sporadically.  His last payment was made in 1998.   
 
 Virginia  A man was sentenced to 4 years probation, ordered to stay current on all 
child support and spousal support orders and to file an annual financial affidavit for 
failure to pay child support.  Prior to sentencing, the man paid $38,000, the amount of his 
child support and spousal support arrearage.  The investigation revealed that the man 
traveled frequently with his girlfriend and concealed his expenses by using his 
girlfriends credit cards.  His travel included trips to Australia and New Zealand, a 
Caribbean cruise, a 3-week stay in Las Vegas, and a stay in a luxury hotel in New 
Orleans.  Meanwhile, the custodial parent and their four children were receiving public 
assistance. 
 
 Indiana  A man was sentenced to 8 years in prison (all suspended except for 112 days 
already served), 8 years probation, and ordered to pay $32,000 in restitution for failure 
to pay child support.  With the help of the Department of Veterans Affairs (VA), the man 
was located and arrested in the State of Washington.  The man was using an alias to avoid 
his child support obligation but was receiving VA benefits under his true name.  The man 
was extradited back to Indiana where he pled guilty.  In addition to the child support 
arrearage, the man was ordered to pay almost $4,000 in extradition costs.  
 
HHS OIG Semiannual Report to Congress  38  October 1, 2006  March 31, 2007     
General Oversight 
The Office of the Assistant Secretary for Resources and Technology (formerly the Office 
of the Assistant Secretary for Resources and Budget, Technology, and Finance) is 
responsible for developing and executing the HHS budget; ensuring that HHS 
performance measurement and reporting are in compliance with the Government 
Performance and Results Act; establishing and monitoring departmental policy for 
financial management (including debt collection, audit resolution, cost policy, and 
financial reporting); and developing and monitoring HHS information technology policy 
(including information technology security).  The Assistant Secretary is the Departments 
Chief Financial Officer and oversees the Departments Chief Information Officer.  The 
Department also has the responsibility, by virtue of the magnitude of its funding, to 
negotiate the indirect cost rates and methods that many outside entities, such as State and 
local governments, use for administering HHS and other Federal programs. 
 
The Office of the Assistant Secretary for Administration and Management is responsible 
for HHS policies regarding human resources and acquisition management.  This office 
also oversees the Program Support Center, which provides a range of services, such as 
human resource system support, financial management, administrative operations, 
acquisitions, and Federal occupational health services. 
OIG has general oversight responsibility for these activities.  Another major 
responsibility derives from Office of Management and Budget (OMB) Circular A-133, 
under which HHS is the cognizant agency to audit the majority of major research 
institutions and nearly all State and local governments.  As the cognizant agency, OIG 
oversees the work of non-Federal auditors of Federal money at some 6,700 entities, such 
as community health centers and Head Start grantees, as well as at State and local 
governments, colleges and universities, and other nonprofit organizations.  In addition, 
OIG is responsible for auditing the Departments financial statements. 
 
OIG reviews audits, evaluations, and studies performed by others, such as OMBs 
Program Assessment and Rating Tool and reports of the Government Accountability 
Office.  It takes these studies into account when planning its own work and examines 
management actions designed to correct the deficiencies cited in these prior studies. 
HHS OIG Semiannual Report to Congress  39  October 1, 2006  March 31, 2007  General Oversight 
 
General Oversight-Related Reports 
 
Departmental Financial Statement Audit 
The Chief Financial Officers Act of 1990, as amended, requires OIG or an independent 
external auditor, as determined by OIG, to audit the HHS financial statements in 
accordance with applicable standards.  Independent external auditors provided an 
unqualified opinion on the FY 2006 HHS consolidated/combined financial statements.  
This means that for the eighth consecutive year, the statements were reliable and fairly 
presented.  However, the report on internal controls noted two material weaknesses: 
 
 Financial Management Systems and Reporting  As in prior years, HHS continued 
to have serious internal control weaknesses in its financial management systems and 
processes for producing timely and reliable financial statements.  Substantial manual 
procedures, significant adjustments to balances, and numerous accounting entries 
recorded outside HHSs general ledger system were necessary. 
 
 Departmental Information Systems Controls  For several systems, the auditors 
reported numerous issues in the areas of access to data and controls over changes to edits.  
In addition, weaknesses continued in the Entitywide Security Program and Service 
Continuity Planning and Testing, and some slippage occurred in systems software 
controls since the FY 2005 audit.  (A-17-06-00001) 
 
Special-Purpose Financial Statements 
OIG contracted with an independent external auditor to audit the HHS FY 2006 
reclassified balance sheet and the related reclassified statements of net cost and changes 
in net position (the special-purpose financial statements).  Auditors determined that the 
statements were reliable and fairly presented.  No material weaknesses were noted.  
(A-17-06-00006) 
 
Departmental Service Organizations  
To support the audit of the Departments FY 2006 financial statements, OIG contracted 
for examinations of several service organizations that provide common administrative, 
data processing, and accounting services to the operating divisions.  In accordance with 
Statement on Auditing Standards No. 70, independent certified public accounting firms 
examined the organizations controls and tested their operating effectiveness. 
 
Auditors found that controls were suitably designed and operating with sufficient 
effectiveness, with the exception of certain conditions, at the following service 
organizations:  NIHs Center for Information Technology; PSCs Division of Payment 
Management, Division of Financial Operations, and Enterprise Support Service.  
(A-17-06-00009, A-17-06-00010, A-17-06-00011, A-17-06-00012) 
 
Emergency Response to Hurricanes Katrina and Rita 
Following the Gulf Coast hurricanes of 2005, HHS was extensively involved in recovery 
efforts.  To obtain assistance in these efforts, HHS agencies awarded or extended many 
contracts to vendors.  Some of the contracts were in response to assignments from the 
HHS OIG Semiannual Report to Congress  40  October 1, 2006  March 31, 2007  General Oversight 
 
Department of Homeland Securitys Federal Emergency Management Agency; others 
were self-initiated.  
 
During this semiannual period, OIG reviewed the award processes for 12 contracts 
related to hurricane recovery.  CDC, NIHs National Institute of Environmental Health 
Sciences, and PSC awarded these contracts.  The objective of each audit was to determine 
whether the awarding agency complied with Federal and departmental requirements 
during the contract award process.  In all 12 cases, the agencies complied with the 
requirements.  (A-03-06-00514, A-03-06-00519, A-03-06-00527, A-03-06-00528, 
A-03-06-00529, A-03-06-00530, A-03-06-00531, A-03-06-00536, A-04-06-01030, 
A-04-06-01031, A-04-06-01034, A-04-06-01036) 
 
Non-Federal Audits 
OMB Circular A-133 establishes audit requirements for State and local governments, 
colleges and universities, and nonprofit organizations receiving Federal awards.  Under 
this circular, covered entities must conduct annual organizationwide audits of all Federal 
money they receive.  These audits are conducted by non-Federal auditors, such as public 
accounting firms and State auditors.  OIG reviews the quality of these audits and assesses 
the adequacy of the entitys management of Federal funds.  In the first half of FY 2007, 
OIGs National External Audit Review Center reviewed 1,267 reports that covered 
$463.6 billion in audited costs.  Federal dollars covered by these audits totaled 
$109.3 billion, about $54.5 billion of which was HHS money. 
 
OIGs oversight of non-Federal audit activity informs Department managers about the 
soundness of management of Federal programs and identifies any significant areas of 
internal control weakness, noncompliance, and questioned costs that require formal 
resolution by Federal officials.  OIG identifies entities for high-risk monitoring, alerts 
program officials to any trends that could indicate problems in HHS programs and 
profiles non-Federal audit findings of a particular program or activity over time to 
identify systemic problems.  OIG also provides training and technical assistance to 
grantees and members of the auditing profession. 
 
OIG maintains a quality control review process to assess the quality of the non-Federal 
reports received and the audit work that supports selected reports.  The non-Federal audit 
reports reviewed and issued during this reporting period are categorized in the box below. 
 
 
Reports issued:   
 
without changes or with minor changes  1,052 
with major changes  136 
with significant inadequacies  79 
  Total  1,267 
 
 
The 1,267 reports included 5,089 recommendations for improving management 
operations.  In addition, these audit reports provided information for 124 special 
memorandums that identified concerns for increased monitoring by management. 
HHS OIG Semiannual Report to Congress  41  October 1, 2006  March 31, 2007  General Oversight 
 
Resolving Recommendations 
 
The following tables are provided in accordance with section 5 of the Inspector General 
Act and indicate the dollar value of actions taken on OIGs recommendations. 
 
Table 1:  Reports With Questioned Costs 
 
Number of  Dollar Value  Dollar Value 
Reports 
Reports  Questioned  Unsupported 
Section 1       
For which no management decision  
had been made by the beginning of the 
reporting period1  339  $2,666,100,000  $165,146,000 
Issued during the reporting period  42  $   391,888,000  $    9,652,000 
  Total Section 1  381  $3,057,988,000  $174,798,000 
 
Section 2       
For which a management decision was 
made during the reporting period2,3       
  Disallowed costs  173  $1,502,878,000  $  53,697,000 
  Costs not disallowed  20  $     31,363,000  $    1,559,000 
  Total Section 2  193  $1,534,241,000  $  55,256,000 
 
Section 3       
For which no management decision had 
been made by the end of the reporting 
period       
  Total Section 1 
  minus Total Section 2  188  $1,523,747,000  $119,542,000 
 
Section 4       
For which no management decision was 
made within 6 months of issuance4  150  $1,142,521,000  $114,251,000 
 
                                                 
Supporting notes and list of reports are in Appendix A. 
HHS OIG Semiannual Report to Congress  42  October 1, 2006  March 31, 2007  General Oversight 
 
Table 2:  Funds Recommended To Be Put to Better Use 
 
Number of 
Reports  Dollar Value 
Reports 
Section 1     
For which no management decision had been made by the 
beginning of the reporting period1  52  $   981,996,000 
Issued during the reporting period  6  $   593,309,000 
  Total Section 1  58  $1,575,305,000 
     
Section 2     
For which a management decision was made during the 
reporting period     
  Value of recommendations agreed to by management     
  Based on proposed management action  14  $   397,189,000 
  Based on proposed legislative action    $                     0 
  Value of recommendations not agreed to by management    $          122,000 
  Total Section 2  14  $   397,311,000 
     
Section 3     
For which no management decision had been made by the 
end of the reporting period2     
  Total Section 1 minus Total Section 2  44  $1,177,994,000 
 
                                                 
Supporting notes and list of reports are in Appendix A. 
HHS OIG Semiannual Report to Congress  43  October 1, 2006  March 31, 2007  General Oversight 
 
Legislative and Regulatory Review and Development 
 
Regulatory Review Functions 
Section 4(a) of the Inspector General Act of 1978 requires that the Inspector General 
review existing and proposed legislation and regulations and make recommendations in 
this report concerning the impact on the economy and efficiency of the administration of 
the Departments programs and on the prevention of fraud and abuse.  In reviewing 
regulations and legislative proposals, OIG uses as the primary basis for its comments the 
audits, evaluations, investigations, and other activities highlighted in this and previous 
semiannual reports. 
 
During this reporting period, OIG was involved in the review and clearance of the 
implementing regulations and other policy guidance from the various provisions of MMA 
and DRA.  Among the CMS final rules reviewed by OIG during this reporting period, 
OIG provided substantive comments addressing Physicians Referrals to Health Care 
Entities With Which They Have Financial Relationships (Stark III), Revisions to 
Payment Policies Under the Physician and Ambulance Fee Schedules, Hospital 
Conditions of Participation for Organ Transplant Centers, and the joint CMS/IHS final 
rule on the Limitation of Charges for Services Furnished by Medicare Participating 
Hospitals to Indians.  In addition, among the various proposed rules reviewed during this 
period, OIG prepared comments and recommendations on Revisions to the Medicare 
Advantage and Part D Prescription Drug Confidentiality, Disclosure, Determinations, 
Appeals, and Intermediate Sanctions Processes, and the Medicare Prescription Drug 
Benefit. 
 
Regulatory Development 
OIG is responsible for the development and publication of a variety of sanction 
regulations addressing civil money penalty and program exclusion authorities 
administered by the Inspector General, as well as regulations promulgating safe harbors 
related to the anti-kickback statute.  During this semiannual reporting period, OIG 
continued to develop final rulemaking addressing shared risk exceptions to the safe 
harbor provisions and a new safe harbor for Federally Qualified Health Centers, as well 
as new proposed rulemaking addressing the reorganization and revisions to 42 CFR part 
1003, which sets forth OIGs regulatory authorities for imposing civil monetary penalties 
and assessments. 
 
In addition, OIG periodically publishes Federal Register notices that, among other things, 
offer guidance to alert program beneficiaries, health care providers, and other entities 
about potential problems or areas of special interest.  During this semiannual period, 
OIG: 
 
 Prepared and published a Federal Register notice revising OIGs Privacy Act Systems 
of Records for Criminal Investigative Files (71 FR 71180; December 8, 2006). 
 
 In accordance with section 205 of HIPAA, published an annual notice soliciting 
proposals and recommendations for developing new and modifying existing safe harbor 
HHS OIG Semiannual Report to Congress  44  October 1, 2006  March 31, 2007  General Oversight 
 
provisions under the Federal anti-kickback statute, as well as for developing new OIG 
special fraud alerts (71 FR 71501; December 11, 2006). 
 
 Prepared and published a Federal Register notice addressing revisions to the current 
OIG organizational statement and setting forth the alignment of certain functions and 
responsibilities of several OIG components to better reflect the current work environment 
and priorities and to more closely delineate responsibilities for the various offices within 
OIG (71 FR 76674; December 21, 2006). 
 
Employee Fraud and Misconduct 
 
Most people employed by HHS are dedicated, honest civil servants.  Occasionally, 
however, employees violate their ethical and fiduciary responsibilities.  OIG conducts or 
oversees investigations of serious allegations of wrongdoing by Department employees, 
as in the following examples: 
 
 Maryland  An NIH scientist was sentenced for a conflict of interest violation.  The 
scientist provided consulting services for a drug company without the required prior 
approval of and disclosure to NIH officials.  As part of his sentencing, the scientist was 
ordered to pay $300,000, the amount of income and expenses that he received for his 
consulting services. 
 
 South Dakota  An IHS employee was sentenced to 12 months incarceration and 
ordered to pay $100,000 in joint and several restitution for conspiracy to commit health 
care fraud.  This individual, an IHS medical records technician, and four codefendants 
were involved in a scheme to defraud the American Family Life Assurance Company of 
Columbus (AFLAC).  The technician and another IHS coworker used their positions to 
access patient records.  The records were altered to reflect their own names or the names 
of family members and then submitted to AFLAC for medical services they did not 
receive.  The coworker and the other three defendants were previously sentenced for their 
part in the scheme.  All five of these individuals are held responsible for various portions 
of the joint and several restitution amount. 
 
 Washington, DC  A former FDA commissioner was sentenced to 3 years 
supervised release, 50 hours of community service, and ordered to pay over $89,000 in 
fines for conflict of interest and false writing violations.  The investigation found that the 
former commissioner filed false financial reports to Government officials.  On the 
reports, he failed to disclose holdings in companies regulated by FDA. 
 
Prosecutions 
 
During this semiannual reporting period, OIG investigations resulted in 209 successful 
criminal actions.  Also during this semiannual period, 498 cases were presented for 
criminal prosecution to the Department of Justice and, in some instances, to State and 
local prosecutors.  Prosecutors brought criminal charges against 312 individuals and 
entities. 
HHS OIG Semiannual Report to Congress  45  October 1, 2006  March 31, 2007  General Oversight 
 
In addition to terms of imprisonment and probation imposed in the judicial processes, 
$1.4 billion was ordered to be returned, or was returned, as a result of OIG investigations 
during this reporting period.  This amount includes civil settlements from investigations 
resulting from audit findings
HHS OIG Semiannual Report to Congress  46  October 1, 2006  March 31, 2007   
Appendixes 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HHS OIG Semiannual Report to Congress  47  October 1, 2006  March 31, 2007   Appendix A 
 
Notes to Tables 1 and 2 
 
Notes to Table 1  
 
1The opening balance was adjusted upward $270.2 Million  
 
2During the period, revisions to previously reported management decisions included: 
 
  CIN: A-02-99-58263  PUERTO RICO OFFICE OF THE GOVERNOR OFFICE OF CHILD 
SUPPORT  Based on supporting documentation provided by grantee, ACF 
determined that $6.7 million in previously disallowed costs were allowable. 
 
  CIN: A-02-03-74060  PUERTO RICO DEPARTMENT OF THE FAMILY  Based on supporting 
documentation provided by grantee, ACF determined that $21.6 million in 
previously disallowed costs were allowable. 
 
  CIN: A-06-04-00017  AUDIT OF ORGAN ACQUISITION COSTS AT BAYLOR UNIVERSITY 
MEDICAL CENTER  Additional recoveries of $12.8 million were identified in 
addition to the previously reported amount of $13.4 million  
 
  CIN: A-07-95-01126  BLUE CROSS AND BLUE SHIELD OF FLORIDA  CHARGING OF 
PENSION COSTS  Additional unallowable costs of $2.3 million were 
identified. 
 
Other revisions to previously disallowed management decisions totaled $3.9 million. 
 
3Included are management decisions to disallow $369 million that was identified in nonfederal audit 
reports. 
4Due to administrative delays, many of which are beyond management control, resolution of the following 
150 audits were not completed within 6 months of issuance; however, based upon discussions with 
management, resolution is expected before the end of the next semiannual reporting period: 
 
CIN: A-05-01-00099  UNIVERSITY OF ILLINOIS AT CHICAGO HOSPITAL 
DISPROPORTIONATE SHARE HOSPITAL PAYMENT LIMITS, OCT 2004, 
$140,281,912 
CIN: A-09-02-00054  AUDIT OF STATE OF CALIFORNIA DISPROPORTIONATE SHARE 
HOSPITAL PROGRAM FOR FY 1998, MAY 2003, $128,269,448 
CIN: A-09-02-00071  AUDIT OF CA DISPROPORTIONATE SHARE HOSPITAL PROGRAM FOR 
FY 1998 - LA COUNTY, MAY 2003, $98,190,042 
CIN: A-04-03-02027  REVIEW OF MEDICAID UPPER PAYMENT LIMIT CALCULATIONS IN 
ALABAMA, DEC 2005, $73,432,381 
CIN: A-04-04-03000  COMPLIANCE WITH MEDICARES POST ACUTE CARE TRANSFER 
POLICY - FY 01 & 02, APR 2005, $72,369,964 
CIN: A-03-03-00002  NATIONWIDE REVIEW OF IDTF SERVICES AND PROVIDERS, 
JUN 2006, $71,664,839 
CIN: A-02-03-01003  REVIEW OF SCHOOL-BASED HEALTH SERVICES IN NEW JERSEY, 
MAY 2006, $52,309,695 
CIN: A-01-04-00527  REVIEW OF HOME HEALTH AGENCIES BILLING FOR SERVICES 
PRECEDED BY A HOSPITAL DISCHARGE, MAR 2006, $48,135,395 
CIN: A-05-01-00058  OHIO MEDICAID HOSPITAL-SPECIFIC DISPROPORTIONATE SHARE 
HOSPITAL PAYMENT LIMITS, JUN 2004, $47,000,000 
CIN: A-04-01-02006  MEDICAID DISPROPORTIONATE SHARE HOSPITAL PAYMENTS IN 
ALABAMA, JUN 2004, $45,763,327 
                                                 
 Central Identification Number 
HHS OIG Semiannual Report to Congress  49  October 1, 2006  March 31, 2007  Appendix A 
 
CIN: A-02-03-01021  UPPER PAYMENT LIMIT REVIEW - NEW YORK, OCT 2005, $43,284,850 
CIN: A-01-02-00006  REVIEW OF RATE SETTING METHODOLOGY FOR MEDICAID 
SCHOOL BASED HEALTH SERVICES - CONNECTICUT, MAY 2003, 
$32,780,146 
CIN: A-01-04-00513  REVIEW OF MEDICARE PART B PAYMENTS FOR AMBULANCE 
SERVICES RENDERED TO BENEFICIARIES DURING AN INPATIENT 
STAY, MAR 2006, $21,705,010 
CIN: A-01-04-00528  REVIEW OF MEDICARE PART B PAYMENTS FOR RADIOLOGY 
SERVICES RENDERED DURING AN INPATIENT STAY, AUG 2006, 
$20,011,162 
CIN: A-09-01-00098  AUDIT OF KERN MEDICAL CENTER DISPROPORTIONATE SHARE 
HOSPITAL PAYMENTS FOR FY 1998, SEP 2002, $19,446,435 
CIN: A-01-04-00006  REVIEW OF TARGETED CASE MANAGEMENT SERVICES RENDERED 
BY THE MASSACHUSETTS DEPT OF SOCIAL SERVICES DURING 
FEDERAL FISCAL YEARS 2002 AND 2003, MAY 2006, $13,460,989 
CIN: A-01-02-00509  REVIEW OF MEDICARE ADMINISTRATIVE COSTS - PART A & B - 
UNITED HEALTHCARE INSURANCE COMPANY, MAR 2005, $12,991,420 
CIN: A-04-04-00008  PPS PAYMENTS TO REHABILITATIVE HOSPITALS FOR TRANSFERS, 
SEP 2006, $11,967,555 
CIN: A-06-03-00027  REVIEW OF HUMANAS BIPA MODIFICATIONS, JUL 2005, $10,500,000 
CIN: A-09-04-00069  REVIEW OF PHYSICAL THERAPY SERVICES PROVIDED BY 
INDEPENDENT PRACTITIONER, JUN 2006, $9,984,065 
CIN: A-06-02-00034  REV OF COST REPORTS & MEDICARE FEE-FOR-SERVICE PAYMENTS 
AT SCOTT & WHITE, MAY 2003, $8,229,574 
CIN: A-09-01-00085  AUDIT OF UC SAN DIEGO MEDICAL CENTER DISPROPORTIONATE 
SHARE HOSPITAL PAYMENTS FOR SFYE 1998, SEP 2002, $7,999,212 
CIN: A-06-04-00065  REVIEW OF INTERNAL CONTROLS AT TRISPAN HEALTH SERVICES, 
SEP 2006, $7,958,659 
CIN: A-07-02-03033  CAREFIRST SEGMENTATION AUDIT, MAY 2003, $6,788,644 
CIN: A-05-05-00055  REVIEW OF ILLINOIS COMMUNITY MENTAL HEALTH SERVICES FOR 
FEDERAL FISCAL YEAR 2003, SEP 2006, $5,971,577 
CIN: A-01-04-00525  REVIEW OF INTERRUPTED STAYS AT INPATIENT REHABILITATION 
FACILITIES, DEC 2005, $5,868,697 
CIN: A-09-03-00042  REVIEW OF HHA PRECEDING HOSPITAL STAY UNDER PPS - UGS, 
FEB 2004, $5,306,825 
CIN: A-06-02-00060  REVIEW PACIFICARE OK BIPA MODIFICATIONS TO CY 2001 ACRP, 
JUN 2004, $5,204,042 
CIN: A-05-03-00096  REVIEW OF ADMINISTRATIVE COSTS FOR ADMINASTAR FEDERAL, 
AUG 2004, $5,000,598 
CIN: A-07-05-00187  PENSION COSTS CLAIMED REVIEW AT ANTHEM INSURANCE 
COMPANIES - ADMINISTAR FEDERAL, DEC 2005, $4,833,704 
CIN: A-04-04-02003  MEDICARE OUTLIER PAYMENTS TO COMMUNITY MENTAL HEALTH 
CENTERS, APR 2006, $4,762,036 
CIN: A-02-03-01020  REVIEW OF ADMINISTRATIVE COSTS CLAIMED BY EMPIRE 
MEDICARE SERVICES, MAR 2006, $4,686,611 
CIN: A-09-03-00051  REVIEW OF BLUE SHIELD CALIFORNIA BIPA MODIFICATIONS TO 
CALENDAR YEAR 2001 ACRP, OCT 2004, $4,555,992 
CIN: A-05-01-00102  MT. SINAI HOSPITAL-DISPROPORTIONATE SHARE HOSPITAL 
PAYMENT LIMITS, OCT 2004, $4,516,112 
CIN: A-02-00-01047  DEMO BSWNY - FINANCIAL, MAR 2002, $4,505,051 
CIN: A-03-01-00225  VIRGINIA IMD UNDER 21, MAR 2004, $3,948,532 
CIN: A-04-04-06012  GRADUATE MEDICAL EDUCATION FOR DENTAL RESIDENTS - CA, 
JUL 2006, $3,904,527 
CIN: A-01-02-00525  MAINE ANTHEM BCBS - MEDICARE ADMINISTRATIVE COSTS, 
APR 2004, $3,389,716 
CIN: A-06-04-00076  MEDICAL REVIEW OF SYNERGYS PHP CLAIMS, MAR 2006, $3,098,296 
HHS OIG Semiannual Report to Congress  50  October 1, 2006  March 31, 2007 
  Appendix A 
 
CIN: A-01-04-00004  REVIEW OF MAINES MEDICAID RETROACTIVE CLAIMS FOR 
SCHOOL-BASED HEALTH SERVICES - JANUARY 2001 THROUGH 
JUNE 2003, JAN 2005, $3,044,211 
CIN: A-03-04-00207  MEDICAID OVERPAYMENTS-WEST VIRGINIA, JUN 2005, $2,940,469 
CIN: A-03-03-00220  DELAWARE MEDICAID MANAGED CARE FAMILY PLANNING 
FACTOR VALIDATION AUDIT, JAN 2006, $2,916,288 
CIN: A-01-02-00508  REVIEW OF MEDICARE CONTRACT TERMINATION COSTS - UNITED 
HEALTHCARE, NOV 2003, $2,894,010 
CIN: A-04-05-03003  AUDIT OF THE KY MEDICAID AGENCYS BUY-IN OF MEDICARE 
PARTS A AND B, AUG 2006, $2,799,784 
CIN: A-07-03-03039  CAREFIRST OF MARYLAND UNFUNDED PENSION COSTS, MAY 2003, 
$2,611,100 
CIN: A-01-04-00523  REVIEW OF ADMINISTRATIVE COSTS - PART A & B AT 
RHODE ISLAND BLUE CROSS AND BLUE SHIELD, SEP 2005, $2,582,664 
CIN: A-05-05-00051  AUDIT OF ILLINOISS MEDICAID PAYMENTS FOR SKILLED 
PROFESSIONAL MEDICAL PERSONNEL, JUN 2006, $2,427,853 
CIN: A-01-05-02502  REVIEW OF CONNECTICUTS TRAINING AND IV-E ADOPTION 
ASSISTANCE COSTS, JUL 2006, $2,400,000 
CIN: A-07-04-03050  PENSION SEGMENTATION REVIEW AT HIGHMARK, INC. OF 
PENSSYLVANIA, JAN 2005, $2,394,501 
CIN: A-07-04-00173  REVIEW OF UNFUNDED PENSION COSTS FOR PENNSYLVANIA BLUE 
SHIELD, NOV 2004, $2,154,481 
CIN: A-05-03-00063  REVIEW OF INELIGIBLE SNF PAYMENTS UNDER THE 
ADMINISTRATIVE RESPONSIBILITY OF MEDICARE NORTHWEST 
(BLUE CROSS BLUE SHIELD OF OREGON), OCT 2003, $2,100,000 
CIN: A-07-05-00190  PENSION SEGMENTATION REVIEW AT REGENCE BLUE CROSS BLUE 
SHIELD OF UTAH, APR 2006, $2,040,174 
CIN: A-07-05-04048  MEDICAID DRUG REBATE FOLLOW-UP - COLORADO, NOV 2005, 
$1,925,367 
CIN: A-01-02-00516  REVIEW OF POTENTIALLY EXCESSIVE MEDICARE PAYMENTS FOR 
OUTPATIENT SERVICES UNITED GOVERNMENT SERVICES, 
MAR 2003, $1,768,783 
CIN: A-03-01-00228  PENNSYLVANIA IMD UNDER 21, JUL 2005, $1,694,148 
CIN: A-05-06-00047  ESRD #11 PRE-AWARD AUDIT, MAY 2006, $1,420,997 
CIN: A-03-04-00209  VIRGINIA MEDICAID MANAGED CARE FAMILY PLANNING FACTOR 
VALIDATION AUDIT, JUN 2005, $1,388,506 
CIN: A-07-02-03021  ANTHEM BCBS OF CONNECTICUT - PENSION SEGMENT CLOSING, 
FEB 2004, $1,351,284 
CIN: A-04-03-02024  REVIEW OF BCBSFL RESPONSE TO SET-ASIDE COSTS IN PRIOR FACP 
AUDIT, APR 2003, $1,277,247 
CIN: A-07-04-00169  PENSION SEGMENTATION REVIEW AT PBS, NOV 2004, $1,214,985 
CIN: A-04-02-72903  STATE OF TENNESSEE, SEP 2002, $1,213,353 
CIN: A-03-04-00010  MARYLAND ORGAN ACQUISITION COSTS - UNIVERSITY OF 
MARYLAND MEDICAL CENTER, APR 2006, $1,024,852 
CIN: A-07-04-00182  PENSION SEGMENTATION REVIEW AT BLUE CROSS AND BLUE 
SHIELD OF MAINE, OCT 2005, $942,882 
CIN: A-07-05-00195  REVIEW OF SERP COSTS CLAIMED BY ADMINASTAR FEDERAL, 
JAN 2006, $934,728 
CIN: A-06-03-00046  REVIEW OF OKLAHOMAS MEDICAID ADMINISTRATIVE COSTS, 
APR 2005, $853,915 
CIN: A-04-01-05004  REVIEW MEDICARE CLAIMS FOR DEPORTED BENEFICIARIES, 
MAR 2002, $836,711 
CIN: A-06-03-00013  MEDICARE ADMINISTRATIVE COST PROPOSAL-ARKANSAS BLUE 
CROSS BLUE SHIELD, OCT 2003, $759,748 
CIN: A-03-05-00351  AUDIT OF LLEGO GRANTS, JUN 2006, $703,181 
HHS OIG Semiannual Report to Congress  51  October 1, 2006  March 31, 2007  Appendix A 
 
CIN: A-09-03-00046  AUDIT OF ORGAN ACQUISITION COSTS AT ST VINCENT, JUL 2004, 
$683,315 
CIN: A-03-05-00202  COUNTY ADMINISTRATIVE SERVICE COSTS CLAIMED THROUGH 
MARYLANDS CAP, FEB 2006, $666,694 
CIN: A-06-05-00062  MEDICARE PRESCRIPTION DRUG DISCOUNT CARD PROGRAM, 
JUL 2006, $652,135 
CIN: A-06-03-00032  AUDIT OF ADMIN COSTS PART A & PART B OF MEDICARE 
PROGRAM-TRAILBLAZERS, APR 2004, $622,078 
CIN: A-01-04-00012  REVIEW OF UMASS MEDICAL SCHOOLS ADMINISTRATIVE COST 
CLAIMS - FY 2003 - FY 2004, MAR 2006, $614,022 
CIN: A-07-04-00170  REVIEW OF PENSION COSTS CLAIMED FOR MEDICARE 
REIMBURSEMENT FOR VERITUS, AUG 2004, $594,806 
CIN: A-07-02-03015  BCBS OF MINNESOTA PENSION COSTS CLAIMED FOR MEDICARE 
REIMBURSEMENT, FEB 2003, $550,083 
CIN: A-05-02-72811  COMMUNITY ACTION OF GREATER INDIANAPOLIS INC., AUG 2002, 
$547,899 
CIN: A-05-06-00030  DUPLICATE MEDICARE PAYMENTS COST-BASED HMOS FOR 
EXCELLUS HEALTH PLAN, SEP 2006, $539,138 
CIN: A-07-05-03069  MISSOURI UNDISTRIBUTABLE CHILD SUPPORT PAYMENTS, 
JUL 2006, $457,128 
CIN: A-03-04-00205  MEDICAID PROVIDER OVERPAYMENTS--DELAWARE, OCT 2004, 
$437,592 
CIN: A-03-06-03302  ESRD NETWORK #5 BID PROPOSAL RFP CMS-500-06-DMP, MAY 2006, 
$437,008 
CIN: A-01-04-00506  REVIEW OF DISPROPORTIONATE SHARE HOSPITAL PAYMENTS 
CLAIMED BY SAINT MARYS HOSPITAL FOR FISCAL YEAR ENDING 
DECEMBER 31, 2002, MAY 2004, $433,502 
CIN: A-02-05-01017  REVIEW OF DURABLE MEDICAL EQUIPMENT PROVIDERS 
MEDICAID CLAIMS FOR RESIDENTS OF ASSISTED LIVING 
PROGRAMS, SEP 2006, $406,081 
CIN: A-05-04-00081  REVIEW OF INDIANA COMMUNITY MENTAL HEALTH CENTER 
MEDICAID ADMINISTRATIVE COSTS, SEP 2006, $328,151 
CIN: A-02-06-02004  ACF REQUEST FOR ADMINISTRTATIVE COSTS REVIEW  
LONG ISLAND HEAD START, JUL 2006, $325,861 
CIN: A-05-01-00096  PAYMENTS TO INTER VALLEY FOR INSTITUTIONAL BENEFICIARIES, 
MAY 2002, $319,355 
CIN: A-06-06-00022  MEDICARE PRESCRIPTION DRUG CARD PROGRAM, SEP 2006, 
$311,526 
CIN: A-03-04-00204  SKILLED PROFESSIONAL MEDICAL PERSONNEL (SPMP)  
WEST VIRGINIA, DEC 2004, $299,360 
CIN: A-07-05-01013  PAYMENTS FOR M+C ORGANIZATION FOR INSTITUTIONAL 
BENEFICIARIES, OCT 2005, $293,885 
CIN: A-05-06-00048  EVALUATION OF ESRD NO. 9 PRE-AWARD AUDITS, MAY 2006, 
$289,883 
CIN: A-09-04-00068  REVIEW OF CALIFORNIAS STATE AUTOMATED CHILD WELFARE 
INFORMATION SYSTEM (SACWIS) AT SANTA CLARA COUNTY, 
APR 2006, $286,464 
CIN: A-07-04-00175  REVIEW OF UNFUNDED PENSION COSTS AT VERITUS, INC., 
OCT 2004, $266,052 
CIN: A-07-03-02662  REVIEW OF MULTIPLE ASC PROCEDURES IN THE SAME SESSION 
NORDIAN, DEC 2002, $258,112 
CIN: A-05-05-00033  MICHIGAN-UNDISTRIBUTED CHILD SUPPORT COLLECTIONS, 
AUG 2006, $257,859 
CIN: A-03-04-00353  ACCOUNTABILITY OVER CDC BT FUNDS, JUN 2005, $238,537 
CIN: A-05-01-00094  PAYMENTS TO KAISER OF OAKLAND FOR INSTITUTIONAL 
BENEFICIARIES, OCT 2002, $229,656 
HHS OIG Semiannual Report to Congress  52  October 1, 2006  March 31, 2007 
  Appendix A 
 
CIN: A-05-06-00049  EVALUATION OF ESRD NO. 10 PRE-AWARD AUDIT, MAY 2006, 
$210,049 
CIN: A-03-06-03301  ESDR NETWORK #4 BID PROPOSAL RFP CMS-500--06-NW4, MAY 2006, 
$208,449 
CIN: A-02-01-01019  DEMO BSWNY - CASH MANAGEMENT, OCT 2002, $208,271 
CIN: A-01-05-00509  REVIEW OF MEDICARE CONTRACT TERMINATION/SEVERANCE 
COSTS CLAIMED BY BLUE CROSS & BLUE SHIELD OF RHODE 
ISLAND, SEP 2005, $205,384 
CIN: A-05-06-00052  REVIEW OF SAMHSA GRANT, SEP 2006, $203,112 
CIN: A-01-06-00002  MEDICAID ACCOUNTS RECEIVABLE - VERMONT, SEP 2006, $201,383 
CIN: A-05-06-00021  DUPLICATE ELIGIBILITY IN MICHIGAN & OHIO - OHIO REPORT, 
JUN 2006, $196,325 
CIN: A-01-04-01501  NORTHEASTERN UNIVERSITY HHS GRANT COSTS GRANT #S 9274, 
4000 AND 4111, JAN 2005, $194,890 
CIN: A-06-05-00066  MEDICARE PRESCRIPTION DRUG CARD PROGRAM, SEP 2006, 
$168,782 
CIN: A-07-05-00194  PENSION COSTS CLAIMED REVIEW AT ANTHEM INSURANCE 
COMPANIES - MAINE, OCT 2005, $163,107 
CIN: A-07-06-00216  PENSION COSTS CLAIMED AT BLUE CROSS BLUE SHIELD OF 
ARIZONA, AUG 2006, $142,343 
CIN: A-09-05-00077  REVIEW OF PACIFICARES USE OF ADDITIONAL CAPITATION 
UNDER THE MMA OF 2003, MAR 2006, $135,000 
CIN: A-05-06-00029  AUDIT OF COST-BASED HMOS FOR OVERPAYMENTS MADE TO 
CAPITATED PROVIDERS, SEP 2006, $132,075 
CIN: A-01-03-00010  MEDICAID SCHOOL-BASED HEALTH SERVICES ADMINISTRATIVE 
CLAIMING REVIEW - RHODE ISLAND, JUN 2004, $123,010 
CIN: A-04-06-83976  RANDOLPH COUNTY BOARD OF EDUCATION, SEP 2006, $122,663 
CIN: A-05-06-00031  AUDIT OF COST-BASED HMOS FOR OVERPAYMENTS MADE TO 
CAPITATED PROVIDERS, SEP 2006, $122,130 
CIN: A-05-01-00091  PAYMENTS TO UNITED HC OF FLORIDA FOR INSTITUTIONAL 
BENEFICIARIES, SEP 2002, $121,023 
CIN: A-05-05-00044  DUPLICATE MEDICARE PAYMENTS TO COST-BASED HMO PLAN- 
ARNETT HEALTH PLANS, INC. FOR FISCAL YEARS 2000, 
THROUGH 2003, SEP 2005, $111,862 
CIN: A-05-06-00018  WI-UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS, MAY 2006, 
$107,383 
CIN: A-01-02-00527  REVIEW OF ANTHEM BLUE CROSS/BLUE SHIELD MEDICARE 
CONTRACT TERMINATION & SEVERANCE COSTS, SEP 2003, $104,468 
CIN: A-05-01-00079  PAYMENTS TO BLUE CARE MID-MICHIGAN FOR INSTITUTIONAL 
BENEFICIARIES, JUN 2002, $100,692 
CIN: A-04-04-01002  USE OF CDC BIOTERRORISM GRANT FUNDS, JUL 2005, $98,929 
CIN: A-05-02-00067  REVIEW OF MEDICARE FEE-FOR-SERVICE PAYMENTS & COST 
REPORTS AT WELBORN, JUN 2003, $97,623 
CIN: A-05-05-00042  DUPLICATE MEDICARE PAYMENTS TO COST-BASED HEALTH 
MAINTENANCE ORGANIZATION PLAN- DEAN HEALTH PLANS, INC. 
FOR FISCAL YEARS 2000, THROUGH 2003, AUG 2005, $91,710 
CIN: A-05-01-00090  PAYMENTS TO AETNA OF FOR INSTITUTIONAL BENEFICIARIES, 
JUL 2002, $87,516 
CIN: A-05-05-00043  DUPLICATE MEDICARE PAYMENTS TO COST-BASED HMO PLAN - 
JOHN DEERE HEALTH PLANS, INC. FOR FISCAL YEARS 2000, 
THROUGH 2003, SEP 2005, $78,799 
CIN: A-05-01-00089  ADDITIONAL BENEFITS REVIEW ON MANAGED CARE 
ORGANIZATION, OCT 2002, $77,000 
CIN: A-04-05-02000  AUDIT OF HHA THERAPY BILLINGS, SEP 2005, $63,425 
CIN: A-05-01-00086  PAYMENTS TO HMO OF NE PENNSYLVANIA FOR INSTITUTIONAL 
BENEFICIARIES, MAY 2002, $62,432 
HHS OIG Semiannual Report to Congress  53  October 1, 2006  March 31, 2007  Appendix A 
 
CIN: A-05-02-00054  UNITED GOVERNMENT SERVICES, Y2K COSTS FY 1998 & 1999, 
APR 2003, $49,923 
CIN: A-03-02-00373  REVIEW OF US HELPING US, DEC 2003, $45,558 
CIN: A-01-03-01500  REVIEW OF CDC HIV PROGRAMS AT GREATER BRIDGEPORT 
ADOLESCENT PREGNANCY PROGRAM, JUL 2003, $41,088 
CIN: A-05-03-00105  AUDIT OF MEDICAID NURSING FACILITY ADMINISTRATIVE COSTS, 
OCT 2004, $39,104 
CIN: A-02-06-02010  ACF REQUEST FOR LIMITED REVIEW OF HEAD START GRANTEE - 
CONCERNED PARENTS, SEP 2006, $32,490 
CIN: A-08-03-73541  SOUTH DAKOTA FOUNDATION FOR MEDICAL CARE, JAN 2003, 
$28,573 
CIN: A-07-06-00198  REVIEW OF UNFUNDED PENSION COSTS AT REGENCE BLUE CROSS 
BLUE SHIELD OF UTAH, APR 2006, $27,292 
CIN: A-07-02-00150  PAYMENTS TO COVENTRY--PITTSBURG FOR INSTITUTIONAL 
BENEFICIARIES, JUN 2003, $26,000 
CIN: A-02-06-01018  REVIEW OF BID PROPOSAL SUBMITTED IN RESPONSE TO REQUEST 
FOR PROPOSAL #500-06-NW03 - NETWORK 3 - TRANS-ATLANTIC 
RENAL COUNCIL, INC., MAY 2006, $21,865 
CIN: A-05-01-00078  PAYMENTS TO HEALTH NET-TUCSON, ARIZONA.- FOR 
INSTITUTIONAL BENEFICIARIES, APR 2002, $21,233 
CIN: A-05-02-70624  STATE OF OHIO, JAN 2002, $19,970 
CIN: A-08-04-76779  COLORADO FOUNDATION FOR MEDICAL CARE, DEC 2003, $18,925 
CIN: A-05-01-00100  PAYMENTS TO FALLON HEALTH FOR INSTITUTIONALIZED 
BENEFICIARIES, MAY 2002, $18,842 
CIN: A-05-01-00095  PAYMENTS TO HUMANA OF ARIZONA FOR INSTITUTIONAL 
BENEFICIARIES, JUN 2002, $18,645 
CIN: A-07-03-00151  REVIEW OF MEDICARE PAYMENTS FOR BENEFICIARIES WITH 
INSTITUTIONAL STATUS, JUN 2003, $18,400 
CIN: A-01-02-01504  REVIEW OF CDCS HIV PROGRAMS AT FENWAY COMMUNITY 
HEALTH CENTER, JUN 2003, $18,028 
CIN: A-07-06-00203  REVIEW OF MEDICARE SEGMENT ASSETS FOR NONQUALIFIED 
PLAN FOR HIGHMARK & PREDECESSORS, JAN 2006, $13,533 
CIN: A-07-04-01011  PAYMENTS FOR UNITED HEALTHCARE FOR INSTITUTIONAL 
BENEFICIARIES, MAR 2005, $13,128 
CIN: A-02-06-02007  ACF REQUEST FOR LIMITED REVIEW OF HEAD START PROGRAM - 
CAMDEN, NEW JERSEY, SEP 2006, $13,106 
CIN: A-02-06-01017  REVIEW OF BID PROPOSAL SUBMITTED IN RESPONSE TO REQUEST 
FOR PROPOSAL #500-CMS-ESRD-217DMP - NETWORK 2 - IPRO, 
MAY 2006, $11,743 
CIN: A-05-01-00070  PAYMENTS TO GHP MCO/ST LOUIS FOR INSTITUTIONAL 
BENEFICIARIES, JAN 2002, $11,089 
CIN: A-09-05-00058  WEDGE: HAWAII MEDICAID NURSING FACILITIES EXPENDITURES, 
FEB 2006, $9,562 
CIN: A-02-06-01019  REVIEW OF BID PROPOSAL SUBMITTED IN RESPONSE TO REQUEST 
FOR PROPOSAL #CMS-500-06-ESRD-217DMP FOR NETWORK 2 BY 
ESRD NETWORK OF NEW ENGLAND, INC., MAY 2006, $9,526 
CIN: A-06-06-00014  MEDICARE PRESCRIPTION DRUG CARD PROGRAM: ACCLAIM, 
SEP 2006, $8,800 
CIN: A-02-02-01035  EVALUATION OF BID PROPOSAL - MEDICARE HELP LINE, AUG 2002, 
$3,760 
CIN: A-03-03-00393  AUDIT OF CDC HIV/AIDS GRANT TO SEXUAL MINORITY YOUTH 
ASSISTANCE LEAGUE, OCT 2003, $1,155 
 
Total CINs:  150 
Total Amount:  $1,142,520,617 
 
HHS OIG Semiannual Report to Congress  54  October 1, 2006  March 31, 2007 
  Appendix A 
 
Notes to Table 2 
 
1The opening balance was adjusted downward by $10.9 million. 
 
2Management decision has not been made within 6 months on 38 reports.  Discussions with management 
are ongoing and it is expected that the following audits will be resolved by the next semiannual reporting 
period: 
 
CIN: A-09-06-00026  UCLA - REVIEW OF WAGE INDEX DATA: PENSION AND 
POSTRETIREMENT BENEFITS, SEP 2006, $90,020,211 
CIN: A-07-04-04038  MEDICAID HOSPITAL OUTLIER PAYMENTS IN NORTH CAROLINA, 
JAN 2006, $89,420,140 
CIN: A-09-05-00039  UC SAN FRANCISCO - REVIEW OF WAGE INDEX DATA, SEP 2006, 
$72,311,155 
CIN: A-09-06-00024  UC DAVIS - REVIEW OF WAGE INDEX DATA: PENSION AND 
POSTRETIREMENT BENEFITS, SEP 2006, $71,030,255 
CIN: A-05-05-00053  REVIEW OF LAYERED GPOS -- ROLL-UP, JUN 2006, $59,000,000 
CIN: A-07-04-04031  MEDICAID HOSPITAL OUTLIER PAYMENTS IN ILLINOIS, MAY 2005, 
$56,449,668 
CIN: A-09-06-00027  UC SAN DIEGO - REVIEW OF WAGE INDEX DATA: PENSION AND 
POSTRETIREMENT BENEFITS, SEP 2006, $47,773,319 
CIN: A-01-02-00503  FURTHER EXPANSION OF THE DRG PAYMENT WINDOW, AUG 2003, 
$37,000,000 
CIN: A-09-06-00025  UC IRVINE - REVIEW OF WAGE INDEX DATA: PENSION AND 
POSTRETIREMENT BENEFITS, SEP 2006, $31,373,369 
CIN: A-05-02-00078  ROLLUP OF MEDICARE PAYMENTS FOR BENEFICIARIES WITH 
INSTITUTIONAL STATUS, FEB 2004, $12,764,202 
CIN: A-05-03-00019  PAYMENTS FOR SERVICES TO DECEASED RECIPIENTS - NEW YORK, 
OCT 2004, $6,707,623 
CIN: A-05-04-00073  ROLL-UP ON ADDITIONAL GPOS, MAY 2005, $6,600,000 
CIN: A-05-02-00077  MICHIGAN MEDICAID/SCHIP REVIEW, NOV 2003, $5,908,350 
CIN: A-03-02-00203  VIRGINIA - SCHIP/TITLE IV - D SURVEY, JUL 2004, $5,402,491 
CIN: A-05-05-00033  MICHIGAN - UNDISTRIBUTED CHILD SUPPORT COLLECTIONS, 
AUG 2006, $4,397,133 
CIN: A-06-00-00073  REV OF MGR CARE ADDTL BENEFITS FOR CY 00 OF NYLCAR, 
MAR 2002, $4,000,000 
CIN: A-02-05-01008  MEDICARE WAGE INDEX - NORTH SHORE, MAY 2006, $3,119,582 
CIN: A-01-05-02502  REVIEW OF CONNECTICUT'S TRAINING AND IV-E ADOPTION 
ASSISTANCE COSTS, JUL 2006, $2,400,000 
CIN: A-05-02-00075  INDIANA MEDICAID/SCHIP REVIEW, NOV 2003, $1,885,708 
CIN: A-05-04-00025  REVIEW OF MEDICARE PHYSICIAN PLACE OF SERVICE CODING FOR 
AMBULATORY SURGICAL AND RELATED PROCEDURES, OCT 2004, 
$742,510 
CIN: A-05-02-00082  BID PROPOSAL FOR 1-800 MEDICARE HOTLINE ADMINISTRATION, 
AUG 2002, $609,950 
CIN: A-05-03-00021  CIMRO PRO PRE-AWARD AUDIT FOR NEBRASKA, NOV 2002, $504,650 
CIN: A-05-06-00020  MEDICAID PAYMENTS FOR SERVICES TO BENEFICIARIES WITH 
CONCURRENT ELIGIBILITY IN MICHIGAN AND OHIO - MICHIGAN 
REPORT, AUG 2006, $467,317 
CIN: A-04-06-07004  ESRD BID PROPOSAL BY NETWORK ORGANIZATION NO. 8, 
MAY 2006, $415,630 
CIN: A-07-04-01008  FAMILY PLANNING - FEE-FOR-SERVICE - COLORADO, JAN 2005, 
$269,024 
CIN: A-05-00-00006  MEDICAID MUTUALLY EXCLUSIVE CODES - MICHIGAN, JUN 2000, 
$240,000 
HHS OIG Semiannual Report to Congress  55  October 1, 2006  March 31, 2007  Appendix A 
 
CIN: A-04-06-07003  ESRD BID PROPOSAL BY NETWORK ORGANIZATION NO. 7, 
MAY 2006, $235,966 
CIN: A-05-04-00023  HEAD START COMPENSATION REVIEW - CEOGC, JAN 2005, $178,000 
CIN: A-01-05-00512  REVIEW OF 2004 ACRP MODIFICATION SUBMITTED AS A RESULT OF 
MMA FOR THE FALLON COMMUNITY HEALTH PLAN, JAN 2006, 
$154,970 
CIN: A-05-02-00023  SCHOOL-BASED MEDICAID ADMIN & SERVICE COSTS - WISCONSIN, 
MAR 2003, $144,909 
CIN: A-05-03-00059  ESRD #9 PRE-AWARD AUDIT (RFP-CMS-03-001/JAC), MAY 2003, 
$139,816 
CIN: A-04-03-08013  ESRD NETWORK COST PROPOSAL, MAY 2003, $116,085 
CIN: A-05-03-00060  ESRD #10 PREAWARD AUDIT (RFP-CMS-03-001/JAC), MAY 2003, 
$114,289 
CIN: A-05-01-00070  PAYMENTS TO GHP MCO/ST LOUIS FOR INSTITUTIONAL 
BENEFICIARIES, JAN 2002, $98,698 
CIN: A-04-06-07005  ESRD BID PROPOSAL FOR NETWORK ORGANIZATION NO. 17, 
MAY 2006, $43,435 
CIN: A-05-06-00023  MINNESOTA - UNDISTRIBUTABLE CHILD SUPPORT COLLECTIONS, 
SEP 2006, $28,240 
CIN: A-02-04-01008  GME FOR DENTAL RESIDENTS - NYU, MAY 2006, $10,783 
CIN: A-05-04-00051  ALLOWABILITY OF CDC BIOTERRORISM COSTS - OHIO 
DEPARTMENT OF HEALTH, FEB 2005, $4,154 
 
Total CINs:  38 
Total Amount:  $612,081,632 
HHS OIG Semiannual Report to Congress  56  October 1, 2006  March 31, 2007 
  Appendix B 
Reporting Requirements of the Inspector General Act of 1978, 
as Amended 
 
The reporting requirements of the Inspector General Act of 1978, as amended, are listed 
on the following table along with the location of the required information.  Where there 
are no data to report under a particular requirement, the word None appears.   
 
A complete listing of audit and inspection reports is furnished to Congress under separate 
cover.  Copies are available upon request. 
 
Section of 
the Act  Requirement  Location 
Section 4(a)(2)  Review of legislation and regulations  p. 44 
Section 5     
  (a)(1)  Significant problems, abuses, and  Throughout 
deficiencies 
  (a)(2)  Recommendations with respect to  Throughout 
significant problems, abuses, and 
deficiencies 
  (a)(3)  Prior significant recommendations on  See Red Book and Orange Book at 
which corrective action has not been  http://www.oig.hhs.gov/publications.html. 
completed   Please note:  The soon to be released 
Compendium of Unimplemented Office of 
Inspector General Recommendations will 
replace the Red Book and Orange Book. 
  (a)(4)  Matters referred to prosecutive  p. 45 
authorities 
  (a)(5)  Summary of instances in which  None 
information was refused  
  (a)(6)  List of audit reports  Under separate cover 
  (a)(7)  Summary of significant reports  Throughout 
  (a)(8)  Statistical Table 1Reports With  p. 42 
Questioned Costs 
  (a)(9)  Statistical Table 2 - Funds  p. 43 
Recommended To Be Put to Better Use 
  (a)(10)  Summary of previous audit reports  Appendix A 
without management decisions 
  (a)(11)  Description and explanation of revised  Appendix A 
management decisions 
  (a)(12)  Management decisions with which the  None 
Inspector General is in disagreement 
 
HHS OIG Semiannual Report to Congress  57  October 1, 2006  March 31, 2007   Appendix C 
 
Summary of Sanction Authorities 
 
The Inspector General Act of 1978 (Public Law 95-452), as amended, sets forth specific 
requirements for semiannual reports to be made to the Secretary for transmittal to 
Congress.  A selection of other authorities appears below. 
 
Program Exclusions 
Section 1128 of the Social Security Act (42 U.S.C.  1320a-7) provides several grounds 
for excluding individuals and entities from participation in Medicare, Medicaid, and other 
Federal health care programs.  Exclusions are required for individuals and entities 
convicted of the following types of criminal offenses:  (1) Medicare or Medicaid fraud; 
(2) patient abuse or neglect; (3) felonies for other health care fraud; and (4) felonies for 
illegal manufacture, distribution, prescription, or dispensing of controlled substances.  
OIG has the discretion to exclude individuals and entities on several other grounds, 
including misdemeanors for other health care fraud (other than Medicare or Medicaid) or 
for illegal manufacture, distribution, prescription, or dispensing of controlled substances; 
suspension or revocation of a license to provide health care for reasons bearing on 
professional competence, professional performance, or financial integrity; provision of 
unnecessary or substandard services; submission of false or fraudulent claims to a Federal 
health care program; or engaging in unlawful kickback arrangements. 
 
Providers subject to exclusion are granted due process rights (including a hearing before 
an HHS administrative law judge and appeals to the HHS Departmental Appeals Board 
and Federal district and appellate courts) regarding whether the basis for the exclusion 
exists and the length of the exclusion is reasonable. 
 
Patient Dumping 
Section 1867 of the Social Security Act (42 U.S.C.  1395dd) provides that when an 
individual presents to the emergency room of a Medicare-participating hospital, the 
hospital must provide an appropriate medical screening examination to determine 
whether that individual has an emergency medical condition.  If an individual has such a 
condition, the hospital must provide either treatment to stabilize the condition or an 
appropriate transfer to another medical facility. 
 
If a transfer is ordered, the transferring hospital must provide stabilizing treatment to 
minimize the risks of transfer and must ensure that the receiving hospital agrees to the 
transfer and has available space and qualified personnel to treat the individual.  In 
addition, the transferring hospital must effect the transfer through qualified personnel and 
transportation equipment.  Further, a participating hospital with specialized capabilities or 
facilities may not refuse to accept an appropriate transfer of an individual who needs 
services if the hospital has the capacity to treat the individual. 
 
OIG is authorized to collect civil monetary penalties of up to $25,000 against small 
hospitals (fewer than 100 beds) and up to $50,000 against larger hospitals (100 beds or 
more) for each instance in which the hospital negligently violated any of the section 1867 
requirements.  In addition, OIG may collect a penalty of up to $50,000 from a responsible 
HHS OIG Semiannual Report to Congress  59  October 1, 2006  March 31, 2007  Appendix C 
physician for each negligent violation of any of the section 1867 requirements and, in 
some circumstances, may exclude a responsible physician. 
 
Civil Monetary Penalties Law 
Under the Civil Monetary Penalties Law (CMPL), section 1128A of the Social Security 
Act (42 U.S.C.  1320a-7a), a person is subject to penalties, assessments, and exclusion 
from participation in Federal health care programs for engaging in certain activities.  For 
example, a person who submits to a Federal health care program a claim for items and 
services that the person knows or should know is false or fraudulent is subject to a 
penalty of up to $10,000 for each item or service falsely or fraudulently claimed, an 
assessment of up to three times the amount falsely or fraudulently claimed, and 
exclusion. 
 
For the purposes of the CMPL, should know is defined to mean that the person acted in 
reckless disregard or deliberate ignorance of the truth or falsity of the claim.  The CMPL 
also authorizes actions for a variety of other violations, including submission of claims 
for items or services furnished by an excluded person; requests for payment in violation 
of an assignment agreement; violations of rules regarding the possession, use, and 
transfer of biological agents and toxins; and payment or receipt of remuneration in 
violation of the anti-kickback statute (42 U.S.C.  1320a-7b(b)). 
 
Anti-Kickback Statute and Civil False Claims Act Enforcement Authorities 
 
 The Anti-Kickback Statute  The anti-kickback statute authorizes penalties against 
anyone who knowingly and willfully solicits, receives, offers, or pays remuneration, in 
cash or in kind, to induce or in return for (1) referring an individual to a person or entity 
for the furnishing, or arranging for the furnishing, of any item or service payable under 
the Federal health care programs; or (2) purchasing, leasing or ordering, or arranging for 
or recommending the purchasing, leasing, or ordering of any good, facility, service, or 
item payable under the Federal health care programs (Section 1128B(b) of the Social 
Security Act, 42 U.S.C.  1320a-7b). 
 
Individuals and entities that engage in unlawful referral or kickback schemes may be 
subject to criminal penalties under the general criminal anti-kickback statute, civil 
monetary penalties under OIGs CMPL authority (Section 1128A(a)(7) of the Social 
Security Act, 42 U.S.C.  1320a-7a), and/or program exclusion under OIGs permissive 
exclusion authority (Section 1128(b)(7) of the Social Security Act, 
42 U.S.C.  1320a-7(b)(7)). 
 
 False Claims Amendments Act of 1986  Under the Federal civil False Claims 
Amendments Act of 1986 (FCA) (31 U.S.C.  3729-3733), a person or entity is liable 
for up to treble damages and a penalty between $5,500 and $11,000 for each false claim it 
knowingly submits or causes to be submitted to a Federal program.  Similarly, a person 
or entity is liable under the FCA if it knowingly makes or uses, or causes to be made or 
used, a false record or statement to have a false claim paid. 
 
HHS OIG Semiannual Report to Congress  60  October 1, 2006  March 31, 2007    Appendix C 
 
The FCA defines knowing to include not only the traditional definition but also 
instances in which the person acted in deliberate ignorance or reckless disregard of the 
truth or falsity of the information.  Under the FCA, no specific intent to defraud is 
required.  Further, the FCA contains a qui tam, or whistleblower, provision that allows a 
private individual to file suit on behalf of the United States and entitles that 
whistleblower to a percentage of any fraud recoveries. 
HHS OIG Semiannual Report to Congress  61  October 1, 2006  March 31, 2007